Sikaman Gold Resources buying andalusite mine

Toronto-based Sikaman Gold Resources (TSE) has signed a letter of intent to acquire up to a 100% interest (and no less than 75%) in a South African andalusite mine.

The deal was struck with Enro Energie und Rohstoff GMBH of Germany, which controls the mine through Hoogenoeg Andalusite of South Africa. The mine, in the Transvaal region, has been in production since 1974.

Enro will receive a secured debenture convertible into common shares of Sikaman; full conversion would result in Enro acquiring a 50% equity interest in Sikaman.

Should shareholders approve the deal, Sikaman’s board of directors would be increased to seven members from five, with Enro entitled to four of the seats. President A.T. Griffis says he expects Karl Lund, chairman of Enro, to assume the chairmanship of Sikaman.

The Hoogenoeg mine has undergone extensive operational changes during the past few months, including replacement of used and aging equipment. Substantial changes have been made to the production plant.

The modifications are expected to continue throughout most of this year and have a significant impact on cash flow, Griffis says.

Sikaman is planning a special meeting of shareholders to consider the transaction.

Hoogenoeg is one of three mining operations in South Africa that account for 70-80% of the world’s andalusite products.

Andalusite is used primarily in the manufacture of refractory fire bricks, tiles, linings and fillers. Hoogenoeg markets its products through Extram, an industrial mineral marketing group.

Griffis says he expects Sikaman/Enro will focus its attention on Africa; in particular, he mentioned Namibia and West Africa, where Enro has gold interests. Enro’s acquisition of Sikaman will give the former a public vehicle to raise funds for exploration and development.

Sikaman’s assets include gold properties in California, Argentina and Ghana, and a diamond prospect in the Central African Republic.