Four Signs a Crystallex Permit is on its Way

Monday night, CNBC's Mad Money television show host Jim Cramer commented on Crystallex Corp. (KRY) and noted that it had been creeping up and urged investors to buy on weakness. However, he tempered any optimism for the stock because of his belief that the company's mines in Venezuela could be confiscated by President Hugo Chavez. Tobin Smith, editor of the Change Wave Investor newsletter, echoed Cramer's comments when he came out yesterday and labeled Crystallex shares with a sell. While you might think the skepticism is warranted because Hugo Chavez has in the past made some comments to the effect of calling for the nationalization of the mining business, it is instead a common misconception. That is because the Las Cristinas deposits are already owned by the Venezuelan government. Crystallex is allowed to develop the mine based on a mine operation agreement.

After hearing a lot of doubt and negativity regarding Crystallex, we would be tempted to go long and take the contrarian point of view because there are positive signs pointing to permit approval. Management has continually stated in numerous press releases that it is in the final stages of environmental permitting. Though a recent newspaper article from The Globe quoting the current CEO of Crystallex and hinting at a permit after the Easter holiday, we need something that is a little bit more objective and concrete to signal a permit is on its way.

We outlined a few signs that signal Crystallex will receive a permit in the near future and coupled with the heavy volume and increase in share price recently, it is not hard to see why the market agrees:

1. Just yesterday, as reported in a Venezuelan newspaper, the Venezuela Permanent Parliamentary Environmental Commission has urged the final environmental permit to be issued to Crystallex. Representatives are pushing for the passage of the project because it would jumpstart the company's mine operating contract at the Las Cristinas gold field and consequently boost the region's economy.

2. Crystallex recently completed a round of "bought deal" financing in which the company avoided issuing shares at a steep discount to the market price of its common stock. What the bought deal financing means is that the investment syndicate has received the shares and is taking on quite a bit of risk because if unable to sell the securities on the open market, must hold on to them. This should instill a lot of faith in Crystallex obtaining the permit, especially considering the size of the investment, because no one would want to essentially go long and risk being a bag holder if Crystallex fails to receive the environmental permit.

3. Fellow gold miner Gold Reserve Inc. (GRZ) has received a permit for its Brisas project, indicating that the Venezuelan government is not as reluctant to do business with foreign companies despite media reports saying otherwise.

4. Crystallex has recently shuffled up its management team, including appointing William Faust as Chief Operating Officer and Senior Vice President in anticipation of the permit.

Comments

[Stocon]

Not much impact on Kry considering Cramer andTobin"s comments. it's in strong hands