XOTC:LVEN Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10−Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 2012

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________to _____________

Commission File Number: 000-53132

CHILE MINING TECHNOLOGIES INC.
(Exact Name of Registrant as Specified in Its Charter)

Nevada 26-1516355
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)  

Jorge Canning 1410
Ñuñoa, Santiago
Republic of Chile
(Address of principal executive offices, Zip Code)

+(56) (02) 813 1087
(Registrant’s telephone number, including area code)

     _____________________________________________________
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X]          No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X]          No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

  Large accelerated filer [  ] Accelerated filer [  ]
  Non-accelerated filer [  ] (Do not check if a smaller reporting company)      Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ]          No [X]

The number of shares outstanding of each of the issuer’s classes of common stock, as of August 15, 2012 is as follows:

         Class of Securities                    Shares Outstanding          
Common Stock, $0.001 par value 10,182,150


Chile Mining Technologies Inc.

Quarterly Report on Form 10-Q
Period Ended June 30, 2012

TABLE OF CONTENTS

PART I
FINANCIAL INFORMATION

Item 1. Financial Statements 1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 22
Item 3. Quantitative and Qualitative Disclosures About Market Risk 28
Item 4. Controls and Procedures. 28

PART II
OTHER INFORMATION

Item 1. Legal Proceedings. 28
Item 1A. Risk Factors. 29
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 29
Item 3. Defaults Upon Senior Securities 29
Item 4. Mine Safety Disclosures. 29
Item 5. Other Information. 29
Item 6. Exhibits 29


PART I
FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

CHILE MINING TECHNOLOGIES, INC.
(Formerly Latin America Ventures, Inc.)

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2012 and 2011

(Amounts expressed in US Dollars)

Index

  Page
Interim Consolidated Financial Statements 1
Interim Consolidated Balance Sheets as at June 30, 2012 and March 31, 2012 2
Interim Consolidated Statements of Operations and Comprehensive Loss for the three months ended June 30, 2012 and 2011 3
Interim Consolidated Statements of Cash flows for the three months ended June 30, 2012 and 2011 4
Interim Consolidated Statements of Changes in Stockholders’ Deficiency for the three months ended June 30, 2012 and year ended March 31, 2012 5
Notes to Interim Consolidated Financial Statements 6

1


CHILE MINING TECHNOLOGIES, INC.
(Formerly Latin America Ventures, Inc.)
INTERIM CONSOLIDATED BALANCE SHEETS AS AT
(Amounts expressed in U.S. Dollars)
(Unaudited)

 

  June 30,     March 31,  

 

  2012     2012  

 

  (Unaudited)     (Audited)  

ASSETS

           

 

           

Current

           

             Cash and cash equivalent

  1,018,579     300  

             Sundry assets and other receivables (Note 13)

$  36,362   $  3,940  

             Inventory (Note 12)

  40,829     35,403  

 

  1,095,770     39,643  

RESTRICTED CASH (Note 18)

  344,850        

DEPOSITS AND OTHER ASSETS (Note 14)

  959,529     1,002,739  

DEFERRED FINANCING COSTS (Note 8 (b) and 9 )

  677,604     108,318  

PROPERTY PLANT AND EQUIPMENT (Note 3)

  4,565,190     4,766,253  

 

           

 

$  7,642,943   $  5,916,953  

 

           

LIABILITIES AND STOCKHOLDERS’ DEFICIENCY

           

 

           

Current liabilities

           

             Accounts payable and accrued liabilities

$  1,478,523   $  1,721,650  

             Loan from related parties (Note 5)

  712,505     548,938  

             Loan from non related party (Note 15)

  401,856     560,000  

             Obligation under capital leases

  148,065     482,787  

             Due to related party (Note 5)

  1,891,485     1,838,836  

             Convertible Promissory Note (Note 8 (c))

  190,000     190,000  

 

           

 

  4,822,434     5,342,211  

 

           

PROMISSORY NOTES (Note 4)

  2,051,727     2,022,809  

LONG TERM -OBLIGATION UNDER CAPITAL LEASE

  219,570     -  

SECURED CONVERTIBLE NOTES (Note 9)

  2,021,688     -  

DERIVATIVE FINANCIAL INSTRUMENTS (Note 8 (a))

  -     -  

 

           

 

  9,115,419     7,365,020  

 

           

REDEEMABLE COMMON STOCK (Note 8 (b))

  -     -  

Stockholders’ deficiency

           

             Capital stock (note 6)

  10,169     10,062  

             Additional paid in capital

  12,701,361     11,558,314  

             Deficit

  (14,260,819 )   (13,043,895 )

             Accumulated other comprehensive income

  76,813     27,452  

 

           

 

  (1,472,476 )   (1,448,067 )

 

           

Total liabilities and stockholders’ deficiency

$  7,642,943   $  5,916,953  

Going Concern (Note 1)
Related Party Transactions (Note 5)
Commitments (Note 16)

The accompanying notes are an integral part of these interim consolidated financial statements.

2


CHILE MINING TECHNOLOGIES INC.
(Formerly Latin America Ventures, Inc.)
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Amounts expressed in U.S. Dollars)
(Unaudited)
For the three months ended

    June 30,     June 30,  
    2012     2011  
             
Sales $  34,829   $  63,209  
Cost of sales   378,361     341,242  
Gross profit (loss)   (343,532 )   (278,033 )
Operating expenses:            
             Impairment of mining rights (Note 7) $  3,528     701  
             Salaries and wages   22,694     40,684  
             General and administrative   497,657     318,659  
             Professional fees   198,000     13,884  
    721,879     373,928  
             
Operating loss before the undernoted   (1,065,411 )   (651,961 )
             
Amortization of deferred finance costs (Note 8 (b) and 9)   (45,108 )   (27,275 )
             
Fair value adjustment relating to warrants   -     433,477  
             
Imputed interest expense (note 4 and 9 )   (106,405 )   (80,847 )
             
Net Loss for the period   (1,216,924 )   (326,606 )
Foreign exchange translation adjustment for the period   49,361     66,851  
             
Comprehensive loss for the period $  (1,167,563 ) $  (259,755 )
             
             
Weighted average number of common shares outstanding   10,089,414     9,364,593  
             
Loss per share – basic and diluted $  (0.12 ) $  (0.03 )

The accompanying notes are an integral part of these interim consolidated financial statements.

3


CHILE MINING TECHNOLOGIES INC.
(Formerly Latin America Ventures, Inc.)
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts expressed in U.S. Dollars)
(Unaudited)
For the three months ended June 30,

    2012     2011  
Cash Flows from Operating Activities:            
             Net loss $  (1,216,924 ) $  (326,606 )
             Impairment of mining rights   3,528     701  
             Amortization   108,754     115,612  
             Imputed interest expense   106,405     80,847  
             Amortization of deferred finance costs   45,108     27,275  
             Fair value adjustment relating to warrants   -     (433,477 )
Changes in non-cash working capital:            
             Increase in sundry assets and other receivables   (32,794 )   (56,256 )
             Increase in inventory   (6,273 )   (48,266 )
             Increase (Decrease) in accounts payable and accrued liabilities*   (206,339 )   105,148  
             Decrease (Increase) in deposits and other assets   20,924     (157,711 )
Net Cash provided (used) by Operating Activities   (1,177,611 )   (692,733 )
             
Cash Flows from Investing Activities:            
             Acquisition of mining rights   (3,528 )   (701 )
               Restricted cash   (344,850 )   -  
             Acquisition of property plant and equipment   (13,545 )   (15,576 )
Net Cash used by Investing Activities   (361,923 )   (16,277 )
             
Cash Flows from Financing Activities:            
             Proceeds (Repayments) of promissory notes   -     -  
             Due from (repayment to) related party   93,851     (1,687 )
             Loan from related party   175,867     211,575  
             Loan (repayment) from non-related party   (145,596 )   500,000  
             Capital lease proceeds (repayment)   (105,248 )   (75,404 )
             Proceeds from secured convertible notes, net   2,520,606     -  
Net Cash Provided By Financing Activities   2,539,480     634,484  
             
Effects of foreign currency exchange rate changes   18,333     76,293  
Net Increase in Cash and Cash Equivalents   1,018,279     1,767  
Cash and Cash Equivalents at beginning of the period   300     437,124  
Cash and Cash equivalents at end of the period $  1,018,579   $  438,891  
             
Supplemental information:            
Income tax paid   Nil     Nil  
Interest paid   Nil     Nil  

The accompanying notes are an integral part of these interim consolidated financial statements.

4


CHILE MINING TECHNOLOGIES, INC.
(Formerly Latin America Ventures, Inc.)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIENCY FOR THE
THREE MONTH PERIOD
ENDED JUNE 30, 2012 AND YEAR ENDED MARCH 31, 2012
(Amounts expressed in U.S. Dollars)
(Unaudited)

                            Accumulated        
    Number of                       Other        
    common     Capital     Additional Paid           Comprehensive        

 

  shares     stock     in capital     Deficit     Income (loss)     Total  

Balance as at March 31, 2011

  9,364,593     9,365     1,822,309     (9,096,767 )   213,312     (7,051,781 )

Issue of shares due to non- performance

  697,682     697     (697 )                  

Transfer of derivative liabilities to equity

              6,608,097                 6,608,097  

 

                                   

Transfer of redeemable common stock to equity

              3,128,605                 3,128,605  

Net loss for the year

                    (3,947,128 )         (3,947,128 )

Foreign currency translation

                          (185,860 )   (185,860 )

Balance as at March 31, 2012

  10,062,275     10,062     11,558,314     (13,043,895 )   27,452     (1,448,067 )

Issue of shares due to non- performance

  107,375     107     (107 )                  

Debt discount on secured convertible notes

              1,143,154                 1,143,154  

Net loss for the period

                    (1,216,924 )         (1,216,924 )

Foreign currency translation

                          49,361     49,361  

Balance as at June 30, 2012

  10,169,650     0,169     12,701,361     (14,280,667 )   76,813     (1,472,476 )

The accompanying notes are an integral part of these interim consolidated financial statements.

5


CHILE MINING TECHNOLOGIES INC.
(Formerly Latin America Ventures, Inc.)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
(Amounts expressed in U.S. Dollars)
(unaudited)

1.

NATURE OF OPERATIONS

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with U.S. generally accepted accounting principles; however, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for a fair statement of the results for the interim periods.

The condensed consolidated financial statements should be read in conjunction with the financial statements and Notes thereto together with management’s discussion and analysis of financial condition and results of operations contained in the Company’s annual report on Form 10-K for the year ended March 31, 2012. In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments of a normal recurring nature considered necessary to fairly state the financial position of the Company at June 30, 2012 and March 31, 2012, the results of its operations for the three month periods ended June 30, 2012 and June 30, 2011, and its cash flows for the three-month periods ended June 30, 2012 and June 30, 2011. In addition, some of the Company’s statements in this quarterly report on Form 10-Q may be considered forward-looking and involve risks and uncertainties that could significantly impact expected results. The results of operations for the three-month period ended June 30, 2012 are not necessarily indicative of results to be expected for the full year.

The interim consolidated financial statements include the accounts of Chile Mining Technologies, Inc. (the “Company” or “Chile Mining” ), and its subsidiary Minera Licancabur S.A. (“Minera”) (99.99% owned by the Company). All material inter-company accounts and transactions have been eliminated.

Organization

On May 12, 2010, the Company entered into and closed a share exchange agreement (the “Share Exchange Agreement”) with Minera, a Chilean company, and its shareholders, pursuant to which the Company acquired 99.9% of the issued and outstanding capital stock of Minera in exchange for 6,000,000 shares of common stock, par value $0.001, which constituted 83.33% of the Company’s issued and outstanding capital stock on a fully-diluted basis as of and immediately after the consummation of the transactions contemplated by the Share Exchange Agreement and after giving effect to the Cancellation Agreement described below. The acquisition was accounted for as a recapitalization effected by a share exchange, wherein Minera is considered the acquirer for accounting and financial reporting purposes. The assets and liabilities of the acquired entity have been brought forward at their book value and no goodwill has been recognized.

The Company’s Chief Executive Officer (“CEO”), who is also one of the former shareholders of Minera, retained one share of Minera, constituting 0.1% of Minera’s issued and outstanding capital stock. The acquisition of Minera was structured to allow the CEO to retain one share of Minera in order to comply with Chilean legal requirements to have at least two record owners of its capital stock. Upon the closing of the Share Exchange Agreement, the CEO entered into a nominee agreement with the Company pursuant to which he agreed to act as the record holder of such share, but agreed that all other rights to the share, including the right to receive distributions on the share, vote the share and be the beneficial owner of the share, rest in the Company.

As a condition precedent to the consummation of the Share Exchange Agreement, on May 12, 2010, the Company also entered into a cancellation agreement (the “Cancellation Agreement”) with Halter Financial Investments, LP (“HFI”) and Mr. Pierre Galoppi, the controlling stockholders, whereby HFI and Mr. Galoppi agreed to the cancellation of an aggregate of 3,600,500 shares of common stock owned by them.

6


CHILE MINING TECHNOLOGIES INC.
(Formerly Latin America Ventures, Inc.)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
(Amounts expressed in U.S. Dollars)
(unaudited)

Private Placement Transaction

On May 12, 2010, the Company also completed a private placement transaction with a group of accredited investors. Pursuant to a securities purchase agreement that was entered into with the investors and Minera (the “Securities Purchase Agreement”), the Company issued to the investors an aggregate of 2,089,593 shares of common stock for an aggregate purchase price of $5,809,000, or $2.78 per share, and warrants (the “Closing Warrants”) to purchase up to 1,044,803 shares of our common stock. The Closing Warrants have a term of four years, bear an exercise price of $3.61 per share (subject to customary adjustments), are exercisable on a net exercise or cashless basis and are exercisable by investors at any time after the closing date.

Pursuant to the Securities Purchase Agreement, the Company also agreed to certain “make good” provisions. Under the “make good” provisions, the Company issued additional warrants (the “Make Good Warrants”) to the investors to purchase up to an aggregate of 2,089,593 shares of its common stock, at an exercise price of $0.01 per share, which will only become exercisable if the company does not meet certain financial performance targets in 2011 and 2012. The “make good” provisions established minimum net income thresholds of $14,382,102 and $15,179,687 for the 2011 and 2012 fiscal years, respectively. If, in a given fiscal year, 90% of the applicable minimum net income threshold is not met, such aggregate number of Make Good Warrants will become exercisable equal to the amount by which the Company’s actual net income is less than the applicable financial target, divided by the financial target, and multiplied by 2,089,593. In connection with the private placement, the Company also entered into (i) a registration rights agreement, pursuant to which the Company is obligated to register the shares of common stock issued to investors, including the shares of common stock underlying the warrants, within a pre-defined period and (ii) a closing escrow agreement, with Halter Financial Securities, Inc., as placement agent, and Securities Transfer Corporation, as escrow agent, for deposit of funds by the investors. The company also entered into lock-up agreements with each of its directors and officers, pursuant to which each of them agreed not to transfer any shares of capital stock held directly or indirectly by them for a one year period following the effective date of a registration statement covering the shares issued in connection with the private placement.

Convertible Promissory Note and Make Good Warrant

Halter Financial Group, L.P. (“HFG”) provided certain advisory services to the Company in connection with the acquisition of Minera and the private placement transaction described above. Pursuant to an advisory agreement that Minera entered into with HFG on April 16, 2009, HFG agreed to (a) advise Minera with regard to its desire to effect a combination transaction with a U.S. domiciled public shell corporation, (b) help Minera identify suitable investment bank(s) to act as placement agent for its contemplated private placement transactions and (c) counsel management on matters related to the operating a U.S. domiciled public company. Under the terms of the advisory agreement, HFG was entitled to receive a cash payment of $450,000 at the closing of the reverse acquisition of Minera. In lieu of such cash payment, HFG agreed to accept a cash payment of $260,000 and a promissory note issued by the Company in the principal amount of $190,000 that accrues simple annual interest at a rate of 3% (the “HFG Note”). The HFG Note is due and payable on the sooner of the closing of our next equity financing (including the receipt of additional funds by the Company from any subsequent closing of the May 12 private placement) or the 180th day following the date of its issuance. In addition, at any time that the HFG Note remains outstanding, it may be converted at HFG’s option into shares of our common stock at a conversion price of $2.78. At the closing, HFG was also issued a “Make Good” warrant, to purchase up to 985,104 shares of the Company’s common stock (the “HFG Make Good Warrant”). The terms of the HFG Make Good Warrant are identical to the terms of the Make Good Warrants issued to the investors in the private placement.

7


CHILE MINING TECHNOLOGIES INC.
(Formerly Latin America Ventures, Inc.)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
(Amounts expressed in U.S. Dollars)
(unaudited)

Going Concern

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. This contemplates that assets will be realized and liabilities and commitments satisfied in the normal course of business.

As shown in the accompanying financial statements, the Company has a working capital deficit of $3,726,664 and has incurred a deficit of $14,260,819 for the cumulative period to June 30, 2012. On May 8, 2012, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain accredited investors (the “Investors”), pursuant to which the Company agreed to issue and sell to the Investors (i) up to $3.5 million of eleven percent (11%) secured convertible notes (the “Notes”) and warrants to purchase the Company’s common stock. The Notes and warrants were issued in two tranches. The first tranche issued on May 8, 2012 contained (i) Notes in the aggregate original principal amount of $2,120,000 and (ii) Investor Warrants to purchase an aggregate of 530,000 shares of Common Stock, for aggregate gross proceeds of $2,120,000. The second tranche issued on June 7, 2012 contained (i) Notes in the aggregate original principal amount of $1,015,000 and (ii) Investor Warrants to purchase an aggregate of 507,500 shares of Common Stock, for aggregate gross proceeds of $1,015,000. The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations from the production of copper. Management has plans to seek additional capital through private placements and public offering of its capital stock. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Although there are no assurances that management’s plans will be realized, management believes that the Company will be able to continue operations in the future. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

2.

COMPLETION OF ACQUISITION

On May 12, 2010, Chile Mining Technologies, Inc (The “Company”) completed an acquisition of Minera pursuant to the Share Exchange Agreement. The acquisition was accounted for as a recapitalization effected by a share exchange, wherein Minera is considered the acquirer for accounting and financial reporting purposes. The assets and liabilities of the acquired entity have been brought forward at their book value and no goodwill has been recognized.

3.

PROPERTY PLANT AND EQUIPMENT


    June 30, 2012     March 31, 2012  
          Accumulated              
    Cost     Amortization     Net     Net  
    $     $     $     $  
Santa Filomena Plant   1,053,926     -     1,053,926     1,065,602  
Land-Santa Filomena Plant   50,000     -     50,000     51,146  
Ana Maria Plant and equipment   4,285,249     988,664     3,296,585     3,481,051  
Machinery under construction   164,679     -     164,679     168,454  
                         
    5,553,854     988,664     4,565,190     4,766,253  

Property Plant and Equipment is translated into U.S. Dollars using the rate of exchange prevailing at the balance sheet date. The Santa Filomena Plant is not being amortized as plant is under construction. Amortization for the period amounted to $108,754 ($115,612 in 2011)

8


CHILE MINING TECHNOLOGIES INC.
(Formerly Latin America Ventures, Inc.)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
(Amounts expressed in U.S. Dollars)
(unaudited)

4.

PROMISSORY NOTES

Promissory notes from related parties payable were unsecured and consisted of the following:

      June 30,     March 31,  
Company   Interest Rate       2012     2012  
Ivan Vergara   Nil   $  289,603   $  285,521  
Jorge Pizarro   Nil     183,016     180,437  
Geominco EIRL   Nil     1,579,108     1,556,851  
Total Long Term       $  2,051,727   $  2,022,809  

All long term liabilities are valued at fair market value at inception. These long term notes do not bear interest and had a maturity date of March 31, 2013. On May 8, 2012, the Company entered Loan Repayment Agreements (the “Repayment Agreements”) with holders of promissory notes of the Company (each, a “Lender”). Pursuant to the Repayment Agreements, each Lender agreed that the Company is entitled to defer payment, and the Lender shall not demand payment, of any amounts due under certain loans made by the Lender to the Company, and the Lender shall not commence the exercise of any remedies it may have against the Company or any of its assets arising out of the Company’s breach of its obligations under the loans until the later of: (i) twelve (12) months from the date of closing of the transactions contemplated by the Purchase Agreement, and (ii) such time as the Company reports positive net income in quarterly or annual financial statements filed with the U.S. Securities and Exchange Commission. Notwithstanding the foregoing, the deferment shall be operative only so long as any Notes remain outstanding.

The Company recognized a discount on the face value of the loans at inception to adjust the carrying value to the fair value. Fair value was calculated by using the net present value of the loans, at an assumed interest rate of 18%. The amount of the discount, being $1,404,458 was recorded in “Additional paid in capital” on the opening balance sheet.

During the year ended March 31, 2011, the promissory note holders forgave $661,552 in debt. The transaction was accounted for as a capital transaction with related parties and the company credited ‘Additional paid in capital’ with $661,552.

In addition, the Company credited additional paid in capital with $13,835 (refer to Note 8 (c))

On May 8, 2012, the Company entered Loan Repayment Agreements (the “Repayment Agreements”) with holders of promissory notes of the Company (each, a “Lender”). Pursuant to the Repayment Agreements, each Lender agreed that the Company is entitled to defer payment, and the Lender shall not demand payment, of any amounts due under certain loans made by the Lender to the Company, and the Lender shall not commence the exercise of any remedies it may have against the Company or any of its assets arising out of the Company’s breach of its obligations under the loans until the later of: (i) twelve (12) months from the date of closing of the transactions contemplated by the Purchase Agreement, and (ii) such time as the Company reports positive net income in quarterly or annual financial statements filed with the U.S. Securities and Exchange Commission. Notwithstanding the foregoing, the deferment shall be operative only so long as any Notes remain outstanding.

The discounts are being amortized over the lives of the promissory notes using the effective interest method, with interest expense being recorded as an expense in the related period. The Company recognized interest expense to amortize discounts on promissory notes to related parties for the three month period ended June 30, 2012 in the amount of $76,563 ($80,847 in 2011).

9


CHILE MINING TECHNOLOGIES INC.
(Formerly Latin America Ventures, Inc.)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
(Amounts expressed in U.S. Dollars)
(unaudited)

5.

RELATED PARTY

a) As of June 30, 2012, the Company has loans payable to related parties for $712,505 (2011: $329,112). Loan for $149,202 is unsecured, free of interest and was payable on March 31, 2012. The balance loan for $563,303 is unsecured, free of interest and was payable on demand. On May 8, 2012, the Company entered Loan Repayment Agreements (the “Repayment Agreements”) with related parties of the Company (each, a “Lender”). Pursuant to the Repayment Agreements, each Lender agreed that the Company is entitled to defer payment, and the Lender shall not demand payment, of any amounts due under certain loans made by the Lender to the Company, and the Lender shall not commence the exercise of any remedies it may have against the Company or any of its assets arising out of the Company’s breach of its obligations under the loans until the later of: (i) twelve (12) months from the date of closing of the transactions contemplated by the Purchase Agreement, and (ii) such time as the Company reports positive net income in quarterly or annual financial statements filed with the U.S. Securities and Exchange Commission. Notwithstanding the foregoing, the deferment shall be operative only so long as any Notes remain outstanding.

During the quarter, the Company paid salaries of $9,617 ($7,998 in 2011) to parties that are related to the shareholder of the Company.

During the quarter, the Company expensed fees to three directors for $5,000 each and $18,800 to the CFO. The expense for the CFO includes commitment to issue 4,000 shares of common stock.

During the quarter, the Company had equipment rental and consulting expenses of $218,583 (2011: $240,751) to a related party, a party related by virtue of companies under common control.

During the quarter the Company paid a total of $62,700 as Co-placement agent fee and reimbursed expenses for $46,094 to Halter Financial Securities, Inc., a Company in which a director has an interest. The fee and reimbursement of expense were netted from the proceeds of $3,135,000 from secured convertible notes and warrants to purchase the Company’s common stock (see note 9)

The transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties under common control

b) The company owes the following amounts to related parties:

Included in accounts payable and accrued liabilities are amounts owing for services provided by two directors for $Nil (2011 $42,500)

As of June 30, 2012 the Company owes Geominco E.I.R.L., a related party for $1,891,485. This advance was unsecured non-interest bearing and due on demand. On May 8, 2012, the Company entered Loan Repayment Agreements (the “Repayment Agreements”) with related parties of the Company (each, a “Lender”). Pursuant to the Repayment Agreements, each Lender agreed that the Company is entitled to defer payment, and the Lender shall not demand payment, of any amounts due under certain loans made by the Lender to the Company, and the Lender shall not commence the exercise of any remedies it may have against the Company or any of its assets arising out of the Company’s breach of its obligations under the loans until the later of: (i) twelve (12) months from the date of closing of the transactions contemplated by the Purchase Agreement, and (ii) such time as the Company reports positive net income in quarterly or annual financial statements filed with the U.S. Securities and Exchange Commission. Notwithstanding the foregoing, the deferment shall be operative only so long as any Notes remain outstanding.

10


CHILE MINING TECHNOLOGIES INC.
(Formerly Latin America Ventures, Inc.)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
(Amounts expressed in U.S. Dollars)
(unaudited)

6.

CAPITAL STOCK

Authorized

Preferred Stock; $0.001 par value 10,000,000 shares authorized
Common Stock: $0.001 par value 100,000,000 shares authorized

Issued

Preferred Stock: None issued and outstanding
Common Stock: 10,169,650 common shares (March 2012: 10,062,275 common shares)

On May 12, 2010, the Company entered into and closed the Share Exchange Agreement with Minera and its shareholders, pursuant to which the Company acquired 99.9% of the issued and outstanding capital stock of Minera in exchange for 6,000,000 shares of common stock, par value $0.001, which constituted 83.33% of the Company’s issued and outstanding capital stock on a fully-diluted basis as of and immediately after the consummation of the transactions contemplated by the Share Exchange Agreement and after giving effect to the Cancellation Agreement.

As a condition precedent to the consummation of the Share Exchange Agreement, on May 12, 2010, the Company also entered into the Cancellation Agreement HFI and Mr. Pierre Galoppi, the controlling stockholders, whereby HFI and Mr. Galoppi agreed to the cancellation of an aggregate of 3,600,500 shares of common stock owned by them.

On May 6, 2010, the Company entered into a letter agreement that outlined the proposed terms of a standby facility of credit with AIBC International Corp.(SR), or AIBC. Under the letter agreement, the Company could request an advance from AIBC for up to an aggregate of $3 million, subject to satisfaction of certain conditions. In connection with the execution of the letter agreement, the Company issued to AIBC 75,000 shares of common stock.

On May 12, 2010, the Company also completed a private placement transaction with a group of accredited investors. Pursuant to the Securities Purchase Agreement that was entered into with the investors and Minera, the Company issued to the investors an aggregate of 2,089,593 shares of common stock for an aggregate purchase price of $5,809,000, or $2.78 per share, and the Closing Warrants to purchase up to 1,044,803 shares of common stock. The Closing Warrants have a term of four years, bear an exercise price of $3.61 per share (subject to customary adjustments), are exercisable on a net exercise or cashless basis and are exercisable by investors at any time after the closing date (refer note 8 (b)).

Pursuant to the Securities Purchase Agreement, the Company also agreed to certain “make good” provisions. Under the “make good” provisions, the Company issued additional warrants (the “Make Good Warrants”) to the investors to purchase up to an aggregate of 2,089,593 shares of its common stock, at an exercise price of $0.01 per share, which will only become exercisable if the company does not meet certain financial performance targets in 2011 and 2012. The “make good” provisions established minimum net income thresholds of $14,382,102 and $15,179,687 for the 2011 and 2012 fiscal years, respectively. If, in a given fiscal year, 90% of the applicable minimum net income threshold is not met, such aggregate number of Make Good Warrants will become exercisable equal to the amount by which the Company’s actual net income is less than the applicable financial target, divided by the financial target, and multiplied by 2,089,593.Halter Financial Group, L.P. (“HFG”) provided certain advisory services to the Company in connection with the acquisition of Minera and the private placement transaction. At the closing, HFG was also issued a “Make Good” warrant, to purchase up to 985,104 shares of the Company’s common stock (the “HFG Make Good Warrant”). The terms of the HFG Make Good Warrant are identical to the terms of the Make Good Warrants issued to the investors in the private placement.

11


CHILE MINING TECHNOLOGIES INC.
(Formerly Latin America Ventures, Inc.)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
(Amounts expressed in U.S. Dollars)
(unaudited)

The Company was unable to meet minimum income thresholds in 2011 and again in 2012. The Company is obligated to issue 3,074,698 common shares on a cashless basis to meet the “make good” provisions of the “Make Good Warrants’. The Company transferred $6,608,097 from derivative liabilities to the credit of additional paid in capital (see note 8 (c)) . In addition the Company transferred $3,128,605 from redeemable common stock to additional paid in capital (see note 8(b)). As of March 31, 2012 the Company had issued 697,682 common shares for exercise of 809,104 make good warrants on a cashless basis. In addition, during the quarter ended June 30, 2012, the Company issued 107,375 common shares for exercise of 107,915 make good warrants on a cashless basis.

7.

IMPAIRMENT OF MINING RIGHTS

Except for the mining sites currently being exploited, all other mining rights obtained by the Company have been expensed, since the Company currently has no formal plan to exploit these mineral rights.

8(a) DERIVATIVE FINANCIAL INSTRUMENTS

Derivative financial instruments, as defined in FASB Accounting Standards Codification (“ASC”) 815-10-15-83 Derivatives and Hedging, consist of financial instruments or other contracts that contain a notional amount and one or more underlying (e.g. interest rate, security price or other variable), require no initial net investment and permit net settlement. Derivative financial instruments may be free-standing or embedded in other financial instruments. Further, derivative financial instruments are initially, and subsequently, measured at fair value and recorded as liabilities or, in rare instances, assets.

The Company generally does not use derivative financial instruments to hedge exposures to cash-flow, market or foreign-currency risks. However, the Company has entered into certain other financial instruments and contracts, such as secured convertible debenture and warrant financing arrangements that are either (i) not afforded equity classification or (ii) embody risks not clearly and closely related to host contracts. As required by ASC 815, these instruments are required to be carried as derivative liabilities, at fair value, in the financial statements.

The following table summarizes the components of the derivative liabilities as of June 30, 2012 and inception of the instruments:

          Inception  
May 2010 Private Placement:   June 30, 2012     May 12, 2010  
Investor warrants $  -   $  1,519,144  
Broker warrants   -     273,442  
Credit facility warrants   -     523,440  
Make Good warrants   -     131,891  
Acquisition advisory fees:            
Make Good warrants   -     62,176  
Total derivative liabilities $  -   $  2,510,093  

At inception, warrants were classified as liabilities due to the fact that they were considered not to be indexed to the company’s own stock and due to the firm registration rights embodied in the agreements. At March 31, 2012 all variability and rights resulting in liability classification were removed and the instruments were re-measured and reclassified to equity.

The following table summarizes the common shares indexed to the derivative instruments as of June 30, 2012 and inception of the instruments:

12


CHILE MINING TECHNOLOGIES INC.
(Formerly Latin America Ventures, Inc.)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
(Amounts expressed in U.S. Dollars)
(unaudited)

          Inception  
May 2010 Private Placement:   June 30, 2012     May 12, 2010  
Investor warrants   -     1,044,803  
Broker warrants   -     188,062  
Credit facility warrants   -     360,000  
Make Good warrants   -     47,597  
Acquisition advisory fees:            
Make Good warrants   -     22,438  
    -     1,662,900  

Make Good warrants indexed to 1,537,349 shares of common stock vested when the Company did not meet the performance condition as of March 31, 2011 and additional Make Good warrants indexed to 1,537,349 shares of common stock vested when the Company did not meet the March 31, 2012 performance condition. At March 31, 2012 all variability and rights resulting in liability classification were removed and the instruments were remeasured and reclassified to equity

8(b) MAY 2010 PRIVATE PLACEMENT

On May 12, 2010, the Company commenced a private placement of (i) 2,089,593 shares of common stock for an aggregate purchase price of $5,809,000, or $2.78 per share, (ii) Closing Warrants to purchase up to 1,044,803 shares of common stock, and (iii) Make Good Warrants to purchase up to an aggregate of 2,089,593 shares of common stock (the “May 2010 Private Placement). In connection with the May 2010 Private Placement, the Company entered into a Registration Rights Agreement related to the common stock and warrants that requires the Company to, among other things, file a Registration Statement within 65 days from the closing of the May 2010 Private Placement and achieve effectiveness as soon as possible , but in no event later than the 180th day following the Final Closing Date or the 5th trading day following the date on which the Company is notified that the initial Registration Statement will not be reviewed or is no longer subject to review and comments. The Registration Rights Agreement does not provide for an alternative or contain a penalty in the event the Company is unable to fulfill its requirements. As a result of the registration rights obligation to file within a specified period, which is presumed not to be within the Company’s control, the Company is required to classify the common stock outside of stockholders’ equity as redeemable common stock. At March 31, 2012 the Company reclassified these securities to permanent equity due to the fact that the registration requirement had been met.

The Closing warrants included in the May 2010 Private Placement are indexed to 1,044,803 shares of the Company’s common stock and may be exercised until the fourth anniversary of their issuance at an exercise price of $3.61 per share. Pursuant to the Securities Purchase Agreement, the Company also agreed to issue Make Good warrants to investors to purchase up to an aggregate amount of 2,089,593 shares of its common stock at an exercise price of $0.01 per share which became exercisable when the Company did not meet certain financial performance targets in 2011 and 2012. The “make good” provisions established minimum net income thresholds of $14,382,102 and $15,179,687 for the 2011 and 2012 fiscal years, respectively. If, in a given fiscal year 90% of the applicable minimum net income threshold was not met, such aggregate number of Make Good warrants became exercisable equal to the amount by which the Company’s actual net income was less than the applicable financial target, divided by the financial target, and multiplied by 50% of the total warrant shares underlying the warrant agreement. The Closing and Make Good warrants were evaluated under the guidance of ASC 480, Distinguishing Liabilities and Equity for purposes of their classification. Due to the Make Good warrants contingent exercise provisions, they did not meet the definition of “indexed to a Company’s own stock” and were required to be classified as liabilities and measured at inception and an ongoing basis at fair value. As of March 31, 2012 the Make Whole warrants were no longer contingently exercisable and the registration rights agreement had been fulfilled. Accordingly, at March 31, 2012, the warrants met the 8 conditions for equity classification provided in ASC 815-40 and were revalued and reclassified to equity.

13


CHILE MINING TECHNOLOGIES INC.
(Formerly Latin America Ventures, Inc.)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
(Amounts expressed in U.S. Dollars)
(unaudited)

The total basis in the financing was allocated first to derivative instruments, required to be classified as liabilities with the remaining basis being allocated to the common stock

The following table illustrates the initial allocation:

          Financing        
    Proceeds     Cost     Final  
    Allocation     Allocation     Allocation  
Gross proceeds $  5,809,000   $  -   $  5,809,000  
Financing costs paid in cash   -     (522,810 )   (522,810 )
    5,809,000     (522,810 )   5,286,190  
Derivative liabilities:                  
  Closing warrants:                  
     Investor warrants   (1,519,144 )         (1,519,144 )
     Broker warrants         (273,442 )   (273,442 )
     Credit facility warrants         (523,440 )   (523,440 )
  Make Good warrants   (131,891 )         (131,891 )
                       Total derivative liabilities   (1,651,035 )   (796,882 )   (2,447,917 )
                   
Redeemable common stock   (4,157,965 )   -     (4,157,965 )
  Financing costs paid in cash         407,792     407,792  
  Financing costs paid with warrants         621,568     621,568  
                       Total redeemable common stock   (4,157,965 )   1,029,360     (3,128,605 )
                   
Deferred finance costs $  -   $  290,332   $  290,332  

The Company amortized deferred finance cost by $27,275 during the quarter ended June 30, 2012. Deferred finance costs outstanding as of June 30, 2012 relating to this financing is $ 81,043.

The direct financing costs are allocated to the financial instruments (redeemable common stock and warrants), based upon their relative fair values. Amounts related to the warrants are recorded as deferred finance costs and amortized through charges to interest expense over the term of the arrangement using the effective interest method while amounts related to the common stock directly offset the carrying value of the redeemable common stock.

8(c) CONVERTIBLE PROMISSORY NOTE AND MAKE GOOD WARRANT

HFG provided certain advisory services to the Company in connection with the acquisition of Minera and the May 2010 Private Placement. Pursuant to an advisory agreement that Minera entered into with HFG on April 16, 2009, HFG agreed to (a) advise Minera with regard to its desire to effect a combination transaction with a U.S. domiciled public shell corporation, (b) help Minera identify suitable investment bank(s) to act as placement agent for its contemplated private placement transactions and (c) counsel management on matters related to the operating a U.S. domiciled public company. Under the terms of the advisory agreement, HFG was entitled to receive a cash payment of $450,000 at the closing of the reverse acquisition of Minera. In lieu of such cash payment, HFG agreed to accept a cash payment of $260,000 and the HFG Note in the principal amount of $190,000 that accrues simple annual interest at a rate of 3%. The HFG Note is due and payable on the sooner of the closing of the next equity financing (including the receipt of additional funds by the Company from any subsequent closing of the May 12 private placement) or the 180th day following the date of its issuance. In addition, at any time that the HFG Note remains outstanding, it may be converted at HFG’s option into shares of our common stock at a conversion price of $2.78.

14


CHILE MINING TECHNOLOGIES INC.
(Formerly Latin America Ventures, Inc.)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
(Amounts expressed in U.S. Dollars)
(unaudited)

The Company has evaluated the terms and conditions of the HFG Note under the guidance of ASC 815, Derivatives and Hedging. The embedded conversion feature (“ECF”) is an equity-linked feature that is not clearly and closely related to the risks of the host debt instrument. However, current accounting standards afforded an exemption to bifurcation of the ECF because it is both indexed to the Company’s own stock and otherwise met the definition of Conventional Convertible based upon the fixed conversion price.

At the closing, the Company had also issued to HFG the HFG Make Good Warrant for the purchase of up to 985,104 shares of common stock. The terms of the HFG Make Good Warrant are identical to the terms of the Make Good Warrants issued to the investors in the private placement and accordingly, they did not meet the definition of “indexed to a Company’s own stock” and were required to be classified as liabilities and measured at inception and an ongoing basis at fair value. As of June 30, 2012, HFG had exercised warrants for 492,552 common shares.

The fair value of the HFG Note was estimated based upon the present value of its future cash flows, using credit risk adjusted rates, as enhanced by the fair value of the ECF. Since the Company does not have an established credit rating, the credit risk adjusted yield of 15.51% was determined by reference to comparable instruments in public markets and industry-specific risk. The fair value of the ECF was determined using the Monte Carlo Simulation (“MCS”). MCS is an option-based model that embodies assumptions that would likely be considered by market participants who trade the financial instrument. In addition to more traditional assumptions, such as stock price, trading volatilities and risk-free rates, MCS assumptions include credit risk, interest risk and redemption considerations. Significant assumptions included in the MSC valuation technique were as follows:

    Assumption  
Linked common shares   68,345  
Stock price $  2.78  
Expected life (years)   4.00  
Volatility (based on peers)   58.24%- 63.55%  
Risk adjusted yield   15.51%- 16.94%  
Risk adjusted interest rate   1.52%- 1.65%  

The advisory fee expense was determined based upon the fair value of the HFG Note and the HFG Make Good Warrants. In accordance with APB 14, the premium on the HFG Note, representing the difference between the fair value and the face value of the note, was recorded to additional paid in capital.

On May 8, 2012, the Company also entered Loan Repayment Agreements (the “Repayment Agreements”) with HBG ( “Lender”). Pursuant to the Repayment Agreements, Lender agreed that the Company is entitled to defer payment, and the Lender shall not demand payment, of any amounts due under certain loans made by the Lender to the Company, and the Lender shall not commence the exercise of any remedies it may have against the Company or any of its assets arising out of the Company’s breach of its obligations under the loans until the later of: (i) twelve (12) months from the date of closing of the transactions contemplated by the Purchase Agreement, and (ii) such time as the Company reports positive net income in quarterly or annual financial statements filed with the U.S. Securities and Exchange Commission. Notwithstanding the foregoing, the deferment shall be operative only so long as any Notes remain outstanding.

The following table illustrates the initial allocation:

    Initial  
  Allocation  
Convertible Promissory Note $  190,000  
Make Good warrants   62,176  
Additional paid in capital   13,835  
Total $  266,011  

15


CHILE MINING TECHNOLOGIES INC.
(Formerly Latin America Ventures, Inc.)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
(Amounts expressed in U.S. Dollars)
(unaudited)

9.

SECURED CONVERTIBLE NOTES

$3,135,000 Face Value Secured Convertible Notes

On May 8, 2012, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain accredited investors (the “Investors”), pursuant to which the Company agreed to issue and sell to the Investors (i) up to $3.5 million of eleven percent (11%) secured convertible notes (the “Notes”) and warrants to purchase the Company’s common stock. The Notes and warrants were issued in two tranches. The first tranche issued on May 8, 2012 contained (i) Notes in the aggregate original principal amount of $2,120,000 and (ii) Investor Warrants to purchase an aggregate of 530,000 shares of Common Stock, for aggregate gross proceeds of $2,120,000. The second tranche issued on June 7, 2012 contained (i) Notes in the aggregate original principal amount of $1,015,000 and (ii) Investor Warrants to purchase an aggregate of 507,500 shares of Common Stock, for aggregate gross proceeds of $1,015,000. The notes are payable quarterly in arrears on March 31, June 30, September 30 and December 31, with the initial payment due on September 30, 2012. The Notes mature on May 8, 2017. The notes are convertible at the option of the holder at any time on or prior to the Maturity Date into shares of Common Stock at a conversion price of $2.00 per share (subject to appropriate adjustments for any stock dividend, stock split, stock combination, reclassification or similar transaction after the issuance date). The Investor Warrants have a strike price of $2.00 per share (subject to appropriate adjustments for any stock dividend, stock split, stock combination, reclassification or similar transaction after the issuance date). The Investor Warrants are immediately exercisable, on a net exercise or cashless basis, and have a term of five years.

Accounting for the Financing:

The Company has evaluated the terms and conditions of the convertible notes and warrants under the guidance of ASC 815, Derivatives and Hedging. The conversion features meet the definition of conventional convertible for purposes of applying the conventional convertible exemption. The definition of conventional contemplates a limitation on the number of shares issuable under the arrangement. The notes are convertible into a fixed number of shares and there are no down round protection features contained in the contracts. Since the convertible notes achieved the conventional convertible exemption, the Company was required to consider whether the hybrid contracts embody a beneficial conversion feature. The calculation of the effective conversion amount did not result in a beneficial conversion feature. Additionally, the warrants did not contain any terms or feature that would preclude equity classification.

The purchase price allocation for the convertible notes resulted in a debt discount of $1,143,154. The discount on the notes will be amortized through periodic charges to interest expense over the term of the debenture using the effective interest method. Imputed interest expense amounted to $29,842 during the three month period ended June 30, 2012. In addition, amortization of deferred finance charges amounted to $17,833 for the three month period ended June 30, 2012. The purchase price allocation is as follows:

    Inception  
Net proceeds $  2,520,606  
Carrying value (fair value of debt component)   (1,991,846 )
Paid in capital (warrants)   (1,143,154 )
Financing fees   614,394  

16


CHILE MINING TECHNOLOGIES INC.
(Formerly Latin America Ventures, Inc.)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
(Amounts expressed in U.S. Dollars)
(unaudited)

Significant assumptions included in the MSC valuation technique to determine the fair value of the debt component were as follows:

    Assumption  
Linked common shares   1,037,500  
Stock price $  2.20  
Expected life (years)   5.00  
Volatility (based on peers)   58.43%-83.82%  
Risk adjusted interest rate   0.15%-0.77%  

10.

SEGMENT INFORMATION

As at June 30, 2012 the Company operated in one reportable segment, being the exploration for and the development of mining rights in the Republic of Chile.

11.

CAPITAL MANAGEMENT

The Company manages its capital structure and makes adjustments to it, based on the funds available to the Company, in order to maintain its daily operations. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s management to sustain the future development of the business.

The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. The Company upon approval from its Board of Directors will balance its overall capital structure through new share issues or by undertaking other activities as deemed appropriate under the specific circumstances. As such, the Company is dependent on external financing to fund its daily operations. In order to procure materials and pay for administrative costs, the Company will spend its existing working capital and raise additional amounts as needed.

Management reviews its capital management approach on an ongoing basis and believes that this approach, given the foregoing paragraph and the relative size of the Company, is reasonable.

There were no changes in the Company’s approach to capital management during the quarter ended June 30, 2012.

12.

INVENTORY

The quantity of material in ore on the leach pad is based on surveyed volumes of mined material. Sampling and assaying determine the estimated amount of copper contained in material delivered to the leach pad. As at June 30, 2012 the amount of copper contained in material delivered to the leach pad is at a level of 1%.Expected copper recovery rates are determined using small-scale laboratory tests, historical trends and other known factors, including mineralogy of the ore and rock type. The ultimate recovery of copper contained in leach stockpiles can vary from a very low percentage to over 90 percent depending on several variables, including type of processing, metallurgical processes and mineralogy. As at June 30, 2012 the amount of inventory on balance sheet represents supplies inventory only.

13.

SUNDRY ASSETS AND OTHER RECEIVABLES


    June 30,2012     March 31,2012  
Employee and other advances $  36,362   $  3,940  

17


CHILE MINING TECHNOLOGIES INC.
(Formerly Latin America Ventures, Inc.)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
(Amounts expressed in U.S. Dollars)
(unaudited)

14.

DEPOSITS AND OTHER ASSETS


    June 30, 2012     March 31,2012  
Navidad (Arica) project $  401,856   $  560,000  
Narnia project   71,881        
Value added taxes (“VAT”)   421,171     376,638  
Equipment deposit   64,621     66,101  
  $  959,529   $  1,002,739  

In November 2010, Minera signed a ten year lease with an option to purchase for two properties owned by Mr. Santiago Lay in Arica, Republic of Chile. Minera would be obligated to pay a total monthly rent of $32,051 for the first 12 months (15 million Chilean Pesos) which will be adjusted and offset with future royalty payments. The Royalty established was equivalent to ten percent of the net value of the ore to be extracted and sold, metallic or nonmetallic, taking as reference the rates established by ENAMI monthly. However, Minera, at its full cost, considered installing a plant to process the ore extracted. The royalty was to be paid monthly, starting in month thirteen counted from the signing of the contract. All direct and indirect expenses related to the program of exploration, conceptual study and feasibility study will be at the total and exclusive charge of Minera and not adjustable with the rent or royalty.

Minera only paid two months of the actual minimum rent and therefore failed to deliver on the remaining balance owed on the purchase of the property. As a result of this agreement lapsing, the option to purchase this property was nullified and subsequent to the year end Minera let this agreement lapse. On May 19, 2012, Minera signed an agreement with Santiago Lay releasing it from any liabilities and future payments due from this agreement. With this agreement, Mr. Lay agreed to repay deposits paid by Minera as well as provide partial compensation for the work and studies performed on this property to a maximum of $560,000. Minera and Mr. Lay agreed to use this compensation to repay Minera’s loan of $500,000 with interest of $60,000 payable to Exportadora e Importadora Bengolea (Bengolea). In accordance with the final contract, Mr. Lay is currently repaying this loan directly to Bengolea.

On June 28, 2012 Minera contracted with Narnia Uno Al Las Veinte to acquire 90 hectares of mining property located in the Commune of Illapel for a total purchase price of $222,000 (CLP112, 000,000). All rights to the property belonged to the seller and the property was properly registered under the Conservatory of Mines of the City of Illapel (ROL #43011253-8). All properties and rights will transfer from seller to buyer provided price of CLP 112,000,000 is met. As of June 30, 2012, Minera had made payments totaling $64,000 (CLP 32,000,000 ) toward the purchase price and incurred an additional $7,881 expenses related to the acquisition. Additional monthly payments will be made through February 2013 to complete the sale.

Value added tax balance represents net VAT recoverable which may be refunded or applied toward future corporate tax liability.

15.

LOAN FROM NON RELATED PARTY

During the year ended March 31, 2012, Minera received a loan from Exportadora e Importadora Bengolea (Bengolea), a non-related party for $500,000 for additional working capital. This loan is free of interest and payable in six monthly equal installments commencing six months after the receipt of loan. Minera will be obligated to pay interest at 10% per annum in the event of default. The Company defaulted on the loan and in settlement of the $500,000, Bengolea agreed to accept a one-time payment of interest of $60,000. On May 19, 2012 Minera finalized an agreement between one of its debtors and Bengolea that released Minera from this loan through repayment of the loan with accrued interest (refer to Note 14).

18


CHILE MINING TECHNOLOGIES INC.
(Formerly Latin America Ventures, Inc.)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
(Amounts expressed in U.S. Dollars)
(unaudited)

16.

COMMITMENTS

During the year ended March 31, 2012, the Company received a loan from Exportadora e Importadora Bengolea (Bengolea), a non-related party for $500,000 for additional working capital. Associated with this loan, the company was committed to supply 100MT of cathodes per month to a customer for a period of 12 months for a total of 1,200MT commencing May, 2011. The selling prices are based on London metal prices less 8% commission. Any short supply will be carried forward to next month until the supply of 1,200MT is complete. As of March 31, 2012, the Company did not supply any cathodes and since the production from the Ana Maria plant was significantly limited Bengolea agreed to void the loan conditions for a full refund of their money plus a one-time payment of interest of $60,000. On May 19, 2012 the Company finalized an agreement between one of its debtors and Bengolea that released the Company from this loan through repayment of the loan with accrued interest (refer to Note 14).

17.

FAIR VALUE OF FINANCIAL INSTRUMENTS AND RISK FACTORS

The fair value of a financial instrument is the estimated amount that the Company would receive or pay to settle the financial assets and financial liabilities as at the reporting date. The book value of sundry assets and other receivables, deposits and other assets, accounts payable and accrued liabilities, and due to related party approximate fair values at the balance sheet dates.

The fair value of the long-term debt has been estimated by discounting future cash flows at a rate offered for debt of similar maturities and credit quality.

All financial instruments except for derivative financial instruments and cash and cash equivalent are classified as level 3. Both cash and cash equivalents and derivative financial instruments are classified as level 3.

      June 30, 2012     March 31, 2012  
      Carrying           Carrying        
Assets/Liabilities     Value     Fair Value     Value     Fair Value  
Cash and cash equivalents   $  1,018,579     1,018,579    $ 300     300  
Restricted cash   $  344,850   $ 344,850    $     -  
                           
Sundry assets and other receivables   $  36,362   $ 36,362   $ 3,940   $  3,940  
Accounts payable and accrued liabilities   $  1,478,523   $ 1,478,523    $ 1,721,650   $  1,721,650  
Due to related party   $  1,891,485   $ 1,891,485    $ 1,838,836   $  1,838,836  
Loan from related party   $  712,505    $ 712,505   $ 548,938    $ 548,938  
                           
Loan from non related party   $  401,856    $ 401,856   $ 560,000    $ 560,000  
                           
Convertible promissory note   $  190,000   $ 190,000   $ 190,000    $ 190,000  
                           
Promissory notes   $  2,051,727   $ 2,051,727    $ 2,2022,809    $ 2,2022,809  
                           
Secured convertible notes   $  2,021,688   $ 2,021,688     -     -  

19


CHILE MINING TECHNOLOGIES INC.
(Formerly Latin America Ventures, Inc.)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
(Amounts expressed in U.S. Dollars)
(unaudited)

Interest rate risk

The company’s exposure to interest rate fluctuations is not significant.

Credit risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of amounts receivable. The Company is not exposed to material losses on its accounts receivable and future revenues.

Commodity price risk

The ability of the Company to develop its properties and the future profitability of the Company is directly related to the market price of certain minerals. The Company does not currently use derivative financial instruments to reduce its exposure to commodity price risk.

Liquidity risk

The Company’s exposure to liquidity risk is dependent on the collection of amounts receivable and the ability to raise funds to meet purchase commitments and to sustain operations. The company controls its liquidity risk by managing working capital and cash flows.

Foreign currency risk

The Company is exposed to foreign currency risk as substantially all of the Company’s cash is denominated in Chilean Pesos. This risk is partially mitigated by the fact that a significant portion of the costs associated with the mining claims and deferred exploration expenditures are incurred in Chilean Pesos.

18.

RESTRICTED CASH

On May 8, 2012, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain accredited investors (the “Investors”), pursuant to which the Company agreed to issue and sell to the Investors (i) up to $3.5 million of eleven percent (11%) secured convertible notes (the “Notes”), which mature on the five year anniversary of the date of issuance and shall be convertible into shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at $2.00 per share (subject to adjustment) and (ii) warrants (the “Investor Warrants,” and together with the Notes, the “Securities”) to purchase such number of shares of Common Stock equal to fifty percent (50%) of the number of shares of Common Stock that the Notes purchased by the Investors may be convertible into, at an exercise price of $2.00 per share (subject to adjustment).

On May 8, 2012, the Company completed an initial closing pursuant to the Purchase Agreement in which the Company issued and sold to Investors (i) Notes in the aggregate original principal amount of $2,120,000 and (ii) Investor Warrants to initially purchase an aggregate of 530,000 shares of Common Stock, for aggregate gross proceeds of $2,120,000.

On June 7, 2012, the Company completed its second and final closing pursuant to the Purchase Agreement in which the Company issued and sold to investors (i) Notes in the aggregate original principal amount of $1,015,000 and (ii) investor Warrants to purchase an aggregate of 507,500 shares of Common Stock, for an aggregate gross proceeds of $1,015,000.

20


CHILE MINING TECHNOLOGIES INC.
(Formerly Latin America Ventures, Inc.)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
(Amounts expressed in U.S. Dollars)
(unaudited)

As a result of the two closings, the Company issued and sold to investors a total amount of $3,135,000 in notes and warrants to purchase a total of 1,037,500 shares of Common Stock. In accordance with these agreements, the Company must keep the equivalent of one year worth of interest payments in an escrow account at all times. As interest payments become due, the Company must continually maintain one years worth of payments in the escrow account and as such cannot use this for any other purpose.

21



ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Special Note Regarding Forward Looking Statements

In addition to historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We use words such as “believe,” “expect,” “anticipate,” “project,” “target,” “plan,” “optimistic,” “intend,” “aim,” “will” or similar expressions which are intended to identify forward-looking statements. Such statements include, among others, those concerning market and industry segment growth and demand and acceptance of new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those identified in Item 1A “Risk Factors” included in our Annual Report on Form 10-K for the year ended March 31, 2012, as well as assumptions, which, if they were to ever materialize or prove incorrect, could cause the results of the Company to differ materially from those expressed or implied by such forward-looking statements.

Readers are urged to carefully review and consider the various disclosures made by us in this report and our other filings with the SEC. These reports attempt to advise interested parties of the risks and factors that may affect our business, financial condition and results of operations and prospects. The forward-looking statements made in this report speak only as of the date hereof and we disclaim any obligation, except as required by law, to provide updates, revisions or amendments to any forward-looking statements to reflect changes in our expectations or future events.

Use of Terms

Except where the context otherwise requires and for the purposes of this report only, references in this report to:

  • “Company,” “we,” “us,” or “our,” are to the combined business of CMT and its 99.9% owned subsidiary, Minera, but do not include the stockholders of CMT;
  • “CMT” are to Chile Mining Technologies Inc., a Nevada corporation;
  • “Minera” are to Sociedad Minera Licancabur, S.A., a Chilean company;
  • “Chile” and “Chilean” are to the Republic of Chile;
  • “Peso” are to the Chilean peso, the legal currency of Chile;
  • “U.S. dollar,” “$” and “US$” are to the legal currency of the United States.
  • “SEC” are to the United States Securities and Exchange Commission;
  • “Securities Act” are to the Securities Act of 1933, as amended;
  • “Exchange Act” are to the Securities Exchange Act of 1934, as amended;
  • “Exploration” means the process of locating commercially viable concentrations of minerals to mine; and
  • “Exploitation” means the act of extracting a mineral resource from source material.

Overview

We are a mineral extraction company based in the Republic of Chile, with copper as our principal “pay metal.” Our founders, Messrs. Jorge Osvaldo Orellana Orellana and Jorge Fernando Pizarro Arriagada, have refined the electrowin process in a way that permits it to be used at a relatively small mine and/or tailings sites. Electrowinning is a process in which positive and negative electrodes are placed in an acidic solution containing copper ions, and an electric current passed through the solution causes the copper to be deposited on the negative electrodes so that it can be collected.

We have obtained rights to conduct our mineral extraction operations at several sites in and around the Coquimbo region, which is located in north-central Chile, approximately 400 kilometers north of Santiago. While these sites each have their own mineral deposits, we will procure the majority of our source material from non-traditional sources, including tailings, ore, or a combination thereof, by purchasing rights to such source material at smaller sites, where it is not economical for larger open-pit mining companies to operate, due largely to the transportation costs associated with moving source materials to fixed processing sites.

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By utilizing Minimum Intrusion Non-traditional Input, or MINI, plants, we are able to build scalable, less expensive plants closer to source material deposits, thereby resulting in significant processing savings. In addition, since smaller sites generally require higher copper prices, due to transportation costs, to operate profitably, these deposits can currently be purchased at a discount. By utilizing this strategy, we are able to reduce costs and operate profitably with smaller deposits.

The initial design capacity of each MINI plant is between approximately 1,200 and 2,000 metric tons of annual copper cathode output. Each MINI plant can be expanded on a modular basis in increments of 1,500 metric tons. We believe that the installed cost for a new 1,500 metric ton MINI plant, with the ability to produce tailings, at the average location, is about $3,000,000, or $2,000 per metric ton of annual capacity. Expanding the capacity of an existing MINI plant will cost between $400 and $800 per metric ton, depending on the site. Once the available source material deposits at and around the site of an existing MINI plant have been depleted, we anticipate that we can recover up to 70% of the cost of constructing a new MINI plant by relocating the support structures and processing equipment from the original MINI plant.

By reducing unit costs and carefully managing the average source material grade, we estimate that the MINI plant technology will allow us to break even at copper prices as low as US$1.00 per pound, or US$2,205 per metric ton. As of August 13, 2012, copper was trading at $7,495 per metric ton on the London Metals Exchange, or LME. As the price of finished copper has increased, however, there has been increased interest in raw copper ore from a number of “higher cost” producers that can increase their production volumes by buying ore in the market from small miners. Historically, these producers would not have been interested in raw ore purchases, as they could not generate profits at lower finished copper prices. However the increase in finished copper prices has made third-party purchase attractive for a number of additional producers. While the additional producers entering the market for minerals has not had an effect on the cost of the ore, it has put the miners into a stronger negotiating position on the sales of their ore. As such, the market now demands that producers must purchase the ore by providing payment upon delivery of the ore, as opposed to the historical practice of providing payment following the sale of the finished copper. This shift in the market has affected our need for working capital substantially, in that we now require approximately $1 million per MINI plant to purchase enough ore to operate at full capacity.

Initially, we plan to sell our copper cathodes to Madeco, the largest cable producer in Chile. Based on our discussions with Madeco, we expect that the selling price will be at a 3% discount from the price for copper, adjusted for purity, on the LME. We expect that sales will be made under purchase orders where cash will be paid upon delivery. We anticipate that this arrangement will provide us with immediate cash flow with which we will use to fund our current operations. In the future, as business volume grows, we may elect to sell our copper cathodes at the generally higher prices prevailing on the LME.

Since our inception on January 2, 2008, we have focused our activities on acquiring mineral rights and sites on which to construct our MINI plants. Since starting construction in the fall of 2008, we have successfully completed our first scalable MINI plant, designated as the Ana Maria plant, located about 30 kilometers northeast of the town of Illapel, in the mining district of Matancilla. We have been testing the production of copper cathodes at the Ana Maria plant since late April 2009. In July 2009, we produced our first commercial run of copper cathodes.

We commenced operations at the Ana Maria plant in July 2009. The Ana Maria plant was taken off-line the first week of May 2010 in order to increase the capacity of this facility. As a result, the total capacity of the Ana Maria plant increased from 120 metric tons per month to 180 metric tons per month, effectively increasing its capacity by 50%. We resumed operations at the plant with the additional capacity in place at the beginning of August 2010. We believe that the site can be progressively expanded to about 5,000 metric tons per annum on a modular basis in increments of 500 to 1,000 metric tons, subject to the market price for copper and the grade and quantity of source materials available to be processed. In addition, we are also further enhancing our electrowin-based recovery techniques to reduce costs and improve the yield of the copper out of the mineral spectrum.

Our second plant, Santa Filomena, is approximately 75% complete as of the date of this report, and we have also begun preparatory work at one additional site we have under our control, in anticipation of the construction of additional MINI plants over the next 18 to 24 months.

The table below summarizes the capacity of each of our current and planned MINI plants.

District   Plant   Initial Production   Initial Capacity/Year
Matancilla   Ana Maria   Operating   1,200 MT (1)
Salamanca   Santa Filomena   2nd Quarter 2013   1,200 MT
Combarbala   Gabriella   2nd Quarter 2014   1,200 MT

(1) Since we commenced operations at the Ana Maria plant, total annual capacity has been increased to 2,225 metric tons.

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To date, the majority of our capital expenditures have been used for the construction of our facilities.

Results of Operations

The following table sets forth key components of our results of operations for the periods indicated.

    Three Months Ended June 30,     % Increase/  
    2012     2011     (Decrease)  
Sales $  34,829   $  63,209     (45% )
Cost of sales   378,361     341,242     11%  
Gross loss   (343,532 )   (278,033 )   24%  
Operating expenses:                  
Impairment of mining rights   3,528     701     403%  
Salaries and wages   22,694     40,684     (44% )
General and administrative expenses   497,657     318,659     56%  
Professional fees   198,000     13,884     1,326%  
Total operating expenses   721,879     373,928     93%  
Operating loss before the undernoted   (1,065,411 )   (651,961 )   63%  
Amortization of deferred finance costs   (45,108 )   (27,275 )   65%  
Fair value adjustment relating to warrants   -     433,477     (100% )
Imputed interest expense   (106,405 )   (80,847 )   32%  
Net Loss   (1,216,924 )   (326,606 )   273%  
Foreign exchange translation adjustment   49,361     66,851     (26% )
Comprehensive loss $  (1,167,563 ) $  (259,755 )   349%  

Sales. We had sales of $34,829 for the three months ended June 30, 2012, as compared with sales of $63,209 for the three months ended June 30, 2011, a decrease of 45%. During the first half of the quarter ended June 30, 2012, we had limited funds to operate. As a result, we were not able to operate our plant. We had an agreement with a 3rd party to process copper powder provided we delivered enough mineral to their plant to cover half of the costs. We were only able to deliver a small amount of mineral with our limited resources. Because our plant has not been in operation for a period of time, it will require additional time to ensure it is fully operational. As a result, we had no production from our own plant during the current quarter. For the quarter ended June 30, 2011, we also had limited resources and limited production from our Ana Maria Plant.

Cost of sales. Cost of sales includes direct costs associated with the sale of our products. Cost of sales was $378,361 for the three months ended June 30, 2012, as compared with $341,242 for the three months ended June 30, 2011, an increase of 11%. During the first half of the quarter ended June 30, 2012, we had limited funds to operate. As a result, we were not able to operate our plant. We incurred expenses in an agreement with a 3rd party whom agreed to process our mineral to produce copper powder. We were only able to deliver a limited amount of mineral and as a result still incurred expenses associated with this limited production. Since the first close of our fund raise on May 8, 2012 the company has been incurring expenses to develop mines in order to ensure the delivery of mineral to the plant as well as complete all of the necessary testing and equipment improvements to ensure the plant is operational in the near term. The lower cost reflected in the June 30, 2011 period is due to the fact that we were operating with limited resources.

24


Gross loss. Gross loss is equal to the difference between our sales and the cost of sales. For the three months ended June 30, 2012, we had a gross loss of $343,532, as compared with a gross loss of $278,033 for the three months ended June 30, 2011. The increase in gross loss was primarily due to the decrease in sales and increase of cost of sales as discussed above.

Operating expenses. Our operating expenses consist of impairment of mining rights, salaries and wages, general and administrative expenses and professional fees.

Impairment of mining rights. For the three months ended June 30, 2012, impairment of mining rights was $3,528, as compared with $701 for the three months ended June 30, 2011. We have expensed mining rights, since we currently have no formal plans to exploit these mining rights.

Salaries and wages. Salaries and wages amounted to $22,694 for the three months ended June 30, 2012, as compared to $40,684 for the three months ended June 30, 2011, a decrease of 44%. During the first half of the quarter ended June 30, 2012 we encountered significant working capital challenges and were forced to limit all overhead costs. With limited production in both periods, we worked hard to minimize salaries and wages as much as possible.

General and administrative expenses. General and administrative expenses consist primarily of building maintenance and repairs, energy costs and general expenses. General and administrative expenses for the three months ended June 30, 2012 were $497,657, as compared with $318,659 for the three months ended June 30, 2011. This significant increase is the result of preparing the Company for our fund raises of May 8, 2012 and June 7, 2012, as well as ramping up the operations of the Company once we received the funds. In preparing for the fund raises the Company’s public company expenses increased significantly in order to ensure its filings were complete and up to date. To support these activities, the Company incurred significantly more general and administrative expenses. During the quarter ended June 30, 2011 the Company operated with limited resources and therefore incurred fewer general and administrative expenses.

Professional fees. Professional fees consist of legal fees, accounting fees and other fees associated with our private placement transaction and operations as a public company. For the three months ended June 30, 2012, professional fees were $198,000, as compared with $13,884 for the three months ended June 30, 2011. This increase was due to the fact that we closed fund raises on May 8, 2012 and June 7, 2012. In preparing for the fund raises the Company’s public company expenses increased significantly in order to ensure its filings were complete and up to date. In addition, the Company uses outside contractors for specialized services where necessary. In raising funds and ramping our operations we incurred significantly increased professional fees. During the quarter ended June 30, 2011, the Company was operating with limited resources and as a result was forced to limit all professional fees.

Amortization of deferred finance costs. On May 12, 2010, we consummated a private placement of common shares, warrants and make good warrants. The direct financing costs were allocated to the financial instruments (redeemable common stock and warrants), based upon their relative fair values. Amounts related to the warrants were recorded as deferred finance costs and amortized through charges to interest expense over the term of the arrangement using the effective interest method, while amounts related to the common stock directly offset the carrying value of the redeemable common stock. For the three months ended June 30, 2012, we amortized deferred finance costs of $27,275, as compared to $27,275 for the three months ended June 30, 2011.

On May 8, 2012, the Company entered into a Securities Purchase Agreement with certain accredited investors for issue of eleven percent (11%) secured convertible notes and warrants to purchase the Company’s common stock. The Company evaluated the terms and conditions of the convertible notes and warrants under the guidance of ASC 815, Derivatives and Hedging. The financing costs are being amortized over the term of the notes. Amortization of the deferred finance charges amounted to $17,833 for the three month period ended June 30, 2012 and $nil for the three months ended June 30, 2011.

Fair value adjustment relating to warrants. For the three months ended June 30, 2012, we had no fair value adjustment to warrants, as compared to $433,477 for the three months ended June 30, 2011. On May 12, 2010, we commenced a private placement of common shares, warrants and make good warrants. At inception, warrants were classified as liabilities due to the fact that they were considered not to be indexed to the company’s own stock and due to the firm registration rights embodied in the agreements. At March 31, 2012, all variability and rights resulting in liability classification were removed and the instruments were re-measured and reclassified to equity which results in no fair value adjustment relating to the warrants for the quarter ended June 30, 2012.

Imputed interest expense. Imputed interest expense is related to unsecured, no interest promissory notes from related parties. These loans were valued at fair value at inception. We recognized a discount on the face value of the loans at inception to adjust the carrying value to the fair value. Discounts associated with these notes are being amortized over the lives of the promissory notes using the effective interest method, with interest expense being recorded as an expense in the related period. We recognized interest expense to amortize discounts on promissory notes to related parties for the three months ended June 30, 2012, in the amount of $76,563, as compared with $80,847 for the three months ended June 30, 2011.

25


On May 8, 2012, the Company entered into a Securities Purchase Agreement with certain accredited investors for issue of eleven percent (11%) secured convertible notes and warrants to purchase the Company’s common stock. The Company evaluated the terms and conditions of the convertible notes and warrants under the guidance of ASC 815, Derivatives and Hedging. The purchase price allocation for the convertible notes resulted in a debt discount of $1,143,154. The discount on the notes will be amortized through periodic changes to interest expense over the term of the debenture using the effective interest method. Imputed interest expense amounted to $29,842 during the three month period ended June 30, 2012 and $0 during the three months ended June 30, 2011.

Net loss. As a result of the cumulative effect of the foregoing factors, we generated a net loss of $1,216,924 for the three months ended June 30, 2012, as compared to a net loss of $326,606 for three months ended June 30, 2011.

Liquidity and Capital Resources

As of June 30, 2012, we had cash and cash equivalents of $1,018,579 and had a working capital deficit of $3,726,664. The following table provides detailed information about our net cash flow for the periods indicated.

Cash Flow

    Three Months Ended June 30,  
    2012     2011  
Net cash used in operating activities $  (1,177,611 ) $  (692,733 )
Net cash used in investing activities   (361,923 )   (16,277 )
Net cash provided by financing activities   2,539,480     634,484  
Effect of exchange rate change in cash   18,333     76,293  
Net increase (decrease) in cash and cash equivalents   1,018,279     1,767  
Cash and cash equivalents at beginning of the period   300     437,124  
Cash and cash equivalent at end of the period $  1,018,579   $  438,891  

Operating Activities

Net cash used in operating activities was $1,177,611 for the three months ended June 30, 2012, as compared to $692,733 for the same period in 2011. The increase during the quarter ended June 30, 2012, was mainly due to the increased net loss and the decrease on accounts payable and accrued liabilities.

Investing Activities

Net cash used in investing activities was $361,923 for the three months ended June 30, 2012, as compared to $16,277 for the same period in 2011. This increase was mainly due to the increase in restricted cash.

Financing Activities

Net cash provided by financing activities was $2,539,480 for the three months ended June 30, 2012, as compared to $634,484 for the same period in 2011. This increase was mainly due to the proceeds from the private placement completed in the quarter ended June 30, 2012.

In the first fiscal quarter of 2013, we completed a private placement in which we issued and sold to certain accredited investors (i) eleven percent (11%) secured convertible notes in the aggregate original principal amount of $3,135,000, which notes are convertible into shares our common stock at $2.00 per share (subject to adjustment) and (ii) warrants to purchase an aggregate of 783,750 shares of our common stock at an exercise price of $2.00 per share (subject to adjustment). As a result of this private placement, we raised approximately $3.1 million in gross proceeds, which left us with approximately $2.6 million in net proceeds after the deduction of offering expenses.

26


Overall Liquidity and Capital Resources

Through the course of our operations we have realized that MINI plants which process tailings will now require an additional module at a cost of $500,000 in order to more efficiently process the tailings. Accordingly, the total cost of construction per such MINI plant has increased from our initial estimates of $2,500,000 to approximately $3,000,000. In addition, due to the higher copper prices, there has been a significant increase in demand for raw copper ore. As a result, the market now demands that any producer must purchase the ore by providing payment at the delivery of the ore, and therefore, we now require approximately $500,000 per MINI plant to purchase enough ore to operate at full capacity.

Initially, we estimated that it would cost approximately $2,500,000 in working capital per plant to construct and operate the plant to capacity. However, as discussed above, we now require approximately $3,500,000 in working capital per MINI plant in order to construct and operate the plant to capacity.

As of March 31, 2011, we determined that in order to fully operate on our business plan, we would need an aggregate of approximately $2.1 million to operate at full capacity at our Ana Maria and Filomena plants. In addition, we determined that we would need approximately $0.7 million for working capital. Accordingly, we completed the private placement transaction noted above in the first fiscal quarter of 2013, in which we raised approximately $3.1 million in gross proceeds, which left us with approximately $2.8 million in net proceeds after the deduction of offering expenses.

Obligations under Material Contracts

As of March 31, 2012, there were outstanding loans made to the Company in the aggregate amount of $5,160,583. On May 8, 2012, we and certain creditors which had loaned us an aggregate of approximately $4,267,774 entered into separate loan repayment agreements whereby the creditors each agreed to allow us to defer repayment of their respective loans until the later of (i) May 8, 2013 and (ii) such time at we report positive net-income on our quarterly or annual financial statements filed with the SEC.

The following table lists the loans which will be deferred in accordance with the loan repayment agreements:

Creditor   Amount of Loan(s) Deferred
Jorge Fernando Pizarro Arriagada   CLP$104,579,970
Iván Orlando Vergara Huerta   CLP$165,770,750
Jorge Orellana   CLP$103,985,073
Geominco E.I.R.L   CLP$1,409,005,176
Importadora y Exportadora Bengolea Ltda.   US$500,000
Halter Financial Group   US$190,000

Inflation

Inflation does not materially affect our business or the results of our operations.

Off Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to our stockholders.

Seasonality

The price of copper on the LME fluctuates during the year, with prices tending to be stronger in the April to September period, and weaker in the October to March period, subject to global supply and demand.

Critical Accounting Policies

Critical accounting policies are those we believe are most important to portraying our financial conditions and results of operations and also require the greatest amount of subjective or complex judgments by management. Judgments and uncertainties regarding the application of these policies may result in materially different amounts being reported under various conditions or using different assumptions. There have been no material changes to the critical accounting policies previously disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2012.

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Recent Accounting Pronouncements

See Note 2 to our unaudited consolidated financial statements included in Item 1 of this report.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15(e), our management has carried out an evaluation, with the participation and under the supervision of our Chief Executive Officer, Mr. Jorge Osvaldo Orellana Orellana, and Chief Financial Officer, Mr. Gerard Pascale, of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2012. Based upon, and as of the date of this evaluation, Messrs. Orellana and Pascale, determined that because of the material weaknesses described in Item 9A “Controls and Procedures” of our Annual Report on Form 10-K for the fiscal year ended March 31, 2012, which we were still in the process of remediating as of June 30, 2012, our disclosure controls and procedures were not effective. See Item 9A of our Annual Report on Form 10-K for the fiscal year ended March 31, 2012, for the description of these weaknesses.

Changes in Internal Control over Financial Reporting

We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.

During its evaluation of the effectiveness of internal control over financial reporting as of March 31, 2012, our management identified material weaknesses related to our need to increase our qualified accounting personnel and to enhance the supervision, monitoring and reviewing of financial statements preparation processes. As disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2012, our management has identified the steps necessary to address the material weaknesses, and in the first quarter of fiscal 2013, we continued to implement these remedial procedures. In addition to holding regular Board and Audit Committee meeting, the Company has increased its qualified accounting staff.

Other than in connection with the implementation of the remedial measures described above and in the 10-K, there were no changes in our internal controls over financial reporting during the first quarter of fiscal 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II
OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these, or other matters, may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.

28



ITEM 1A. RISK FACTORS.

Not applicable.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

We have not sold any equity securities during the first quarter of fiscal 2013 that were not previously disclosed in a quarterly report on Form 10-Q or a current report on Form 8-K that was filed during the quarter.

No repurchases of our common stock were made during the first quarter of fiscal 2013.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

We have no information to disclose that was required to be in a report on Form 8-K during the first quarter of fiscal 2013, but was not reported. There have been no material changes to the procedures by which security holders may recommend nominees to our board of directors.

ITEM 6. EXHIBITS.

The list of exhibits in the Exhibit Index to this report is incorporated herein by reference.

29


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1935, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: August 20, 2012 CHILE MINING TECHNOLOGIES INC.
     
  By: /s/ Jorge Osvaldo Orellana Orellana                     
    Jorge Osvaldo Orellana Orellana, Chief Executive Officer
    (Principal Executive Officer)
     
  By:      /s/ Gerard Pascale                                                     
    Gerard Pascale, Chief Financial Officer
    (Principal Financial Officer and Principal
    Accounting Officer)


EXHIBIT INDEX

Exhibit No.   Description
4.1 Form of 11% Secured Convertible Note (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on May 14, 2012)
4.2 Form of Common Stock Purchase Warrant issued to investors (incorporated by reference to Exhibit 4.2to the Company’s Current Report on Form 8-K filed on May 14, 2012)
4.3 Form of Common Stock Purchase Warrant issued to agents (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on May 14, 2012)
10.1 Form of Securities Purchase Agreement, dated May 8, 2012 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 14, 2012)
10.2 Closing Escrow Agreement, dated May 8, 2012, by and among the Company, Euro Pacific Capital, Inc., Halter Financial Securities Inc. and Escrow, LLC (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on May 14, 2012)
10.3 Subsidiary Guarantee, dated May 8, 2012, by Sociedad Minera Licancabur, S.A. (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on May 14, 2012)
10.4 Form of Security Agreement, dated May 8, 2012 (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on May 14, 2012)
10.5 Loan Repayment Agreement, dated May 8, 2012, between the Company and Jorge Osvaldo Orellana Orellana (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on May 14, 2012)
10.6 Loan Repayment Agreement, dated May 8, 2012, between the Company and Jorge Fernando Pizarro Arriagada (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on May 14, 2012)
10.7 Loan Repayment Agreement, dated May 8, 2012, between the Company and Ivan Orlando Vergara Huerta (incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on May 14, 2012)
10.8 Loan Repayment Agreement, dated May 8, 2012, between the Company and Geominco E.I.R.L. (incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed on May 14, 2012)
10.9 Loan Repayment Agreement, dated May 8, 2012, between the Company and Importadora y Exportadora Bengolea Ltda. (incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K filed on May 14, 2012)
10.10 Loan Repayment Agreement, dated May 8, 2012, between the Company and Halter Financial Group (incorporated by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K filed on May 14, 2012)
31.1 Certifications of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certifications of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certifications of Principal Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certifications of Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101   Interactive data files pursuant to Rule 405 of Regulation S-T (furnished herewith).


XOTC:LVEN Quarterly Report 10-Q Filling

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XOTC:LVEN Quarterly Report 10-Q Filing - 6/30/2012
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