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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.
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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 $C1.9 million) has been paid,
YBBS will be in full control of the operations. Appropriate
new experienced technical and administrative staff have been
sourced for HJ. It is anticipated that YBBS will be fully in
charge of HJ by mid August 2008. The minority HJ owners will
maintain close involvement in operations during the transition
period and YBBS will have its own mining, financial, and
processing specialists directly involved in day to day operations during that time. |
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Current Germanium Price
US$ 1,412 kg
(Apr.16, 2008)  |
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Lee Barker,
Sparton's President |
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Michael Vaughan,
Business
Journalist |
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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. |