3. Sulfatos Chile

9 Months Ended

Sep. 30, 2012

Sulfatos Chile

3. Sulfatos Chile

On February 15, 2012, Bluestone purchased a 60% equity interest in Sulfatos Chile from Santa Teresa Minerals S.A., a Chilean corporation ("Santa Teresa Minerals"). The purchase price for the equity interest was: (a) a 20% interest in Bluestone; (b) $2.2 million, with $1.1 million paid by assumption of a demand loan payable by Santa Teresa Minerals to Angelique de Maison, and the balance of $1.1 million to be paid in monthly installments from time to time upon demand by Santa Teresa Minerals. As of September 30, 2012, the entire purchase price had been paid. Santa Teresa Minerals’ 20% interest in Bluestone has been cancelled, and Bluestone is a wholly owned subsidiary of the Company.

At the time of the Sulfatos Acquisition, Bluestone was an affiliate of Santa Teresa Minerals because substantially all of the equity interests of Bluestone were owned by Juan Carlos Camus Villegas and Angelique de Maison, who were officers and/or directors of Santa Teresa Minerals and its parent holding company and were principal shareholders of the parent holding company.

The Sulfatos Acquisition has been treated as a "purchase" for financial reporting purposes. Because the Sulfatos Acquisition was between related parties, the purchase price has been allocated to additional paid-in capital and the assets and liabilities were carried over at historical costs. Results of operations for Sulfatos have been reflected in the Company's financial statements from the closing date.

The following information presents supplemental cash flows information of assets acquired and liabilities assumed in connection with the Sulfatos Acquisition:

	Nine Months Ended September 30, 2012
Prepaid expenses	$	764,551
Property and equipment		3,289,521
Mining property		3,492,824
Land		549,310
Accounts payable		(447,343	)
Notes payable		(2,580,399	)
	$	5,068,464
Plus, cash acquired		892,294
Total value of acquisition	$	5,960,758
Value of acquisition allocated to additional paid-in capital	$	2,696,455
Value of acquisition allocated to minority interest	$	3,264,303

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of Sulfatos Acquisition. In accordance with US GAAP, the assets and liabilities acquired are carried over at their historical value because the transaction occurred between related parties.

	At February 15, 2012
Working Capital Items
Cash and cash equivalents	$	892,294
Prepaid expenses and other		764,551
Accounts payable and accrued liabilities		(447,343	)
Notes payable		(2,580,399	)
Subtotal—Working Capital Items		829,103
Long-lived Assets:
Property & Equipment
Land		549,310
Mining property		3,492,824
FFE and Equipment		3,289,521
Subtotal—long-lived assets		7,331,655
Total value of acquisition	$	5,960,758
Value of acquisition allocated to additional paid-in capital	$	2,696,455
Value of acquisition allocated to minority interest	$	3,264,303

Had the Sulfatos Chile Acquisition taken place on January 1, 2012, results of operations would have reflected the following pro forma amounts for the nine months ended September 30, 2012:

	Nine Months Ended September 30, 2012
	Lustros, Inc.			Sulfatos Chile			Purchase			Pro
	Actual			Actual			Adjustments			Forma
Revenues	$	–		$	54,900		$	–		$	54,900
Operating expenses		934,914			2,600,992			(173,060	)		3,362,846
Other loss		–			4,023			–			4,023
Net loss	$	(934,914	)	$	(2,550,115	)	$	173,060		$	(3,311,969	)

The $173,060 purchase adjustment is the accumulated deficit thru the date of purchase on February 15, 2012.