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Crystallex Flounders as Circumstances Worsen

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Crystallex Flounders as Circumstances Worsen

I think it might be useful to break down the first paragraph of the Company’s August 20, 2007 press release into two separate and distinct ideas:

<blockquote>1.) the Company is not aware of any adverse corporate developments - other than general stock market conditions - which could account for the recent trading activity;

2.) and that, to its knowledge, the process for the issuance of the environmental permit for Las Cristinas remains on track</blockquote&g...

Let’s deal with the first part about not being aware of any adverse corporate developments, etc.

I suspect a likely motivation for the Crystallex press release was to assuage the concerns of investors who were alarmed, not by general market conditions (if that were the case, why hasn’t virtually every publicly-traded company whose share prices have been caught in the sub-prime mortgage downdraft issued a similar press release?), but rather, by the comments you refer to being made by Minister of Basic Industries & Mines José Khan about migrating mining companies to state-controlled-major... joint ventures.

Minister Khan's statements were made at a press conference given by the Economic Cabinet at Miraflores Palace on Friday, Aug 17, 2007.

The Economic Cabinet is tied to the Comisión Central de Planificación, or Central Planning Commission (if you've been following Venezuelan political & economic news, you'll know that President Chavez set up this centralized planning cabinet on June 22, 2007).

It was actually Dow Jones that carried the first comments by Minister Khan regarding the Ministry’s contemplation of moving private commercial mining enterprises to state-majority-control... joint ventures. DJ Newswires issued a series of updates on the Sidor situation on August 17, 2007, both in Spanish, as well as English, beginning at 14:44 ET, but importantly, the articles also made reference to the mining sector. The relevant section of the most complete report available to newswire subscribers only (thus no URL available) which was issued at 16:42 ET reads as follows:

<blockquote>Khan also discussed the government's ongoing efforts to enact a new mining law. He insisted that under the new legislation private mining companies would "still exploit natural resources but in association with the government."

Plans to create a national mining company to serve as the equivalent of Petroleos de Venezuela in the oil business are still on the table, he added. The Chavez administration has said this new state-owned enterprise will serve as the "PdVSA for gold and diamonds."

"Mining companies will sign join ventures with the state mining company," Khan said. "That's the one of the proposals we're looking at."

If Venezuela pushes mining firms to sign deals with the state, "there will be a transition process so companies can adjust, and everything can move forward in good terms," he said.</blockquote&g...

For those without a newswire subscription, a summary of the other related DJ headings (in English) may be found here.

A Spanish version of the article can be found at the following link, albeit it appears to be an earlier, less complete edit than the English report that came out at 16:42 ET.

So, while the article in El Universal which you refer to is indeed recent – in fact, it was from the paper’s August 18, 2007 edition - it was actually issued the day following the Dow Jones reports (readers who wish to read the full El Universal article for themselves may find it here).

[it should be clarified that the paper quotes José Khan as stating that the term “minería” should be added to Article 302 of the Constitution – this is the Spanish word for “mining”, as opposed to “minera”, the word you’ve used, which is Spanish for “mine”.]

Given these comments, I suspect there might have been pressure (either external or internal to the company) to issue a comforting release to diffuse the situation. If further incentive was required, it may have been provided early that same day, on August 20, 2007, when El Universal published another article about how President Chavez’s Constitutional reforms would give the State more control over property. The President’s proposal specifically refers to the right of the State to reserve the exploitation of natural resources deemed to be of strategic value to state-owned entities or joint ventures in the 9th paragraph of this article from Aug 19, 2007.

I agree with you, though, that it is unusual that if the press release was issued in order to calm investor fears in the face of the Minister’s comments, the absence of any reference to the Minister’s comments seems rather odd. Furthermore, if it is the case that the press release was issued in response to these comments, some might consider it a stretch for the company to state in their August 20, 2007 press release that they “[are] not aware of any adverse corporate developments - other than general stock market conditions - which could account for the recent trading activity.” Perhaps it is because it is not yet a “corporate development” until it actually happens - at this point it appears to be discussion about the direction the industry could go.

This raises the question of why provide a reference to the comments made by National Assembly Congressman Ricardo Gutierrez in the first place. As you’ve already noted, the Congressman presides over the Assembly’s Economic Development Commission, but this body has nothing to do with Mining (there is a separate Energy & Mining Commission, with its own Mining Sub-Commission), nor the Environment (there is also a separate Environmental Commission), arguably the two most relevant commissions when it comes to Las Cristinas. Though it should be noted that it is actually the Environmental Ministry, not any National Assembly Commissions & Sub-commissions that is empowered to actually grant permits.

Assemblyman Gutierrez has indeed made comments in favour of the Las Cristinas project in the past. These supportive were made within weeks of the company’s Annual General Meeting of Shareholders in 2006, in response to a number of negative media reports.

On June 12, 2006, a series of articles appeared on El Universal and Bloomberg, in which 40-year old José Ramón Rivero, President of the Mining Sub-Commission, made assertions that mining contracts would be migrated to state-majority joint ventures.

See:

www.eluniversal.com/20...

www.eluniversal.com/20...

www.bloomberg.com/apps...;refer=latin_america

www.bloomberg.com/apps...

www.bloomberg.com/apps...;sid=aq7k7OXo92xI

www.bloomberg.com/apps...

This was just weeks before the company’s AGM that year, and on June 13, 2006, Crystallex issued a press release in response to the Bloomberg articles in particular. In this press release, the Company reiterates the supportive comments made by Congressman Gutierrez which were published in an earlier article which appeared in El Diario de Guayana a week earlier in the June 5, 2006 edition. Those that wish to read the Crystallex press release may find it here.

In the June, 2006 press reports (there were many – I’ve not included them all) and the company press release of that month, Assemblyman Gutierrez is identified as the President of the National Assembly’s Mining Commission (as distinct from the Mining Sub-Commission, which was headed by José Ramón Rivero at the time). Congressman Gutierrez is now with the Commission for Economic Development and Deputy Rivero is now the Minister of Labour.

Let’s move to the present day. On August 13, 2007, VHeadline published a synopsis of what it reports it received in an e-mail from the Economic Development Commission, in support of moving the Cristinas project forward. The next day, on Aug 14, 2007, an article bylined, “Especial” appeared in a local Bolivar State newspaper, El Luchador, with Congressman Gutierrez’s picture and the same supportive comments.

Finally, on August 15, 2007, VHeadline had the radio interview with the same Deputy Ricardo Gutierrez.

When Crystallex issued their press release on August 20, 2007, they referred to segments of the radio interview, which by this point was already 5 days old - presumably not particularly newsworthy enough to have issued a press release in the day immediately following the radio broadcast. But, with the more recent comments by Mines Minister José Khan out on the newswires and in the local Venezuelan press on August 17 & 18, I suspect it was handy material that demonstrated at least someone supports the project, even if Congressman Gutierrez is not the decision-maker.

What is interesting about the August 14, 2007 El Luchador article (the “Especial” byline would seem to indicate it was either a press release or sponsored article) and the subsequent radio interview by Ricardo Gutierrez is that it follows circumstances quite similar to when a different National Assembly politician, Congressman Luis Gamargo, issued a press release just over one year earlier on June 15, 2006. In that press release, Congressman Gamargo, who was Vice-President of the Assembly’s Administration & Public Services Commission, came on the scene to contradict claims by then-President of the Mining Sub-Commission, José Ramón Rivero on the subject of Nationalization of Las Cristinas, even though José Ramón Rivero was President of the Mining Sub-Commission and Deputy Gamargo’s Commission has nothing to do with Mining, nor, it would seem, Las Cristinas.

One year later, on June 22, 2007, Congressman Gamargo issued another press release – this time just prior to the company’s AGM - in which he and another politician, Congressman Fernando Vásquez (who presides over the National Assembly’s Sub-commission of National Parks and Protected Areas under Special Administration – what that has to do with Mining is anyone’s guess) expressed their support for the Crystallex Las Cristinas project. Their press release (in which they did not actually purport to speak on behalf of any Commission or Sub-commission) echoed precisely what Crystallex had said in their own June 14, 2007 press release, noting that they expect the long-awaited environmental permit should be issued once payment of the bond and taxes has been confirmed. The Congressmen’s press release was subsequently picked up by El Mundo on June 26, 2007 (though they did misspell Congressman Gamargo’s surname). It does seem that congressmen with no apparent direct portfolio involvement in either Mining or Environmental Permits are quite ready to weigh in on the subject of Las Cristinas when either the Minister of Mining or the President of the Mining Sub-commission speak about potential negative implications for the project, though frankly, I’m not sure that is altogether unusual – the same thing happens with elected officials (whether they be part of the government or in the opposition) throughout the world.

Frankly, in my view, unless it is either the current Minister of Mines, José Khan, the Vice-Minister of Mines, Iván Hernández, the Minister of Environment, Yuvirí Ortega, or President Chavez himself, it seems besides the point what any other politician has to say on the subject of permits for Las Cristinas.

Now, let’s address the second part of the press release – that the “process for the permit issuance is on track” (paraphrased).

I don’t think anyone can deny that the company has been saying the permit is “in the final administrative phase”, “imminent”, should be here “by Easter”, etc., for a number of years, not just months. That begs the question of whether the “process” is even fully understood by the participants – it certainly has never been clearly disclosed. I, too, have asked the question (at least rhetorically) regarding the involvement of President Chavez. If accurate, the news reported by VHeadline would appear to be in conflict with statements attributed to the company such as, "We do understand that we aren't the only issue on the Minister and Vice Ministers Desk and are somewhere in line," as it would seem – at least according to VHeadline’s reports - that the permits may now with President Chavez, and no longer with the MinAmb. Also, if the permit is with the President, it would seem to be outside of the normal process for permit issuance, which makes one wonder how the Company can reasonably claim the process is on track. Indeed it raises questions.

Is the permit (or permits?) indeed with President Chavez as reported by VHeadline, and which was subsequently regurgitated by Mineweb on August 14, 2007.

Is this outside of the established and normal process for permit issuance or is intervention by, or escalation to, the Head of State covered by the existing Mining Law and normal bureaucratic process?

If it is a deviation from established process, might this represent a change in the risk to shareholders (either positively or negatively)?

Certainly a "Go/No Go" decision by President Chavez would appear to be extraordinary with regards to the normal bounds of the permitting process - I know of no other Venezuelan miner that has had their permits processed by President, at least not “officially”.

This said, the article is consistent with the earlier article by VHeadline reporter Patrick O'Donoghue which was published in Las Verdades de Miguel on July 27, 2007. Readers will recall that in a June 6, 2007 piece, Dow Jones referred to comments by President Chavez, where he said he was waiting to receive a report on Las Cristinas from his Mining Minister, José Khan.

Is it good news for Crystallex and its shareholders that the permit is “on the desk of President Chavez”? I am not convinced it is, and while I'll reserve judgment, I will say this:

In my view, the value of having clear policies & guidelines in any Administration is that the decision criteria is transparent. Leaving decisions to a single individual to make (in this case President Chavez, presumably) on what might be an arbitrary basis is risky business. Is it a yes or is it a no? Are you in favour today or not? Are there competing interests at work behind the scenes? Can the decision be appealed to a higher authority either by you or by your competitors (in this case, presumably not)? Can the decision subsequently be rescinded by another administration? With a pivotal decision such as this in the hands of the President, these types of questions pose a significant risk (in my view).

You raise a point about lenders being able to call in a USD $100 million loan should the company lose majority control of the Las Cristinas project. While this indeed may be a risk should the State impose a majority interest joint venture on the company through a renegotiation of the existing Mine Operating Agreement (MOA), it would appear that the right to call the loan is elective, rather than mandatory on the part of the lender. Not knowing who that party might be, I am not certain it is safe to assume with any degree of certainty that it would actually be called, should such circumstances come to bear.

Meanwhile, be it Crystallex or any of the other foreign commercial miners working in Venezuela, I’d suggest there are plenty of issues to be concerned about without having to dissect press releases. Not only have there been multiple media reports over the course of the last week that Gen. Daniel Machado has been or will let go as the head of the CVG (with rumours that Minister José Khan will take over as President of the CVG, in addition to retaining his role as Minister of Basic Industries & Mines), widespread flooding in El Callao & Sifontes (declared a state of emergency) which in my opinion could may impact Q3 production, seemingly endless labour disputes, as well as – how shall we say it - a novel proposal by Minister José Ramón Rivera (who, as noted above is now the Minister of Labour) that the work week be reduced from 44 hours to just 36 hours per week, but with employees continuing to receive the same basic salary or wage. If approved and if employers are to maintain the same levels of productivity, this could represent at least a 22% increase in wages, discounting any overtime allowance. The cost could be even greater if an entirely new shift of workers would be required to make up the time. I’m still not entirely clear how working just 6 hours Monday through Thursday and 4 hours on Friday adds up to 36 hours, but I’m sure it’s expensive.

Add to that the fact that President Chavez has developed a rather socialist view of private property, though he does attempt to give some comfort to those who are afraid he might be a Marxist (this said, readers might also find an example provided by Veneconomy’s Roberto Bottome, entitled, “What’s a contract worth?” quite interesting) in an environment where it has taken well over 2 years and still there is no New Mining Law, despite ongoing promises that it is just around the corner (and presumably then, players will be advised of the new rules of the game, having already been dealt their cards and anted up) and it seems to me as if there just might be better places to invest one’s hard-earned capital at this time.

I feel I should point out that identifying El Universal as an “internet newspaper” as you’ve done in your article is somewhat misleading. While it does have an online presence, it is actually the largest circulating newspaper in Venezuela. I presume you wouldn’t refer to newspapers closer to home such as the Globe & Mail or National Post as internet newspapers, even though they also have a web presence. Lest it not be clear, my point is your readers shouldn’t be given the impression El Universal is a cheap online rag. It isn’t – and they carry many syndicated stories from the newswires, as well as quality articles from their own reporters.

NOTE: By way of my own disclosure, while I have owned Crystallex in the distant past and avidly follow the Venezuelan commercial gold mining sector (not company-specific) for close to 10 years, I do not currently have any financial interests (long, short or otherwise) in Crystallex or any of the Venezuelan miners, nor to the best of my knowledge do any of my family or close friends. I don’t anticipate that changing any time soon. Nor am I in any way compensated for my views or opinions. I like to think this affords me the ability to take a dispassionate view of the circumstances and present what are clearly just my own personal observations, in what I hope is balanced and objective manner. I could certainly be mistaken in my personal assessments – thus, I would urge all investors or potential investors to do their own due-diligence and come to their own conclusions.

Chavez's Recent Statement Positive For Crystallex

j_yates - your post is informative, no question. And I know you weren't trying to "muscle-in".

For what it's worth, I was not questioning the size of the Brisas project (which I intended to refer to as a mega-project in my post, but I guess I must have inadvertently edited that out before posting), just your assertion that "employ thousands of workers commencing within weeks."

That thousands of personnel would be required over the course of the engineering &amp; construction phase, I don't doubt, but I think if you'll refer to my original post, you'll see that I was referring to mining jobs, of which there might be perhaps 900 at the top end (as you rightly point out, the engineer's figures indicate somewhere between 674-934). Perhaps I should have been clearer. For that, I apologize - I honestly wasn't trying to lead you down a garden path so I could subsequently ambush you! :&gt;)

Finally, for me, "within weeks" usually has a time frame spanning somewhere betweeen 2 weeks to perhaps 7 weeks. Two years, or 104 weeks, takes us down the slippery slope of hyperbole, which I'll admit can be useful to try to make a point sometimes, but I was trying to avoid here. I realize everyone - and different cultures - have different concepts of time, but if you were an unemployed miner in Sifontes municipality, for instance and someone told you that you could expect a job "within weeks", for instance, I do think you would be disappointed if it turned out you were only hired many months later. In fact, the mining jobs would likely only ramp up after the majority of construction was completed, so it could be an even longer wait for a local who doesn't have construction or engineering skills (a percentage of the construction &amp; engineering jobs would likely be imported anyway - but I won't hazzard a guess at just how many that might be).

I hope you won't think I am being too pedantic - I am just trying to clarify my initial point which I recognize certainly could have made better if I had been more clear - and probably more succint!

Peace &amp; best of luck with your investments, no matter what or where they might be.

Chavez's Recent Statement Positive For Crystallex

j_yates - Manny's article was about Chavez's comment being positive for Crystallex, and my post was in response to that, so I don't get into a detailed discuss about another company - and I know that isn't your expectation.

But I do think you raise a valid point (even though I have issues with part of your comment - see below).

Another large-scale project, such as Brisas, which as you point out is about to kick-off in the immediate vicinity, will do considerable good to contribute to the economic &amp; social development of the area, creating many new jobs directly, as well as many more indirectly - and they could draw on the pool of small miners from the areas that I have identified in my original post. You are quite probably right that that could alleviate pressure on authorities to act. This said, I am not convinced there are ever enough jobs to go around in such an economically-depressed area.

It should be noted that the impact of the New Mining Law on existing miners (including not only Gold Reserve, but also other publicly-traded companies with gold mining interests in Venezuela, such as Yamana, Rusoro, Menoro, Cadre, Gold Fields, Hecla &amp; Crystallex - never mind the many private companies or those mining other metals, such as Anglo American's Loma Niquel, etc.) is still unknown. In my view, all of the miners in Venezuela face uncertainty right now - hopefully that will be clarified soon, and that it will not have a serious negative impact.

I wish you well with your investment in Gold Reserve Inc. - it is good to see they are able to make progress in such a difficult environment.

Where I am not entirely in agreement with your comments, j_yates, are the following:

1. I am not sure it is the case that Gold Reserve will "employ thousands of workers commencing within weeks."

2. I am not sure that larger capital outlay necessarily means a higher number of employees. I would imagine that opex has a greater linkage to employment than does capex.

Chavez's Recent Statement Positive For Crystallex

Manny – let me first say that I find you are a refreshing voice of moderation and reason on the message boards and always look forward to reading your intelligent and well-written posts which have recently appeared on Yahoo (and now here).

I'm afraid, however, that I must politely disagree with you in this instance. I am not arguing for or against the fortunes of Crystallex in Venezuela, just pointing out what I consider to be flaws in your argument that it is necessarily the case that “<strong>Chavez'... Recent Statement [is] Positive For Crystallex</strong&...

Please do not take my criticisms of your argument personally; rather consider it in the spirit of a friendly &amp; polite debate.

That said, let me go through your well-organized (but in my humble opinion, unsupported) statements (which I’ve hopefully put in <strong>bold<... – we’ll see once I hit the “add comment” button if my rusty HTML skills are up to the task!) point by point:

<strong>1. KRY is being discussed at the highest level of government, meaning that decision makers are present and being considered</strong&... [and <em>“It's not that he was asked specifically about KRY, rather, he used them as THE EXAMPLE. This is extremely positive.”</em>]

According to the Dow Jones story, President Chavez says he is waiting for a report on Las Cristinas from his Mining Minister (note the distinction between Las Cristinas vs. Crystallex). Yet, it is the Ministry of Environment (MinAmb) who are responsible for issuing the long-awaited Environmental Permit. What exactly is the nature of the Mining Minister’s report, given the Ministry of Mines &amp; Basic Industries (MIBAM), which the Mining Minister heads up, apparently approved the this same Las Cristinas project back in March, 2006?

It would suggest, at least to me, that there are broader issues being contemplated with regards to Las Cristinas. Furthermore, it should be noted that it could be the case that in this instance the President uses the terms “Las Cristinas” and “Crystallex” interchangeably, but we cannot be certain of that, and therefore, we cannot ascribe more meaning to his statement than is evident.

According to the Bloomberg story, President Chavez said that his administration is continuing to work with Crystallex. This would imply to me that the company is aware and involved in the discussions, at least at some level. What those discussions are is anyone’s guess, as they have not been disclosed, other than the company’s repeated statements to investors that they know of no impediments to the project (there have not been any discussions about the Mine Operating Agreement being changed to a state-majority joint venture, etc.) nor to the long-awaited Environmental Permit (final stage of the process, imminent, by Easter, etc.).

I agree that discussions taking place within the highest levels of the Chavez administration does appear to be fact. This could be good news, or it might not – but before we can determine its outcome one way or the other, we have to recognize that it is wholly dependant upon what exactly is being discussed, why, and what are the motivations or agendas of the decision-makers and their influencers.

I am not convinced we have enough information to make that determination yet; and therefore, we can make no conclusion as to the impact of the outcome.

I am afraid I haven’t seen anything in the Bloomberg, Dow Jones, or the transcript of the press conference (supplied by VTV) that would support your assertion
that President Chavez spontaneously mentioned Crystallex, rather than being asked specifically about the company. Even if that were true (I will concede you may have sources that I am unaware of who may have given you unreported first-hand accounts of this), my points above, that we cannot know the significance of this one way or another stand.

<strong>2. Chavez is not a fool, regardless of what you think about his policies. </strong>

I agree with you that he is not a fool (and must also confess that I typically don’t agree with his policies, but as you imply that’s another matter separate from the real issues here).

While it may or may not be the case that President Chavez is aware of the frustration that Crystallex (and presumably its shareholders) has been suffering, I do not understand how the statement attributed to him by Bloomberg (that his administration is continuing to work with the company), which I presume you are referring to, must necessarily be seen <em>“an effort to appease that [sic] management and show support.” </em>

You are quite right, if the Bloomberg quote is correct, he didn’t say “the government is continuing to work <em>against</... Crystallex” (he apparently said <em>“with”</e... but can we really jump to the conclusion that it is an effort to show support to beleaguered Crystallex executives? Perhaps neither of us have any real proof to argue definitively on either side of this point, so I’ll just have to say I am not so sure your position is defensible (though, of course, it could actually be the case – it’s just not provable with the facts as known).

<strong>3. Chavez is also feeling tremendous internal pressure.</strong&g...

You are right that unemployment - particularly in this area of Bolivar State - is very high, and this is causing considerable social problems, too. I agree that Crystallex will generate local employment should the project finally be green-lighted, but if it is true that most locals are artisanal miners, they probably do not have the skills to operate a commercial mine. Training programmes will go a long way to remedy this, and some of the miners that have been displaced by Gold Fields' PGM subsidiary at Cuacia could be hired, as well as others from Raúl Leoni, Paragua and elsewhere in El Callao, including other miners who have been laid off elsewhere. If the other Crystallex mines in El Callao are reaching the end of their mine life, workers from Tomi &amp; Minera Bonanza could also be transferred to work the Las Cristinas project. But, I do not think that is going to create thousands of direct jobs.

This said, I think we have to acknowledge the existence of alternatives to resolve this chronic unemployment problem that do not necessarily require the exclusive participation of foreign multinationals. In the context of a country with a strong socialist government, some alternatives might be considered by the Venezuelan government that would probably not even come to the table in Western capitalist economies.

Small miners and some politicians have called for “Nationalization” of the mining industry (and some properties in particular, including not just Las Cristinas, but also those operated by Hecla and Gold Fields), suggesting that state majority-owned joint ventures in the form of an “Empresa de Producción Social” (EPS) could be established with the small miners. Whether or not there still a role for commercial miners to play in such a scheme remains to be seen, but it is definitely a socialist approach and I think you will agree that Venezuela is a socialist nation. So, even if it might be anathema to our capitalist or even classical liberal economic mindsets, I would not be surprised if some in Venezuela's political and labour circles would find such an approach appealing.

<strong>4. Lastly, I would offer that it's very healthy that KRY has not issued a public statement supporting or commenting on the Chavez statement. </strong>

I agree that at this stage, the best course of action from the company's standpoint is to remain silent. I am not sure, however, that that necessarily coincides with what shareholders might consider to be in their best economic interests. Shareholders are probably more than a little curious to know what the Chavez administration is contemplating with regards to Las Cristinas and whether or not Crystallex is aware of or involved in these discussions, so that they can make their own assessments with regards to the possible ramifications.

Finally, in re-reading my post, I see for someone who has said at the very beginning of this note that I disagree with you, I seem to have said, “I agree” quite often!

By way of disclosure I should point out that I have been actively following Venezuela’s gold mining industry for many years, and have previously been a shareholder of Bolivar Gold (subsequently bought out by Gold Fields at a reasonable premium) and Crystallex (many, many months ago), but that I don’t have any financial interest in any of the Venezuelan miners (nor do my family or friends, to the best of my knowledge). I have never shorted a stock, nor do I (nor anyone I know) receive any compensation or benefit in any other way financially for me posting my views. I like to think (perhaps mistakenly!) that this allows me to maintain an unbiased, dispassionate view of the issues. Some might call it a hobby - I like to think of it more like a morbid fascination. :&gt;)

And while I don’t know the local miners in Bolivar State, I do have many “internet” acquaintances who are Crystallex shareholders, many of whom I know are quite exhausted from this whole multi-year embroglio. I sincerely wish a quick and positive resolution to the Las Cristinas saga in favour of Crystallex for their sake. I do mean that.

As for you, Manny, I wish you every success both at grad school, as well with your investments (including this one), and look forward to reading - and agreeing with - many more of your posts on this and other subjects in the future.

Crystallex’s Las Cristinas Contract in Doubt

Sorry, JL Bane, I should add two points before retiring from this discussion:

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!

Crystallex’s Las Cristinas Contract in Doubt

JL Bane - I disagree with you regarding the significance of President Chavez's "Nationalization" comments at the press conference held with international journalists at Miraflores yesterday.

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 &amp; 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.