Crystallex International Corp. 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 special shareholder meeting in Toronto.
Crystallex shares plunged last week after reports the Venezuelan government plans to take control of the company's principal asset, the Las Cristinas property in Bolivar State.
Venezuela's socialist government, under President Hugo Chavez, has seized control of industries considered strategic to its development. The reports said the government had 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 government's 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 officially denied the rumours either, 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 government officials have acknowledged the importance of the mine and the employment it will provide to surrounding communities.
Crystallex says on its website that Las Cristinas has an estimated production of 17 million ounces, "which positions Crystallex as one of the largest North American-based gold companies in terms of gold reserves." The website also says the company expects to start gold production at Las Cristinas in 2010 at a level of 20,000 tonnes of ore per day.
Crystallex has said it plans to continue with capital expenditures for Las Cristinas despite the reports. The Toronto-based company forecasts that it will have cash to fund its operations until the fourth quarter of 2009. As of Sept. 30, when its third quarter ended, Crystallex had $44.6 million in cash and equivalents. For the first nine months of 2008, it had spent $17 million on Las Cristinas, including $4.3 million in the third quarter.
At the end of September, Crystallex ceased mining at the Tomi and La Victoria mines due to the handover of the Revemin mill to Minerven, a Venezuelan state-owned company. The company reported a loss from discontinued operations at El Callao, where the Tomi and La Victoria mines are located, of $6 million for the three months ended Sept. 30. Loss from continuing operations was $1.6 million, or one cent per share, in the third quarter, including $5.8 million of unrealized foreign exchange gain. The company hasn't yet produced revenues from its operations.
Crystallex shares were up three cents, or 12.5 per cent, to 27 cents in early trading on the Toronto Stock Exchange after trading as high as $2.90 in March.
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