Tasman Metals 6-K Tasman July 2014 6K Financial

TASMAN METALS LTD.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED

MAY 31, 2014

(Unaudited - Expressed in Canadian Dollars)

Page 1

NOTICE OF NO AUDITOR REVIEW OF

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

In accordance with National Instrument 51-102 Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of these condensed consolidated interim financial statements they must be accompanied by a notice indicating that the condensed consolidated interim financial statements have not been reviewed by an auditor.

The accompanying unaudited condensed consolidated interim financial statements of the Company have been prepared by and are the responsibility of the Company’s management.

The Company’s auditors have not performed a review of these condensed consolidated interim financial statements in accordance with the standards established by the Canadian Institute of Chartered Accountants for a review of interim financial statements by an entity’s auditor.

Page 2

TASMAN METALS LTD.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION

(Unaudited - Expressed in Canadian Dollars)

	Notes		May 31, 2014 $			August 31, 2013 $
ASSETS
Current assets
Cash				7,572,179			5,601,492
Amounts receivable				31,933			13,444
GST/VAT receivables				57,228			56,240
Prepaids				96,939			69,302
Total current assets				7,758,279			5,740,478
Non-current assets
Investments		5		22,274			24,805
Property, plant and equipment		6		141,183			175,485
Exploration and evaluation assets		7		9,517,263			7,883,939
Bond deposit				31,819			31,646
Total non-current assets				9,712,539			8,115,875
TOTAL ASSETS				17,470,818			13,856,353
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities				598,128			645,492
TOTAL LIABILITIES				598,128			645,492
SHAREHOLDERS’ EQUITY
Share capital				25,933,774			20,299,802
Share-based payments reserve				9,093,696			9,056,102
Deficit				(18,024,627	)		(16,034,024	)
Accumulated other comprehensive loss				(130,153	)		(111,019	)
TOTAL SHAREHOLDERS’ EQUITY				16,872,690			13,210,861
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY				17,470,818			13,856,353

These condensed consolidated interim financial statements were approved and authorized for issue by the Board of Directors on July 11, 2014 and are signed on its behalf by:

 /s/ Mark Saxon         Mark Saxon  Director     /s/ Nick DeMare Nick DeMare Director

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

Page 3

TASMAN METALS LTD.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited - Expressed in Canadian Dollars)

			Three Months Ended						Nine Months Ended
	Note		May 31, 2014 $			May 31, 2013 $ (Note 3)			May 31, 2014 $			May 31, 2013 $ (Note 3)
Expenses
Accounting and administration	9(b)(ii)			27,374			28,949			104,013			96,359
Audit				-			-			51,117			33,650
Corporate development				51,277			30,720			126,485			106,627
Depreciation		6		13,778			13,522			40,857			42,707
General exploration				(9,537	)		20,948			9,142			68,462
Insurance				22,837			25,204			69,693			77,123
Investor relations				-			-			-			10,500
Legal				8,790			27,359			231,603			72,392
Management fees		9(a)		40,500			40,500			121,500			121,500
Office				47,690			19,942			109,180			87,512
Professional fees		9		105,313			141,274			366,157			515,207
Regulatory fees				17,898			15,508			54,802			48,048
Rent				11,483			13,906			36,827			45,263
Salaries and benefits				93,841			66,942			272,304			230,962
Shareholder costs				18,270			12,073			23,646			28,193
Share-based compensation		8(d)		82,000			51,250			225,200			654,705
Transfer agent				14,619			15,021			21,048			21,019
Travel				31,950			52,896			119,390			153,818
				578,083			576,014			1,982,964			2,414,047
Loss before other items				(578,083	)		(576,014	)		(1,982,964	)		(2,414,047	)
Other items
Gain on sale of property, plant and equipment				-			-			-			1,921
Impairment of exploration and evaluation assets		7		(37,631	)		(2,591	)		(44,230	)		(17,074	)
Interest income				25,993			32,691			60,854			76,242
Foreign exchange				(22,075	)		(7,961	)		(24,263	)		14,041
				(33,713	)		22,139			(7,639	)		75,130
Net loss for the period				(611,796	)		(553,875	)		(1,990,603	)		(2,338,917	)
Other comprehensive loss				(10,141	)		(3,129	)		(19,134	)		(28,257	)
Comprehensive loss for the period				(621,937	)		(557,004	)		(2,009,737	)		(2,367,174	)
Basic and diluted loss per common share				(0.01	)		(0.01	)		(0.03	)		(0.04	)
Weighted average number of common shares outstanding				65,739,508			60,777,649			62,780,459			60,435,982

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

Page 4

TASMAN METALS LTD.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY

(Unaudited - Expressed in Canadian Dollars)

	Nine Months Ended May 31, 2014
	Share Capital											Accumulated
	Number of Shares		Amount $			Share-Based Payments Reserve $			Deficit $			Other Comprehensive Loss $			Total Equity $
Balance at September 1, 2013		60,850,982		20,299,802			9,056,102			(16,034,024	)		(111,019	)		13,210,861
Common shares issued for:
Cash - private placement		4,919,940		5,411,934			-			-			-			5,411,934
Cash - exercise of share options		285,000		351,000			-			-			-			351,000
Exploration and evaluation assets		86,000		104,420			-			-			-			104,420
Share issue costs		-		(620,282	)		-			-			-			(620,282	)
Share-based compensation on share options		-		-			225,200			-			-			225,200
Share-based compensation on finder’s option		-		-			189,222			-			-			189,222
Share-based compensation on finders’ warrants							10,072			-			-			10,072
Transfer on exercise of share options				386,900			(386,900	)		-			-			-
Unrealized loss on investments		-		-			-			-			(19,134	)		(19,134	)
Net loss for the period		-		-			-			(1,990,603	)		-			(1,990,603	)
Balance at May 31, 2014		66,141,922		25,933,774			9,093,696			(18,024,627	)		(130,153	)		16,872,690

	Nine Months Ended May 31, 2013
	Share Capital										Accumulated
	Number of Shares		Amount $		Share-Based Payments Reserve $			Deficit $			Other Comprehensive Loss $			Total Equity $
Balance at September 1, 2012 (Note 3)		59,570,982		19,808,552		8,565,897			(12,552,782	)		(54,962	)		15,766,705
Common shares issued for:
Cash - exercise of share options		1,250,000		301,250		-			-			-			301,250
Exploration and evaluation assets		30,000		25,500											25,500
Share-based compensation on share options		-		-		654,705			-			-			654,705
Transfer on exercise of share options		-		164,500		(164,500	)		-			-			-
Unrealized loss on investment		-		-		-			-			(28,257	)		(28,257	)
Net loss for the period		-		-		-			(2,338,917	)		-			(2,338,917	)
Balance at May 31, 2013 (Note 3)		60,850,982		20,299,802		9,056,102			(14,891,699	)		(83,219	)		(14,380,986	)

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

Page 5

TASMAN METALS LTD.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(Unaudited - Expressed in Canadian Dollars)

	Nine Months Ended
	May 31, 2014 $			May 31, 2013 $ (Note 3)
Operating activities
Net loss for the period		(1,990,603	)		(2,338,917	)
Adjustments for:
Depreciation		40,857			42,707
Share-based compensation		225,200			654,705
Impairment of exploration and evaluation assets		44,230			17,074
Gain on sale of property, plant and equipment		-			(1,921	)
		(1,680,316	)		(1,626,352	)
Changes in non-cash working capital items:
Decrease (increase) in amounts receivable		(18,489	)		33,231
Decrease (increase) in GST/VAT receivables		(988	)		100,877
Increase in prepaids		(27,637	)		(28,767	)
Decrease in accounts payable and accrued liabilities		(78,490	)		(485,629	)
		(125,604	)		(380,288	)
Net cash used in operating activities		(1,805,920	)		(2,006,640	)
Investing activities
Proceeds on sale of property, plant and equipment		-			25,545
Additions to exploration and evaluation assets		(1,542,008	)		(1,585,324	)
Additions to property, plant and equipment		(6,555	)		-
Increase in bond deposit		(173	)		(20,138	)
Increase in investments		(16,603	)		-
Net cash used in investing activities		(1,565,339	)		(1,579,917	)
Financing activities
Issuance of common shares		5,762,934			301,250
Share issue costs		(420,988	)		-
Net cash provided by financing activities		5,341,946			301,250
Net change in cash		1,970,687			(3,285,307	)
Cash at beginning of period		5,601,492			9,778,040
Cash at end of period		7,572,179			6,492,733

Supplemental cash flow information - see Note 12

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

Page 6

TASMAN METALS LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED MAY 31, 2014

(Unaudited - Expressed in Canadian Dollars)

1. Nature of Operations

Tasman Metals Ltd. (“Tasman” or the “Company”) was incorporated under the laws of the Province of British Columbia on August 27, 2007.  The Company’s common shares are listed and traded on the TSX Venture Exchange (“TSXV”) under the symbol “TSM” and on the New York Stock Exchange Market (“NYSE MKT”), under the symbol “TAS”.  The Company’s head office is located at #1305 - 1090 West Georgia Street, Vancouver, British Columbia, V6E 3V7, Canada.

The Company is a junior resource company engaged in the acquisition and exploration of unproven mineral interests in Scandinavia.  As at May 31, 2014 the Company has not earned any production revenue, nor found proved reserves on any of its mineral interests.

The Company is in the process of exploring and evaluating its mineral properties.  On the basis of information to date, it has not yet determined whether these properties contain economically recoverable ore reserves.  The underlying value of the mineral properties and related deferred acquisition costs is entirely dependent on the existence of economically recoverable reserves, the ability of the Company to obtain the necessary financing to complete development and upon future profitable production.  The amounts shown as resource interests represent net acquisition costs to date, less amounts written off, and do not necessarily represent present or future values.

As at May 31, 2014 the Company had working capital of $7,160,151.  These condensed consolidated interim financial statements have been prepared on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business operations for the foreseeable future.  The Company’s ability to continue as a going concern is dependent upon the ability of the Company to obtain the necessary financing to develop properties and to establish future profitable production.  The Company’s operations are funded from equity financings which are dependent upon many external factors and may be difficult to impossible to secure or raise when required.  Although management considers that the Company has adequate resources to maintain its core operations and planned exploration programs on its existing exploration and evaluation assets for the next twelve months, the Company recognizes that exploration expenditures may change with ongoing results and, as a result, it may be required to obtain additional financing.  While the Company has been successful in securing financings in the past, there can be no assurance that it will be able to do so in the future.

See also Note 13.

2. Basis of Preparation

Statement of Compliance

These condensed consolidated interim financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards (“IFRS”), and in accordance with International Accounting Standards (“IAS”) 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (“IASB”).  These condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements for the year ended August 31, 2013, which have been prepared in accordance with IFRS as issued by the IASB.  The accounting policies followed in these condensed consolidated interim financial statements are consistent with those applied in the Company’s consolidated financial statements for the year ended August 31, 2013.

Basis of Presentation

The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, revenue and expenses.  The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis.  Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and further periods if the review affects both current and future periods.

Page 7

TASMAN METALS LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED MAY 31, 2014

(Unaudited - Expressed in Canadian Dollars)

3. Change in Accounting Policy

During fiscal 2013 the Company changed its accounting policy with respect to exploration and evaluation expenditures.  In prior years the Company’s policy was to expense mineral exploration and development costs as incurred until such time as either mineral reserves are proven or permits to operate the mineral resource property are received and financing to complete the development are obtained.  The Company has elected to change this accounting policy to now capitalize by property all costs relating to the exploration and evaluation of mineral properties classified as exploration and evaluation assets, effective with the presentation of these consolidated financial statements, on a retrospective basis.

The effects of the change in accounting policy related to the Company’s exploration and evaluation assets are as follows:

Reconciliation of Statements of Financial Position

	As at September 1, 2012
	As previously reported $			Effect of change in accounting policy $		As restated $
ASSETS
Current assets
Cash		9,778,040			-		9,778,040
Amounts receivable		44,581			-		44,581
GST/VAT receivables		158,271			-		158,271
Prepaids		69,929			-		69,929
Total current assets		10,050,821			-		10,050,821
Non-current assets
Investment		80,862			-		80,862
Property, plant and equipment		255,338			-		255,338
Exploration and evaluation assets		214,297			5,944,868		6,159,165
Bond deposit		3,496			-		3,496
Total non-current assets		553,993			5,944,868		6,498,861
TOTAL ASSETS		10,604,814			5,944,868		16,549,682
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities		782,977			-		782,977
TOTAL LIABILITIES		782,977			-		782,977
SHAREHOLDERS’ EQUITY
Share capital		19,808,552			-		19,808,552
Share-based payments reserve		8,565,897			-		8,565,897
Deficit		(18,497,650	)		5,944,868		(12,552,782	)
Accumulated other comprehensive loss		(54,962	)		-		(54,962	)
TOTAL SHAREHOLDERS’ EQUITY		9,821,837			5,944,868		15,766,705
TOTAL LIABILITIES AND      SHAREHOLDERS’ EQUITY		10,604,814			5,944,868		16,549,682

Page 8

TASMAN METALS LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED MAY 31, 2014

(Unaudited - Expressed in Canadian Dollars)

3. Change in Accounting Policy (continued)

	As at May 31, 2013
	As previously reported $			Effect of change in accounting policy $		As restated $
ASSETS
Current assets
Cash		6,492,733			-		6,492,733
Amounts receivable		11,350			-		11,350
GST/VAT receivables		57,394			-		57,394
Prepaids		98,696			-		98,696
Total current assets		6,660,173			-		6,660,173
Non-current assets
Investment		52,605			-		52,605
Property, plant and equipment		189,007			-		189,007
Exploration and evaluation assets		239,561			7,634,587		7,874,148
Bond deposit		23,634			-		23,634
Total non-current assets		504,807			7,634,587		8,139,394
TOTAL ASSETS		7,164,980			7,634,587		14,799,567
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities		418,581			-		418,581
TOTAL LIABILITIES		418,581			-		418,581
SHAREHOLDERS’ EQUITY
Share capital		20,299,802			-		20,299,802
Share-based payments reserve		9,056,102			-		9,056,102
Deficit		(22,526,286	)		7,634,587		(14,891,699	)
Accumulated other comprehensive loss		(83,219	)		-		(83,219	)
TOTAL SHAREHOLDERS’ EQUITY		6,746,399			7,634,587		14,380,986
TOTAL LIABILITIES AND      SHAREHOLDERS’ EQUITY		7,164,980			7,634,587		14,799,567

Page 9

TASMAN METALS LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED MAY 31, 2014

(Unaudited - Expressed in Canadian Dollars)

3. Change in Accounting Policy (continued)

Reconciliation of Statements of Comprehensive Loss

	Three Months Ended May 31, 2013									Nine Months Ended May 31, 2013
	As previously reported $			Effect of change in accounting policy $			As restated $			As previously reported $			Effect of change in accounting policy $			As restated $
Mineral exploration costs		485,228			(485,228	)		-			1,689,719			(1,689,719	)		-
Expenses
Accounting and administration		28,949			-			28,949			96,359			-			96,359
Audit		-			-			-			33,650			-			33,650
Corporate development		30,720			-			30,720			106,627			-			106,627
Depreciation		13,522			-			13,522			42,707			-			42,707
General exploration		20,948			-			20,948			68,462			-			68,462
Insurance		25,204			-			25,204			77,123			-			77,123
Investor relations		-			-			-			10,500			-			10,500
Legal		27,359			-			27,359			72,392			-			72,392
Management fees		40,500			-			40,500			121,500			-			121,500
Office		19,942			-			19,942			87,512			-			87,512
Professional fees		141,274			-			141,274			515,207			-			515,207
Regulatory fees		15,508			-			15,508			48,048			-			48,048
Rent		13,906			-			13,906			45,263			-			45,263
Salaries and benefits		66,942			-			66,942			230,962			-			230,962
Shareholder costs		12,073			-			12,073			28,193			-			28,193
Share-based compensation		51,250			-			51,250			654,705			-			654,705
Transfer agent		15,021			-			15,021			21,019			-			21,019
Travel		52,896			-			52,896			153,818			-			153,818
		576,014			-			576,014			2,414,047			-			2,414,047
Loss before other items		(1,061,242	)		485,228			(576,014	)		(4,103,766	)		1,689,719			(2,414,047	)
Other items
Gain on sale of property, plant    and equipment		-			-			-			1,921			-			1,921
Impairment of exploration    and evaluations assets		(2,591	)		-			(2,591	)		(17,074	)		-			(17,074	)
Interest income		32,691			-			32,691			76,242			-			76,242
Foreign exchange		(7,961	)		-			(7,961	)		14,041			-			14,041
		22,139			-			22,139			75,130			-			75,130
Net loss for the period		(1,039,103	)		485,228			(553,875	)		(4,028,636	)		1,689,719			(2,338,917	)
Other comprehensive loss		(3,129	)					(3,129	)		(28,257	)					(28,257	)
Comprehensive loss    for the period		(1,042,232	)		485,228			(557,004	)		(4,056,893	)		1,689,719			(2,367,174	)
Basic and diluted    loss per common share		(0.02	)					(0.01	)		(0.07	)					(0.04	)
Weighted average number of    common shares outstanding		60,777,649						60,777,649			60,435,982						60,435,982

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TASMAN METALS LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED MAY 31, 2014

(Unaudited - Expressed in Canadian Dollars)

3. Change in Accounting Policy (continued)

Reconciliation of Statement of Cash Flows

	Nine Months Ended May 31, 2013
	As previously reported $			Effect of change in accounting policy $			As restated $
Operating activities
Net loss for the period		(4,028,636	)		1,689,719			(2,338,917	)
Adjustments for:
Depreciation		42,707			-			42,707
Share-based compensation		654,705			-			654,705
Impairment of exploration and evaluation assets		17,074						17,074
Gain on sale of property and equipment		(1,921	)		-			(1,921	)
		(3,316,071	)		1,689,719			(1,626,352	)
Changes in non-cash working capital items:
Decrease in amounts receivable		33,231			-			33,231
Decrease in GST/VAT receivables		100,877			-			100,877
Increase in prepaids		(28,767	)		-			(28,767	)
Decrease in accounts payable and accrued liabilities		(364,396	)		(121,233	)		(485,629	)
		(259,055	)		(121,233	)		(380,288	)
Net cash used in operating activities		(3,575,126	)		1,568,486			(2,006,640	)
Investing activities
Proceeds on sale of property, plant and equipment		25,545						25,545
Additions to exploration and evaluation assets		(16,838	)		(1,568,486	)		(1,585,324	)
Increase in bond deposit		(20,138	)					(20,138	)
Net cash provided by (used in) investing activities		(11,431	)		(1,568,486	)		(1,579,917	)
Financing activity
Issuance of common shares		301,250			-			301,250
Net cash provided by financing activity		301,250			-			301,250
Net change in cash		(3,285,307	)		-			(3,285,307	)
Cash at beginning of period		9,778,040			-			9,778,040
Cash at end of period		6,492,733			-			6,492,733

4.           Significant Accounting Policy

The preparation of financial data is based on accounting principles and practices consistent with those to be used in the preparation of the audited annual consolidated financial statements as at August 31, 2013.  The accompanying unaudited condensed consolidated interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended August 31, 2013.

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TASMAN METALS LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED MAY 31, 2014

(Unaudited - Expressed in Canadian Dollars)

5. Investments

	May 31, 2014
	Number of Shares		Cost $		Accumulated Compre- hensive Loss $			Carrying Value $
Hannans Reward Limited (“Hannans”)		2,647,059		135,824		(122,469	)		13,355
Thomson Resources Ltd. (“Thomson”)		600,000		16,603		(7,684	)		8,919
				152,427		(130,153	)		22,274

	August 31, 2013
	Number of Shares		Cost $		Accumulated Compre- hensive Loss $			Carrying Value $
Hannans		2,647,059		135,824		(111,019	)		24,805

(a) The Company had received common shares of Hannans, a public company listed on the Australian Stock Exchange, from the option of certain of its iron ore properties, as described in Note 7(b)(i).  As at May 31, 2014 the quoted market value of the Hannans shares was $13,355.

(b) During the nine months ended May 31, 2014 the Company received common shares of Thomson, a public company listed on the Australian Stock Exchange on sale of exploration data.  As at May 31, 2014 the quoted market value of the Thomson shares was $8,919.

6.           Property, Plant and Equipment

Cost:	Computers $			Office Furniture and Equipment $			Field Equipment $			Vehicles $			Total $
Balance at August 31, 2012		18,032			19,767			98,081			166,689			302,569
Disposal		-			-			-			(32,214	)		(32,214	)
Balance at August 31, 2013		18,032			19,767			98,081			134,475			270,355
Addition		-			-			6,555			-			6,555
Balance at May 31, 2014		18,032			19,767			104,636			134,475			276,910
Accumulated Depreciation:
Balance at August 31, 2012		(5,035	)		(3,201	)		(13,822	)		(25,173	)		(47,231	)
Depreciation		(3,507	)		(3,842	)		(20,265	)		(28,615	)		(56,229	)
Disposal		-			-			-			8,590			8,590
Balance at August 31, 2013		(8,542	)		(7,043	)		(34,087	)		(45,198	)		(94,870	)
Depreciation		(2,624	)		(2,875	)		(15,546	)		(19,812	)		(40,857	)
Balance at May 31, 2014		(11,166	)		(9,918	)		(49,633	)		(65,010	)		(135,727	)

Page 12

TASMAN METALS LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED MAY 31, 2014

(Unaudited - Expressed in Canadian Dollars)

6.           Property, Plant and Equipment (continued)

Carrying Value:	Computers $		Office Furniture and Equipment $		Field Equipment $		Vehicles $		Total $
Balance at August 31, 2013		9,490		12,724		63,994		89,277		175,485
Balance at May 31, 2014		6,866		9,849		55,003		69,465		141,183

7. Exploration and Evaluation Assets

	May 31, 2014
	Acquisition Costs $		Deferred Exploration Costs $		Total $
Rare Earth Properties
Norra Kärr		92,682		8,540,415		8,633,097
Olserum		143,231		564,930		708,161
Other		15,960		4,758		20,718
Other Properties		115,147		40,140		155,287
		367,020		9,150,243		9,517,263

	August 31, 2013
	Acquisition Costs $		Deferred Exploration Costs $		Total $
Rare Earth Properties
Norra Kärr		23,045		7,179,904		7,202,949
Olserum		124,846		488,336		613,182
Other		49,088		15,860		64,948
Other Properties		2,406		454		2,860
		199,385		7,684,554		7,883,939

Page 13

TASMAN METALS LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED MAY 31, 2014

(Unaudited - Expressed in Canadian Dollars)

7.           Exploration and Evaluation Assets (continued)

	Rare Earth Element Properties										Other
	Norra Kärr $		Otanmaki $			Olserum $		Other $			Properties $		Total $
Balance at August 31, 2012		5,312,704		340,766			316,137		186,698			2,860		6,159,165
Exploration costs
Consulting		400,543		-			186,511		-			-		587,054
Core cutting		13,837		-			-		-			-		13,837
Database		3,707		-			3,698		-			-		7,405
Drilling		74,950		-			-		-			-		74,950
Exploration site		21,779		-			119		-			-		21,898
Fuel		1,253		-			668		-			-		1,921
Geochemical		385,093		-			35,306		-			-		420,399
Geological		92,398		-			31,511		-			-		123,909
Maps		-		-			-		1,920			-		1,920
Metallurgical consulting		21,152		-			-		-			-		21,152
Metallurgical testing		692,637		-			-		-			-		692,637
Preliminary economic assessment		27,559		-			-		-			-		27,559
Pre-feasibility study		117,594		-			-		-			-		117,594
Salaries		13,486		-			-		-			-		13,486
Sample preparation		-		-			17,791		-			-		17,791
Travel		24,257		-			83		-			-		24,340
		1,890,245		-			275,687		1,920			-		2,167,852
Acquisition costs
Mining rights		-		-			21,358		33,678			-		55,036
Impairment		-		(340,766	)		-		(157,348	)		-		(498,114	)
Balance at August 31, 2013		7,202,949		-			613,182		64,948			2,860		7,883,939
Exploration costs
Consulting		350,923		-			64,945		-			34,963		450,831
Exploration site		16,823		-			6,465		-			868		24,146
Geochemical		38,223		-			1,954		-			3,865		44,042
Geological		232,418		-			-		-			-		232,418
Metallurgical testing		468,395		-			-		-			-		468,395
Pre-feasibility study		188,431		-			-		-			-		188,431
Surface rights		54,016		-			-		-			-		54,016
Travel		11,282		-			3,230		-			-		14,512
		1,360,511		-			76,594		-			39,686		1,476,791
Acquisition costs
Mining rights		16,717		-			18,385		-			16,241		51,343
Issuance of common shares		52,920		-			-		-			51,500		104,420
Acquisition		-		-			-		-			45,000		45,000
		69,637		-			18,385		-			112,741		200,763
Impairment		-		-			-		(44,230	)		-		(44,230	)
Balance at May 31, 2014		8,633,097		-			708,161		20,718			155,287		9,517,263

(a) Rare Earth Element Properties

Norra Kärr

The Norra Kärr property consists of four staked exploration claims and a mining lease located in southern Sweden.

During the nine months ended May 31, 2014 the Company entered into an agreement to acquire certain surface access rights to the Norra Kärr property, whereby the Company issued 36,000 common shares of the Company at a fair value of $52,920.

Page 14

TASMAN METALS LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED MAY 31, 2014

(Unaudited - Expressed in Canadian Dollars)

7.           Exploration and Evaluation Assets (continued)

Olserum

During fiscal 2012 the Company acquired a 100 % interest in the Olserum property, comprising one claim, in southern Sweden.  The Olserum property was purchased from Norrsken Energy Limited, a private company registered in the United Kingdom, for a total consideration of 37,746 common shares of the Company issued at an estimated fair value of $95,120.  The Company subsequently staked a further five claims surrounding the Olserum property.

Other

During the nine months ended May 31, 2014 the Company relinquished certain exploration claims in Sweden and recorded an impairment charge of $44,230 to exploration and evaluation assets.

As at May 31, 2014 the Company has 17 exploration claims and one mining lease in Sweden.

(b) Other Properties

(i) Iron Ore Properties

On May 16, 2010 the Company entered into an option agreement with Hannans whereby Hannans has agreed to acquire up to a 90% interest in the Sautusvaara, Vieto, Harrejaure and Lauukujarvi exploration claims (the “Iron Ore Claims”) in Sweden.  Hannans has earned a 75% interest in the Iron Ore Claims and may earn a further 15% interest by funding a feasibility study on at least one Iron Ore Claim prior to June 30, 2018, including spending a minimum of AUS $100,000 per annum.

(ii) Tungsten Properties

On October 7, 2013 the Company entered into a letter agreement with Tumi Resources Ltd. (“Tumi”) and acquired a 100% interest in seven exploration licenses (the “Tungsten Projects”) located in south-central Sweden by paying $45,000 cash and issuing 50,000 common shares of the Company at a fair value of $51,500.  A further 50,000 common shares are issuable upon commencement of production from any of the Tungsten Projects.  Tumi has two common directors.

8. Share Capital

(a)           Authorized Share Capital

The Company’s authorized share capital consists of an unlimited number of common shares without par value.  All issued common shares are fully paid.

(b) Reconciliation of Changes in Share Capital

(i) In February 2014 the Company completed the first tranche of a private placement of 3,875,863 units at a price of $1.10 per unit for gross proceeds of $4,263,449.  Each unit comprised one common share and one non-transferable share purchase warrant.  Each warrant entitles the holder to purchase an additional common share at a price of $1.50 per share on or before February 11, 2017.  The Company paid a finders’ fee of $168,735 cash and issued finders’ warrants which entitled the holder to purchase 15,495 common shares at a price of $1.50 per share on or before February 11, 2017.  The fair value of the finders’ warrants, estimated using the Black-Scholes option pricing model, is $10,072.  The assumptions used were: a risk-free interest rate of 1.39%; an estimated volatility of 88%; an expected life of 3 years; an expected dividend yield of 0%; and an estimated forfeiture rate of 0%.

Page 15

TASMAN METALS LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED MAY 31, 2014

(Unaudited - Expressed in Canadian Dollars)

8. Share Capital (continued)

The Company also issued 192,000 compensation options exercisable into units with each unit having the same terms as the units issued under the private placement.  The fair value of the compensation options, estimated using the Black-Scholes option pricing model, is $124,800.  The assumptions used were: a risk-free interest rate of 1.39%; an estimated volatility of 88%; an expected life of 3 years; an expected dividend yield of 0%; and an estimated forfeiture rate of 0%.

In May 2014 the Company completed the final tranche of its private placement and issued 1,044,077 units as a price of $1.10 per unit for gross proceeds of $1,148,485.  Each unit comprised one common share and one non-transferable share purchase warrant.  Each warrant entitles the holder to purchase an additional common share at a price of $1.50 per share on or before March 31, 2017.  The Company paid a finder’s fee of $80,009 cash and issued 103,907 compensation options exercisable into units with each unit having the same terms as the units issued under the private placement.  The fair value of the compensation options, estimated using the Black-Scholes option pricing model, is $64,422.  The assumptions used were: a risk-free interest rate of 1.26%; an estimated volatility of 87%; an expected life of 3 years; an expected dividend yield of 0%; and an estimated forfeiture rate of 0%.

The Company incurred $172,244 for legal and filing fees associated with this private placement.

Directors and officers of the Company purchased 83,000 units of this private placement.

See also Note 7(b)(ii).

(ii) No equity financings were conducted by the Company during fiscal 2013.

(c) Warrants

A summary of the number of common shares reserved pursuant to the Company’s warrants outstanding at May 31, 2014 and 2013 and the changes for the nine months ended on those dates is as follows:

	2014					2013
	Number			Weighted Average Exercise Price $		Number			Weighted Average Exercise Price $
Balance, beginning of period		2,090,667			1.85		2,177,607			1.85
Issued		4,935,435			1.50		-			-
Expired		(2,090,667	)		1.85		(86,940	)		1.85
Balance, end of period		4,935,435			1.50		2,090,667			1.85

The following table summarizes information about the number of common shares reserved pursuant to the Company’s warrants outstanding and exercisable at May 31, 2014:

Number Outstanding		Exercise Price $		Expiry Date
	3,891,358		1.50	February 11, 2017
	1,044,077		1.50	March 31, 2017
	4,935,435

Page 16

TASMAN METALS LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED MAY 31, 2014

(Unaudited - Expressed in Canadian Dollars)

8. Share Capital (continued)

(d)           Share Option Plan

The Company has established a rolling share option plan (the “Plan”), in which the maximum number of common shares which can be reserved for issuance under the Plan is 10% of the issued and outstanding shares of the Company.  The minimum exercise price of the options is set at the Company’s closing share price on the day before the grant date, less allowable discounts in accordance with the policies of the TSXV.  Options granted may be subject to vesting provisions as determined by the Board of Directors and have a maximum term of ten years.

During the nine months ended May 31, 2014 the Company granted 360,000 (2013 - 230,000) share options and recorded compensation expense of $225,200 (2013 - $154,000).  In addition, the Company recorded $nil (2013 - $9,475) compensation expense on share options previously granted which had vested during the period.

The fair value of share options granted and/or vested during the nine months ended May 31, 2014 and 2013 is estimated using the Black-Scholes option pricing model using the following assumptions:

	2014		2013
Risk-free interest rate		1.26% - 1.46%		1.09% - 1.26%
Estimated volatility		87% - 96%		86% - 130%
Expected life	3 years		2 years - 3 years
Expected dividend yield		0%		0%
Expected forfeiture rate		0%		0%

The weighted average fair value of all share options granted and/or vested during the nine months ended May 31, 2014 was $0.63 (2013 - $0.67) per option.

During the nine months ended May 31, 2013 the Company re-priced 1,706,500 share options previously granted, from original exercise prices ranging from $2.13 to $4.22 per share, to a revised exercise price of $1.40 per share.  The fair value of the re-priced share options have been estimated using the Black-Scholes option pricing model.  The assumptions used were:  risk-free interest rate of 1.09% - 1.22%;  estimated volatility of 91% - 103%;  expected life of 1.25 years to 2.46 years;  expected dividend yield of 0%;  and estimated forfeiture rate of 0%.  The value assigned to the re-pricing of the share options was $491,230.

Option-pricing models require the use of estimates and assumptions including the expected volatility.  Changes in the underlying assumptions can materially affect the fair value estimates and, therefore, existing models do not necessarily provide reliable measure of the fair value of the Company’s share options.

A summary of the Company’s share options at May 31, 2014 and 2013 and the changes for the nine months ended on those dates is presented below:

	2014					2013
	Number of Options			Weighted Average Exercise Price $		Number of Options			Weighted Average Exercise Price $
Balance, beginning of period		3,781,500			2.01		5,181,500			2.09
Granted		360,000			0.85		230,000			0.96
Exercised		(285,000	)		1.23		(1,250,000	)		0.24
Expired		(1,011,500	)		1.91		(380,000	)		2.32
Balance, end of period		2,845,000			1.99		3,781,500			2.01

Page 17

TASMAN METALS LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED MAY 31, 2014

(Unaudited - Expressed in Canadian Dollars)

8. Share Capital (continued)

The following table summarizes information about the share options outstanding and exercisable at May 31, 2014:

Number Outstanding		Exercise Price $		Expiry Date
	100,000		1.40	July 15, 2014
	100,000		4.22	July 15, 2014
	50,000		3.20	August 9, 2014
	60,000		1.40	August 22, 2014
	100,000		3.37	September 13, 2014
	275,000		1.40	December 6, 2014
	250,000		1.40	January 9, 2015
	445,000		2.13	January 9, 2015
	700,000		2.70	January 9, 2015
	50,000		1.40	February 27, 2015
	200,000		1.87	May 3, 2015
	50,000		1.40	September 13, 2015
	25,000		1.44	October 31, 2015
	30,000		1.07	February 11, 2016
	125,000		0.66	April 12, 2016
	60,000		0.65	September 2, 2016
	85,000		0.76	September 23, 2016
	40,000		0.95	January 3, 2017
	100,000		1.47	April 7, 2017
	2,845,000

(e)           Escrow Shares

As at May 31, 2014, 91,745 common shares are held in escrow.

9. Related Party Disclosures

A number of key management personnel hold positions in other entities that result in them having control or significant influence over the financial or operating policies of those entities.  Certain of these entities transacted with the Company during the reporting period.

(a) Transactions with Key Management Personnel

During the nine months ended May 31, 2014 and 2013 the following amounts were incurred with respect to the Company’s executive officers, comprising the President, Vice-President of Corporate Development (“VPCD”) and Chief Financial Officer (“CFO”):

	2014	2013
	$	$
Management fees	121,500	121,500
Professional fees	97,500	124,500
Share-based compensation	-	51,250
	219,000	297,250

As at May 31, 2014, $46,000 (2013 - $3,000) of the above amounts remained unpaid and has been included in accounts payable and accrued liabilities.

Page 18

TASMAN METALS LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED MAY 31, 2014

(Unaudited - Expressed in Canadian Dollars)

9. Related Party Disclosures (continued)

The Company has a management agreement with the President which provides that, in the event the President’s services are terminated without cause or upon a change of control of the Company, a termination payment of two years of compensation, at $13,500 per month, is payable.  If the termination had occurred on May 31, 2014 the amount payable under the agreement would be $324,000.

(b)           Transactions with Other Related Parties

(i) During the nine months ended May 31, 2014 and 2013 the following amounts were incurred with respect to the Company’s non-management directors of the Company:

	2014	2013
	$	$
Professional fees	93,000	95,000

As at May 31, 2014, $23,500 (2013 - $16,000) of the above amounts remained unpaid and has been included in accounts payable and accrued liabilities.

(ii) In addition, during the nine months ended May 31, 2014 the Company incurred a total of $49,300 (2013 - $38,100) to Chase Management Ltd. (“Chase”), a private corporation owned by the CFO of the Company, for accounting and administration services provided by Chase personnel, excluding the CFO, and $3,015 (2013 - $3,470) for rent.  As at May 31, 2014, $5,135 (2013 - $3,335) remained unpaid and has been included in accounts payable and accrued liabilities.

(c) During the nine months ended May 31, 2014 the Company incurred $21,650 (2013 - $16,977) for shared administration costs with public companies with common directors and officers.  As at May 31, 2014, $4,100 (2013 - $3,470) of the amount remained unpaid and has been included in accounts payable and accrued liabilities.

(d) During the nine months ended May 31, 2014 the Company recorded a recovery of $37,252 (2013 - $73,207) for shared office personnel and costs from public companies with common directors and officers.  As at May 31, 2014, $3,645 (2013 - $nil) of the amount remained outstanding and has been included in amounts receivable.

(e) See also Notes 7(b)(ii) and 8(b)(i).

10.           Segmented Information

The Company is involved in the exploration and development of resource properties in certain Scandinavian countries, with corporate operations in Canada.  The Company is in the exploration stage and accordingly, has no reportable segment revenues or operating results.

The Company’s total assets are segmented geographically as follows:

	May 31, 2014
	Canada $		Scandinavia $		Total $
Current assets		7,507,752		250,527		7,758,279
Investments		22,274		-		22,274
Property, plant and equipment		-		141,183		141,183
Exploration and evaluation assets		-		9,517,263		9,517,263
Bond deposit		-		31,819		31,819
		7,530,026		9,940,792		17,470,818

Page 19

TASMAN METALS LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED MAY 31, 2014

(Unaudited - Expressed in Canadian Dollars)

10.           Segmented Information (continued)

	August 31, 2013
	Canada $		Scandinavia $		Total $
Current assets		5,518,107		222,371		5,740,478
Investment		24,805		-		24,805
Property, plant and equipment		-		175,485		175,485
Exploration and evaluation assets		-		7,883,939		7,883,939
Bond deposit		-		31,646		31,646
		5,542,912		8,313,441		13,856,353

11. Financial Instruments and Risk Management

Categories of Financial Assets and Financial Liabilities

Financial assets are classified into one of the following four categories:  FVTPL; held-to-maturity investments; loans and receivables; and available-for-sale.  Financial liabilities are classified as FVTPL or other temporary liabilities.  The carrying values of the Company’s financial instruments are classified into the following categories:

Financial Instrument	Category	May 31, 2014 $			August 31, 2013 $
Cash	FVTPL		7,572,179			5,601,492
Investment	Available-for-sale		22,274			24,805
Amounts receivable	Loans and receivables		31,933			13,444
Accounts payable and accrued liabilities	Other liabilities		(598,128	)		(645,492	)

The Company’s financial instruments recorded at fair value require disclosure about how the fair value was determined based on significant levels of inputs described in the following hierarchy:

  Level 1 -      Quoted prices are available in active markets for identical assets or liabilities as of the reporting date.  Active markets are those in which transactions occur in sufficient frequency and value to provide pricing information on an ongoing basis.

Level 2 -  Pricing inputs are other than quoted prices in active markets included in Level 1.  Prices in Level 2 are either directly or indirectly observable as of the reporting date.  Level 2 valuations are based on inputs including quoted forward prices for commodities, time value and volatility factors, which can be substantially observed or corroborated in the market place.

Level 3 -     Valuations in this level are those with inputs for the asset or liability that are not based on observable market data.

The recorded amounts for amounts receivable and accounts payable and accrued liabilities approximate their fair value due to their short-term nature.  The Company’s cash and investments under the fair value hierarchy are measured using Level 1 inputs.

The Company’s risk exposures and the impact on the Company’s financial instruments are summarized below:

Credit Risk

Credit risk is the risk of loss associated with a counterparty’s inability to fulfill its payment obligations.  The Company’s credit risk is primarily attributable to cash and amounts receivable.  Management believes that the credit risk concentration with respect to financial instruments included in cash and amounts receivable is remote.

Page 20

TASMAN METALS LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED MAY 31, 2014

(Unaudited - Expressed in Canadian Dollars)

11. Financial Instruments and Risk Management (continued)

Liquidity Risk

Liquidity risk is the risk that the Company will not have the resources to meet its obligations as they fall due.  The Company manages this risk by closely monitoring cash forecasts and managing resources to ensure that it will have sufficient liquidity to meet its obligations.  All of the Company’s financial liabilities are classified as current and are anticipated to mature within the next fiscal period.  The following table is based on the contractual maturity dates of financial assets and the earliest date on which the Company can be required to settle financial liabilities.

	Contractual Maturity Analysis at May 31, 2014
	Less than 3 Months $			3 - 12 Months $		1 - 5 Years $		Over 5 Years $		Total $
Cash		7,572,179			-		-		-		7,572,179
Investment		-			-		22,274		-		22,274
Amounts receivable		31,933			-		-		-		31,933
Accounts payable and      accrued liabilities		(598,128	)		-		-		-		(598,128	)

	Contractual Maturity Analysis at August 31, 2013
	Less than 3 Months $			3 - 12 Months $		1 - 5 Years $		Over 5 Years $		Total $
Cash		5,601,492			-		-		-		5,601,492
Investment		-			-		24,805		-		24,805
Amounts receivable		13,444			-		-		-		13,444
Accounts payable and      accrued liabilities		(645,492	)		-		-		-		(645,492	)

Market Risk

Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates, and commodity and equity prices.  These fluctuations may be significant.

(a) Interest Rate Risk

The Company is exposed to interest rate risk to the extent that the cash bears floating rates of interest.  The interest rate risk on cash and on the Company’s obligations are not considered significant.

(b) Foreign Currency Risk

The Company’s functional currency is the Canadian dollar and major transactions are transacted in Canadian Dollars and Swedish Kronors (“SEK”).  The Company maintains SEK bank accounts in Sweden to support the cash needs of its foreign operation.  Management believes the foreign exchange risk related to currency conversions are minimal and therefore does not hedge its foreign exchange risk.  At May 31, 2014, 1 Canadian Dollar was equal to 6.17 SEK.

Balances are as follows:

	Swedish Kronors			CDN $ Equivalent
Cash		1,038,079			168,246
Amounts receivable		397,780			64,470
Accounts payable and accrued liabilities		(2,202,624	)		(356,989	)
		(766,765	)		(124,273	)

Page 21

TASMAN METALS LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED MAY 31, 2014

(Unaudited - Expressed in Canadian Dollars)

11.           Financial Instruments and Risk Management (continued)

Based on the net exposures as of May 31, 2014 and assuming that all other variables remain constant, a 10% fluctuation on the Canadian Dollar against the SEK would result in the Company’s net loss to be approximately $11,000 higher (or lower).

Capital Management

The Company manages its capital structure and makes adjustments to it, based on the funds available to the Company, in order to support the acquisition and exploration of mineral properties.  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 future development of the business.  The Company defines capital that it manages as share capital, cash and cash equivalents and short-term investments.  The Company will continue to assess new properties and seek to acquire an interest in additional properties if it feels there is sufficient geologic or economic potential and if it has adequate financial resources to do so.  Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable.

12.           Supplemental Cash Flow Information

During the nine months ended May 31, 2014 and 2013 non-cash activities were conducted by the Company as follows:

	2014		2013
	$		$
Operating activity
Increase in accounts payable and accrued liabilities	215,688		-
Financing activities
Issuance of common shares	386,900		190,000
Share issue costs	(199,294	)	-
Share-based payments reserve	(187,606	)	(164,500	)
	-		25,500
Investing activity
Additions to exploration and evaluation assets	(215,688	)	(25,500	)

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