Sparton Resources Inc.

Sparton Resources Inc.

December 19, 2006 09:31 ET

Sparton Locates Major Source of High Uranium Coal Ash for its Non-Conventional Uranium Program in China


TORONTO, ONTARIO--(CCNMatthews - Dec. 19, 2006) - Sparton Resources Inc. (TSX VENTURE:SRI) (the "Company") reported today that it's eight month old research program in China, conducted jointly with ARCN, the remote sensing and research branch of the China National Nuclear Corporation ("CNNC") has identified a major supply of uraniferous coal ash that may develop into a significant supply of uranium ("U") for that country's developing nuclear power program.

Based on a comprehensive review of archived analytical data for most of China's coal deposits the ARCN-Sparton team completed a field sampling program of fly ash and bottom ash from a number of coal fired power stations burning lignitic coals with anomalously high uranium contents. The analytical data for the coal ashes tested has resulted in the Company recently focussing on three power stations (two operating and one under final stages of construction) located within 20 km of each other in central Yunnan Province. These stations all burn the same high uranium content lignitic coal from one centrally located open pit mine. These include the Xiaolongtang, Dalongtang and Kaiyuan stations located approximately 250 km southeast of the Yunnan provincial capital of Kunming. To date only samples from Xiaolongtang have been analysed, and sampling of the other operating station (Dalongtang) is currently underway. The Kaiyuan station is in the commissioning phase and samples will be collected when test material is available.

The local coal has a high ash content (approximately 20-30%) and the coal uranium content varies from about 20-315 parts per million ("ppm") and averages about 65 ppm U (historical and current data). Both the bottom ash and fly ash samples tested by Sparton returned values varying from 123-142 ppm U. Two coal samples tested by Sparton returned values of 20 and 105 ppm U respectively. Analyses were done by the Beijing Central Analytical Laboratory using Induced Coupled Plasma (ICP) methods. The initial analytical results in China were confirmed by analyses at SGS Laboratories In Toronto, Canada and additional check analyses are currently underway using SGS. All the available current data are believed by Sparton's technical staff to be reliable as they correlate well with reported values from historical literature research information.

Due to its high radioactivity levels the waste ash from these stations is not suitable for sale to cement users for residential applications. Small amounts are sold with permission of the Yunnan Bureau of Environmental Management for outdoor applications such as bridge abutments but most is stockpiled in dry re-vegetated disposal areas. Currently the Xiaolongtang station, which has been in operation for sixteen years, produces 600,000 to 800,000 tonnes per year of combined fly and bottom ash and has accessible stockpiles containing about 5 million tonnes of recoverable ash. When a sixth burner is operating at Xiaolongtang in 2007 the station is expected to produce about 900,000 tonnes of ash annually (information supplied by Xiaolongtang Guodian Operating Staff). In 2008 the local coal mine has indicated that it will increase its allotment of feed material to Xiaolongtang from the current 9000 tonnes of coal per day up to 15-16,000 tonnes per day depending on power requirements. This will increase the production of coal ash significantly, effectively doubling the output of ash at Xiaolongtang at that time.

In aggregate, until 2008, all three stations in the area are expected to produce an average of about 1.2 million tonnes of ash annually based on forecast schedules for power generation supplied by the Xiaolongtang officials.

Uranium Content and Potential Value of Ash

Using available analytical data, the annual coal ash produced from these stations, assuming an average U content of 125 ppm, contains about 150 tonnes or 330,900 lbs of uranium or 390,000 pounds of U3O8 (yellowcake). At current world spot yellowcake prices of about $C75 per pound the gross value of the contained uranium oxide in this material is valued at over $C29 million. At a U recovery rate of 70% (to be confirmed with planned leaching tests) the current value of uranium oxide (273,000 pounds) in all the ash which could be processed annually would be approximately $C20.5 million. Using similar assumptions, the value of the 5 million tonnes of accessible ash stockpiles is approximately $C72.38 million. Based on Sparton's analytical results the ash also contains potentially valuable amounts of rare earths, strontium and vanadium which may also be extractable. The potential for recovery of these metals will also be determined in the planned testing program.

Leach Testing Program and Technical Report

Sparton has commissioned a full independent technical report and leaching test program for the Xiaolongtang area ash material under the direction of Lyntek Inc. of Denver, Colorado USA. This engineering and mineral process design company has been involved in over 30 uranium recovery projects in 10 different countries and is a recognized leader in uranium extraction process engineering. Senior Lyntek staff have visited the area and are currently working on recommendations for the leach test parameters for various types of ash from the different active burners at the power stations.

The test program, expected to extend over several months, will involve leach testing of various types of ash samples from all active burners at the stations, and endeavour to establish the best process methodology to maximize recovery of uranium and other valuable metals from this material. At a later stage if leaching results are positive it is expected that detailed sampling and leach testing will also be done on the stockpile material. Scoping studies and pre-feasibility level reports to develop a uranium recovery plant will be then be commissioned. This work is fully supported by the management of the Xiaolongtang station, which is owned by the China Guodian Power Corporation.

Cautionary Statement

While the available information generated to date are positive and indicate significant potential for development of a secondary recovery program of uranium from the Xiaolongtang area waste ash material there is as yet insufficient data regarding actual uranium recoveries, possible sale prices and business and operating cost structures to accurately predict any possible economic benefit to the Company and its partner ARCN in this program.

The purpose of the leach test program and technical report will be to establish the technical parameters necessary to achieve reasonable recovery rates, and will be able to predict within reasonable limits a operating cost range for a possible industrial development to extract uranium from the ash material.

Business issues and an operating structure for an extraction plant going forward will be subject to negotiated agreements with the coal ash suppliers, CNNC, the local Yunnan and Federal environmental authorities and Sparton and its operating partners in this program.

To protect their commercial position in this pioneering enterprise, Sparton and ARCN have registered the business of extracting uranium from non conventional sources in China and made patent applications for specific flow sheets to recover uranium from both coal ash and other non conventional sources. These applications have been accepted, indicating that there are no competing applications, and are now under final review by the China patent authority.

Going Forward

There are compelling reasons for success in the future of the development of a uranium extraction facility at this location as well as others in China. Not only will these facilities function as a source of new domestic uranium supply in China but they will serve to clean up a potential or existing environmental hazards in the radioactive waste ash material. Once cleaned the ash will also have some value as a cement and concrete filler material for any applications.

Benefits to the Company are expected to accrue in the form of management fees, and possible modest production royalties plus an equity ownership in the operating company set up to build and operate a recovery plants. Based on historical programs for the recovery of uranium from coals ash in North America, Europe, and also in China the Company believes there is a significant potential for developing a new business in this field.

There are several other coal ash production and waste stockpile locations currently under evaluation by Sparton and its partner in China, and this initial detailed evaluation project at Xiaolongtang is seen as a stepping stone to several similar programs at other locations in the country.

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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