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Sparton Resources Inc.: Sparton Announces $1.7 Million Financing and Acquisition of Majority Interest in Profitable Coal/German

^{Published on 2009-07-28 06:24:08, Last Modified on 2009-07-28 06:24:22 - Market Wire}
 

TORONTO, ONTARIO--(Marketwire - July 28, 2009) - Sparton Resources Inc. (TSX VENTURE:SRI) (the "Company") is pleased to announce that its wholly-owned subsidiary, Sparton Energy Inc. ("SEI") has completed a $1.7 million financing provided by an arm's length third party (the "Lender") by way of a loan (the "Loan"). The proceeds of the Loan will be used to complete the acquisition of a further 34% share interest in Linxing 306 Huajun Coal Co. Ltd. Lincang City ("Huajun"), which owns the Huajun coal and germanium producing operations in Yunnan, China. This will result in SEI taking over control of the operations and cash flow at Huajun. SEI has completed the sourcing of experienced technical and financial staff to effect a smooth transition of the operational and management changes.

The Loan is for a principal amount of $1.7 million evidenced by a debenture and will carry interest at 17.6% annually payable on a quarterly basis for 18 months and is repayable on or before maturity on April 23, 2011. The Loan will be repaid out of the proceeds from a future financing.

The Loan can be prepaid at any time prior to 30 days of maturity without penalty. Within 30 days prior to maturity, the parties can each elect for the repayment of the principal in full plus $425,000 in cash. In the event no such election is made, the Lender can elect to require transfer of SEI's 34% interest Huajun acquired with the proceeds of the Loan in full satisfaction of the amounts owing under the Loan. In addition, if at any time the board of directors of SEI formally authorizes a going public transaction of SEI and so long as none of the elections described above has been made, the Lender shall have the right to convert the debt owed under the Loan in the capital of SEI in an amount equal to 150% of the then outstanding principal amount on the Loan, subject to all applicable regulatory approval.

SEI, the Company and another subsidiary of the Company are providing security for the Loan in the form of a guarantee backed by the Huajun shares, SEI's interest in its equipment, inventory and intangible assets and certain other assets of the Company.

Quam Limited has agreed to extend the repayment date of the US$2 million bridge loan made to SEI to April 23, 2011, provided that the US$500,000 be repaid by September 30, 2009.

This press release contains "forward-looking statements" within the meaning of applicable Canadian securities legislation. Generally, forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "planned", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may" , "could", "would", "might" or "will be taken", "occur" or "be achieved". Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, closing of transactions, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking statements, including but not limited to: risks related to exploration and development, the environment, local and foreign government regulation, currency fluctuation infrastructure, capital markets and additional funding requirements and the departure of key executives as well as those factors discussed in the Company's documents filed on SEDAR ([ www.sedar.com ]).

Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The Company does not undertake to update any forward-looking statements that are contained herein, except in accordance with applicable securities laws. Further information on Sparton Resources Inc. is available at [ www.sedar.com ].

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.

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.