READ ON:

Crystallex shunts 66% of Las Cristinas to China Railway

2010-06-07 07:11 ET - New Release
Shares issued 294,817,719
KRY Close 2010-06-07 C$ 0.52

Mr. Richard Marshall reports

CRYSTALLEX FORMS STRATEGIC PARTNERSHIP WITH THE RESOURCE SUBSIDIARY OF CHINA RAILWAY ENGINEERING CORPORATION, THE WORLD'S LARGEST CONSTRUCTION AND ENGINEERING COMPANY, FOR THE LAS CRISTINAS

Crystallex International Corp. has signed a binding agreement with China Railway Resources Group Co. Ltd. to create a strategic partnership for the development of the Las Cristinas gold project in Bolivar state, Venezuela. China Railway Engineering Corp. is the world's largest contracting and engineering company and one of the world's 150 largest companies. It is one of China's largest state-owned companies with the majority of its shares held by China.

China Railway Resources and Crystallex have met with the government of Venezuela to apprise them of this strategic partnership and are very pleased by the government of Venezuela's expression of support. Both Crystallex and China Railway Resources are working closely with Venezuelan officials to obtain the approvals and permits required to bring Las Cristinas into production. The advancement of Las Cristinas will benefit all stakeholders and especially the people of Venezuela, particularly in Bolivar state.

Under the terms of the agreement, China Railway Resources is leading the efforts of the strategic partnership to unblock the stalled environmental permitting process for Las Cristinas and will provide the necessary project capital to develop the project to commercial production at an optimized mining rate.

Upon completion of the transactions contemplated by the agreement, Crystallex will hold a one-third fully carried interest in the Las Cristinas joint venture and China Railway Resources will have a two-thirds interest. Crystallex will contribute the Las Cristinas mine operating contract, feasibility study, all design and engineering already completed by Crystallex, and other project assets. China Railway Resources will provide the necessary construction and operating capital to finance project development, optimized expansion and operation, and will be responsible for construction of the project. Crystallex will pay for its one-third carried interest of the capital costs provided by China Railway Resources from its share of future cash flows from the project. In addition, China Railway Resources will assist Crystallex to retire the outstanding noteholders' obligations, will provide a construction guarantee and has agreed to make an equity investment in Crystallex following closing of the transactions, at a share price based on the then-prevailing market price of the common shares of Crystallex.

China Railway Resources had previously advanced Crystallex $2.5-million (U.S.) during the negotiation of this agreement. Subject to requisite regulatory and shareholder approvals, this $2.5-million (U.S.) advance is convertible into common shares of Crystallex at a price of 40 cents per share. China Railway Resources shall also have a one-time option to convert a portion of funds advanced to Crystallex to satisfy its obligation to the noteholders into common shares of Crystallex at a price of 40 cents per share for a period of five years from the date of financing, provided that China Railway Resources and its affiliates shall beneficially own not more than 19.9 per cent of the outstanding common shares of Crystallex after giving effect to such conversion. China Railway Resources shall have the right to maintain its pro rata equity interest in Crystallex to a maximum of 19.9 per cent of the outstanding shares.

The closing of the transactions contemplated by the agreement is subject to the applicable regulatory, government and shareholder approvals, satisfaction or waiver of all conditions contained in the agreement, and the execution and delivery of all closing documents including final definitive agreements which are being prepared and are expected to be completed before July 30, 2010. A meeting of Crystallex's shareholders to approve the transactions is expected to be held in August, 2010, with closing expected in the third quarter of 2010. A copy of the agreement will be filed on SEDAR within 24 hours of this release.

Crystallex's financial advisers are Macquarie Capital Markets Canada Ltd., GMP Securities L.P. and Kingsway International Holdings Ltd., and its legal advisers are Cassels Brock & Blackwell LLP.

We seek Safe Harbor.