Crystallex restates earnings

Trading in Crystallex International (KRY-T) shares was halted July 9 as part of an ongoing review by the Toronto Stock Exchange of the company’s eligibility for continued listing. The review has been extended to August 6 and trading remains halted.

In response, Crystallex released on Wednesday its restated financial statements for 2000, 2001, 2002 and the first quarter of 2003 as they related to the company’s accounting treatment of its gold forward contracts and written call options.

The restatement, completed by auditor Deloitte & Touche, gives effect to changes in the timing and recognition of premium income and mark-to-market adjustments relating to these derivatives under Canadian and U.S. generally accepted accounting principles.

The result is US$10.9 million more in losses than was first reported, broken down into:

• for 2000, a net loss of US$0.4 million has been restated to a net income of US$4.6 million;
• a net loss of US$36.7 million in 2001 has been restated to a net loss of US$42.6 million;
• a US$39.8-million net loss in 2002 has been restated to a net loss of US$56.5 million, and;
• for the quarter ended March 31, 2003, a net loss of US$29,000 has been restated to a net income of US$6.7 million.

Crystallex says that for its 2000 and 2001 fiscal years, it initially recognized premium income on certain call options at the time the call options were written. Instead, it says it should have set up a deferred credit on its balance sheet.

The company notes that, over the full term of the transactions, the total contribution from these transactions will be the same under the new accounting as under the old treatment.

Also, the financial statements for 2000, 2001 and 2002 and for the quarter ended March 31, 2003 were restated to reflect on a mark-to-market basis the company’s gold forward contracts.

Crystallex says these last changes will result in “significant fluctuation in profit and loss” for accounting purposes.

Crystallex’s primary focus is its Las Cristinas gold project in Venezuela, which, in September 2002, it agreed to develop jointly with government-owned Corporacion Venzolana de Guyanan (CVG).

Crystallex has hired SNC Lavalin (SNC-T) to complete both a feasibility study and an environmental impact study at Las Cristinas, both of which are said to be on budget and on schedule for completion by September.

In March 2003, Reno-based Mine Development Associates revised its estimates for Las Cristinas, pegging proven and probable reserves at 224 million tonnes grading 1.33 grams of gold per tonne (9.5 million contained oz.), measured and indicated resources at 439 million tonnes grading 1.09 grams gold (15.3 million oz.), and inferred resources at 208 million tonnes grading 0.91 gram gold (6.1 million oz.).