Dispelling the Myths Surrounding Yet Another Crystallex Attack

I suspect that the Globe & Mail's Fabrice Taylor's report on Crystallex (KRY) was simply another negative spin to a great investment. The writer has clearly stated that his views were merely opinions and certainly not based on fact. This is, and continues to be, the negative reporting geared towards specific companies such as KRY, which causes the problems that he discussed.

Here are some comments made and my reply with answers based on facts.

Myth: In January, the company's stock tumbled when Venezuela threatened (again) to nationalize vital industries, including mining. Given that most of Crystallex's market value lies on its claim to the Las Cristinas gold deposit in that country, that wasn't exactly welcome news.

Fact: Las Cristinas has already been Nationalized. Kry has a MOA with the CVG for 40 yrs and is backed by Bilateral agreements between Venezuela and Canada.

Myth: Two days (after a false report from Yahoo) later, Crystallex' chief executive officer suddenly decamped. The company issued the usual statement thanking him for all his hard work and, strangely, emphasizing that he'd been paid appropriate compensation as per his contract. No word on why he was leaving, although he did say that he was confident in the company's future -- a future that he apparently doesn't want to be a part of.

Fact: He will, and has made clear, he will be available for future company dealings. He did not state that he did not want to be part of the future of Crystallex.

Myth: A month later, auditor Deloitte & Touche quit, pending completion of the 2006 audit. (Crystallex prefers to say the accounting firm decided not to seek reappointment.) We're told the firm's decision had nothing to do with finding anything untoward in the accounts or financial literature. Pressed for details, neither auditor nor client volunteers any more explanation. (Deloitte cites client confidentiality, but rest assured that it does not happily relinquish business.) This auditor news was followed by more changes in the executive suite.

Fact: We're told the firm's decision had nothing to do with finding anything untoward in the accounts or financial literature.

Myth: Crystallex' market capitalization now sits at $840 million, which looks pretty low when you consider that Las Cristinas holds almost 14 million ounces of proven and probable reserves. A bargain then? Not on your life.

Fact: Quite the bargain when financial analysts put together statistical facts based solely on facts and not misguided political opinions. Capitalization of $840 million is extremely low based on 14+ million ounces. Possible reserves of close to 20 million oz could be proven in May.

Myth: Crystallex has spent tens of millions of dollars preparing Las Cristinas for production. The equipment is gathering dust while the company waits for an environmental permit. It's been waiting for years. It's pretty clear that the Chavez regime is in no particular hurry to see the mine start producing, despite the employment and royalties the project would create. Why the foot dragging? Does it think the state or a domestic company may eventually be able to take on the project? Is it looking for a reason to take it away?

Fact: Crystallex continues to finance as necessary and already has equipment ready to be moved to start immediately. The mine will be built shortly after the issuance of the final permit, which in Canada takes close to 10 years in some cases.

Venezuela has recently made changes to the ministers due to the elections and those officials are now concentrating on the new mining law as well as projects awaiting approval. Permit concerns have already been evaluated and are currently in the administrative phase. A total review of KRY contractual obligations has been completed and stated as everything in order as of Venezuela mining laws.

Myth: Crystallex points out that there are companies who describe Venezuela as a perfectly fine place to do business. Look hard enough and you'll find that this is true. But leaving aside the obvious reply (i.e., what else are they going to say if they want to keep working there?), there are plenty of firms who, even publicly, don't have much good to say about the business climate there.

Fact: If this were the case why would companies do business in Venezuela?

Myth: The frustrating truth is that over the years that Crystallex has waited for the environment ministry to issue a permit, the Venezuelan government has been changing the rules and regulations covering the exploitation of minerals, and as you might imagine, the changes are not friendly to private foreign companies.

Fact: The new mining law has not yet been completed and there is no indication that this negativity exists.

These comments are once again opinions based on no factual findings. There are numerous mining companies that have stated that Venezuela has been a great host. Hecla (NYSE:HL) has stated through reports that they have no problems, as did CEO of ValGold (NYSE:VAL) Steve Wilkinson. Fact remains that nothing has changed as far as mining in Venezuela. Mining has already been nationalized and most of the concern regarding mining investment in Venezuela is based on untrue reports circulated through the press regarding nationalization.

Myth: If you need a cue, take it from the insiders. Few of them own a lot of stock, and they're not buying it now. They all get loads of options though, and some even hang on to them while others liquidate. In other words, they have no idea what might happen. Don't be tempted to think you know any better.

Fact: This is meaningless. This is the case based on every company.

What is clear is that Crystallex is sitting on a gold mine with 40 years of mining contract in good standing. Crystallex is an example of the way Chavez sees mining, in his views of socialism in the 21st century; after all it was he who approved Las Cristinas. This socialist view is where a mining company gives back to the community by social programs, as well as environmentally. They won an environmental award already based on their way of mining and have been granted the operating contract for those reasons.

Las Cristinas is located in a very crucial area, where water supply and health issues are of great concern. New mining laws will be enacted to control illegal mining activities destroying the water supply and to control the exporting of illegal gold from the communities. This law will also solve problems with small miner concessions that were distributed but not recognized due to changes in government. The new mining law is of major importance and is almost to the point of being official.

Once these mining changes are complete the Crystallex project will be confirmed as far as law regulations, but until then Crystallex is simply awaiting the final environmental permit and nothing more.

I encourage readers to explore for themselves this investment opportunity, and to review the Crystallex website and follow Venezuela laws from an unbiased view. Simply call companies involved in mining in Venezuela and decide for yourself, rather than reading opinions clearly based on misguided views.

Recently there were rumors that Polyus, a Russian gold company, was interested in buying Crystallex. This was proven not to be a rumor but a serious inquiry. This also adds to the buy-out play on an already good investment. A possible buy out of all three gold mines, Gold Reserve Inc. (GRZ), Rosoro and KRY would make any such company the largest gold miner in the world at an estimated 50 million oz.