Sparton Resources : 2023 – First Quarter Statements – click here

2023

FIRST QUARTER - 2023

MANAGEMENT DISCUSSION AND ANALYSIS UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

SPARTON RESOURCES INC.

SPARTON RESOURCES INC.

For the period ended March 31, 2023

Management's Discussion and Analysis dated May 29, 2023

The following discussion and analysis of results of operations of Sparton Resources Inc. ("Sparton" or the "Company") and its subsidiaries for the period ended March 31, 2023, should be read in conjunction with the unaudited condensed interim consolidated financial statements for the period and the audited consolidated financial statements for the year ended December 31, 2022, 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) Sparton 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 9.8% 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 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, and the Matachewan area Ontario Oakes Leases and adjacent mineral claims.

The VRB ENERGY Transaction:

In 2016, under a Share Acquisition Agreement (the "SAA") between private investment corporation, HPX TechCo Inc., and VanSpar, HPX TechCo Inc. agreed to directly fund the acquisition of the shares of JD Holding Inc. ("JDH") for US$ 3.3 million (the "Funding Transaction"), pursuant to an existing share purchase agreement between VanSpar and JDH, a private company that owned a leading vanadium battery manufacturer and distributor and its security holders. JDH was later renamed Pu Neng Energy in China and JDH renamed VRB Energy Inc. ("VRB Energy") internationally.

1

In consideration for HPX TechCo Inc. funding the acquisition cost together with a further US$2,000,000 for working capital and US$605,000 paid to VanSpar, VanSpar caused 82% of the VRB Energy shares to be transferred to HPX TechCo Inc., with the remaining 18% being retained by VanSpar (the "VRB Transaction").

The VRB Transaction was financed by HPX TechCo Inc., which provided the purchase price funding of US$

3.3 million payable to the then current security holders of VRB Energy, with payment of at least US$1,650,000 on closing. The balance of the purchase price could be reduced by up to US$300,000 for financial obligations or liabilities of the VRB Energy subsidiaries after closing. The net balance of the purchase price would be paid to the then current VRB Energy security holders after closing.

The VRB Transaction also required a minimum US$2 million investment within 20 business days after closing, to provide working capital to reactivate the VRB Energy subsidiaries' operations. These funds were also to be invested by HPX TechCo.

In addition, under the terms of the restructured transaction, in the event that VRB Energy or its affiliates acquire certain vanadium assets in China within 5 years after closing, VanSpar will receive a finder's fee equal to 5% of the value of the acquired assets up to a maximum of US$250,000.

The VRB Transaction and the Funding Transaction were closed before December 31, 2017. US$1,650,000 had been paid to the former shareholders of VRB Energy in 2017, and US$1,650,000 ($2,215,636) had been received and held by the Company and paid to the former shareholders of VRB Energy. VanSpar received a US$605,000 transaction fee payment from HPX TechCo shortly after closing as per the terms of the Funding Transaction, which together with the 9,000,000 VRB Energy common shares (equal to 18% equity in VRB) received and valued at $700,000 was recorded as other income in 2017. The 9,000,000 VRB Energy common shares (split into 18,000,000 shares on November 30, 2017) were revalued to $1,587,133 at December 31, 2022 and March 31, 2023.

In 2017, the Company's subsidiary VanSpar executed a profit-sharing agreement with a private investor for VanSpar to acquire additional shares in VRB Energy. Before the agreement VanSpar owned 9,000,000 common shares of VRB Energy or 18% of the total VRB Energy shares. Under the profit-sharing agreement, the private investor agreed to provide funds required for VanSpar to participate in any VRB Energy financing and acquire additional VRB Energy shares ("Additional Shares") in VRB Energy's future financings, to maintain VanSpar's 18% in VRB Energy. The funds could be used only for this purpose.

Once the Additional Shares are sold subsequent to a liquidity event, the investor will be entitled to 80% of the profits from sales of VRB Energy shares acquired by the investor, (calculated as proceeds of sales minus transaction costs minus the principal fund provided by the investor plus 7% annual interest). VanSpar would be entitled to receive 20% of the profit. In the event that there is no profit or even a loss, VanSpar will not be responsible for repayment of the principal funds to the investor. In 2017, VanSpar participated in a VRB financing where VRB Energy raised US $5 million through the sale of 38,759,690 shares at a deemed value of USD$0.129 per share, completed by 5 tranches. As of December 31, 2017, VanSpar had received five payments for a total of US$900,000 from the private investor to participate in this financing and had made five payments to VRB Energy for purchase of 6,976,744 Additional Shares. The Company has determined this profit-sharing agreement with the investor to be a joint operation and had recognized no share of gain, asset or liability as of December 31, 2021 and December 31, 2022. 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.

On July 12, 2019, VanSpar received a new financing and debt conversion notice from VRB Energy whereunder in order to maintain its 18% share interest in VRB Energy, it was required to subscribe to the

2

purchase of an additional 31,331,863 VRB Energy shares at a price of USD$0.065 per VRB Energy share for a total cost of USD$2.036 million to VanSpar.

VanSpar did not participate in the financing and now retains its original 31,953,488 VRB Energy shares representing a 9.8 percent share interest in VRB Energy. With a share ownership now below 10% VanSpar no longer is entitled to nominate its representative to the VRB Energy board of directors.

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 has produced a more efficient 3rd generation vanadium battery.

VRB Energy pursued a number of sales opportunities during the year 2022 and continued this work in 2023.

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 ("VRB-ESS"). The project will be 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 project for Hubei Province to 500 megawatts. The timing of the award for this project has been deferred until 2023.

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.

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, 2022, the Company reported $1,141,865 drilling revenue and a cost of drilling of $808,820. No drilling revenue was reported in the period in 2023. It is actively negotiating new contracts in the 2023 field season.

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 issued a total of 1,500,000 Common Shares, incurred a total of $1,500,000 in exploration expenditures on the claims, and made cash payments totaling $300,000 to earn a 100% interest in the Property. 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

3

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.

On December 16, 2019, Sparton announced that it executed an Option Agreement with Eldorado Gold Corporation ("Eldorado") granting Eldorado the option to earn up to an initial 75% interest ("Option") in the Bruell Project Eldorado 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.

This agreement may provide the Company with up to $4.5 million in cash payments and an ongoing 1% net smelter return royalty should Sparton not participate in future equity development.

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. Complete assays are now available. The drilling work (9 holes) concentrated on the area between the Avocalon /Aurora shaft and the area where Sparton drilling in 2018-2019 located several wide shear zones with anomalous gold mineralization. Please see Sparton News Release dated April 25, 2019. Two holes (numbers 10 and 11) were drilled about 2,500 meters to the east of this area to test a gold-in-till geochemical anomaly.

Eldorado's 2022 work also involved structural analysis of the geometry of the mineralized intervals to determine true thickness. As well, limited trenching, stripping and sampling where feasible, was completed in the central claim area. No drilling was done in the vicinity of the Bruell 1 and Bruell 2 shaft areas to the north and west of Avocalon/Aurora area. A map showing the drill hole locations will be posted on the Sparton website at www.spartonresources.com. The Hole Collar Table for the Bruell drilling follows the text of this news release.

In the first three months of 2023 Eldorado completed an additional 8430 meters of drilling at Bruell and located a new gold zone ("Penguin") near holes 10 and 11. One hole where visible gold was seen received priority assaying.

While core logging is still in progress and most assay data have not yet been received, visible gold was seen in core from Drill Hole BU- 23-14 at the Penguin Anomaly and priority analyses completed with the following results:

BU-23-14 (azimuth 003 deg, Dip -50 Deg,) 497.2-500.2, 3.0 meters @ 13.77 grams / tonne Au

Including:

497.2-497.7, 0.5 meters @ 73.92 grams/tonne Au

499.7-500.2, 0.5 meters @ 7.95 grams/tonne Au

Exploration activities on the Bruell project have been conducted under the direct supervision of Eldorado Gold Québec employee Nathalie Prud'homme, P.Geo. from Eldorado Gold who is a qualified person as defined by National Instrument 43-101 Standards of Disclosure for Mineral Projects ("NI 43-101"), and has verified and approved, the scientific and technical disclosure contained in this press release in relation to the Bruell project.

4