Crystallex inks Las Cristinas deal (September 18, 2002)

Vancouver Less than two weeks after being granted the right to negotiate, Crystallex International (KRY-T) and Corporacion Venezolana de Guayana (CVG) have signed a definitive agreement paving the way to advance the long stalled Las Cristinas gold project in southeastern Venezuela.

“We are pleased that we could move to a definitive agreement so quickly,” says Crystellex Chief Executive Officer, Marc Oppenheimer. “Crystallex, under the agreement, has the exclusive right to develop Las Cristinas 4, 5, 6 and 7 in all respects including exploration, the design and construction of facilities, the operation of those facilities for the processing of gold and the subsequent exploitation, commercialization and sale of gold.”

Under the deal, Crystallex will control the reserves and resources, as well as all production with a 3% royalty payment going to the Venezuelan Ministry of Energy and Mines and a sliding royalty 1% when the price of gold is under US$280 per oz to 3% when the gold price is more than US$400 per oz.

The agreement has an initial term of 20 years with two renewals good for an additional 10 years each.CVG has agreed to help Crystallex in obtaining all necessary permits, including explosive and operating permits, and will be responsible for obtaining environmental permits.

Crystallex agreed to pay US$15 million for the exclusive use of National assets related to the project including digital drill data, drill cores, and existing studies in the possession of the CVG, and all infrastructure improvements on the property, including access to the new hydroelectric substation located adjacent to the site.

“We have arrived at an agreement which clearly sets forth our exclusive access to the reserves and resources of Las Cristinas and grants to us our exclusive right to exploit the resource to its full potential,” adds Oppenheimer. “We are confident that the financial and investment community will quickly understand and support this agreement.”

The company is currently reviewing the data before completing a feasibility study.

CVG selected Crystallex as its partner for the project because it has operating interest in the region and the belief that the junior is in the best position to rapidly develop the long-stalled project. CVG envisions a 40,000 tonne per day operation needing a total investment of some US$500 million.

The impact of on going legal actions over the property remain unclear. Over the last year, the Las Cristinas project has been the object of a bitter dispute between CVG and Vancouver-based Vannessa Ventures (VVV-V), which purchased a 95% stake in Minera Las Cristinas (Minca), the company that held the rights to the property, from Placer Dome (PDG-T).

Minca’s partner in the project, CVG refuses to recognize the sale accusing Placer of selling its interest in Las Cristinas without its written approval. Placer claims no such approval was required. The proposed sale was made just days before Placer’s rights to the Venezuelan deposit were scheduled to expire.

Placer had planned a US$600-million operation, producing 470,000 oz. gold and 16,000 tonnes copper annually, based on reserves of 323 million tonnes grading 1.1 grams gold per tonne with 0.14% copper. Placer halted development in 1999 when gold prices entered their prolonged slump. Vannessa envisages a 100,000-oz.-per-year mine, much smaller than Placer had planned, to exploit near-surface mineralization. The junior estimates it would take US$35-50 million to put that project into production.

Vannessa claims that as the holder of both the mining and environmental permits for the project, it would continue its legal challenges, including the Venezuelan government’s decision to resume state control of the mine. The junior is also taking its claim to international arbitration under an investment protection agreement existing between Canada and Venezuela.