Lee Barker, President of Sparton Resources is pleased to announce the signing of a strategic alliance with a research and remote sensing institute affiliated with the China National Nuclear Corporation. Sparton Resources Inc. (TSX VENTURE:SRI), and its China business partner Beijing Jong Hanseng Investment Consulting Co. Ltd. ("BJH") reported today, that they have executed a Cooperation Agreement ("the Agreement") with The Airborne Survey and Remote Sensing Centre of Nuclear Industry in China ("ARCN") to undertake a joint research study on the feasibility of extraction of commercial quantities of uranium and other trace metals from coal ash and other non conventional sources of uranium within China. ARCN is an institute affiliated with the China National Nuclear Corporation Group ("CNNC") the organization responsible for all nuclear related issues in the country.

Under the terms of the agreement Sparton and ARCN will jointly begin a study and sampling program to identify and evaluate the uranium content of China's huge coal ash waste deposits and other non conventional uranium bearing materials such as phosphate rock where high contents of uranium and other trace metals are often present. If the program is successful in identifying the technical potential to extract uranium from any of these materials a joint venture will be set up between Sparton-BJH (60%) and ARCN (40%) to develop the project further with full feasibility studies to review the potential for commercialization of the project and eventual production of uranium from one or more of these sources by an organization to be structured from the partners in the current program.

The project also has the potential to serve as a pathway for the possible cleanup of naturally occurring radioactive materials (NORMS) from fly ash and other power station waste products and can be considered as a bonus for reducing the local environmental concerns about these types of waste materials.

COAL IN CHINA

China has huge coal resources which are used to produce most (70-80 %) of the country's electricity, or for metallurgical purposes such as steel making. Nearly 2 billion tonnes of various grades of coal are currently produced and consumed annually in China for electric power generation and other industrial purposes such as steel making.

Most of this coal is bituminous or mid grade thermal coal but several hundred million tonnes of lower grade brown coals are mined and burned annually as well. Coal ash produced from power stations is either stored in waste disposal areas or a small portion is used as a filler in making cement products for construction purposes. The ash content of these coals varies from 5-15% depending on the quality of the coals burned. The lower grade coals have a higher ash content. Two types of ash are generally produced, fine "fly ash" recovered by scrubbing of stack emissions and coarse "bottom ash" from burner grates. China has instituted a program of emissions reduction at many power stations to collect fly ash more efficiently and is improving the technology to reduce particulate and other types of emissions as well.

CHINA'S NUCLEAR INDUSTRY

Presently only about 3 % of China's power is supplied by nuclear power stations. Recognizing the future power needs of the country, and the acceptance of nuclear energy as an effective non polluting alternative to coal burning, CNNC has embarked on a program to construct approximately 25 new nuclear power stations in the next 10 years and is actively sourcing long term supplies of uranium fuel in Canada, Australia and elsewhere. China has few primary uranium deposits and is expected to be a net importer of large amounts of uranium as a reactor fuel for the longer term. Locating new domestic sources of uranium has become a priority for CNNC and the Central Government.

URANIUM IN COAL ASH

Uranium and other heavy metals such as vanadium are naturally occurring substances in coal, particularly in the lower grade coal types such as brown coal and lignite. The process of coal burning (through volume reduction) concentrates the original metal content by ten to fifteen times depending on the ash content of the burned material, thus increasing the 'grade' of the ash to potentially economic amounts for various metals including uranium. Most coals average about 3-4 parts per million (ppm) uranium but certain deposits are known to contain 20-50 ppm and the ash produced by burning them can rarely contain uranium quantities similar to low grade primary uranium deposits. Similarly certain deposits of phosphate rock used in making agricultural fertilizer may be anomalously high in uranium and other metals.

During the period high uranium prices (similar to the present) in the 1960's and up to the early 1980's the value of uranium in coal ash and phosphate rock from several areas of North America and Europe justified installation of extraction facilities and commercial yellowcake (U3O8) production. The de-emphasis on nuclear power generation and severe reduction in uranium prices which occurred in the early 1980's rendered most of these facilities uneconomic.

In today's energy environment the use non polluting nuclear energy for power generation has been widely re-accepted as an alternative to fossil fuel thermal power generation and many new power stations are under construction worldwide resulting in a strong demand for uranium and much higher prices. The potential to use the huge amounts of coal ash produced in China as a domestic source for uranium has not been widely recognized. ARCN and Sparton will undertake a study to identify high uranium content ash deposits in China and also review the potential for other non conventional sources of uranium to be exploited. Within China a working group has been formed with representatives of Sparton and ARCN who will work out of ARCN's large research and analytical facilities near Beijing. Sparton will contribute a total of Can. $100,000 dollars to expenditures for the initial phase of the work and ARCN will make all of its analytical facilities, data bases and remote sensing technology available to the program.

URANIUM IN CHINA

Uranium is a strategic material in China, and with exception of purchase agreements with various international producers no foreign organizations have been permitted entry into the Chinese uranium industry. Foreign ownership of uranium resources in China is forbidden. The current agreement is believed to be unique one and because of the opportunity to locate and exploit a new domestic uranium supply as well as the potential for environmental cleanup of high heavy metal content coal ash storage areas, the initiative provided by Sparton has been recognized by CNNC, and its technical branch, ARCN, has been assigned to become involved in the program. ARCN is one of only two commercial remote sensing organizations in China and operates a fleet of airborne magnetic, electromagnetic, and radiometric geophysical data acquisition platforms, as well as providing contracted survey services using state of the art ground geophysical systems. It also has the most sophisticated analytical facilities for testing for radioactive elements, and manufactures and markets airborne and ground radiometric sensing devices for use in environmental monitoring and exploration work. If a joint venture is formed to provide facilities to produce uranium or other heavy metals form these sources its partners will be in a unique position to benefit from the operation of any extraction facilities commissioned for production.

Sparton Resources Inc. is a diversified mineral and energy royalty company, which has been an active participant in the Canadian junior resource sector for over 20 years. In addition to its interest in the undeveloped Chebucto natural gas field in offshore Nova Scotia, and a production royalty on the Blizzard uranium deposit in B.C. Canada, it also holds a portfolio of Chinese, Mexican, and Canadian mineral exploration properties focussing on base and precious metals.

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