Crystallex soars on Venezuelan nod

Shares in Crystallex International (KRY-T, KRY-X) jumped as much as $1.44, or 39%, to $5.10 in early trading on March 27, a day after Venezuela’s Ministry of Basic Industry and Mining (MIBAM) approved the company’s feasibility study for the Las Cristinas gold project in Bolivar state.

“Through the MIBAM approval, the government of Venezuela has officially sanctioned the Las Cristinas gold project from the technical, economic and financial perspective,” the company said in a statement.

Crystallex chief executive Todd Bruce says the formal approval represents the “crucial cornerstone” for project development. It is also the final external input required by the Ministry of the Environment and Natural Resources (MARN) to complete the permitting process.

Earlier this year, the Environment Ministry granted Crystallex permission to “impact natural resources” for a quarry on the Albino property that would provide construction aggregate for the adjacent Las Cristinas project.

Final permit outstanding

Singing a common refrain, Bruce said he expects to soon receive the long-awaited final environmental permit from MARN, which is still required before construction can begin at Las Cristinas. That permit has been sought since 2004.

Thereafter, the company says construction would ramp up quickly, as detailed engineering and design is already essentially complete. Those plans call for a base case 20,000-tonne-per-day operation to produce 300,000 oz. gold annually by early 2008.

So far, Crystallex has committed around US$179 million to the US$293-million project, including US$94 million worth of orders for a mining fleet, crushers and grinding mills, plus various construction and service contracts. The mining fleet awaits shipping from docks in Houston, Tex., and Antwerp, Belgium.

Crystallex plans to look at doubling the operation’s capacity to 40,000 tonnes per day to spit out an average of 500,000 oz. gold per year; a previous prefeasibility study of the plan pegged the price tag at US$153 million. Engineering work for the expansion would begin around six months after completion of the base case; a 2-year construction phase would follow six months later.

In mid-February, Crystallex boosted some marginally economic resources at Las Cristinas to reserve status thanks to higher gold prices. Completed by consulting firm Mine Development Associates, proven and probable reserves in the Conductora pit total 328 million tonnes averaging 1.2 grams gold per tonne, up from the previous 276 million tonnes at 1.3 grams. Likewise, probable reserves in the smaller Mesones pit weigh in at 25.7 million tonnes averaging 1.1 grams gold, up from the previous 18.5 million tonnes grading 1.3 grams.

Both estimates are based on a US$400-per-oz. gold price, up from a previous US$350 basis.

Shares in Crystallex plunged in late September, after Venezuelan President Hugo Chavez announced that his government planned to turn over inactive gold and diamond mining concessions to smaller government-supported co-operatives. The plan is part of a broader campaign to review the country’s resource contracts, which he said are robbing Venezuelans of their natural resources.

Shares in Crystallex eased to finish the day 77 or 21% better at $4.43 — near their price before Chavez’s statements. The shares have traded in a 52-week range of $1.17 to $5.19.