Marino Pieterse is the editor of Uraniumletter International and Goldletter International. In his Special Situation report for February, Marino takes a look at Sparton Resources.

Sparton Resources is a diversified mineral and energy company that focuses on projects with readily identifiable mineral occurrences in advanced exploration stage or that require development.

The company’s precious and industrial specialty metal portfolio concentrates on exploration in proven, low risk mineral areas in China, Nevada and Mexico.

On the Luxi Gold Belt, in the western part of Yunnan Province, China, exploration is carried out through a Chinese joint-venture company Yunnan Sparton Minerals Company (YSM), in which Sparton has a 39% share interest. Other share interests include Zhaojin Mining, China’s largest integrated gold producer and refiner (51%), and Yunnan Nuclear Exploration Team ‘201’ (10% non contributing).

YSM is planning a new exploration program including 3000 metres of drilling to accelerate the identification of primary and oxide gold resources in the Luxi area with the objective of early production.

Also in China, Sparton entered into an agreement with Brigade 208 of the Geology Bureau of the National Nuclear Corporation to carry out due diligence evaluation of 208’s gold production and exploration areas in the northern part of Inner Mongolia.

More recently the company has entered into an agreement to purchase an 85% interest in a profitable germanium producer in Yunnan Province and concluded agreements to form an operating environmental solutions company in joint venture with the China National Nuclear Corporation to allow production of uranium from coal ash in the same area.

In Nevada, United States, Sparton holds a 100% interest in the 29 claim SBD Project within the Battle Mountain-Eureka Gold trend and the 20 Coal Canyon claims in the West Humboldt Range of Pershing County. A 2007 drill program at SBD successfully outlined a significant zone of gold mineralization which will be followed up with a delineation drilling program in 2008.

In Mexico, Sparton has the right to earn a 51% interest in the Sierra Rosario Project in the Sierra Madre Mineral Belt owned by International Northair Mines. Recently a new zone of mineralization has been found on this property and drilling is planned for later in 2008.

The energy-related business core assets include a 6% participating interest in the undeveloped Chebucto natural gas field in offshore eastern Canada operated by Exxon Mobil and a production royalty on the Blizzard Uranium Deposit in British Columbia, operated by Boss Power Corp.

The company’s main recent focus is the evaluation in and recovery of by-product uranium from non-conventional uranium sources such as phosphates and coal ash. Recent agreements to put the operating structure in place for uranium production in China are a new milestone in Sparton’s ongoing secondary source uranium recovery programs.

In January 2007 Sparton announced the signing of an agreement with the Xiaolongtan Guodian Power Company of Yunnan, China for a 3-phase program to test and possibly commercialize the extraction of uranium from waste coal ash at the company’s thermal power stations in central Yunnan Province.

In October 2007, Sparton reported that its ongoing uranium testing program had successfully produced its first small amount of U3O8 from the Xiaolongtan thermal power plant.

In 2003, Sparton acquired the right to explore a number of contiguous mineral exploration licences which now comprise an area of about 250sqkm within the Luxi Gold Belt, in the western part of Yunnan Province in southwest China. The Luxi Gold Belt is a Carlin or Nevada-type geological environment.

Gold mineralization on the Luxi Gold Project was first discovered in the area by Yunnan Nuclear Geological Exploration Brigade 201 during a follow-up of regional surveys carried out in the 1980s.

The follow-up work defined a number of oxide gold deposits developed in soils overlying primary mineralization in weathering “pockets associated with fault zones, silicification and hydrothermal alteration”. Primary gold mineralization is hosted in high angle structure associated with the contact zone between Permian carbonate rocks and Jurassic clastic sediments.

More than 200,000 ounces of gold have been produced from the oxide deposits since 1989.

As a result of the comprehensive exploration program, at least seven strong gold-in-soil anomalous zones were identified in the Shangmangang, Nongxi, Mabozi and Bajowa areas.

No systematic drilling has been carried out on any of these anomalies with the exception of one drill hole in the Mabozi area which tested a structure with intense hydrothermal alteration and pyrite-rich jasperoid developed in carbonaceous sediments favourable for hosting gold mineralization.

Brigade 201 subsequently used the geochemical information to locate additional oxide gold mineralization on the licences. This resulted in the extraction of additional ore for heap leaching from two zones near the main Guanlingpo oxide deposit.

Initial drilling carried out by Sparton in mid-2004 using its own drill, consisted of 1360 metres of mostly HQ core in 10 holes testing the gold mineralization in the Guanlingpo Mine main pit area along a strike of 350m.

At the same time, a comprehensive chip sampling program sampled all exposed outcrops in the Guanlingpo Mine main pit area.

About 600m in 46 holes of auger drilling was completed at the same time. Auger drilling penetrates through overburden to bedrock providing samples of basal soil and decomposed bedrock at the soil-bedrock interface. This is a useful method to determine what underlies the overburden.

About a 2-km long zone of the Shangmangang Fault was tested by auger drilling from the Guanlingpo Mine area, southwest to the Yangshishan area, where a small oxide deposit was outlined by previous exploration.

Second stage drilling was completed by the end of 2004. It consisted of 2145 metres of drilling, mostly HQ core, in 18 holes to test the gold mineralization found in the Guanlingpo Mine main pit during the first stage of drilling, and to evaluate primary mineralization associated with the oxide soil gold occurrences associated with pits 2,3 and 4 in the northeast of the Guanlingpo Miner area.

With the completion of the second stage of drilling, it was evident that there was potential to host mineralization ranging from 4 to 6 million tonnes with a grade ranging from 1.5 to 3.0 g/t gold.

Two small pits at Bajowa were mined several years ago for soil oxide ore and heap leach treatment. Production was reported to be about 8000 ounces.

New mineralization at Nongchiuba, about 15km south-west of the Guanlingpo Mine area, was found in 2006 when stream sediments sampling results from the early 1990s were investigated.

By mid-2006, nine areas of granitic intrusive rocks had been located along a 3km long by 1km wide zone trenching north-east. Chip and grab sample assays ranged from 0.20 grams/tonne to 4.0 grams/tonne gold.

By late October 2006, detailed geochemical rock chip sampling and geophysical surveys were completed in the Nongchiba area. More than 450 soil samples and 101 bedrock chip samples from auger drilling were collected.

Exploration on the Luxi Property is now carried out through a Chinese joint venture company Yunnan Sparton Minerals (YSM).

Sparton has entered into an agreement with Brigade 208 of the Geology Bureau of the China National Nuclear Corporation to carry out a due diligence evaluation of 208’s gold production and exploration areas in the northern part of Inner Mongolia.

The 208 project area is about 27km from the Mongolian border, and existing operations vary from 200-350km north-west of Baotou, the largest industrial city in Inner Mongolia.

Sparton may acquire up to a 30% interest in the producing operations covered by a total of 12sqkm of Mining Licences and a 70% interest in 140sqkm of Exploration Licences which surround the existing mines.

An evaluation and technical review is underway on 208’s precious metals programs and producing properties.

The local area government Wulate Zongqui Administrative Area has given 208 the mandate to explore a 23,000sqkm area under its jurisdiction, with the exception of a 36sqkm area under development by Jinshan Gold Mines, at its 217 Project.

Jinshan, controlled by Ivanhoe Mines, is building the largest open pit gold mine in China at 217, with production having started in July of 2007, of about 50,000 tonnes of ore per day and recovery of over 3 tonnes (about 117,000 ounces) of gold per year by heap leach methods.

The WAA is within the eastern extension of the prolific Tianshan Gold Belt, which hosted a number of large gold deposits including the Kumtor Deposit, (8.5 million ounces of reserves and resources) in Kyrgyzstan, the Muruntau Deposit (170 million historic and current resources) in Uzbekistan, and the Axi Deposit (1.7 million ounce reserve) in Kazakhstan.

Until 2000, precious metal production in the WAA was mainly through cottage industry type operations by locals. At that time 208 began to study the gold occurrences in the area and identify gold bearing veins at Tugirige, as well as widespread mineralization associated with major fracture zones in granite and dioritic host rocks.

More than 1000 mineral showings have been identified in the 140sqkm Exploration Licence. Thirty-nine of the veins are over one metre or more in width. With the exception of the area around the Tugurege Mine none of the veins hosting gold and silver mineralization have been drill tested.

The Exploration Licence is divided into three areas: the East, West and Nine Kilometre Area (NKA). The NKA hosts several gold occurrences none of which have been drill tested, but over 200,000 tonnes of heap leach material grading 12.2 grams/tonne gold has been mined for testing purposes.

The Tugirige Mine operates at about 400 tonnes per day, producing ore from two vein systems. According to local mine officials the known gold resource (non NI 43-101 compliant) at Tugirige to a depth of about 250m below surface has been increased about 12 tonnes of gold and the mineralized vein systems are still open at depth and along strike.

Production in 2007 at Tugirige was about 400kg of gold and 300kg of silver. The structural zones hosting the veins are over 2.8km long, but only about 30% of this distance has been tested with detailed exploration.

There is potential to increase resources along strike and at depth with further drilling.

Four small leach pads from three locations are operated seasonally by 208. In 2007 they produced about 100kg of gold and 1000kg of silver. Ore is dug from weathered multiple quartz vein systems and placed on the pads without crushing. Recoveries average about 50-60% of the precious metals.

The mineralized zones holding this material have never been drill tested or subjected to detailed resource evaluation. Should Sparton complete the acquisitions, this work will be part of the future work programs.

The production of uranium from coal ash is a new milestone in Sparton’s ongoing secondary source uranium recovery programs in China and elsewhere. The company and its process engineering partner Lyntek, of Denver, Colorado has demonstrated that U3O8 can be produced from this material. Refinement of the process methodologies for extraction will be a priority activity for future work.

Elsewhere waste ash sampling programs are underway in Hungary and South Africa.

In January 2007, Sparton signed an agreement with the Xiaolongtan Guodian Power Company of Yunnan (XLT) for a three phased 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.

XLT is owned by China Guodian National Power Group, a state-owned company which is China’s third largest electric power producer.

CGG owns and operates more than 200 power stations producing electricity from thermal coal (as at XLT), several hydro power installations and a number of wind power electric generating stations.

Sparton and its partner ARCN, the remote sensing and research branch of the China National Nuclear Corp (CNNC) had previously identified the Xiaolongtan and nearby power stations as a possible major supply for uraniferous coal ash that, if amenable at economic uranium extraction methods, could develop into a significant supply of uranium for China’s developing nuclear power program.

This document, followed by granting the exclusive rights in July 2007, and the joint venture agreement in early 2008, are believed to be unique in the Chinese nuclear industry in that it may be the first time a western partnered organization has entered into any agreements that my result in uranium production in China.

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 CXLT 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 underway. XLT has provided over 100kg of material and all the 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 3 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.

In April 2007, Sparton reported positive early stage leach testing of the fly ash and bottom ash samples from Xiaolongtan that contain approximately 0.46 pounds of U3O8 per tonne of ash (160-180 parts per million uranium).

In May 2007, Sparton received approval from the China National Nuclear Corporation’s (CNNC) Comprehensive Planning Department to proceed with the advanced coal ash leaching tests commissioned with the Beijing Number 5 Testing Institute.

These tests are expected to recover small amounts of uranium, and further CNNC has agreed to purchase any U3O8 produced from these tests, as well as any further U3O8 production from the program.

42 drill holes totalling approximately 700m were completed in September 2007 in a systematic pattern over the entire fly ash waste pile at Xiaolongtang with a 50 metre average hole spacing. The pile averages about 17m in thickness, and contains approximately 5.3 million tonnes of ash, has been completed and samples are being analyzed at a laboratory in China. Duplicate samples have been taken and sent to SGS Lakefield Laboratories in Toronto, Canada for quality control.

The results of the analysis will provide an average uranium content for the waste pile ash and also the content of several other trace heavy metals, including molybdenum (similar the uranium content) and vanadium (twice the uranium content), which have been identified in earlier analysis. Leaching and uranium extraction tests will begin shortly on this material.

In October 2007, Sparton reported that its ongoing uranium testing program had successfully produced its first small amount of U3O8 from the Xiaolongtan Thermal Power Plant.

This first test, being done by Lyntek, the first one to attempt to produce U3O8, was qualitative in nature and used 6.1kg of mixed fly ash being produced by the old and new burners at the station. The ash averaged about 160 ppm U or 0.40 pounds per tonne U3O8.

New test work in progress will focus on refining the leaching, filtering and ion exchange processes. The leach solutions contain significant amounts of gypsum and iron oxide which require removal by filtering prior to passing them through the ion exchange system. A representative sample taken from drill holes used to test the waste pile will be used for this work.

In November 2007, Sparton signed an agreement to evaluate the extraction of uranium from waste material produced from a germanium production plant in the Lincang area of Yunnan Province, China. This area hosts at least two large coal basins (Bangmai and Mengwang) which contain highly anomalous amounts of uranium and germanium.

Currently, these support seven germanium producing operations which are producing large amounts of uranium bearing ash and waste. Historically, uranium was produced in the 1970s and early 1980s from coal ash from these deposits, but all production ceased with the collapse of uranium markets in the early 1980s. Germanium production has continued, however and there are a number of radioactive ash waste piles in the area.

Under the terms of the memorandum of Understanding with the Hua Jun Coal Mine (HJC), Sparton and its Chinese partners ARCN, the Remote Sensing and Research Branch of the China National Nuclear Corp, and Beijing John Hanseng Investment Consulting Co will do uranium analysis and leach tests on the coal and various types of waste on the 2.7sqkm Mining Licence owned by HJC.

If results are positive Sparton can purchase up to an 85% share interest in the HJC company and all of its assets, including the coal mines and germanium production facilities, based on a negotiated value.

Previous sampling of coal ash waste material by Sparton indicated that bottom ash and fly ash samples taken from the area contain between 253 and 804 ppm uranium, which corresponds to grades of about 0.03% to 0.09% U3O8, or roughly 0.66 to 2.0 pounds of U3O8 per metric tonne.

The germanium content of this ash was not determined in these samples, but it is known that the lower limit per germanium recovery from coal in the area is about 100 ppm germanium.

Early January 2008, Sparton reported initial results from the sampling for 61 of a total of 122 samples completed in late November 2007. The samples represent material from the largest of the piles, estimated to contain approximately 350,000 tonnes of ash produced by the local germanium extraction operations.

The average content of 46 samples taken from the largest waste pile area is 0.029% U3O8 or approximately 0.64 pounds U3O8 per tonne. The range of values varies from 0.01% to 0.036% U3O8.

In addition, 3 samples taken from one highly radioactive area in the same waste pile averaged 0.41% U3O8, but these results were not used in calculating the average content reported above.

Determinations for lime and magnesia content were also completed on these samples and the results indicate low values for both, averaging less than 4% for lime and 1% for magnesia.

Sparton considers these results highly encouraging and the low lime content of this material should contribute positively to uranium leach extraction tests which will begin shortly both in China and North America.

www.spartonres.ca