Canadian junior Sikaman busy outside the country

Gearing up for gold production in Ghana, West Africa, during the latter part of 1989, Canadian junior- mining firm Sikaman Gold Resources (TSE) has started to look farther afield for new, and different, opportunities.

Sikaman, which went public in January, 1987, and which recently announced participation in a gold exploration program in Mali, also in West Africa, now says it has entered into a joint venture agreement with an Australian company, Centenary International Mining, to develop a base metal property in northwest Australia (see separate story). The company also says it is investigating mineral possibilities in Indonesia and has its eye on a possible acquisition in Sumatra.

“Sikaman’s goal has always been to diversify geographically. We didn’t want the company to have just one leg on a stool,” President Thomas Griffis told The Northern Miner in an interview at his Toronto office.

Griffis, a native of Timmins, Ont., is a retired Canadian air force officer and a former leader of the Snowbirds, the air force’s aerobatic flying team which performs throughout North America. His father, A. T. Griffis, was one of the founders of the consulting and mining engineering firm Watts Griffis & McOuat of Toronto. Sikaman project

It didn’t take Griffis long to get into the mining business following his retirement from the armed forces in 1984. The next year, in fact, Sikaman came into existence as a private company, funded by a group of investors. “The Sikaman project,” Griffis said, referring to the Bogosu concession in Ghana, “really started to take shape in 1986.”

Sikaman’s original principal partners in the venture were Denison Mines (TSE) and Denison affiliate Exall Resources (TSE), but earlier this year Billiton B.V. of The Netherlands, a wholly-owned subsidiary of Royal Dutch/Shell, acquired the combined Denison-Exall 40.5% interest. Sikaman also has a 40.5% interest. The other two partners are the government of Ghana, 10%, and the World Bank’s investment arm, International Finance Corp. (IFC), 9%.

The Bogosu project has current reserves (all classes) of 6.8 million tons grading 0.14 oz gold per ton. Sikaman says preliminary information from a feasibility study indicates a startup production rate of at least 100,000 oz gold per year.

While the Bogosu project will be run jointly by Sikaman and Billiton, Griffis said in Mali the operator will be Billiton. Longtime producer

A known producer of gold since ancient times, Ghana in 1987 turned out 324,000 oz of the yellow metal. There are two producing corporations in the country, Ashanti Goldfields and the smaller state- owned Gold Mining Corp. The Ashanti mine, it is reported, has been in production since 1897.

“It’s a very good place to do business,” Griffis said, praising government technical officials for their co-operation. Businessmen, especially mining people, are welcomed, he said, adding that Ghana “is becoming a favorable country to invest in.”

The climate of the English- speaking nation, he said, is “very hot and humid,” and, as might be expected, working conditions are much different than in North America. Griffis described workers there as “keen and willing.” The Bogosu concession is located 90 miles inland and is easily accessible by road.

A new Minerals Code adopted in 1986 gives the government of Ghana, among other considerations, a 10% equity position in all mining operations in the country.

Debt financing for the Bogosu project, the capital cost of which is estimated to be $45 million(US), is being undertaken by IFC. Minproc Engineering of Perth, Australia, is the project engineer. The feasibility study, which indicates an operating cost of between $170 and $210 per oz, should be completed by September. Project insurance

While the IFC provides a financial security blanket, Sikaman has also acquired investment insurance through the Export Development Corp. in Ottawa. The company’s projected equity investment and retained earnings up to $21 million(C) are covered by the policy in case of losses suffered through nationalization or fighting in the country. Sikaman expects to have 250 workers operating its open-pit Bogosu concession, which is in sharp contrast to the labor-intensive Ashanti mine works and its labor force of about 12,000, Griffis said.

Asked about possible Canadian mining ventures, Griffis said that in due course Sikaman will no doubt investigate targets in Canada and also the U.S. It was a corporate decision to first try mining outside of Canada, he said.

Sikaman currently has 4.6 million shares outstanding, about 10% of which are held by Griffis, and working capital of about $5 million.

Other Canadian firms active in Ghana include Ghanorcan Resources and Canada Ghana Gold Syndicate, both of Toronto.