The LUXI GOLD BELT is in a Carlin or Nevada-type geological environment. Carlin type deposits are sediment-hosted gold deposits that contain disseminated gold with grains undetectable by the naked eye, located in impure limestones, dolomites, calcareous shales or similar rock types, and are associated with anomalous arsenic, antimony, mercury and thallium. These types of very large gold deposit were first discovered in the Carlin area of Nevada in the early 1960s and 1970s. Sparton management has extensive exploration experience and a track record of successful discovery and development of numerous disseminated type gold deposits in Nevada.

The style of primary mineralization and geochemical signature at Luxi is generally similar to a number of the well-known gold producing “trends” in Nevada , USA . (e.g. Carlin Trend, Pinson-Getchell Trend, Round Mountain Trend, etc.) where over 8 million ounces of gold are produced annually.

The Luxi Gold Belt is located in the western part of Yunnan Province , in southwest China . The Luxi property is approximately 40 km west of the town of Mangshi (population 300,000), a regional centre serviced by domestic commercial jet aircraft. Mangshi is about 500 km west by paved highway from Kunming , the provincial capital, and 70 km east of the Myanmar border.

In 2003, Sparton acquired the right to explore a number of contiguous mineral exploration licences which now comprise an area of approximately 250 sq km.

Exploration on the Luxi property is now carried out through a Chinese joint-venture company Yunnan Sparton Minerals Company Limited (YSM), which is a People's Republic of China-registered foreign joint venture company. YSM is owned 51% by Starry Limited, 39% by Sparton Resources International (SRI) and 10% by Yunnan Nuclear Exploration Team 201 (201). In November 2006 Sparton agreed to sell 41% of its then held 80% interest in Yunnan Sparton to Starry Limited for approximately $C2.8 million. At the same time 201 also agreed to sell 10% of its then held 20% interest to Starry. Starry is supported by one of China 's largest integrated gold producers. Exploration on the property continues to be carried out under the technical/direct supervision of Sparton management and in Q1 2007 a 2 million RMB ( $C310,000) budget was approved and a 3000 metre drilling program commenced.

YSM also has the right to earn a 75% interest in the 0.5 sq. km Deep Exploration Licence below the 1180 metre level of the Guanlingpo Mine Licence, by providing the mine owners with a positive feasibility study for new mine development in the licence areas.

Expenses for the project are now paid 57% by Starry and 43% by SRI. The 10% share interest held by 201 is a non-contributing carried equity interest in YSM.

History of Activity

Gold mineralization 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 (gold that is in the underlying rock and not in the soils) is hosted in high angle structures associated with the contact zone between Permian carbonate rocks and Jurassic clastic sediments. Over seven tonnes (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 had 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 (soil) 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 (first stage) 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 350 metres. At the same time a comprehensive chip sampling program sampled all exposed outcrops in the Guanlingpo Mine main pit area.

Approximately 600 metres 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 Guanglingpo 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 Mine 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 gpt gold.

The ongoing auger drill program tested the Shangmangang Fault system across overburden covered areas in the 8-km long zone southwest of the Guanlingpo Mine towards the Yangshishan, Mongmo and Sashuipo oxide gold deposit areas.

IP surveys in 2005 outlined new prospective areas for testing at Bajowa, Mabozi, Hebianzhai-Guanming, plus the area that includes the Guanlingpo Mine area and southwest from there to the Yangshishan and Mongmo oxide gold deposits.

By August 2005, a sampling program collected over 1250 chip and channel samples averaging 2 metres in length across all outcrop exposures in the various areas. Strong IP anomalies were associated with mineralized zones at Yangshishan, Mabozi, Hebianzhai-Guanming and Bajowa.

Over 400 auger drill holes were completed in all areas across a 1.8 km-long portion of the favourable Shangmangang Fault structure. The results show a continuous zone of bedrock gold mineralization with anomalous values ranging from 0.20 to 1.20 gpt gold in basal soil and rock chips in samples taken 20 metres apart. There is an IP anomaly directly associated with these anomalous gold values along the same 1.8-km long zone. These results have extended the zone of continuous bedrock mineralization and associated IP anomalies to nearly 3 km in strike length. Core drilling has tested less than one third of this.

A third stage drill program of six holes begun in June 2005 extended the South Zone breccia mineralization a further 100 metres along strike and to a depth of at least 100 metres.

By September 2005, Sparton concluded that a possible mineral deposit ranging in size from 4.2 million to 7.6 million tonnes grading 1.5 to 1.2 gpt gold (1.0 gpt and 0.50 gpt gold cut-off grades respectively), is possible for an 800 metre section of the 3-km long Shangmangang-Mongmo Break. The contained gold could range from 210,000 to 320,000 ounces depending on the cut-off grade used. The estimate, based on about 1000 drill core assays from 34 drill holes and over 200 surface chip sample assays, is preliminary and not National Instrument 43-101 compliant.

Drilling tested to a depth of 100 metres. Approximately 80% of the tonnage is within the Mining Licence or the Deep Exploration Licence while the remainder is within the licences held 100% by YSM.

In May 2006, Sparton released results from the drilling program evaluating the Bajowa area. Bajowa is about 40 km southwest of Guanlingpo Mine along the Luxi Gold Belt. The drilling consisted of 1050 metres in nine holes. Gold values ranged from 0.20 to 4.2 gpt over 1 to 15 metre intervals. The drill program tested a 350-metre long section of the Bajowa mineralization. The results confirmed in situ gold mineralization similar to that found at the Guanlingpo Mine. This positive result enhances the prospectivity of the Bajowa area for further mineralization, but requires further exploration.

Two small pits at Bajowa were mined several years ago for soil oxide ore and heap leach treatment. Production was reported to be about 250 kg (8000 ounces) of gold.

New mineralization at Nongchiuba about 15 km southwest of the Guanlingpo Mine area was found in 2006 when stream sediment sampling results from the early 1990s were investigated. By mid-August 2006, nine areas of granitic intrusive rocks had been located along a 3-km-long by 1-km-wide zone trending north-northeast. Chip and grab sample assays ranged from 0.20 gpt to 4.0 gpt gold. This discovery is significant in that it represents a new target opportunity similar to deep high grade intrusive-related mineralization in Nevada.

By late October 2006 detailed geochemical, rock chip sampling and geophysical surveys were completed in the Nongchiuba area. Over 450 soil samples and 101 bedrock chip samples from auger drilling were collected. Magnetic surveys appear successful in outlining intrusive areas here.

At the Mabozi mineralized area, detailed exploration by YSM has extended the Mabozi mineralized zone over 600 metres to the northeast for a total known length of over 1.5 km. Previous limited drilling in 1998-9 reported wide intervals (24-60m) of about 0.4-0.6 g/t gold, with values of 1-3g/t reported over 5-10 metre widths. None of these zones has ever been retested or extended.

Metallurgy

Results from preliminary metallurgical studies have been positive. Gold recoveries from core samples containing the dominant breccia style mineralization averaged 77% for cyanide soluble gold. Samples from carbonaceous sulphide rich mineralization, which represents about 10% of mineralization, produced low gold recoveries.

Current program

A $310,000 budget has been approved for exploration in the first quarter of 2007. The work program will consist of 3000 metres of reverse circulation and core drilling. Initially, drilling will test outside the Guanlingpo Mine area to extend the known mineralization, followed by drilling at Bajowa and then Mabozi, two prospective areas outlined in the 2005 IP surveys.