Pre-concentration method could reduce Sikaman costs

A 3-year extension was recently given to Sikaman Gold (TSE) on its option to bring the Snow Lake tailings project into production after tests showed that an alternative pre-concentration method could reduce capital costs by 65%.

Since acquiring the northern Manitoba tailings project in 1989, Sikaman has considered using a pre-treatment system known as the Redox process to oxidize arsenopyrite in the tailings and standard cyanide-in-leach technology to recover gold mineralization.

Under an agreement with High River Gold Mines (TSE), which owns a 5% net smelter return royalty and 10% net profits interest in the project, Sikaman has until May, 1993, to treat the tailings using the Redox system. Within that time frame, Sikaman expected to recover about 90% of the 105,000 oz. contained in a tailings pile hosting 270,000 tons of material grading 0.35 oz. per ton.

However, estimated capital costs of $18.5 million would be prohibitively expensive in the prevailing financial climate, says President Thomas Griffis. He says bench scale tests indicate that capital costs could be reduced to about $6 million if the tailings are concentrated down prior to treatment. As a result, the two companies have amended the terms of their agreement to allow Sikaman until May 23, 1994, to bring the project into production. In return for paying High River $10,000 per month from May, 1994, to November 1997, Sikaman would have the option to treat the tailings until Nov. 23, 1997. If pilot tests to be conducted over the next three months are successful, Sikaman would rank as the first mining company to recover gold from refractory sulphide concentrate using the Redox system. “The next step is to obtain project financing,” Griffis told The Northern Miner.

Meanwhile, Sikaman is attempting to eliminate debts of $6.9 million by restructuring the terms of its $6.1-million convertible debenture. In March, 1989, Sikaman issued 6,715 units at $1,010 per unit, each consisting of one 10%, $1,000 convertible redeemable subordinated debenture and 20 gold purchase warrants. Scheduled to mature March 31, 1994, the debentures are convertible into common shares at $3.50 until March, 1994.

While Sikaman began making semi-annual payments in July, 1989, Sikaman recently postponed a Nov. 15 meeting of debenture holders to consider a restructuring. Sikaman says discussions with debenture holders are continuing and shareholders will be advised of any proposals that are to be submitted to them for approval.