What gives investors that inkling? Let's start with Gold Reserve (GRZ) getting its permit. What does this tell you? Well, for one, it says that Venezuelan mining is open for business. It says that companies do not have to wait for the passing of the new mining regulations to pass in the National Assembly for their projects to move forward. Since the granting of Gold Reserve's permit, Crystallex shares have appreciated over 32%, concurring with a finance deal of over CDN 53 million dollars. The original plan was a little over CDN 30 million, but was quickly raised due to demand. Usually the markets frown on such situations concerning dilution, but Crystallex finished the day in the green (up 2 cents on the Amex), and gained an additional 9% on the Amex the following Monday, April 2nd.
That brings us to the now infamous and semi-contended Reuters article from March 30th, which J.L Bane chose to cherry pick from. It must be noted that the first two versions were pulled from Rueters under Crystallex protest, and the third and final version can only be found on the Latin America site. One must question, if it was wholly accurate, why was it pulled twice?
It is not my goal to start a personal spraying match here, but only to offer a counter opinion and analysis of this article. In that article, Sergio Rodriguez stated (in translation) "It has been decided that these two projects will move forward". These two projects are, of course, referring to Las Brisas, in which Gold Reserve owns the concession, and Las Cristinas, with which Crystallex has the mining contract. Those words, combined with the permitting of Gold Reserve once and for all, proved to many Crystallex investors that the permitting of Las Cristinas is no longer an IF, it is a WHEN.
Now to take directly from Mr./Mrs. Bane's article, he/she states:
According to Rodriguez, Crystallex's plan does not take advantage of the mining of copper mineral that is found at Las Cristinas, and their plan does not have a plan to destroy cyanide used to extract the gold.
I must admit, I myself became a little confused at this point, because this is what I found from Crytallex's Environmental Impact Statement [EIS]: 1.11.9:
The cyanide destruction process is air/SO2 using sodium metabisulphite as the source of SO2. Excess reclaim water from the TMF will be treated however provision for future treatment of CIL tailings has been made, if deemed necessary.
Current Crystallex experience in Venezuela indicates that this will not be necessary. The cyanide destruction tank is fitted with an agitator consisting of dual impellers supported from a bridge mounted on the tank shell. Air is introduced through a bottom entering line to an inverted cone under the center shaft of the agitator. The air bubbles then travel upward into the maximum shear zone of the impeller blades. Sodium metabisulphite solution is added at a rate sufficient to reduce the free cyanide to below detection limits along with the level of weak acid dissociable [WAD] cyanide complexes in the tailings pond water. Provision is made to add lime slurry to maintain pH between 8 and 8.5.
At this point a serious investor must ask, 'what is the validity of this article to begin with?'. At the least Mr. Rodriguez has fallen victim to a mis-translation; at the most grievous he is either mis-informed as a MARN official or is just plain lying. At this point, if I were a Reuter's reporter, I would be looking for confirmation, and not so quick to post the story. As for the copper, it is true that Crystallex has zero plans to recover it. In fact, at 0.13% grade, it is economically non-viable to recover, at least at 2003 standards.
According to a 2003 Letter to Shareholders from Todd Bruce, the grade of copper is actually less than that of most tailings from Peruvian copper mines. In economic terms, a copper recovery process would unfortunately require a certain loss in gold recovery.
From Todd Bruce's letter:
The technical review also determined that the gold copper plant would generate an overall gold recovery of 78%, due to losses in the flotation process and smelter/refinery losses. In comparison, pilot plant work determined that the gold only CIL plant would achieve an average gold recovery of 89%. As a consequence, the gold only option would recover some 583,000 more ounces of gold over the life of the operation than the gold copper option, while the gold copper option would recover approximately 186,000 tonnes of copper over the life of the operation.
Furthermore, as a consequence of the above issues, the gold only option generates some US$ 11 million more in royalties to the Government of Venezuela and the CVG than does the gold copper option.
That was 2003. In March of 2006, MIBAM approved Crystallex's Feasability and mining plan when copper was close to it's all time high, higher than today. It must be noted here that Las Cristinas has a gold deposit of 1.3g/tonne while Las Brisas has 0.68g/tonne, therefore making it profitable for Gold Reserve to develop a copper recovery process.
So, now let me address Crystallex's so called 'reputation for constantly blaming the press for it's woes by claiming the press was misreporting or not accurately interpreting comments made by Venezuelan officials', as pointed out by Mr./Mrs. Bane. Hmm, where do I start?
First, please re-read above paragraphs.
Second, read any article on Venezuelan Nationalization and notice how Crystallex is always mentioned...always. Read any article on the new mining laws concerning concessions and Crystallex is mentioned. It may be me, but I thought they had a 'mining contract', which Hugo Chavez himself said was the model of the future.
And third, let me point out the publishing of Mr. /Mrs. Bane's editorial. I applaud Seeking Alpha for allowing a forum for such discussions and debate. This is my rebuttal.
As I write this, Crystallex is up 13 cents USD on over 100K shares traded.
The market is speaking. Do you hear it?
This, is, of course, one investor's opinion. I predict Crystallex will receive it's permit far sooner than Mr. or Mrs. Bane believes.
Point and counter-point.
Disclosure: Author has a long position in KRY
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