BRENDA BOUW

VANCOUVER — From Friday's Globe and Mail Published on Friday, Apr. 02, 2010 12:00AM EDT

MINING REPORTER

Crystallex International Corp.'s long, drawn-out fight to develop the Las Cristinas gold project in Venezuela appears to have taken its toll as the Toronto-based company warns it may soon run out of cash to operate.

The announcement comes after Crystallex finished the year with $6.9-million (U.S.) in cash, down significantly from $34.5-million at the end of 2008.

The money it has now, and what it raises through equipment sales, will be enough to get it through the second quarter, but won't cover its obligations over the next 12 months, the company said.

"This uncertainty raises substantial doubt as to the ability of the company to meet its obligations as they come due and, accordingly, as to the appropriateness of the use of accounting principles applicable to a going concern," Crystallex said yesterday.

While it is looking at a number of financing options, ranging from new joint-venture partners to the sale of equity, there's no guarantee those will come through.

Crystallex lost $311.9-million in 2009, compared with $21.8-million the year before, due largely to a $297.1-million writedown on the value of its interest in the languishing Las Cristinas project.

Despite its financial troubles, and its struggle to get approvals to develop Las Cristinas from the Venezuelan government, Crystallex said it will continue to pursue the project.

Its permit for the project, located in the southeast corner of Venezuela in Bolivar State, was denied in 2008. Crystallex appealed, but said it has yet to receive a response. The company doesn't own the mining claims to the deposit but has the right to operate the mine under a contract signed in 2002.

Crystallex refuses to acknowledge reports that the government has taken over the project. "Despite media reports of possible nationalization of mining assets, the company has not received any official notification from any government entity concerning changes to the control of Las Cristinas," it said in documents filed as part of its year-end financial statements. It also said its legal rights to the project remain "intact."

Calls and e-mails to the company were not answered yesterday and the voice mailbox for the investor relations contact was full.

Earlier this year, President Hugo Chavez reportedly chose a Russian firm to run the project as a joint venture with the Venezuelan government. The move is viewed as a way for the oil-dependent nation to secure new sources of income as crude prices fall from their highs before the global recession.