Venezuelan Miners Crystallex and Gold Reserve Go Vertical

Wednesday morning, the shares of Crystallex (KRY) and Gold Reserve (GRZ) “went vertical” causing traders to question if the environmental permits had been issued in Venezuela. There was no news from Venezuela, but I did note that the GRZ lifted off the launching pad ahead of KRY, and managed to maintain altitude during the afternoon.

Gold Reserve 6-K SEC Filing Nov 15 2006.

This filing includes an interesting discussion on the environmental permitting process plus the additional work programs recently undertaken to increase reserves for its Brisas copper-gold project in the KM 88 Mining District.

The company believes the property contains at least 10.4 million oz of gold and 1.3 billion lb of copper. The proven and probable reserve is 484.6 million tonnes grading 0.13 pct Cu and 0.67 g/t Au. The operating plan assumes a large open pit mine using conventional truck and shovel mining methods. At full production the mill will treat 70,000 t/d of ore, yielding an average annual production of 456,000 oz of gold and 60 million lb of copper over an estimated mine life of about 18.5 years. Initial capital costs are now put at US$638.0 million.

The numbers look quite interesting, and that’s probably the reason the GRZ stock got into play ahead of Crystallex. Crystallex will probably announce 18 million oz of gold by the end of 1Q07. I also note that Crystallex does not report copper values because, as CEO Todd Bruce has indicated, the mill will be fully optimized for gold production, leaving minimal copper values.

From Crystallex regulatory filing Nov 14 2006:

Management discussion, included: (i) Continuing discussions with Venezuelan government officials to advance the process for obtaining the Las Cristinas permit (ii) Subsequent to quarter end, commenced an 11,500 metre drilling program at Las Cristinas (iii) Received net proceeds of $48.1 million from a unit offering and the issue and exercise of warrants during 3Q06 (iv) Increased revenues in 3Q06 and first nine months due to higher realized gold prices, and (v) Net loss for 3Q06 of $8.8 million.