Sparton Resources Inc.
TSX VENTURE : SRI

Sparton Resources Inc.

November 11, 2010 09:31 ET

Sparton Options Ontario Gold Properties to Osisko Mining Corporation

TORONTO, ONTARIO--(Marketwire - Nov. 11, 2010) - SPARTON RESOURCES INC. (TSX VENTURE:SRI), (the "Company') is pleased to announce today that it has executed a binding Letter of Intent (LOI) with Osisko Mining Corporation ("Osisko"), (TSX:OSK)(FRANKFURT:EWX) where under Osisko has the option (the "Option") to acquire up to a 70% interest in approximately 7500 hectares of mining claims held under option from third parties or wholly owned by Sparton (the "Properties") in the Atikokan Gold Area, Ontario.

The Properties straddle Osisko's Hammond Reef Project property which hosts an NI 43-101 compliant inferred resource of 6.7 million ounces of gold (259.4 million tonnes at a grade of 0.8 grams per tonne, using 0.3 grams per tonne cut-off), of which 97% lies within 300 metres of surface.

The terms of the LOI are as follows: 

  • In order to maintain the Option in good standing and acquire a 60% undivided interest in the Properties (the "First Option"), Osisko shall:

    1. Before signing of a definitive agreement, close a subscription in the capital stock of Sparton of 2,000,000 Units at a price of $0.25 per Unit, for gross proceeds of $500,000. Each Unit shall consist of one common share and one-half transferable common share purchase warrant. Each whole transferable common share purchase warrant will entitle its holder to acquire one common share for $0.40 for a period of 1.5 years from the closing of the subscription.

    2. on November 10, 2011, subscribe in the capital stock of Sparton for a total amount of $500,000, priced at the 20-day VWAP preceding November 10, 2011, and Osisko will refrain from any trading in the shares of Sparton during said 20 day pricing period.

    3. pay Sparton's counterparts to the Underlying Option agreements (the "UOA") (hereinafter the "Vendors") cash and shares of Sparton according to the following schedule:

      1. $140,000 and 200,000 shares on or before July 10, 2011;

      2. $200,000 and 220,000 shares on or before July 10, 2012;

    4. incur aggregate expenditures on the Properties :

      1. in the amount of at least $1,000,000 on or before November 10, 2011;

      2. in the aggregate amount of at least $2,500,000 on or before November 10, 2012;

      3. in the aggregate amount of at least $5,000,000 on or before November 10, 2013;

      4. in the aggregate amount of at least $8,000,000 on or before November 10, 2014, including funding and completion of a scoping (Preliminary Assessment) study.

  • Upon acquiring a 60% interest, Osisko will have the option of earning an additional 10% interest (aggregate 70% interest, or the "Second Option") by either expending an additional $6,000,000 on the Properties or funding and delivering a bankable feasibility study on or before November 10, 2016.

  • Osisko may, at its sole discretion, accelerate and apply exploration and development expenditures to future years' expenditures and, accordingly, the First or Second Options may be exercised sooner.

Osisko will be the manager of the project. A management committee will be formed during the Option Period with two representatives from each party. This management committee will be responsible for reviewing programs submitted by Osisko and for approving and evaluating the results of all programs. In the event of a tie, Osisko shall have the casting vote during the Option Period. Upon acquiring a 60% or a 70% interest in the Property, a joint venture would be formed between Osisko and Sparton.

DISCUSSION

"Work by Sparton in this area only started about one year ago and we were impressed by the number and size of the new gold zones we found in such a short period of time" stated Lee Barker, Sparton's President and CEO. "We find it gratifying that Osisko, after reviewing our data, has elected to option this strategic area and consolidate it into its core holdings for the Hammond Reef Project. We will work diligently with Osisko to advance the potential of the Properties". 

Barker further added: "Osisko currently has 16 drills operating at Hammond Reef and it is obvious that there is a serious commitment to developing both the deposit itself and conducting new exploration on their claim area. We believe the Sparton Properties can add new opportunities and value to Osisko's overall potential in the area."

The Sparton share issuances referred to in the Osisko LOI are subject to normal regulatory approval.

Sparton Resources Inc. is a Canadian mining and exploration company focussed on gold exploration in Canada. It is also presently operating (through its subsidiaries) a producing germanium mine in China, and developing secondary uranium recovery businesses in China and Canada from radioactive waste such as coal ash, mine waste and tailings, and other types of material.

Statements in this release that are forward-looking statements are subject to various risks and uncertainties concerning the specific factors disclosed under the heading "Risk Factors" in the Company's filings with Canadian securities regulators. Such information contained herein represents management's best judgment as of the date hereof based on information currently available. The Company does not assume any obligation to update any forward-looking statements, save and except as may be required by applicable securities laws.

This news release and the information contained herein does not constitute an offer of securities for sale in the United States and securities may not be offered or sold in the United States absent registration or exemption from registration.

We Seek Safe Harbour.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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