Crystallex International Corp. (AMEX:KRY) Climbs Down on Growing Uncertainty

Crystallex International Corp. (AMEX:KRY, KRY message board) could not break up once again yesterday, as the market signaled drawback with a 4.72% decrease and a close of $0.50 on less than a half from the previous day's volume. The stock remained though close to the upper band in the daily trading on a costly promotion for $200,000.

After Wednesday's attempt to bounce off this year's high of $0.56 on the confirmation of the Court in Ontario for the dismiss of some noteholders' appeals against the company, yesterday investors were not willing to maintain the higher levels.

High dilution risks are hanging over Crystallex under $1 stock, as a total of 15.3 million shares of common stock can be issued upon exercise of outstanding stock options, warrant and rights, 7.2 million of that amount representing stock options held by executive officers and directors under the company's equity compensation plan. Some positive signal for the market is the relatively high exercise price of those options, mostly above $1.90, meaning on the one hand that management should be highly motivated to improve performance, and on the other hand dilution might not happen in the near future.

And there is room for improvement, taking into account a scary 85% decrease in the assets of the gold producing company, lack of any revenues and still negative results from operations and operating cash flow. The significant drop in assets is due to a non-cash write down of $297,069 to the book value of the company's principal asset and main future source of revenues, the Las Cristinas gold property in Venezuela.

According to a Mine Operating Contract, entered 2002 and confirmed by the Government of Venezuela in March last year, the company has the exclusive rights to develop and mine the gold deposits. However, Crystallex is still waiting for a permit from Venezuela environmental authorities to commence working on the project and if no settlement of the case is reached soon, the company will file for international arbitration, which means that another three to five years might be lost until a judgment is received.