Sparton Resources Unveiled: VRB Stake & Canadian Critical Metals

0:03 We are now live. Hello everyone and thank you for joining us today for this live Spartan Resources event. I'm joined by Lee Barker, President and CEO, who will walk us through today's presentation. Following that, we'll open the floor to a Q&A session. So please feel free to submit your questions at any time using the chat feature in the bottom right corner of your screen. And as always, this event is being recorded and will be made available shortly after we conclude. With that said, Lee, the floor is yours. Well, good morning, everyone.

0:29 I'm very happy to be able to present Spartan and its current situation regarding our exploration programs and our other assets. And Kyle is going to present some questions which I'll be able to answer. But any other questions that come up during the meeting and presentation, please put them out and we'll try and answer them as quickly as we can. This is our corporate structure, of course. Spartan at the moment has about 169M shares issued. Our trading price currently is around 3.5 cents. You can see the range. We have no options outstanding at the moment, and there are some outstanding ones. In terms of cash, at the current time we have around US$100,000 in the bank, but we're in the process of raising some additional funds and there will be news about that coming out shortly.

1:21 In the portfolio of assets and projects that we have in Spartan, we have exploration projects, but we also have a core asset which is an interest in a battery building company called VRB Energy. Now, this is an asset that we've had for over 10, nearly 10 years now. And it's a company that builds and markets very large grid-scale storage batteries using vanadium technology for storage of the electricity. And we've been involved in this vanadium industry and this particular program for about almost 16 years now. We pioneered some of the work that was done in China by locating a lot of new Vanadium assets and resources.

2:09 And we actually had an investor come into this project in 2016. It was the Robert Friedman interests. And at the moment, we now have just under 10% of VRB Energy. And we have a major shareholder now, which is Ivanhoe Electric, which is part of the asset base in Ivanhoe Mining. And they're building a large copper project in Nevada. VRB Energy is in the process of building a North American factory to build these batteries. They have a company now called VRB USA, And a factory in China, which is operating as we speak, and has been building batteries all along, has a number of new joint venture projects on the goal, the last one being a $65 million contract to build a 50 megawatt hour system. These are very large systems.

3:06 They're tied into grid electricity as both distribution and storage, renewables such as wind, solar and off-peak purchase of electricity to charge the battery and a resale of the electricity at the higher prices during the peak period. This is a good asset. We are hoping to have this valuation of this asset on our books upgraded in our next audit because at the moment it's very undervalued and we have a lot of information from Ivanhoe Electric in their bookkeeping and their filings of the Reina reports that show a much higher value for us. And in the next 6 to 8 months, we're hoping that there may in fact be some sort of liquidity event regarding VRV energy and we would be able to participate in that and get a lot of cash for our asset base.

3:58 So, any questions about that, I can answer them later on once we see the chatroom questions. On the critical metals side and the exploration projects for minerals, we have 1 Royalty property that's owned by now by Eldorado Gold in the East Val d'Or area of Quebec. We optioned this property to Welderado about 5-years ago. They spent well over US$5M on it, which is pretty significant. There were 51 claims in that property that we pioneered the exploration and found some new mineralization. 3 old shafts on the property from the 1930s, not a lot of work done subsequently after the flow through started to slow down in Quebec. And then when the Gold market came back, Eldorado bought the option on this property from us.

4:51 And we now have basically a 2.5% Royalty with a buyout for half of that of about US$2M. So that's a Royalty property. Hopefully El Dorado will develop something there, but it sits there as an asset on our portfolio. But inactive by the context of Spartan's operations, Eldorado is the operator and of course, will do all the future work. In the other part of our exploration portfolio, we've started to focus on critical metals, critical minerals, because this is something which politically, there's the new discovery that El Dorado made where those 4 drill holes are on that particular screen and some of the old drill holes that were done previously. And I don't believe you can see the shafts there, but I can point them out. There's a shaft just over here. There's another shaft there, another shaft there. And so this property actually has some merit. There is a fair bit of gold on it, and we're hoping that Eldorado will do some work on it in the future.

5:56 And there's a bit of visible gold they found in that new penguin zone. Next, please. And again, another vein with visible gold in it right here that was found by El Dorado's work. We also have another gold project, which is in fact partly critical metals near Metatuan and the Young Davidson Gold Mine, owned by Alamos Gold. This is a project that was brought to us with a former shareholder, actually. There is 3 mining leases that we own, plus we own 2 adjacent claims, plus we own some other interests and claims in the general area. And this property was explored by Harry Oakes, the founder of the Lake Shore Gold Mine, was at one time the richest man in the British Commonwealth.

6:45 And we picked this up and because it's so close to El Dorado, of course, we have a possible market if we come up with some significant results. We own 100% of it, subject to a small royalty to the vendor of the leases and the claims. And this particular property had an old shaft on it that was put down in the 1930s and some very old drill holes in the 1930s that had some results. We tried to follow up on, we did get some sniffs, nothing really or grade, but we came up with some interesting Copper mineralization in the drill holes that we've done around this shaft. And we have, if you go to the next slide, please, done a very detailed IP survey on this area. Shaft is just in here.

7:31 And we have these IP anomalies that we want to test in the coming exploration period. And these are quite strong, never been tested before. So it's a Gold project, but it has Copper credit possibilities and there is also Molybdenum associated with the mineralization in that area. The leases and the claims are actually adjacent to a former Copper producer called the Ryan Lake Copper mine. So we have a gold producer to the southeast of us, and we have a former copper producer to the west. So we're in a good mineralized area and we're looking hopefully for some positive results from the work there. On the full critical metals side, we have a project which is on the Quebec-Ontario border, which is called the Pence-Montreuil Critical Metals Project.

8:27 And this project comprises about 150 mining claims. It's a large area. It's very close to Kirkland Lake and very close to Ruanaranda. So we're again in an area that has infrastructure, mining infrastructure. We have a smelter, well, the Glencore smelter may or may not be available in the future. But this mineralization, which has had no significant work except by us since basically 1997, is very similar to the mineralization hosted in Finland in an area called Orokumpu, where there are some major world-class copper-zinc-nickel deposits with some cobalt credits. And we recognized the geological environment for this project. We acquired the initial part of the project from a group of prospectors, And we did some detailed airborne magnetic and electromagnetic surveying and came up with a bunch of brand new targets that had never before been identified or drill tested.

9:28 We drill tested last fall one small area to confirm that the mineralization from the historic work was legitimate and had similar geological similarities to the stuff in Finland. And that was confirmed. We had some interesting results, which we reported. And we have about 12 other targets on this property that we're hoping to test in the coming months. And the host rocks here are very, very similar to the stuff in Finland. And in Finland there are 2 kinds of deposits, high-grade massive sulphide-related type deposits and some very large deposits, over a billion tonnes of resources, which are currently in production by Örecompoo government, the Finland government, and Boliden, a major Swedish mining company.

10:23 And those are much lower grade, but they mine them at 50,000, 60,000 tonnes a day. So we have the possibility of 2 styles of mineralization here, the smaller high grade stuff and the larger lower grade stuff that may be present in the area. Next, please. The project is on the Quebec Ontario border. It's interesting because there are different minor sets of different rules for exploration of both sides. But we're fully permitted. We have a good relationship with the local First Nations. Our field manager is, in fact, a First Nations person. And we have all our permits in place for the work that we plan and of course for the work that we've done. This is a map that shows the airborne anomalies from our first survey and you can see that these are very, very short strike lengths, isolated, and they're associated with the magnetic anomalies of the special rocks that are in this rock package.

11:19 The interesting thing about this is the Ontario-Kibbutz border. This area here, there's a fold nose. These ultramafic mafic rocks that are the hosts in part for the mineralization come across here. There's a fault likely coming down through here if you want to interpret this, but there's a fold nose here and fold noses are very prospective areas for thickening of the mineralization. And there are many ore deposits, well-known ones around the world that are related to this type of structure. We've never drilled in here. We've never drilled the target that's over here to the east. And we've only done a little bit of limited drilling here. So these targets here are all relatively untested And that's what we hope to investigate in the coming months.

12:05 This just shows some of the geophysical results. These are the 4 holes we drilled in here. We had in this case 11 meters of 0.15 Nickel with some Copper mineralization. And then this picture of all here, 4m of 3% Zinc, 4m of 0.85% Zinc, 30m of 0.12% Nickel, 25m of 0.14% Copper. And Very interestingly, right in here, there's a Gold Zone that was intersected in a hole that was drilled in 1993 over here. We didn't re-drill any drill holes, we drilled beside them to look for extensions. And this Gold Zone is a completely unique looking set of mineralized information in the package that contains the massive sulfides in the base metal. So we're gonna pursue that as a separate target in future drilling. These are all untested targets over here that have never been drilled.

13:04 And this is where we plan to carry on the exploration coming up in a few months ahead of us.

13:15 This was just a report on the Zinc market by Tech Corporation that we put together and we reviewed that shows that there's going to be over the long term, Zinc projected to be a commodity that's going to increase in price and the demand is going to maintain itself. And so we're looking forward to getting more mineralization in our future drilling and we're hoping of course that this is a prediction by Jack, a major zinc producer around the world, that will come to pass. Next please. There's our VRB Energy minority interest that we talk about. The interesting thing that's happened in here in the Ivanhoe Electric majority owners' reporting is that there was a contract done in 2021 that financed VRB Energy by a Thailand renewable energy manufacturing producer.

14:12 And they loaned, through a debenture, of US$24M to VRB. That debenture comes due next June, I believe. And that debenture for the valuation placed on the possible conversion into VRB Energy shares put a minimum value of US$158M onto VRB Energy itself. So our 9.975%, if you factor that, looks like it's far more significant than what we're showing in our books. And we're going to try and address that and correct it in our future financial reporting. These batteries, as I said, are very safe. They last for 25 years. The big competitor, of course, is Lithium.

14:59 They're more expensive than lithium at this time, but they have a complete safety record, which lithium doesn't, as you well know. And the large, large installations are very dangerous and have been banned. Lithium has been banned in many places, Korea, Japan, China, New York, California. These very large lithium battery installations have caught fire. There's been some major damage. And this type of battery that VRB Energy builds also has an extreme cold weather permit, which lithium doesn't. We all know that lithium batteries are difficult to recharge, have to be kept warm, and that their performance drops very significantly in cold weather. Even in the electric vehicle business, we noticed that if you want to keep your car warm in the wintertime, you're going to use a lot of your batteries for that, not for making the car run.

15:54 Next please. These are the valuation that we're talking about, the $158M. This is a publication put out by Ivanhoe Electric in their 10K annual report.

16:06 And in fact, on their books, they recorded the transaction that was done for the sale of the VRB Energy operating joint venture in China last October.

16:21 The VRB Energy received US$20M in cash out of that sale. It was a US$55M transaction for 51%. But the VRB USA, where that US$20M has been being invested in now to build a new facility in Arizona near the Ivanhoe Electric landholdings where their Copper deposit is. That $20M is being spent as we speak. They have permits in application and they have staff hired engineering and design going on for that factory. So we're looking forward to some kind of an event happening in the next 5 to 6 months that will reflect the value here for us and give us the possibility of getting some cash for our interest next week.

17:12 This is just a diagram that shows how these batteries work. This is what a battery looks like. This particular battery here with one of the cell stacks produces approximately

17:25 25,000 watts of electricity. And these are the tanks that the electrolyte goes in. And these installations are in 40-foot containers built as modules. Each module represents 1 megawatt hour of available electricity storage.

17:46 They have many patents available that have been picked up over the last many years by BRB. And they actually have successfully now generated 2 or 3 brand new contracts. This last $65M contract in China for the joint venture is a milestone and there will be more of course, because now that the geopolitical problem of Chinese buyers buying batteries from American manufacturers is gone because they're buying them from a 51% owned Chinese manufacturer. That is going to enable VRB in China to sell batteries both to the private sector and to battery installations for renewable energy projects that are partly funded by the Chinese government.

18:38 And, of course, VRB USA will be able to sell batteries completely away from the geopolitical hypocrisy of having to deal with a Chinese company, even though VRB Energy is in fact a Cayman Islands company subject to US rules. But that's politics and politics affects economies as we well know in today's environment. We can carry on past this slide. This is just the highlight of the work that VRB has been doing. And here's the plans for VRB USA, which is ongoing. And we're quite optimistic that this is going to be a successful operation. Create some value for Spartan share. We go on to the asset summary again and here we go with the earlier slides picked up that the core value is the interest in VRB energy. But We have the royalty property on Burrell Discovery in Quebec with Eldorado Gold, and hopefully Eldorado will develop something on that project in the future and we'll be subject to getting some royalties.

19:42 And of course, the Oaks Gold project, which we plan to do more work on, is ongoing. And then we have the critical metals projects in Northern Ontario and Quebec that we're going to be doing work on in the coming months. So we're, we also at the bottom here, you'll see We own a small drilling company that we've had for over 20 years, which has provided a lot of income for Spartan, actually, and kept the doors open in some cases when things were slow. And we actually have the ability to do all our own drilling work up to a certain point. That allows us to be very flexible, very agile, and we can get things done quickly. Of course, we're always looking for third-party contracts to keep drillers working. We have a good drilling subsidiary that's been very successful.

20:35 That's more or less a summary. There's a photo of one of our drilling drills. We have 2 machines and a couple of bulldozers and all various equipment that we use. If anybody has any questions now, I'd be happy to answer them and look forward to listening. Excellent. There are a few questions coming in from the chat. So thank you everyone for that.

20:56 Lee, given Ivanhoe Electric's disclosure of the $158 million implied valuation and the June 26 liquidity event deadline tied between the convertible bond. How do you envision what scenarios can Spartan do to monetize their 9.975% stake? Well, the transaction that deals with this conversion by the companies called BCPG in Thailand, that transaction, which will have to be sorted out by Ivanhoe Electric and VRB Energy in the coming months, that could have a number of different scenarios that would affect Spartan asset value. There could be an IPO, for instance, of VRB Energy, in which the IPO would involve liquidity for our share asset interest. We own about 31M shares of GRB Energy.

21:53 If that happened, then of course, that IPO, we could sell them to that market. There may be an RTO done with an existing listed shell.

22:02 They could do another major financing with a SPAC or some sort of a special fund that was interested in renewables or join with another renewable organization that would make a much stronger and larger critical mass renewable energy storage producer. So there's a number of scenarios that could take place. And obviously, because Ivanhoe Electric is the majority shareholder in BRB Energy, Their staff, I'm sure, are going to be working on this in the coming months and we're looking forward to some positive news. So a couple of individuals in the chat are wondering, market cap of 6 million Canadian, It's not reflecting the assets in the portfolio.

22:48 Do you have any commentary on that? Well, that's mainly because, number 1, I think our core asset of VRB Energy is clearly undervalued on our books. It only shows in our books as 1.5 million roughly Canadian dollars. And as you've seen from the presentation here, with the implied value of 158 million, and the fact that Ivanhoe Electric values it

23:13 as a much higher number on their books. We have to deal with our auditors for the next round of reporting, but I'm quite sure that we're going to be able to get a much higher value on our books. And of course, any news that comes out with progress for VRV Energy or the VRV China joint venture with values that show that this is a profitable organization. It was profitable last year. It should be reflected in our reporting and we'll be able to piggyback onto that, I think, and show shareholders that there is value in this. The news flow out of VRB Energy via Ivano Electric, on VRB USA is a bit slow, but they're involved in a very comprehensive program right now, permitting and engineering design and all those things. I'm quite sure that they'll be reporting milestones as they move forward.

24:09 So let's touch on Pence for a minute. You've got 12 untested targets, I believe. Recent results show 3% sink with some Nickel, Copper and Gold credits as well. As you plan the next phase of drilling, what would your team consider a successful outcome? Well, I think if we can get 1 or 2 intersections that have similar grades to the grades of Copper, Nickel and Zinc that have been commercially viable, both in the massive sulphide critical metals, polymetallic environment in Canada and of course to the stuff in Finland. And that will be a success. And the intersections that we have now, we're basically confirming the old data. We could not find the old drill core, it was dumped, of course, so we had to get some new core ourselves.

25:00 But what we've done is we've confirmed the geological environment. We know this environment has the potential to host commercially viable deposits and it behooves us to test them and see if something's, I mean, you know, Mother Nature can be very fickle, But at this stage, these targets are as good as anything I've ever seen from a geophysical

25:21 perspective. And we know that the environment does have the potential to host economic-grade deposits. So if the next drilling program gives us 1 or more intersections of something that looks like it's economic, then obviously we're going to pursue that. That's our objective. Otherwise, if we weren't looking for something that was economically viable, we shouldn't be looking. That's my philosophy. I don't believe in just spending money if there's no potential of something economic. And we would anticipate somebody like Tech or someone like that, possibly Glencore, DHP, would, once we come up with something significant, would be interested, of course, in acquiring this property, but we're not going to give it away, of course.

26:13 Let's say you found something economic there. Paul's wondering, won't there be an issue with the border? Wouldn't that complicate permitting? Should a deposit be found? Well, the permitting system in Quebec is a little different from the permitting issue in Ontario. But, you know, There are other deposits that are close to the borders. And the real complication, I think, is the fact that it's not a complication in the fact that you can deal with both sides of the issue on both sides of the border. We have full permits in place for the work that we're doing now. We have a relationship with both the local community in Quebec and the local community on the Ontario side. That's very positive. We hire their people to do work for us for back, and they know this and we keep them updated exactly what we're doing.

27:02 And in fact, I'm planning next week or week after to have a meeting with the local First Nation people, update them on what we're doing. But there is a complication in the permitting and in the context that There's some minor differences in the permitting on Quebec's side and the Ontario side. But that can be dealt with through the bureaucracy. And I think there's a significant movement these days to try and move things forward much more quickly than in the past, and not bind them up by bureaucracy making decisions. You know, the whole of the Canadian government and both provincial governments are in the process of saying, we're going to speed things up, we don't want things to slow down because we need to develop these things internally and we can't really tolerate big long delays and if something is viable. You know, we're not in an area that has a huge effect.

27:59 It's remote, relatively remote, has a huge effect on anything environmentally. It's past historical mines within 25km. It's something that's an issue, but I believe it can be dealt with successfully. I understood. Paul has a follow-up question. He's just wondering the share ownership structure, how does it look right now? Well, This diagram is relatively up to date. We did announce a financing that will be closed in part, I hope very soon. There'll be a larger number of potentially issued shares, but we have about 12 or 14 major shareholders that have been supporting us over the years that own half a million to plus 10 million shares or 15 million shares.

29:02 And they've been very supportive. They do trade the stock periodically. But our share structure, we're very liquid actually. When good news comes out, there's lots of float out there available to trade. And some of these people that have been supporting us for so long have bought their shares at very, very low prices. We had a large block of stock 10 years ago that came on the market at 1.5 cents, and one of my shareholders bought most of it. And so, you know, we have, I don't know if people remember very much, but we became a meme stock about 3 years ago on Reddit and Robinhood.

29:48 And 1 day over the period of a week when they were trading this thing really, really big volume, we traded 42 million shares 1 day, which was roughly 30% of our total issued market cap at that time. And for some strange reason, I didn't even receive a call from the exchange, which I was anticipating it basically every 15 minutes. Where are they going to call? Where are they going to call? And with some really significant good news and such a low share price at the moment, 3.5 cents roughly, that's the possibility also that could happen again. Although, that type of trade doesn't reflect the nearing value, I think. Good news coming out of the VRP Energy or a good drill from our work on the Fence project or the Oaks project.

30:36 We'll have a significant impact that means something in terms of real value. Now, Mark is saying at one time, Spartan had an 18% interest in VRB Energy. How does Spartan plan on maintaining its current 9.97% stake? Well, we have a non-dilution clause in our shareholder agreement. And If we are able to liquefy our asset base into a significant amount of money, we do have a small debt that we have to pay. But the current situation with Ivanhoe Electric and the transactions they've been doing with their other financial people have limited our dilution situation.

31:25 And if we were able to liquidate some of our shares, if there was a liquidity event, then that would give us the cash to basically pay that back. And it won't be a lot of money, it may only be 10% or 15% of what the valuation could be on liquidation. And we'll be able to still have a significant amount of cash in the company treasury. So there is a non-dilution provision in our shareholder agreement and that was implemented when the Thailand company gave the $24M to venture. There is a disclosure about that on CDAR, but of course that goes back a few years. But we really are quite confident that we will be able to retain a large portion of anything that we bring in from the sale of the energy shares. The other thing is that we have in our corporate structure over US$9M in tax losses carried forward.

32:30 And so we don't believe that we're going to have a significant tax problem. Tax losses and also income from Edcor drilling, correct? That's correct, yes. Paul's wondering what kind of third-party order flow is Edcor currently experiencing given the bullish commodity cycle we're in right now? Well, at the moment I have inquiries out to about 4 groups for drilling work. Our drilling company specializes in early-stage type of drilling for exploration. I try to tailor my inquiries to companies that are doing that sort of work. At the moment, because we have our own little program coming up next week, I'm telling people that we may have something available in approximately 3 weeks to do work for them. Now we're getting to the end of the summer drilling season in some areas, winter is coming. And some of these programs will likely be winter programs. And there is a lot of money being raised at the moment in the flow-through environment.

33:37 So, there will be funds available and we're looking forward to, if we don't get funding, third-party contracts, we'll use the company to drill for ourselves and of course internally invoice ourselves because we're arm's length internally on an accounting basis and be able to show some revenue. Now I'm not obviously well-knowledged in VRB Energy's internal strategy, but Jeremy is asking a question here. There's a wide and significant demand for large-scale energy storage all around the world. Why is VRB's sales and marketing team rarely engaged in chasing down possible revenue? An excellent question. And I think it might be a good idea if Jeremy could approach Ivanhoe Electric directly on that.

34:28 I think at the moment, right now, VRB Energy through Ivanhoe Electric and VRB USA is focusing on the development of this factory in Arizona and a lot of work permitting and staff and engineering that has to go with that. And that they're probably not doing as much work as they should be on marketing. You start financing something, you develop markets, you make proposals to potential customers, which they are doing. We have a potential customer proposal which we're doing right now for British Columbia, which was brought to us by one of our directors through an engineering company that's bidding a contract to build a large storage facility out there. And we try to pass things on to the VRB USA staff as potential opportunities. And we've been doing that ever since we became involved in this program. But I do acknowledge that we believe that their marketing should be a little bit more aggressive. And we do know that there are many many projects all around the world. Irrespective of Mr.

35:36 Trump trying to maximize the benefit for the fossil fuels industry, the renewable energy business is something we just cannot stop these days. And we're hoping, in fact, that Mr. Friedland, with all his work now in Saudi Arabia and everything is going to try to propose that there's some work done there on energy storage for their huge renewable energy projects which they have over here. These are major opportunities which I fully understand. And obviously we would like to see the VRB USA staff a little more aggressive in marketing and we hope they will get that way in the future. Lee, I want to thank you for the great presentation, as well as everyone that joined us and submitted questions. A lot of great engagement today. So thank you for that. We participate in questions.

36:26 I do have one more for you and I'll leave this as your closing remarks here. But from your perspective, what are the key catalysts that could help the market recognise this value gap? And what's your message to investors about why now might be the right time to consider Spartan Resources? Well, I think the key catalysts are really basically 2 things. Number 1, VRB Energy is coming up with new news about how they're going to restructure VRB USA and how the valuation is going to be recognised going forward, which we believe the valuation is there, There's no question. It's just how it's going to be expressed and how it's going to be promoted. And number 2, of course, positive results from our drilling programs on the 2 projects at Oaks and at Pence.

37:15 Any positive news that comes out of those, it's something that's different than most other people that have exploration projects are doing. 3 months ago, when you drilled a hole and got good results, everybody yawned. Right now, because of the situation regarding both critical metals and Gold is holding its own very well. I don't think people will be yawning if we have some good results and prove that we can deliver on what we anticipated doing. So that, I think, are the 2 catalysts that are going to drive the valuation of the company higher for shareholders. Well said. And we look forward to hearing future updates from you, Lee. Thank you so much for taking the time out of your day to update us here. Well, thanks everybody for your questions as well and we'll go onwards and upwards and try and make things work.

38:09 Okay, have a great day everyone. Bye now. You