Crystallex’s Las Cristinas Contract in Doubt 23 comments
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That was more than enough to send Crystallex speculators into the after hours buying frenzy, at least until the Dow Jones article appeared, as it provided a clearer description of the events and comments as they transpired. According to Raul Gallegos of Dow Jones Newswires, Chavez did indeed say that "a mining industry nationalization is not contemplated in the constitutional reform," but then goes on to quote him as saying that no reform was needed as the Venezuelan government already had the power to nationalize the mining industry. Indeed, it is the same power that Venezuela exercised when it forced government majority ownership in oil industry in 2006.
In summary, there was no consideration of changes to the constitution to allow for nationalization as Venezuela already has the powers, but this in no way meant that Venezuela had ruled out nationalization. According to an official Venezuelan government press release, Chavez’s comments were even more contentious than the newswires had portrayed. According to Chavez, there would definitely be no more mining concessions granted. It is time for Venezuela to recover the natural reserves of the country, Chavez said, and that action has a two fold purpose as it “releases to the Venezuelan deposits from the hands of imperialism and the oligarchy (it commits)”, placing the "potential wealth in favor of the interests of the society.”
Moreover, Chavez confirmed the formation and operation of a new national mining company and went on to say that Venezuela could handle projects itself and that outside investment was not necessary. In regard to foreign investment capital, Chavez threatened that companies either respect the laws and regulations of Venezuela, that they pay taxes and respect the environment, or just go away and let Venezuela handle the development of the industry. What is more troubling for Crystallex shareholders is that Chavez singled out Las Cristinas as a government project that could, in fact, be facing some changes. Dow Jones reports that when discussing steel conglomerate Sidor, which Chavez had threatened to nationalize unless it agreed to renegotiate its relationship with Venezuela by increasing sales to the domestic market and at more favourable terms than it could get in international market, he said that he was also waiting for a report from his mining minister as to how to proceed with Las Cristinas.
As documented in previous articles, several Venezuelan politicians have said that Crystallex’s Mine Operating agreement [MOA] could be converted into a joint venture with Venezuela where the country would have majority control over the project but that no decicion had yet to be made. Chavez’s comments seem to indicate that as the fate of Las Cristinas would be up to him but leaves the listener wondering if that decision will be based upon the new proposed mining law or an arbitrary declaration from a President who has shown little regard for existing operating contracts. This could spell serious trouble for Crystallex not only because of the reduction in role and thus the comparative reduction claimed resources and reserves but also due to its outstanding debt obligations.
This may also explain why Bloomberg, when he got in touch with the elusive VP of Investor Relations Richard Marshall, had nothing to say. Chavez’s comments, after all, fly in the face of the public statements issued by Crystallex in press releases and media interviews as it tried to assure the North American markets that its contract to mine Las Cristinas was safe and binding and that no changes were being discussed. To be fair to Crystallex though, they do declare in their less widely read Annual Information Form that political instability could "result in the deprivation of contractual rights or the taking of property by nationalization, expropriation or other means without fair compensation.”
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This article has 23 comments:
I don't believe it casts any more doubt on the Crystallex Las Cristinas contract at all. In fact, I believe that this whole thing is essentially a "non-news" event.
Think of it this way: President Chavez was talking about both exit from the World Bank & IMF (www.abn.info.ve/go_new...;lee=Array[0]) as well as constitutional reform plans (www.abn.info.ve/go_new...;lee=Array%5B0%5D) at the press conference. Perhaps he was asked if he's going to implement constitutional reform to nationalize mining and he said no (and that bit gets reported by Bloomberg), but he goes on to say, he don't need a referendum on that, as he can do it anyway under existing rules, just like he did with oil, telecoms, and electrical power (and that part is reported by Reuters via El Universal and Dow Jones).
So, in my humble opinion, we're back to where we were before this so-called news even hit the wires. What really has changed in terms of the "nationalization" bugaboo? Nothing that I can see if we are still talking about the possibility of state majority joint ventures in the industry within the context of existing constitutional or legislative powers. It's not clear to me whether that is still on or off the table.
One final point: the Presidential Press Release (www.minci.gob.ve/notic...) you refer to in your article is nearly 2 years old (Sept 20, 2005), so I would question how valid linking your article to it is at this late stage.
About the Presidential Press Release. You are correct. My bad. I received the page via e-mail and as the mood of the message fit so well, I failed to properly check the published date. The section referring to the press release should be discarded. It is unfortunately not feasible that it is deleted under the current format but let it be known that I retract all references to that release.
I appreciate your feedback. It is refreshing to hear from someone who is knowledgable about Crystallex and Venezuela instead of the usual diatribes that are contributed by Crystallex supporters.
I have no direct stake in KRY outside of being involved with SNC Lavalin on several projects around the world (ex. Las Cruces Project). My friend has invested heavily in this Stock and he wanted me to evaluate your comments on this matter.
I would like to provide my take on this issue. But first, I should give you my background in the mining arena.
I am a Project Manager on all projects related to mining from my company. I have been involved from the ground-up of Mining Operations with Phelps Dodge, BHP, CODELCO, CRVD, Grupo, Penoles, Frontera, Placer Dome, Constellation Copper, etc. As a recent example, I have been involved in a project with Phelps Dodge called Safford Mine and Leach. This project recently got approved regarding environment issues. The process has taken over 10 years to get the final OK and they will start production in 2008. So, my background lends itself to understanding the approval and development process for a mining project. If requested, I have no problems in providing more detail of my expierences on any mining project.
Based on my perception and discussion with the KRY President and the SNC Lavalin Project Manager for this project (Toronto, Canada), the process of approval is heading towards an environmental approval to build and operate a plant to mine gold. Also, the CEO of KRY is in Venezuela to finalize the environmental approval. From all indications, this will occur in the next couple of weeks. If you currently hold this stock, I would stay with your position. But, if you don't own this stock, I would evaluate all issues before purchasing this stock at this time. Remember for any mine, the environmental approval is the most critical document for most locations involving mining operations.
As for Mr. Banes, he has made comments referring to outdated documentation. For example, the problem with evaluating 2-year old documentation on the Safford Project could have impacted your decission to buy Phelps Dodge Stock. Therefore, Mr. Banes credibility should be tarnish. No matter if he made a mistake or he had an alternative motive, the investor for KRY should not use his information for purchasing this stock. I am interested in his experience in mining operations.
Mr. Banes, I welcome your answer and response on this subject.
Thank you also for providing your credentials but I don't see your need for listing them other an attempt at gaining come level of credibility for your argument. What does you in though is your focus on Crystallex's pending environmental permit application as an evaluation of the article. If you decide to reread the article, you will see that it is not the focus of the article and is not even mentioned. I hope you do not display this type of attention deficit at your place of work.
Moreover the article was about mining legislation in Venezuela and comments made by President Chavez, a topic you did not even touch on.
In this regard, your whole critique lacks any connection to the article. Your discussions with individuals at SNC Lavalin and Crystallex's CEO fare the same fate.
As you deem yourself an expert at understanding the permitting and development process, you might consider replying to the following questions in order to assist your friend and other readers.
A) If the permitting process is a lengthy one, how is it Crystallex was able to tell investors that they expected to receive it mere months after handing over the EISA ? How has it been possible that Crystallex has been telling investors that it expected to receive the permit any day, sooner rather than later or at any moment for several years but then the CEO Gordon Thompson said Crystallex had only recently submitted the final documentation to the MinAmb ?
B) I will give you one thing. When pointing out a mistake I have alread admitted to and apologized for, you said that the problem with evaluating a 2-year old documentation is that it could have impacted a decision to buy a stock, in your case, Phelps Dodge. I would like to turn your attention to another 2 years old document. Crystallex's feasibility study.
With your education and knowledge of the industry, how much do you think the costs listed in the study will increase accounting for inflation, penalty fees, contract renegotiations and all ?
Knowing even an estimate of the current numbers may well impact a decision to buy a stock.
Regards,
JLB
Why don't you yourself try to contact Richard Marshall. You will find he is not elusive at all. Your source Raul, lacks even more substance...! So your professional take on the situation has no bearing on the matter. If you subscribe to Bloomberg, you will see a very different translation of the accounts from yesterday by Steven Bodzin and Theresa Bradley.
You yourself said in previous articles "I have no position in Crystallex."
SECTIONS OF THIS COMMENT HAVE BEEN DELETED BY SEEKING ALPHA'S EDITORS DUE TO INAPPROPRIATENESS.
Did you even know Crystallex has a joint operating agreement with the CVG, rather than a concession?
As for anyone who is reading this, please refer to the last updated Annual Report on Crystallex.com.
www.crystallex.com/The...
You will find much more valuable data there.
Any comments President Chavez makes about Nationalization are presumably either constitutional or national policy issues, and therefore, in my view, there is potential for the entire sector to be at risk. I will concede that the policy could be used to target any under-performing companies or assets deemed to be of national strategic interest, but I do not think the story is only about Crystallex. Other companies in the sector are in the midst of a two-stage review of their projects, as recently announced by the MIBAM (I refer readers to: www.minci.gob.ve/notic... and www.minci.gob.ve/notic...).
Based on my contact with a number of these companies, it would seem they are walking on eggshells at the moment, though I admit that perhaps that is merely my own misperception of their collective state of mind. Suffice it to say, they are reluctant to talk about it.
This said, the fact that President Chavez apparently chose to specifically mention the Crystallex Las Cristinas project is noteworthy in my opinion. Based on the Bloomberg comments that the government "is continuing to work with Crystallex International Corp" or the Dow Jones quote that refers to the President waiting for a final report on Las Cristinas from the Mining Minister, it would appear that there is more being contemplated than merely the rubber-stamping of the long-awaited Environmental Permit as some have asserted previously.
But what precisely is being contemplated by the administration (and why), as well as how that might manifest itself remains to be seen. In the absence of the details being disclosed, investors are left to speculate - be they "long" or "short" - and I expect that will generate many more posts on the bulletin boards and further contributions to blogs such as seekingalpha from both sides.
Amidst all of this uncertainty, there is one thing you can say with certainty when it comes to the gold mining industry in Venezuela - it is never boring!
Also, in the two articles the only negative spin on Sidor or Crystallex was imposed by the authors of the articles and not Chavez himself. When mentioning Sidor, Chavez said that talks with Sidor were commencing at a good pace. And as for Crystallex, the government is working with them, and as for mining, he said there is no need for nationalization.
Chavez did say that there was no need for constitutional change as the gvt already has tools in place such as the ones used to Nationalize the power and CANTV. But remember, VZ also paid for that Nationalization. It was not a confiscation.
Not that I am keeping score, but the day after each article from Bane is usually a nice up day. Currently pre-market has looked pretty robust. Let's make it 4 out of 4, shall we?
I believe you still have not replied to my last request for evidence supporting your accusation against the KRY management that "...They hide cards up their sleeves, bottom deal and so forth...."
I almost couldn't stop myself laughing after reading your latest article on KRY and especially the responses from other readers. I wish to add one more comment that the way Mr. Raul Gallegos and you view and interpret the world is so very similar to our Attorney General Gonzalez on the issue of Habeas Corpus. I have to say very entertaining but with no substance. I copy a few paragraphs from SF Gate.com and paste below because I feel they are relevant to the way you and Mr. Gallegos operate:
www.sfgate.com/cgi-bin...
"
"The Constitution doesn't say every individual in the United States or every citizen is hereby granted or assured the right of habeas,'' Gonzales told Sen. Arlen Specter, R-Pa., during a Senate Judiciary Committee hearing Jan. 17.
Gonzales acknowledged that the Constitution declares "habeas corpus shall not be suspended unless ... in cases of rebellion or invasion the public safety may require it.'' But he insisted that "there is no express grant of habeas in the Constitution.''
Specter was incredulous, asking how the Constitution could bar the suspension of a right that didn't exist -- a right, he noted, that was first recognized in medieval England as a shield against the king's power to dispatch troublesome subjects to royal dungeons.
Later in the hearing, Gonzales described habeas corpus as "one of our most cherished rights'' and noted that Congress had protected that right in the 1789 law that established the federal court system. But he never budged from his position on the absence of constitutional protection -- a position that seemingly would leave Congress free to reduce habeas corpus rights or repeal them altogether.
...
"
I rest my case.
I have stated before here and will state again, that the mining industry is not the oil industry. Just look at production and profit margins. I, at this point give VZ gvt officials the forsight to see this difference. That does not mean that officials quoted or referenced by Bane have that same forsight. There are true Communists in Chavez's ministry. But we all know, and I hope Chavez knows as well, that true Communism is not economical, or beneficial for the country.
- Seeking Alpha is a forum to discuss stock ideas, not to attack other commenters or authors. Please <b>focus on the substantive points, and avoid personal criticism of authors or other participants</b>... Why? Because we want Seeking Alpha to be useful, not to descend into unhelpful mud-slinging like some well-known message boards.
- Even if you question the motivation of another contributor, you should still address the points made on their own merits. Attacking authors is a lame substitute for addressing substantive issues.
- Seeking Alpha's editors will delete or edit comments that contain personal attacks of any kind.
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Let this be a reminder to how foolish your article is, and a flag post warning other reader of your motives. Thanks for the entertainment in your bash articles.
tinyurl.com/2rfert
Crystallex Updates Shareholders Regarding Permitting for the Las Cristinas Gold Project
6/14/2007
Download this Press Release
TORONTO, ONTARIO -- (MARKETWIRE) -- 06/14/07 -- Crystallex International Corporation (TSX: KRY)(AMEX: KRY) reported today it has received notice from the Corporacion Venezolana de Guayana ("CVG"), that the requirements of the Ministry of the Environment and Natural Resources of Venezuela ("MinAmb" formerly referred to as "MARN") for the issuance of the Environmental permit to commence construction of the Las Cristinas Project have been fulfilled.
MinAmb, based on its approval of the Environmental Impact Study ("EIS") for the Las Cristinas gold project, requested the CVG to post a Compliance Guarantee Bond and pay certain taxes for the issuance of the Environmental permit. Crystallex has posted the bond and paid the taxes.
The CVG confirmed that the approval of the EIS, the posting of the bond and the payment of the taxes represent the final and conclusive step in the procedure for the issuance of the Environmental permit to construct the Las Cristinas Project. Crystallex as the builder and operator of Las Cristinas will have use of this permit in order to construct the project on the basis of the approved feasibility study.
In the formal notice that MinAmb sent to the CVG, it was stated that the Environmental permit will be issued following the payment of taxes and posting of the bond. The CVG now awaits the permit required for the construction of the mine from MinAmb.
Mr. Gordon Thompson, Crystallex President and CEO commented, "The request by the Venezuelan Government for the posting of the Compliance Guarantee Bond and taxes further confirms our understanding that we've complied with the very final stage of the procedure for receipt of the environmental permit."
About Crystallex
Crystallex International Corporation is a Canadian based gold producer with significant operations and exploration properties in Venezuela. The Company's principal asset is the Las Cristinas property in Bolivar State that is currently under development and which is expected to commence gold production in 2009 at an initial annualized rate of some 300,000 ounces at the initial planned production rate of 20,000 tonnes of ore per day. Other key assets include the Tomi Mine, certain Lo Increible properties and the Revemin Mill. Crystallex shares trade on the TSX (symbol: KRY) and AMEX (symbol: KRY) Exchanges.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS: This press release contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian securities laws, including: statements relating to the estimated reserves and resources at Las Cristinas; anticipated results of drilling programs, feasibility studies or other analyses; the potential to increase reserves and expand production, at Las Cristinas; Crystallex's projected construction and production schedule, and cost and production estimates, for Las Cristinas; and management's statements regarding its expectations regarding mining in Venezuela. Forward-looking statements are based on estimates and assumptions made by Crystallex in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors that Crystallex believes are appropriate in the circumstances. Many factors could cause Crystallex's actual results, performance or achievements to differ materially from those expressed or implied by the forward looking statements, including: gold price volatility; impact of any hedging activities, including margin limits and margin calls; discrepancies between actual and estimated production, between actual and estimated reserves, and between actual and estimated metallurgical recoveries; mining operational risk; regulatory restrictions, including environmental regulatory restrictions and liability; risks of sovereign investment; speculative nature of gold exploration; dilution; competition; loss of key employees; additional funding requirements; and defective title to mineral claims or property. These factors and others that could affect Crystallex's forward-looking statements are discussed in greater detail in the section entitled "Risk Factors" in Crystallex's Annual Information Form (which is included in the Annual Report on Form 40-F that Crystallex files with the United States Securities and Exchange Commission (the "SEC") and elsewhere in documents filed from time to time with the Canadian provincial securities regulators, the SEC and other regulatory authorities. These factors should be considered carefully, and persons reviewing this press release should not place undue reliance on forward-looking statements. Crystallex has no intention and undertakes no obligation to update or revise any forward-looking statements in this press release, except as required by law.
Contacts:
Investor Relations Contact:
Crystallex International Corporation
Richard Marshall, VP
1-800-738-1577
Email: info@crystallex.com
Website: crystallex.com