Sparton Resources Inc.

Sparton Resources Inc.

January 16, 2007 11:48 ET

Sparton Signs Letter of Intent With Xiaolongtang Guodian Power Station for Coal Ash Uranium Extraction Testing

Leach Test Program Underway

TORONTO, ONTARIO--(CCNMatthews - Jan. 16, 2007) - Sparton Resources Inc. (TSX VENTURE:SRI) (the "Company") reported today that it has signed an agreement with the Xiaolongtang Guodian Power Company of Yunnan PRC ("XLT") for a three phase program to test and possibly commercialize the extraction of uranium from waste coal ash at that company's thermal power station in central Yunnan Province. As reported previously, (see Company news release dated December 19, 2006) Sparton and its partner ARCN, the remote sensing and research branch of the China National Nuclear Corporation ("CNNC") had previously identified the Xiaolongtang and nearby power stations as a possible major supply of uraniferous coal ash that, if amenable to economic uranium extraction methods could develop into a significant supply of uranium ("U") for China's developing nuclear power program.

This document is believed to be unique in the Chinese nuclear industry in that it may be the first time a western partnered organization has entered into an agreement that may result in uranium production in PRC.

Under the terms of the Letter of Intent, XLT and the Sparton - CNNC group will undertake a three phase program to evaluate the coal ash at the XLT station for uranium extraction. The first phase will involve various methods of leach testing of ash samples taken from all the burners at the station, and this work is currently underway. XLT has provided over 100kg of material and all technical data related to the waste ash production. Sparton will also investigate the possibility of extracting other valuable heavy metals from the ash including such metals as strontium and rare earths during this program. Duplicate samples will be tested in China at the Beijing Central Analytical Laboratory and also in North America for quality control.

The second phase will involve detailed process engineering and preparations for a bulk test of a larger volume of ash material which will be managed by Sparton. XLT will provide local site infrastructure and engineering assistance in construction and permitting of a pilot scale test plant and will coordinate the program with the Yunnan environmental authorities.

If Phases One and Two are encouraging XLT will have the option in Phase Three to join with Sparton and its partners in the formation of a separate company to commercially develop production of uranium from its ash material, or become a supplier of the ash to the production plant on agreed terms. The relevant agreements in Phase Three will involve sales contracts as well as financing of a production plant which will be managed by the Sparton. The Company and its partners have already successfully registered a process application with the PRC patent authorities for uranium extraction form waste coal ash material which has been accepted.


XLT is owned by China Guodian National Power Group ("CGG"), a state owned company which is China's third largest electric power producer. CGG owns and operates over 200 power stations producing electricity from thermal coal (as at XLT), several hydro power installations, and a number of wind power electric generating stations. The company is very progressive and recently has set up an internal operating and research department to review, study, and possibly implement the construction of its own nuclear power generation stations. Recent developments in the Chinese Central Government's policies regarding new power generating stations have indicated that construction of new coal fired stations will actually be prohibited in areas of high environmental concern. XLT views the agreement with Sparton and its partners as significant and completely consistent with its parent's long term energy production planning.

As well, if the project proceeds to production it will result in a cleanup of the radioactive waste material already stockpiled at the station and remediate the future production of radioactive ash. It is expected that the cleaned ash after extraction of uranium and possibly other valuable heavy metals, will be suitable for sale by the station for use in cement and other filler applications for domestic use. Currently only small amounts of waste ash are sold from the station for non domestic use in construction materials.

The evaluation team has also collected samples from nearby power stations using the same coal and analytical results are expected shortly.

The Company is extremely pleased how rapidly this program has developed. The XLT project is expected to become a flagship for evaluating other high uranium waste deposits in China.

Sparton's exploration and evaluation programs in China are being carried out under the direct supervision of A. Lee Barker, P. Eng., P Geol., the Company's President and CEO who is a Qualified Person under National Instrument 43-101.

The TSX Venture Exchange has not reviewed and does not accept responsibility for adequacy or accuracy of the content of the information contained herein.

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