Sparton Resources Inc.

Sparton Resources Inc.

April 17, 2008 09:22 ET

Sparton Signs Final Share Purchase Agreement for Germanium Production in China

TORONTO, ONTARIO--(Marketwire - April 17, 2008) - Sparton Resources Inc. (TSX VENTURE:SRI) (the "Company") reported today that it has signed the final Share Purchase Agreement to acquire an 85% share interest in Hua Jun Coal Industry Co. Ltd. ("HJ") a private Yunnan Province PRC based coal and germanium producer. Hua Jun is the second largest germanium concentrate producer in the Lincang area of Yunnan, and also produces locally marketed thermal coal from one of its three operating coal mines in the area. (see Company News Release dated January 29, 2008).

The agreement has been signed between the two private owners of Hua Jun, and Yunnan Blue Bay Semiconductor Technology Co. Ltd. ("YBBS"), Sparton's Wholly Owned Foreign Enterprise (WOFE) registered in Yunnan. YBBS in turn is 100% owned by the Company's wholly owned subsidiary Sparton Energy Inc. ("SEI") which is registered in the British Virgin Islands. The two private individuals who were the original owners of HJ will retain 8% and 7% share ownerships in HJ respectively.


During the period between January 29, 2008 and March 31, 2008 Sparton and its legal, financial, and technical staff and consultants completed an extensive due diligence program on this acquisition and received strong support from local Yunnan and Lincang government regulators in relation to the transaction. The Company's proposed program to clean up the radioactive ash waste produced by HJ and the other germanium producers in the Lincang area was a key factor in the rapid progress made in licensing YBBS as an operating company in Yunnan. Further, Yunnan Sparton New Environ-Tech Consulting Co. Ltd. ("YSN") the Joint Venture Company formed with the China National Nuclear Corporation subsidiary has also received its Business Licence. Sparton's positive track record in operating the Luxi Gold Project in Yunnan was a major factor in fast tracking the various government approvals and licences required for these operating companies.


The payments for the Hua Jun share acquisition will be made in four tranches tied to conditions precedent in the agreement that are related to various government agency approvals for the new HJ owner structure, the transfer of labour contracts to HJ, and local approvals for environmental and safety considerations. Once 60 % of the full agreed purchase price of 22 million RMB (approximately $C1.9 million) has been paid, YBBS will be in full control of the operations. Appropriate new experienced technical and administrative staff have been sourced for HJ. It is anticipated that YBBS will be fully in charge of HJ by mid August 2008. The minority HJ owners will maintain close involvement in operations during the transition period and YBBS will have its own mining, financial, and processing specialists directly involved in day to day operations during that time.


The HJ operations continue to be highly profitable. Since Sparton signed the initial share acquisition agreement the price for germanium metal has increased from about $ USD1250 per Kg to over $USD1400 per Kg and demand continues to grow.

Based on the financial records for the past 5 months of operations HJ has been producing approximately 275 kg per month of germanium concentrate valued at 1.6 million RMB ($C228,000) In addition, it produces and sells thermal coal valued at approximately 330,000 RMB ($C47,300) per month.
Operating profits after all operating costs have varied from $ C 110-130,000 per month and over $C70,000 in new capital has been invested for new processing equipment. Sparton's consultants have reviewed the operations and are preparing recommendations to upgrade the efficiency of both the mining and germanium production activities. The Company believes that the operations can be upgraded to significantly increase financial performance in the future.


Initial positive leach test results on Lincang area waste ash were reported earlier. (see Company news release dated March 26, 2008). Testing continues both in China and North America. Sparton's process engineering consultants Lyntek Inc. are currently designing a bulk testing plant and flow sheet that will leach test a minimum of 500 tonnes of Lincang ash later this year. Local permitting and project proposal applications are underway in Yunnan for this work and the units will be constructed locally to Lyntek's design specifications. This program is receiving strong support from the local Yunnan environmental agencies.


Sparton now is well on the way to becoming a profitable producer in the rapidly developing germanium market. The purchase of HJ, which already is a successful germanium operation with significant scope for expansion and value added technology is expected to lead to other germanium related transactions to create added value for the Company.

The advancement of the uranium cleanup program beginning in Lincang and direct investment by China's National Nuclear corporation subsidiary once again demonstrates the Chinese support for Sparton's initiatives in advancing the secondary uranium program to production in PRC.

New results and developments will be reported when available.

Sparton's international exploration and evaluation programs 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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