Crystallex: Still At the Wrath Of The Market

Weren't we here last year? At the end of March 2006, Crystallex (KRY) had just received approval from Mibam, Venezuela's Department of Mining and Basic Materials, for it's Feasibility Study and Mining Plan, and with a little nudge from CNBC's Jim Cramer of 'Mad Money' fame, skyrocketed to $6.00 plus. The permit was around the corner. Right? Fast-forward to June 2006 and a rapid decline commences. No permit and the gold market is in decline.

Now, fast-forward to March 2007 through the present. Once again, on the back of rising gold and some positive news out of Venezuela, mainly the permitting of Crystallex's neighbor, Gold Reserve (GRZ), to commence construction on its proposed mine at Las Brisas, we find that Crystallex has risen to a little over $5.00. In that time, Crystallex's CEO, Gordon Thompson, seemed caught, as Todd Bruce seemed to be caught many times, prematurely predicting the long sought permit with the words, 'Soon after Easter'.

A collective breath was held, and then nothing. Then gold started to falter. And ever since, Crystallex has followed the market and gold. A great example is yesterday. Please compare Crystallex's chart with Goldcorp (NYSE:GG), Cramer's Favorite Yamana (NYSE:AUY), and then the Nasdaq as a whole. Do you notice the same drop off in SP just after 2pm?

kry comparison

Is this a cause to 'sell in May, and go away'?

But let's not forget the press release of June 14th. This from Reuters:

The environmental impact study for the project, one of the world's largest undeveloped gold deposits, has been approved by Venezuela's Ministry of the Environment and Natural Resources.

Crystallex said that it has also posted a compliance guarantee bond and paid certain taxes for the issuance of the environmental permit.

The share price jumped .50+ cents in trading the following day. It seems the market will need that permit in hand and notarized before it trusts Crystallex and Venezuela.

Once again, that was the 14th, and as I write I am looking at the end of the 25th of June. The market once again has turned to indifference and has allowed Crystallex to trend with gold and the rest of the gold stocks in general.

Over the past weekend Gordon Thompson was quoted in the Northern Miner concerning the permit, ' "I think we're talking days, but it could be weeks."'.

Nice cover.

It also appears that Crystallex is also getting support from Venezuela's National Assembly. This from the AN, June 22nd, 2007:

"The deputies Luis Gamargo Lagonel and Fernando Va'squez consider the approval of the environmental impact study for the Las Cristinas project "highly positive", and thus they express their support for the project.

Highlighting the work done by MARN, the parliamentarian Gamargo, Vice President of the permanent commission of Administration and Public Services, affirmed that the task was extremely complex, "an activity that has allowed us to reach our proposed objective, which is in this case the environment permit for a project of the magnitude of Las Cristinas in such a sensitive zone.""

We asked the opinion of assembly member Fernando Va'squez, who presides over the subcommission of National Parks and Areas u! nder Special Administration. He said that with the approval of the environmental impact study, a new stage is started for these communities.

"We want to reassure the local people involved in the project that once the permit is delivered, the construction of the project will begin immediately, bringing all the economic benefits with it."

Regarding the details that were pending, Va'squez said that only a few formalities were left to complete, and that they would soon be resolved, "in light of the fact that the most difficult has already been approved."

Crystallex has also just released positive drill results for the Las Cristinas area. Richard Spencer, Crystallex's VP of Exploration stated:

Apart from demonstrating down-dip continuity of mineralization at Conductora, the 06-07 drill program has clarified two other important aspects of the Las Cristinas deposit. Firstly, it has demonstrated continuity of mineralization through the gap between the planned pits at Conductora and Mesones-Sofia and secondly, it has shown that the Morrocoy zone is a fault-displaced extension of the Conductora mineralization. This suggests that the Morrocoy zone is an extension of the principal deposit at Las Cristinas.

Crystallex is currently awaiting an updated resource estimate from Mine Development Associates [MDA], but one may speculate that a continuation of decent grade mineral resource between the two pits may allow the redesign of the mine to one pit. A redesign based on the upgraded price of gold from $350 to $450 has already been in the works, based on comments from Crystallex's presentation at the Latin American Mining Congress this past May in Miami. I am not a miner or engineer, but it seems one pit would be economically beneficial as well as more efficient and easier to control.

In light of all the positives, Crystallex continues to languish with its peers. I suggest that all Crystallex longs to keep several gold stocks in the watch list with Crystallex as a barometer. We all know this stock has become an obsession. We all know it is wrong to love a stock, but 14 million ounces with new reserve estimates after positive drill results on the way, this Junior automatically becomes a mid-tier miner upon permital, based on reserves.

Still, that recipe is missing one thing, and that is the permit.

The new Mining Regulations seem to have been lost, based on Chavez's latest comments that there is no need for a constitutional change for Nationalization, and that the mining industry would not be Nationalized. According to statements by Ivan Hernandez, the Vice Minister to Mibam, the new laws would be put to Chavez for ratification in 2 weeks. That was May 28th, I believe. It seems that predicting any time line in Venezuela is risky.

Will this saga ever end? Will the once espoused 'Crown Jewel' of Venezuela ever see a permit? All I can say, is that Crystallex is closer now to the permit than ever before. I am sure that 'sooner' is here because this story always goes 'later' and 'later', or in VZ terms, 'Manana', and we all know how that song goes about the sun, and when it will come out.

In my opinion, based on current events, Crystallex will have many sunny days ahead of it. Maybe not today, but maybe tomorrow.

I am a Crystallex Shareholder, and these are the facts and events as I see them.

Disclosure: Author has a long position in KRY