In early January 2007, Sparton announced the signing of an agreement with the Xiaolongtang Guodian Power Company of Yunnan , People's Republic of China for a three-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.

The Xiaolongtang, Dalongtang and the Kaiyuan stations, all located within 20 km of each other burn coal from a centrally located open pit lignite coal mine that contains anomalously high uranium content. The plants are located approximately 250 km southeast of the Yunnan provincial capital of Kunming.

This coal has a high ash content (approximately 20-30%), and the coal uranium content varies from about 20-315 parts per million (ppm) and averages about 65 ppm. Both the bottom ash and fly ash samples tested by Sparton contain approximately 0.46 pounds of U3O8 per tonne. These analyses were done in China and Canada and verified by the Company's consulting engineering firm, Lyntek Inc. of Denver, Colorado, USA. Lyntek specializes in uranium extraction process engineering and has been involved in over 30 recovery projects in 10 different countries.

Due to its high radioactivity levels the waste ash is not suitable for cement uses in residential applications. Small amounts are sold for outdoor applications such as bridge abutments, but most is stockpiled in dry re-vegetated disposal areas. The Xiaolongtang station produces 600,000 to 800,000 tonnes of fly and bottom ash annually, and has accessible stockpiles of about five million tonnes of recoverable ash.

A sixth burner is now in operation at Xiaolongtang and the station is expected to produce about 900,000 tonnes of ash annually.

Using available analytical data, the annual coal ash production from these stations, assuming an average uranium content of 0.45 pounds per tonne and recoveries of 70% , contains about 145 tonnes or about 320,000 pounds of uranium oxide (U3O8) valued at current prices (April, 2007)at over USD$30 million.

Sparton has commissioned a full independent technical report and leaching test program for the Xiaolongtang area ash material under the direction of Lyntek.

Coal ash samples from various burners at the Xiaolongtang power station have now been tested by Lyntek and the initial results indicate that over 70% of the uranium contained in fly ash is soluble in simple acid extraction solutions. Fly ash represents about 90% of the total ash production from these stations. These first results are extremely positive and indicate the same predicted uranium extraction rates as are being reported for various ISL (In Situ Leach) uranium mining projects currently in production. Based on these results testing will continue and is expected to proceed to the pilot plant stage.

A uranium extraction facility would help clean up potential or existing environmental hazards, create a new supply of domestic uranium, and create value as cement and concrete filler material. Sparton would benefit from management fees and possible royalties plus an equity ownership in the company operating the facility.

Sparton's team is continuing to acquire samples from other high uranium ash stations in other areas of China and new results will be available on an ongoing basis. Since signing the agreement in China, Sparton has signed agreements to do similar programs in 6 countries in Central Europe and the Republic of South Africa.