Record says the Portuguese side are hoping to keep the combative midfielder at José Alvalade Stadium beyond the summer, with the Magpies considering a move.
The 21-year-old has 'caught the eye' of a number of clubs this season, with Eddie Howe's side said to be among those interested.
Sporting are in talks to offer the midfielder a new deal.
However, with a reported release clause of €71million suggested in those talks over a new deal, Ugarte is said to not be keen on such a high asking price. The Uruguayan is keen on a new deal with talks set to continue.