Crystallex still awaiting official word from Venezuela on Las Cristinas

7 hours ago

TORONTO — Crystallex International Corp. (TSX:KRY) has received no indication from the Venezuelan government that it plans to take control of the company's Las Cristinas gold mine, but it's still awaiting official confirmation, says CEO Robert Fung.

"No one in government, either directly or indirectly, has indicated to us that the situation has changed," Fung said Tuesday at a shareholder meeting.

Crystallex shares plunged last week after reports the Venezuelan government plans to take control of the company's principal asset.

Venezuela's socialist government under President Hugo Chavez has seized control of industries considered strategic. Reports said the government has chosen Russian-owned Rusoroto to run the project, which Crystallex has been under contract to operate for years.

Venezuela has not yet issued Crystallex an environmental permit for the mine, but the company said in September that discussions with the Ministry of Basic Industry and Mining "have been encouraging."

"No one in any level of government has indicated to us in any way, shape or form that this permit is not coming," Fung said Tuesday.

Investors expressed concern that the government has not denied the rumours, but Fung said the company is in daily contact with a "very high level of government" and has asked for official clarification.

"The issue is, a lot of things were said verbally. This is why we've written to the government seeking clarification... either in writing or by an official press release," Fung said.

He added that it has been "quite some time" since a new mine was issued an environmental permit in Venezuela, but officials have acknowledged the importance of the mine and the employment it would provide.

If the Venezuelan government does take control of the mine it will be breaking a contract, leaving Crystallex with legal recourse, said John Ing, CEO of Toronto-based investment dealer Maison Placements.

"If the Russians, Venezuelans or somebody abrogates the contract, then the question is, is that it for Crystallex?" Ing said. "The answer is obviously no because that contract is quite valuable."

Crystallex says Las Cristinas has an estimated reserve of 17 million ounces, "which positions Crystallex as one of the largest North American-based gold companies in terms of gold reserves." The company aims to start mining in 2010.

Crystallex has said it plans to continue with capital expenditures for Las Cristinas despite the uncertainty.

The Toronto-based company estimates it has enough cash - US$44.6 million at Sept. 30 - to fund its operations until late 2009. In the first nine months of this year it spent $17 million on Las Cristinas.

Crystallex shares, which closed Monday at a new low of 24 cents on the Toronto Stock Exchange, were up three cents at 27 cents Tuesday afternoon, down from a 52-week high of $2.90 in March.