Crystallex Affair Requires SEC Investigation

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Includes: AUY, CRYFQ
by: Bill Cara

I have not commented as to my true beliefs regarding Cramer’s double bashing of Crystallex (KRY), in favor of Yamana (NYSE:AUY), or about the unusual reporting regarding Crystallex coming from Venezuela. But something happened yesterday at exactly 1:19pm that stinks to high heaven and demands immediate investigation by the SEC of this whole affair.

At precisely the moment that a Dow Jones headline crossed the wires regarding a dubious and unsubstantiated comment about Venezuela “eying nationalization of mining,” my real-time ticker stopped for the TSE and AMEX, but not for the NYSE and Nasdaq.

So while I was thinking that KRY was trading relatively strongly yesterday, I was jammed with inquiries as to the dramatic sell-off in KRY shares. I took the following real-time screenshots as soon as I saw on a different monitor that KRY had indeed collapsed.

To the very minute! This is a complete and utter joke.

cara1

According to the company,

..nothing has changed with our position or expectations. DowJones ran a headline and as soon as it hit, the stock sold off:

13:39 *DJ Venezuela Also Eyeing Nationalization Of Mining -Minister

The following story then came out about 15 minutes after the headline:

RIO DE JANEIRO (Dow Jones)--Venezuela, in addition to planning the nationalization of other key sectors of the economy, eyes the nationalization of the mining industry, the country's foreign minister said Thursday. "The basic industries of minerals should be in the hands of the national state," Foreign Minister Nicholas Maduro said. He spoke at the sidelines of a summit of leaders of the Common Market of the South, or Mercosur trade block, taking place here Thursday and Friday. Maduro, however, didn't elaborate on the issue of nationalizing the mining industry. A number of Canadian, U.S. and Brazilian mining companies are operating in Venezuela.

(MORE TO FOLLOW) Dow Jones Newswires
01-18-07 1353ET
Copyright (c) 2007 Dow Jones & Company, Inc.- - 01 53 PM EST 01-18-07

It is my understanding that people at CPM, a research firm in NYC, and Wellington West, a Cdn broker-dealer, had mentioned Crystallex to Cramer initially. That's what I've heard.

Although I was barely able to speak, I called a VP at CPM, whom I personally know, to see if that Street info was correct or if they had changed their outlook on Crystallex. I didn’t get a call-back.

Something is going on here. If anybody knows what Wellington West or CPM is saying about Crystallex recently, I’d like to hear of it. I also think somebody ought to be analyzing the block trades in this stock for the past couple of months to determine which brokers are on the buy/sell.

I don’t know what’s in Cramer’s head, but his double case of histrionics regarding KRY in the past week is over the top. The Dow Jones reportage on this company is also over the top. The coincidental loss of the Comstock real-time data feed at the precise moment the latest DJ story first hit the headlines is so far over the top that it must be explained or else DJ has lost all credibility with me.

There is an explanation here, and shareholders ought to be demanding it.

Cramer happens to like Yamana [NYSE: AUY, TSE: YRI], which I also think is a stand-out Cdn goldminer operating in the Americas. But, on a relative basis, Yamana is no better than say Alamos Gold (AGIGF.PK) or Gammon Lake Resources (GRS), or a few others, in terms of the EPS momentum and size.

Addendum: I did get a call from Adam Crown, VP at CPM Group. He stated that CPM is not in the business of recommending or reporting on individual companies, and played no role with respect to the Cramer discussion re KRY. So my information was incorrect.

Adam did, however, point me to book called Commodities Rising, by Jeffrey Christian, which is available in bookstores, and he said I would be getting a personal invite to their hospitality room at the Prospectors and Developers Show in Toronto in March. I'll have to go because that's where my wife won a silver bar in a biz card raffle last year.

About Wellington West, I see that Catherine Gignac has a "Strong Buy" on KRY. This screenshot came to me yesterday morning from my "country friend." I should have checked first, and made such a remark.

cara3

Barry Allan at Research Capital has a Sell rating. Barry, btw, in my view, is one of the very best mining analysts in Canada. Twenty years ago, I put him at the same level as Pierre Lassonde (ex-Newmont president) and Tony Garson (ex-Canaccord, Haywood, and Dean Witter) who is now an independent analyst and principal in some mining ventures.

I'd respect Barry Allan's judgment in most mining matters. KRY, however, is a different type of situation. It's for speculative money, pending the outcome of final permitting. I think Barry would take a very different view if Crystallex held that permit in hand.

Tony Garson agrees with me about the prospects of Las Cristinas, because it was he and I who interviewed Todd Bruce, the first time I met Todd. Tony was going to do a report for me, but without the permit in hand, he decided that other matters were more pressing. A lot of people feel that way.

KRY 1-day chart

kry