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Sparton Resources Inc. — Management Reports 2025
Apr 30, 2025
42498_rns_2025-04-29_d381e42e-9b63-4d15-8e90-db45460351b8.pdf
Management Reports
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SPARTON RESOURCES INC.
For the year ended December 31, 2024
Management’s Discussion and Analysis dated April 28, 2025
The following discussion and analysis of results of operations of Sparton Resources Inc. (“Sparton” or the “Company”) and its subsidiaries for the year ended December 31, 2024, should be read in conjunction with the consolidated financial statements for the year ended December 31, 2024, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”). All currency is shown in Canadian dollars unless otherwise stated. The Company’s current subsidiaries are comprised of: (i) Spartan International Holdings Inc. (100% owned) (“SIH”) (ii) VanSpar Mining Inc. (90% owned by SIH) (“VanSpar”), both of which are registered in the British Virgin Islands, and (iii) Edcor Drilling Services Inc. (“EDCOR”), (100% owned) registered in Ontario, Canada. VanSpar owns approximately 9.9% of VRB Energy Inc. (“VRB Energy”) a Cayman Islands company and manufacturer of vanadium flow batteries with a factory in Tongzhou (Beijing) China.
Forward-Looking Information
This Management’s Discussion and Analysis (“MD&A”) contains certain forward-looking statements and information relating to the Company that are based on the beliefs of its management, as well as assumptions made by and information currently available to the Company. When used in this document the words "anticipate", "believe", "estimate", "expect" and similar expressions, as they relate to the Company or its management, are intended to identify forward-looking statements. Forward-looking statements include, among other things, regulatory compliance, the sufficiency of current working capital, the estimated cost and availability of funding for the continued exploration and development of the Company’s exploration properties. Such statements reflect the current views of its management with respect to future events and are subject to a variety of inherent risks, uncertainties and other facts that are beyond the Company’s control, and could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements. The Company undertakes no obligation to update or revise any forward-looking statement whether as a result of new information, future events or any other reasons; except as required by applicable Canadian securities law. Investors and others should carefully consider these and other factors and not place undue reliance on these forward-looking statements.
General
The Company continues to seek financing for its various gold and base metal related projects in Canada and to evaluate other opportunities related to the mineral exploration and vertically integrated energy storage industry activities. It also, through joint venture partners, or internally, is continuing its evaluation of other domestic exploration projects including the Bruell gold property in Quebec, the Matachewan area Ontario Oakes Leases and adjacent mineral claims, and the Pense Critical Metals Project in Ontario.
The VRB ENERGY Transaction:
The Company’s 90% owned subsidiary, VanSpar Mining Inc. (“VanSpar”) in 2016 received 18,000,000 common shares of VRB Energy Inc. (“VRB Energy”) a Cayman Islands company and manufacturer of vanadium flow batteries with a factory in Tongzhou (Beijing) China.
In 2017 VanSpar executed a profit-sharing agreement with a private investor to acquire Additional Shares in VRB Energy. Under the profit-sharing agreement, the private investor provided funds required for VanSpar to participate and acquire more shares (“Additional Shares”) in VRB Energy’s future financing, to maintain
VanSpar's percentage of interest in VRB Energy. Once the Additional Shares are sold in a liquidation event, the investor will be entitled to 80% of the profit (calculated as proceeds of sales minus transaction costs minus the principal fund provided by the private investor plus 7% annual interest) and VanSpar will be entitled to 20% of the profit. In case there is no profit or even a loss, VanSpar will not be responsible for repayment of the principal funds provided by the investor. In 2017 VanSpar had received a total of US$900,000 from the private investor to participate in acquisition of 13,953,488 VRB Energy shares. The Company has determined this profit-sharing agreement is a joint operation. There is no downside risk to the Company as VanSpar does not have obligation to repay the full principal fund, therefore the Company has not recorded the funding provided by the private investor as a financial liability and has not recorded the Additional Shares as a financial asset.
VanSpar's total 31,953,482 VRB Energy shares represent a 9.98% share interest in VRB Energy. Ivanhoe Electric Inc., (NYSE American: IE, TSX: IE) holds the other 91.02% of VRB Energy. The Company valued the 31,953,488, VRB Energy shares it owned as at December 31, 2024, to be $1,683,513 (December 31, 2023, $1,547,422).
On June 2, 2020, VRB Energy announced the commissioning of a 5 KW (4hour) vanadium redox battery, as part of a 10 KW photo-voltaic plus energy storage system pilot demonstration project with Hesteel Group Company Ltd., the largest steel and vanadium supplier in China. This solar-shifting pilot project is just the first step toward widespread deployment of the technology.
On August 23, 2020, VRB Energy reported that it had designed a more efficient 3rd generation vanadium battery known as the GEN3 System ("Gen3 VRB-ESS®"). This system received certification for very cold weather use in early April of 2022, having been successfully operated at -40 deg C temperatures for over 6 weeks in a comprehensive test program. On August 30, 2023, Ivanhoe Electric announced that its 90% owned subsidiary, VRB Energy Inc., received Underwriters Laboratories ("UL") 1973 certification for its third generation Energy Storage System.
VRB Energy signed an agreement on March 4, 2021, to build China's largest photo voltaic ("PV") solar integrated battery system – to build in phases a 500 MWH PV and energy storage power station integrating VRB Energy's vanadium flow battery energy storage system. The project is located in Xiangyang, Hubei Province, China at a new industrial park complex that will include a VRB-ESS® manufacturing "Gigafactory", and a vanadium flow battery energy research and development institute. It will eventually generate 100 megawatts (1GW) of power annually.
VRB Energy has the current opportunity to receive a contract increasing the 100- megawatt ("MW") project for Hubei Province to 500 megawatts. The timing of the award for this project was deferred due to ongoing COVID issues in PRC.
VRB Energy pursued a number of sales opportunities during the year 2023 and 2024 and installed several demonstration units for potential larger customer orders.
With lower international vanadium prices, it also continued to seek a long-term economical vanadium supplier and plans to become vertically integrated in the medium term. This will lead to very competitive pricing for its products and is expected to generate new sales. Currently VRB Energy is one of only a few companies manufacturing batteries for clients who supply their own electrolyte.
On October 29, 2023, VRB Energy reported through its China domestic website, the successful 10-year performance review of its 8 Mega Watt Hour GEN1 vanadium flow battery installed at the North China State Grid Zhangbei Renewable Energy Generation and Storage Demonstration Site, about 180 km north of Beijing.
On August 16, 2024, the United States Department of Energy ("DOE") released the results of a 3-year study of 10 various energy storage options. Part of this work involved a study of various battery technologies for large grid style applications and the DOE concluded that Flow Batteries rated the highest in terms of overall cost and efficiency for lifetime cost of service in large scale electricity storage applications. Sparton
Management regards this, when coupled with the various testing and safety features of the VRB Energy battery systems, as a significant endorsement of Vanadium Flow Batteries, which could translate into future product sales.
On September 23, 2024, Ivanhoe Electric Inc. announced that VRB Energy is planning to expand vanadium flow battery manufacturing into the United States and that its existing operations in China will become subject to a 51/49 joint-venture following an investment from a subsidiary of privately held Shanxi Red Sun Co., Ltd. ("Red Sun"), a leading private investment group based in Shanxi province, China, which focuses on investments in new energy and energy storage technology, biomedicine and high-end agriculture.
On October 15, 2024, Ivanhoe Electric Inc. announced that definitive agreements have been signed between VRB Energy and Red Sun and certain other affiliates, finalizing the terms of the transaction. VRB Energy will establish VRB USA, located in Arizona, to pursue domestic manufacturing of vanadium redox flow battery systems. The domestic facility will be capable of producing 50 megawatts per year of VRB-Energy Storage Systems vanadium flow batteries. As noted above, the VRB Energy battery system cell stacks have received an Underwriters Laboratories 1973 safety certificate which is recognized as a global standard for commercially available battery energy storage.
A Cooperation Agreement was entered into to ensure patent protection and to allow VRB USA to maintain access to intellectual property and associated rights as well as obtain the benefits of product improvements. The Chinese operations will also become a preferred supplier of certain key components.
Also announced, was an investment by Red Sun of US$55 Million, of which US$35 Million is towards a 51% participation in the existing VRB Energy operations in China. The joint venture has been formed to manufacture and sell vanadium redox flow battery systems with a market focus in Asia, the Middle East and Africa. US$20 Million of the transaction proceeds will support the establishment of VRB USA operations.
Contract Drilling Business
Revenue and expenses relating to one of the drill units owned by the Company's EDCOR subsidiary is shared with Eva Lake Mining Ltd., an aboriginal Metis service company, based in Atikokan Ontario.
For the year ended December 31, 2024, the Company reported no (2023 - $954,097) drilling revenue and is actively seeking to negotiate new contracts for 2025.
Bruell Property, Canada
On August 11, 2017, the Company entered into an option agreement with two independent prospectors (the "Vendors") to explore the 20 claim Bruell Property ("the Property") in Vauquelin Township, Quebec.
Under the terms of the 5-year option agreement Sparton will issue a total of 1,500,000 Common Shares, incur a total of $1,500,000 in exploration expenditures on the claims, and make cash payments totaling $300,000 to earn a 100% interest in the Property, that the Company has completed in 2023.
Production Royalty: If commercial production takes place on the Bruell property, the Vendors collectively, will be entitled to receive an annual production royalty (the "Royalty") equal to 2% of Net Smelter Returns as customarily defined. At any time after a feasibility study is completed for development of any part of the Property ½ of this Royalty (or 1%) may be purchased by the Company for the sum of $1,000,000. All cash payments share issuances, and royalty payments if any, will be paid or issued as to 50% of the totals to each prospector.
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On October 21, 2019, the Company announced 15 additional mining claims have been acquired from a private prospector extending the original 36 Bruell mining claims.
On December 16, 2019, Sparton announced that it had executed definitive agreements including an Option Agreement with Eldorado Gold Corporation ("Eldorado") to grant an option to Eldorado to earn up to an initial 75% interest ("Option") in the Bruell Project. Under the Option Agreement, Eldorado will make all future cash payments and fund all the future expenditures required under the existing Property Option Agreement between the Company and the original optionors. Sparton received a cash payment of $150,000 on execution of the Eldorado Option Agreement, as partial compensation for past expenditures that was recorded as recovery of exploration expenses in the consolidated statements of (loss). If Eldorado makes all future cash payments and funds all the future expenditures required then it has the right to have Sparton participate in a new joint-venture in which Sparton will hold a 25%, or buy-out Sparton's 25% interest for $1.8 million adjusted for the Consumer Price Index at the time Eldorado makes the election, in which case Sparton will be granted a 2% Net Smelter Return Production Royalty ("NSR"), and 50% of the NSR can be purchased by Eldorado for $2.5 million at any time.
The Company has completed the earn-in and exercised its option to acquire 100% of the 51-claim Bruell Property. It did so by issuing a total of 1.5 million common shares of the Company, making $300,000 in cash payments to the vendors, and incurring $1.5 million in exploration expenditures on the claims.
In 2022, Eldorado completed 11 diamond drill holes totaling 4,745 meters. In 2023 Eldorado planned approximately 8,000 meters of additional drilling at Bruell in 21 holes and completed an additional 9,430 meters of drilling in 18 holes in the first quarter of 2023 with some positive results. On February 13, 2024 the Company and Eldorado executed an agreement extending the Option Agreement decision date for the Bruell gold project until April 19, 2024.
On April 22, 2024, the Company announced that Eldorado Gold Corporation ("Eldorado") has, effective April 18, 2024, exercised its option to acquire from Spartan an initial 75% (seventy five percent) interest in the Bruell gold project, east of Val D'Or, Québec.
Sparton and Eldorado had executed, effective April 18, 2024, a further amendment to the original Option Agreement to delete the twenty (20) business day further option period and replace it with a seventy-five (75) business day option period for Eldorado to implement the joint venture or decide if it wishes to acquire all of the remaining Spartan 25% interest for a combination of a $1.8 million cash payment (adjusted for CPI) and a residual 2% Net Smelter Return ("NSR") royalty. Fifty percent (50%) of the NSR can be purchased by Eldorado for $2.5 million at any time. This extension will enable transferring of the Bruell claim titles to Eldorado, preparation of joint venture documents and the efficient implementation of other things necessary for the property ownership change.
On November 20, 2024, the Company executed a further amendment to the agreement with Eldorado for Bruell Property, where Eldorado received an additional option to acquire the Company's 25% beneficial interest in the Bruell Property free and clear of all Encumbrances for a price of $275,000 (inclusive of all applicable tax). On January 15, 2025, Eldorado exercised this option to acquire from the Company 25% of Bruell Property for $275,000. Legal fees of a maximum of $20,000 may be incurred by the Company for closing this transaction, which is currently pending.
Sir Harry Oakes Gold Property, Canada
On Sept. 25, 2019, the Company announced that it has secured an option to purchase a strategic gold prospect, comprising 3 Mining Leases (the "Leases") in the Matachewan gold mining area of northern Ontario. In addition, the Company has also acquired through staking, an additional 12 Mining Claim Units (approximately 300 hectares) adjacent to the area of the Mining Leases (the "Claims").
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Sparton has executed a 4-year Option to Purchase Agreement with a private owner of the Leases whereunder it has the right to purchase a 100% interest in the Leases.
On July 6, 2020, the Company announced that it acquired 18 additional mining claim units adjacent to or nearby to the Oakes Mining Leases for a cash consideration of $6,000. On September 4, 2020, the Company received a work permit for the project and commenced a drill program on the project on October 19, 2020.
On November 25, 2020, the Company announced that it signed, effective November 17, 2020, a Memorandum of Understanding ("MOU") with the Matachewan First Nation ("MFN") related to its exploration activities on the Sir Harry Oakes Gold Project, near Matachewan, Ontario. MFN is a signatory to Treaty No. 9 and holds inherent aboriginal and treaty rights to and over their traditional territory, which includes the Mining Leases and claims held by Sparton and referred to as the Sir Harry Oakes Project. The MOU recognizes these rights and provides for a mutually beneficial and cooperative relationship between the parties. The MOU, among other things, contemplates the possibility of an Investment Benefit Agreement ("IBA") in the future if the project is successful in advancing the project to advanced exploration and development stages and completion of a positive feasibility study. Additionally, the Company will compensate MFN for its exploration activities in the MFN area by issuing to MFN 50,000 Sparton common shares with a deemed value of $0.06 each, and 50,000 Share Purchase Warrants ("SPW" s). The SPWs are valid for a period of three years from November 17, 2020, and entitled MFN to purchase up to 50,000 additional common shares of the Company at a price of $0.10 per share. As further compensation Sparton will pay MFN on an annual basis, 2% (percent) of its audited exploration costs directly related to the expenses on the Oakes Project. The MOU is valid and in effect until Sparton has either ceased its activities on the Project or an IBA agreement is concluded. The 50,000 warrants issued by the Company to MFN on December 1, 2020, have expired.
On September 4, 2020, the Company received a work permit for the project and commenced a drill program on the project on October 19, 2020.
The plan was permitted for a total of 10 holes to be drilled, from 5 locations, designed to establish approximately 300 meters of strike length of the zones reported from the 1930's historical data. Three of the initial sites duplicated the locations of historical holes DDH 2A, 3 and 5, drilled in the 1930s, each of which successfully intersected reported gold mineralization. The mineralized area near the shaft and the previously drilled area corresponds with a structure defined by a distinct magnetic low, highlighted in the Company magnetic survey, completed earlier in 2020.
All operations were undertaken with proper COVID-19 protocols in place.
Effective May 12, 2021, Sparton signed an evaluation agreement for one year to review and assess the exploration potential of a former producing copper and molybdenum mine property adjacent to the Company Matachewan / Oakes project claims and leases.
The Company now controls 32 Mining Claims and 3 Mining Leases in the Matachewan Gold Area.
The drill program on the Sir Harry Oakes Gold Project was permitted for 2,000 meters. A 3 km access road was completed and drill site locations set out with proper environmental guidelines and setbacks from the nearby lake.
In early 2022, a 3D IP survey was completed over the central part of the claim area. This work outlined 5 high priority anomalies, only one of which has been drill tested (the old Oakes shaft area). A new work permit application was made for several claims covering two of these anomalies and approval was received late in 2022.
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2020 Drill Program
A total of 6 core holes comprising a total of approximately 700 meters were drilled at the sites of historical holes numbered DDH 2A, DDH 3 and DDH 5. (Please see Sparton news release dated October 19th, 2020). All holes, except number 6, were drilled to the end of visible mineralization or alteration and ended in fresh rock material. The historical holes were only drilled to approximately 30–40-meter depths at minus 45-degree angles. The drilling was designed to essentially duplicate the historical holes by drilling a minus 50-degree dip hole and a steeper hole (minus 65 degrees) underneath from the same setup.
Assay results were slow in coming due to COVID19 delays and extremely high laboratory work loads. Over 450 samples were submitted for precious metal and multi element analyses.
Holes DDH 20-1 and 20-2 were drilled east of the old shaft at the site of historical hole DDH 2A, which reported a zone of 5.5 grams per tonne ("gpt") gold ("Au") over 5.53 metres. Holes DDH 20-3 and 20-4 were drilled at the site of historical hole DDH 3, which reported intersections of 8.23 gpt Au over 1.5 metres, and 14.4 gpt Au over 0.9 metres. Current holes DDH 20-5 and 20-6 were located at the site of historical hole DDH 5 which reported which 6.85 gpt Au over 1.85 metres, 3.77 gpt Au over 1.49 metres, and 3.43 gpt Au over 0.61 metres; Please see Sparton news release dated September 16, 2020, and historical maps on the Sparton website at www.spartonresources.com.
CAUTIONARY NOTE
It should be noted that historical results reported here and earlier, by the Company are included with the recent drilling data results and were available to Sparton. Knowing the laboratories where the historical analyses were done, the Company believed the historical data to be reliable and has reviewed them in detail to attempt to determine the discrepancies with the current results. More work needs to be done however, to verify these historical results and information and provide an explanation the reason for the differences with the current results.
Further, a qualified person under NI 43-101 has not done sufficient work to verify the historical results with new sampling and analyses because the original samples and drill core are not available for re-analysis.
Oakes Assay Results
Drilling results from the Oakes Project were reported in March of 2021. All holes intersected significant sulfide mineralization (up to 40% pyrite with lesser chalcopyrite) and ubiquitous red hematite and grey magnetite alteration plus intense silicification. The host sedimentary rocks are strongly brecciated and contain multiple quartz stringers and veining up to 1 meter in core length often associated with zones of red to grey syenite and locally containing up to 20% chalcopyrite. Zones of multiple stage quartz veining and mineralization occur in the current drill holes at roughly the same intervals as reported in the shallow historical holes but significantly more mineralization is present deeper in the current holes, indicating a much larger mineralised structural zone over 50 meters in width. Several small fault zones were encountered in all holes and overall core recovery exceeded 95%.
All core was systematically logged with a susceptibility meter to attempt to correlate mineralized sections with magnetic or non-magnetic zones. As well, all the core was logged systematically with a scintillometer to check for anomalous radioactivity associated with potassium alteration, which is characteristic of gold deposits in the area, including the nearby Young Davidson Mine.
The Oakes assay results were not consistent with the historical data. The best results received from the drilling are set out below:
Hole 20-1 - 0.31 gpt Au over 1.5 meters from 14.5 to 16 meters, roughly corresponding to the zone reported in historical hole 2A.
Hole 20-1 - 0.26 gpt Au over 1.5 meters from 58.5 to 60 meters.
Hole 20-1 - 1.91 gpt Ag (silver) over 6.5 meters from 67.5 to 74.0 meters.
Hole 20-3 - 0.14 gpt Au over 6 meters rom 4.5 to 10.5 meters and:
0.10 gpt Au and 1.12 gpt Ag over 4.5 meters from 31.0 to 35.5 meters and:
0.22 gpt Au over 1.5 meters from 56.0 to 57.5 meters and:
0.11 gpt Au, 1.2 gpt Ag and 0.09% Cu (copper) over 0.5 meters from 104.0 to 104.5 meters from Hole 20-4 drilled under the historical hole DDH 3 at -65 degrees.
Assay results were received from holes 4 and 5 and no significant gold values were reported.
Ongoing Work Program
The work planned for 2022 involved prospecting of the entire claim area surrounding the Oakes Leases and checking various trenches on the 32-claim property where gold values were reported by previous operators. A Geophysical IP (Induced Polarization) survey has been carried out. Similar work was undertaken in the area of the former copper mine. This work was done in early and late 2022 after COVID19 and contractor availability delays.
On May 6, 2022, the Company reported on the results of the Induced Polarization ("IP") survey completed over the central portion of the Oakes Gold Project Property. The IP survey was completed by CXS (Canadian Exploration Services) of Larder Lake, Ontario. It utilized a 3-D Distributed Induced Polarization system with wireless data acquisition and multiple layer data presentation. This system has less impact on the environment, as it reduces the amount of line cutting necessary and was also useful in getting data from underneath the lake, which bisects the survey area. Data are presented as both resistivity and chargeability information at 50-meter vertical intervals, beginning at surface and extending to different depths below surface. This information can provide a 3-dimensional interpretation of the bodies causing the anomalies. Normally, higher chargeability zones are related to metallic minerals in the host rocks and areas of higher resistivity may be related to silicification often associated with gold mineralization. The results indicate five (5) significantly anomalous areas, (please see maps and explanatory video on Company website www.spartonresources.com). One of these (Anomaly "D") is directly associated with a mineralized area adjacent to Hawley Lake, near the old "Oakes" shaft, where Sparton drilled several holes in late 2020. All holes were mineralized with pyrite, magnetite and hematite and locally intersected quartz veins and intense silicification. Anomalous values in silver, copper and gold were reported from these drill holes. The mineralization occurs in brecciated sediments and syenite porphyry. (See Company News Release dated March 19th, 2021). Syenite porphyry is one of the main host rocks for gold mineralization at the Alamos Young Davidson Mine. The other IP chargeability anomalies have never been tested with trenching or drilling and were unknown until the results of this survey. At least two of them, (anomalies "C" and "E") appear to be associated with syenite porphyry rocks on the west side of Hawley Lake. Only a very small portion of Anomaly "D" near the old shaft was tested by the 2020 drill program. Based on the IP results, Sparton prospected the key anomaly areas and determined that a trenching program to attempt to expose the sources for the new IP chargeability anomalies was not feasible due to heavy overburden and swampy areas. This work took place late in 2022, following receipt of a new work permit, approved by the Ontario Government. Drilling will be necessary to test these areas effectively.
The Company reported on December 13, 2022, that it had received an exploration permit from the Ontario Ministry of Natural Resources to allow up to 2,000 meters of drilling, and overburden stripping and sampling on claims west of Hawley Lake, Ontario, adjacent to where the old Oakes Syndicate supported shaft is located, and Sparton focused it past work. These claims were not part of the original property package and contain a
number of high priority induced polarization ("IP") anomalies located in Sparton's earlier work programs. These are associated with syenite porphyry intrusive rocks which host both gold and base metal mineralization in the area. Following receipt of a second exploration permit in mid 2022, these areas were prospected in late 2022 to identify areas where trenching could be done to check for sources of the IP anomalies. All the areas checked were covered with heavy overburden or swamp and no trenching could be carried out. Testing these targets further will be part of the Company's planned exploration work and access trails for possible drilling sites have been scouted and located in the field during 2024
Pense Property
On November 3, 2022, the Company announced that it entered into an option agreement with three independent prospectors (collectively, the "Vendors") to explore the 39 claim (865 hectare) Pense Property ("the Property") in Pense Township, Ontario. The claims are located near the Quebec provincial border, approximately 25 kilometers east of Englehart, Ontario, in the Larder Lake Mining Division.
Under the terms of the 3-year option agreement, Sparton will issue a total of 400,000 common shares, incur a total of $250,000 in exploration expenditures on the Property, and make cash payments totaling $175,000 over the 3- year period, to earn a 100% interest in the Property, detailed as follows:
After receipt of Regulatory Approval: a cash payment of $25,000, issuance of a total of 100,000 common shares to the Vendors, and a commitment to incur exploration expenditures of $50,000 in first year. (Completed)
In Year 2: Cash payment of $50,000 (paid), 150,000 common shares to be issued to the Vendors (issued), and exploration expenditures of $100,000 (completed). In Year 3: Cash payment of $100,000, 150,000 common shares to be issued to the Vendors (issued), and exploration expenditures of $300,000. (Completed)
Production Royalty: If commercial production takes place on the Pense Property, the Vendors, will be entitled to receive an annual production royalty (the "Royalty") equal to 2% of Net Smelter Returns, as customarily defined. At any time after a feasibility study is completed for development of any part of the Property, ½ of this Royalty (or 1%) may be purchased by the Company for the sum of $2,000,000. The Company will also have a right of first refusal to purchase the remaining 1% NSR Royalty.
All cash payments, share issuances and royalty payments, if any, will be paid or issued as to 33.333% of the totals to each vendor.
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VRB Energy
On March 15, 2021, VRB Energy announced a major new agreement for flow battery manufacturing and related activities. This included an agreement for China's largest solar battery; a 100MW solar & storage project in Hubei Province. The framework agreement also included provision for a 'Gigafactory' manufacturing facility and vanadium flow battery R&D institute.
VRB Energy announced this framework agreement for the 100 megawatt (MW) solar photovoltaic (PV) and 100MW / 500MWh vanadium flow battery integrated power station project located in Xiangyang, Hubei Province.
The agreement was signed by the Xiangyang Municipal Government, Hubei Pingfan New Energy, the Xiangyang High-tech State-owned Capital Investment and Operation Group, and VRB Energy at a ceremony on March 4, 2021. The initial 40MW / 200MWh VRB-ESS® and 50MW per annum of manufacturing started construction in 2021.
On July 2, 2021, VRB Energy announced an investment of US$24 million by BCPG PLC – a Thailand-based public company and developer and owner of renewable energy projects in Asia-Pacific region, with 900 megawatts (MW) in operating and a pipeline of over 2,200MW, across Southeast Asia, Japan and Australia.
On July 14, 2021, Sparton reported that VRB Energy's vanadium redox battery system has been selected for national evaluation in China.
In 2022, VRB Energy also tendered a contract to increase the 100 MW project for Hubei Province to 500 MW. The timing of awarding this contract was deferred until the new year, 2023 due to slowdowns related to the Covid 19 pandemic in PRC in 2022. The contract negotiations continued and a phased program was being proposed.
On October 15, 2024, Ivanhoe Electric Inc. announced that definitive agreements have been signed between VRB Energy and Red Sun and certain other affiliates, finalizing the terms of the transaction. (see VRB Energy Transaction, above)
Chebucto Gas
Sparton holds an estimated 6.5% unitized working interest in the Chebucto natural gas field, in the Sable Island area of offshore Nova Scotia. This is part of the Scotia Offshore Energy Project ("SOEP"). SOEP gas production was terminated in 2018 by the operator Exxon-Mobil.
These include SDL 2286, part of the Chebucto gas field, in which the Company owns a 12.5% working interest. Chebucto is located near the existing North Triumph production facilities. The SOEP supplies natural gas into the northeast seaboard areas of the United States and Canada. Sparton has owned the Chebucto interest since 1997.
There were no other new developments with Chebucto during the years in 2022 and 2023. In 2013, the Company had re-assessed the value of the oil and gas properties and concluded an impairment and written down the value of the properties to $1 due to the continuing low price of natural gas.
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Financial Highlights
Results of Operations
For the year ended December 31, 2024
The net loss from operations for 2024 was $707,662 compared to $333,367 for 2023, due to greater exploration and evaluation expenditures by the Company on its properties. The Company's contract drilling subsidiary, EDCOR, recorded $nil revenue in 2024 (2023 - $954,097) and $nil drilling costs (2023 - $908,412). Operating expenses totalled $940,779 in 2024 (2023 - $393,461). Main operating expenses include $623,296 exploration expenditures (2023 - $38,262), $103,427 (2023 - $92,604) general and administrative expenses, $15,337 (2023 - $49,648) stock based expenses, $54,520 (2023 - $64,057) management and consulting fees, $55,329 (2023 - $51,843) professional fees, $4,540 (2023 - $7,785) interests, $18,000 (2023 - $18,000) occupancy costs, $31,163 (2023 - $22,863) transfer agent filing and listing fees, $20,723 (2023 - $44,912) depreciation expenses, and other expenses. The Company also recorded a $nil loss (2023 - $1,496) from marketable securities for the year, $169,117 (2023 - $10,574) government grant and $nil (2023 - $5,331) gain on disposal of asset for the year. An income tax recovery of $64,000 (2023 - $nil) was reported for 2024 from the renunciation of flow through expenditures. Loss per share for the year basic and diluted was $0.00 (2023 - $0.00). Cash used for operating activities was of $813,153 (2023 - 138,849) for the year ended December 31, 2024.
During 2024, the Company reported cash from investing activities of $nil (2023 - $19,699).
During the year ended December 31, 2024, the Company reported a total cash flow from financing activities of $407,000 (2023 - $450,000).
Quarterly Information
The following table sets out selected quarterly financial information of Sparton and is derived from quarterly financial statements prepared by management:
| Dec 31, 2024 | Sept 30, 2024 | June 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | Sept 30, 2023 | June 30, 2023 | Mar 31, 2023 | |
|---|---|---|---|---|---|---|---|---|
| Operating Revenue ($) | Nil | Nil | Nil | Nil | Nil | 739,635 | 214,462 | Nil |
| Total Net (Income) Loss ($) | 65,652 | 179,851 | 130,228 | 331,931 | 168,671 | 96,649 | (5,950) | 97,997 |
| Basic and Diluted Loss (gain) Per Share ($) | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | (0.00) | 0.00 |
Liquidity and Financial Condition
As of December 31, 2024, Sparton had a liquidity concern. It had current assets of $207,768 (December 31, 2023 - $645,835), and a working capital deficit of $355,620 (December 31, 2023 – working capital of $80,482). Cash was $5,253 (December 31, 2023 - $411,406). Amount receivables were $192,892 (December 31, 2023 - $233,138). Property, plant and equipment assets were $21,751 on December 31, 2024 (December 31, 2023 - $42,474). Long term investment in VRB Energy valued at $1,683,513 (December 31, 2023 - $1,547,442). Current liabilities totalled $563,388 on December 31, 2024 (December 31, 2023 - $565,353). Included in the current liability were $50,000 bank line of credit, $149,530 (December 31, 2023 - $107,143) accounts payable and accrued liabilities, $231,702 (December 31, 2023 - $227,155) of loans payable, and $132,156 (December 31, 2023 - $231,055) due to related parties.
As at December 31, 2024, there was a short-term loan of $52,000 (December 31, 2023 - $52,000) bearing annual interest of 6%, payable on a quarterly basis in arrears, unsecured, and due on demand. As at December 31, 2024, there was $148,275 (December 31, 2023 - $145,155) interest payable accrued for this loan.
The Company had interest free government subsidy loans (CEBA) payable with a future payment of $31,426 as at December 31, 2024 (December 31, 2023 - $30,000) that is due on demand.
Non-controlling interests representing carrying value of the share interest held by minority shareholders in Sparton's subsidiary VanSpar was $356,898 as of December 31, 2024 ($348,070 as of December 31, 2023).
Capital Management:
The Company is not subject to any capital requirements by a lending institution or regulatory body, other than the TSX Venture Exchange ("TSX-V") which requires adequate working capital or financial resources of the greater of a) $50,000 and b) the amount required to maintain operations and cover general and administrative expenses for 6 months. As of April 28, 2025, the Company is compliant with this policy of the TSX-V.
Outstanding Share Data
Sparton's authorized capital consists of an unlimited number of common shares without par value. As at the date of this MD&A, there were 169,941,537 common shares issued and outstanding.
As of the date of this MDA, there are 300,000 share options outstanding and 8,460,000 warrants outstanding.
Related Party Transactions
The Company's related parties consist of the following:
| Related parties | Relationship |
|---|---|
| A. Lee Barker | CEO and President; minority shareholder of VanSpar |
| Wes Roberts | Director |
| Richard D. Williams | Director; minority shareholder of VanSpar |
| Oriental Sources Inc. | A company controlled by the Company's CFO |
| December 31, 2024 | |
| --- | --- |
| Due to related parties | $ |
| Consulting fees payable to Oriental Sources Inc. (i) | 32,864 |
| Rent and fees payable to Lee Barker (i) | 99,292 |
| Total | 132,156 |
(i) During 2024, $18,000 (2023 - $18,000) office space rent expenses were accrued for property owned by the President of the Company. The Company was also billed and paid $38,500 plus HST (2023 - $37,500) by Oriental Sources Inc., a company controlled by the CFO of the Company for consulting fees which were recorded as management and consulting fees on the consolidated statement of loss.
(ii) In December 2023 an officer of the Company subscribed for 1,000,000 FTSU and 1,250,000 NFTSU in the financing as described in Note 8(a)(2). The $100,000 proceeds were received in January 2024.
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The compensation expense associated with key management and directors for employment services or similar during the years in 2024 and 2023 are as the follows:
| 2024 | 2023 | |
|---|---|---|
| Salaries, consultant fees and other benefits | $ 38,500 | $ 41,250 |
| Stock-based payments | 15,337 | 34,937 |
| $ 53,837 | $ 76,187 |
Recently Issued Accounting Pronouncements
The Company has determined that new standards, interpretations and amendments to existing standards have been issued by the IASB or IFRIC that are either not applicable to the Company or that no material effect is expected on the financial statements as a result of adoption.
Critical Accounting Estimates and Judgements:
The preparation of financial statements requires management to make estimates and judgments about the future. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Accounting estimates will, by definition, seldom equal the actual results. The following discussion sets forth management's:
- most critical estimates and assumptions in determining the value of assets and liabilities; and
- most critical judgments in applying accounting policies.
Please refer to Note 3 to the December 31, 2024, audited consolidated financial statements for the critical accounting estimates and judgements used by management for the financial statements.
Financial instruments and risk factors
The Company's current major projects are the Chebucto, offshore Nova Scotia, natural gas license, the nearby North Triumph license, the Bruell property, and the Sir Harry Oakes Mining property and the new Pense Polymetallic Project. Unless the Company acquires or develops additional project, the Company will be mainly dependent upon these projects. If no additional major mineral related assets are acquired by the Company, any adverse development affecting these assets would have a material adverse effect on the Company's financial condition and results of operations.
Other risk factors and the impact on the Company's financial instruments are summarized in the Note 4 to the December 31, 2024, audited consolidated financial statements. There have been no changes in the risks, objectives, policies and procedures from the previous year.
Please refer to the Note 4 to the December 31, 2024, audited consolidated financial statements of the Company for the discussions on the financial instruments the Company holds, and the risk factors and analysis.
Off-Balance Sheet Arrangements
The Company has not entered into any off-balance sheet arrangements.
Corporate Governance and Management’s Responsibility for Financial Statements
Management of the Company is responsible for the preparation and presentation of the annual and interim consolidated financial statements and notes thereto and the accompanying MD&A and other information contained therein. Additionally, it is management’s responsibility to ensure that the Company complies with the laws and regulations applicable to its activities. The Company’s management is accountable to the Board of Directors (“Directors”), each member of which is elected annually by the shareholders of the Company. Responsibility for the reviewing and approving of the Company’s annual audited and quarterly unaudited consolidated financial statements and related MD&A is delegated by the Directors to the Audit Committee, which is comprised of three directors, two of whom are independent of management.
The consolidated financial statements and information in the MD&A necessarily include amounts based on informed judgments and estimates of the expected effects of current events and transactions with appropriate consideration to materiality. In addition, in preparing the financial information management must interpret the requirements described above, make determinations as to the relevancy of information to be included, and make estimates and assumptions that affect reported information. The MD&A also includes information regarding the impact of current transactions and events, sources of liquidity and capital resources, operating trends, risks and uncertainties. Actual results in the future may differ materially from our present assessment of this information because future events and circumstances may not occur as expected.
All relevant information related to the Company is filed electronically at www.sedar.com and on the Company’s website at www.spartonres.ca.
Outlook
One of the challenges for clean electricity (wind and solar) is storage. The energy storage industry has now become a significant growth business with installations of clean electricity generation systems around the world. China has been particularly aggressive in this program with its movement to reduce pollution from its fossil fuel power plants. The best solution for power storage and grid distribution on a large scale appears to be the vanadium redox battery. Through Sparton’s interest in vanadium, the Company’s subsidiaries have been provided with the opportunity to be a participant in this exciting nascent global market. Recent China Central government policy statements are both encouraging and mandating the use of vanadium flow batteries in China and the VRB Energy business is expected to grow now that vanadium prices have moved to levels that make vanadium flow batteries competitive with systems such as lithium.
It is anticipated that new contracts for storage systems will be forthcoming both in China and internationally. VRB Energy is actively pursuing new sales opportunities and economical sources of vanadium both inside and outside of China.
Mineral exploration and mining objectives continue to be the focus of the Company’s long-term plans as well as the ongoing search for other resource opportunities. With an emphasis on gold as a priority exploration target Sparton has recognized that, with the current economic situation and Covid-19 influence on the world economy, quality gold projects represent the best opportunity for financing and development.
The positive results achieved at Bruell during 2019 generated interest by Eldorado Gold to invest in the project as a joint venture partner and post the Covid-19 Quebec exploration lockdown new geophysical surveys, geochemical sampling and over 10,000m drilling was carried out at Bruell by Eldorado in 2023. The sale of
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the Company remaining 25% interest in the Bruell claims to Eldorado in 2025 will provide Sparton with cash and an ongoing production royalty if the property is developed into a producer.
By selecting projects near producing gold mines, the Company, if successful in locating new resources, has the potential for strong nearby partners to support additional exploration and development. With the ongoing Canada / US dollar exchange rate very favorable for domestic gold producers the Company believes that seeking viable precious metals projects in Canada will continue to be its focus. The agreement with Eldorado Gold for Bruell in the Val d'Or area of Quebec (nearby Lamaque Mine) and acquisition of the Oakes mining leases near Alamos Gold's Young Davidson Mine, near Matachewan, Ontario, are examples of this Company strategy.
New financing initiatives to support all of these activities are being pursued by Company management on an ongoing basis. In a continuing depressed market for junior resource companies, Sparton has instituted significant cost-cutting measures and is actively seeking new clients for its drilling subsidiary, EDCOR, as a source of revenue.
New project opportunities are also becoming available as competitors struggle to raise financing and these are also being evaluated.
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