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.
DUE DILIGENCE
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.
PAYMENT SCHEDULE -TAKEOVER OF OPERATIONS
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.
GOING FORWARD
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.
URANIUM RECOVERY PROGRAM FROM LINCANG AREA WASTE ASH
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.
DISCUSSION
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. |
