Crystallex Flounders as Circumstances Worsen
Crystallex's recently released financial statements are a disgrace. The company is producing a product at a greater cost that what it is sold for and there are other questionable comments which may be discussed in a future article.
One need only look at Crystallex's attempt to prop up the share price yet again by issuing a press release on August 20th to understand what is truly meant by the word desperate. The press release provides no news and could almost be considered misleading as it fails to disclose all of the facts surrounding the information that was provided. This is a hallmark of Crystallex so one need not be surprised as the press release only reinforced the reputation of the company of not being transparent and open to investors.
In the press release , Crystallex says that "the Company is not aware of any adverse corporate developments - other than general stock market conditions - which could account for the recent trading activity and that, to its knowledge, the process for the issuance of the environmental permit for Las Cristinas remains on track ." Readers should remember the last sentence for recall later in this article.
It may be true to say that there were no material corporate developments as yet that could account for the recent trading activity, but it would be surprising for Crystallex not to be aware of and acknowledge political developments in Venezuela that may have given investors a pause for thought.
As reported in previous articles, Venezuela's mining law and Constitution are undergoing revision and in an April 17, 2007 interview with Dow Jones, Vice Minister of Mining Ivan Hernandez said of the Mine Operating Agreement [MOA] that Crystallex's operating contract has some clauses that need to be revised and that "It will move from being a contract to a mixed company (jointly owned by the Venezuelan government.)" In a later interview with Reuters, Mining Minister Jose Kahn contradicted the statements made by Hernandez by claiming that no decision had yet been made.
Since then , Mining Minister Jose Kahn has hinted that perhaps a decision has been made. As reported by Venezuela's El Universal internet newspaper recently, Minister Kahn has suggested that article 302 of the constitution be amended to include the word "minera" which would "allow that the State, for reasons of sovereignty, development and national interest to reserve the operation of the mines." The Minister emphasized that this inclusion would allow the country to ease the transition of a change in the mining industry, in which mining concessions and contracts would be moved to a "mixed company" through which the country had majority control as had recently been done with oil projects within the country.
The ramifications of such a move for Crystallex would be devastating. Crystallex has an ill advised $100 million unsecured debt outstanding and a reading of the prospectus for that debt shows that there is a clause in that lending agreement that could literally cause Crystallex to cave in upon itself. If Crystallex loses majority control of Las Cristinas, the debt can be immediately called by the creditors. In addition, Crystallex would be forced to revise downwards their reserve and resource figures which as it stands is the only thing keeping the company afloat in the speculative stock arena. One can also safely reach the conclusion that any speculation of a buyout of the company will be suspended as the political risk, which is already at a high level, would increase exponentially.
The August 20th press release goes on to say that "The Company welcomed statements by the President of the Commission of Economic Development of the Venezuelan National Assembly, Ricardo Gutierrez, made last week during a radio interview regarding the status and outlook for the Las Cristinas Project. Mr. Gutierrez served as the First Vice President of the National Assembly in 2004 and 2005.
During the interview, Mr. Gutierrez said:
The Commission I lead, the Permanent Commission for Economic Development at the National Assembly, has started a series of actions before the Environment Ministry and the country's President, to conclude the issuing of the environmental permits.
Mr. Gutierrez further said:
The President (Hugo Chavez) is aware, and so are we, that the beginning of exploitation at the Las Cristinas gold mines has a special importance, it has an economic importance, as it would allow... a social importance, as thousands and thousands of families, dedicated to illegal mining, and who use mercury and work in deplorable conditions, can participate through formal jobs in this activity developed by Crystallex in the exploitation of gold in Las Cristinas .
While Crystallex is supportive of Mr. Gutierrez's promotional comments, they no doubt realize that the comments are all but meaningless. Crystallex is not unfamiliar with Mr Gutierrez. Mr. Gutierrez has after all been making similar statements for at least a year with absolutely no effect.
On June 5th 2006, another Venezuelan newspaper , El Diario de Guayana , reported that "After numerous calls for environmental permits to kick start gold-mining projects at Las Cristinas and Las Brisa del Cuyuni at Las Claritas, in Sifontes municipality, the president of Venezuela's Parliamentary Mining Commission, AN deputy Ricardo Gutierrez is scheduled to meet with Environment Minister (MARN) Jaquelin this week to insist that she should issue the necessary environmental permits to facilitate the kick-starting of the two projects, to substantially reduce pressure from the thousands of miners who do not have either claims or permits for small-scale mining who will otherwise be swallowed up by the two major mining projects" and that "The Mayoress says that she understands the process to kick-start these projects which can cause an impressively positive impact on the economies in southern (Bolivar) municipalities, and, at the highest possible levels, she has stressed the necessity that these projects should be given the green light a.s.a.p.
"The last thing I did," she says, "was when Minister of Environment, Jaquelin Farias and I joined the President of the Republic, Hugo Chavez for a meeting with community councils in Tucupita, when I was able to express to the Minister the absolute necessity that the environmental permits should be issued with all possible speed. She responded with a smile: 'Oh, you! Yet again, you and your mines!'"
"Following that, I met with Ricardo Gutierrez (the AN Mining Commission president) who said that he is well aware of the importance of the two projects to the region and that he will meet with the Environment Minister this week to get the issuance of the permits moving."
That was over a year ago.
Crystallex even covers these statements in a June 13th, 2006 press release commenting on the Venezuelan mining policy.
In it Crystallex says "In addition the media in Venezuela reported last week that Deputy Ricardo Gutiérrez, President of the Commission of Mines of the National Assembly had met with the Mayor of Sifontes district to express their joint support for the rapid commencement of the Las Cristinas project by Crystallex. Deputy Gutiérrez also stated that he had arranged to meet with the Minister of MARN to express his commission's support for the rapid development of the Las Cristinas project by Crystallex ."
The point, as many will understand, is that Mr. Gutierrez or his parliamentary committee has no say in the issuance of the permit and for all of his blather and bullocks, he has accomplished nothing so there is really no reason to rely on his comments other than to facilitate an air of progress.
What is very interesting is Crystallex's lack of disclosure when acknowledging statements of Mr. Gutierrez in their latest press release. Crystallex quotes Mr. Gutierrez as saying that "When asked if President Chavez could speed up the permitting process, Mr. Gutierrez confirmed, "The permits have already been prepared by the Environment Ministry, and the President can speed this up."
Crystallex does not reveal that in the "radio interview" they refer to was staged by one of its more rabid promoters, Vheadline news and it's "editor", Roy S Carson. Both Roy Carson and the publication that he uses to promote Crystallex are already well known for having published numerous stories supporting Crystallex that have proven to be entirely false.
Crystallex also does not admit that Mr. Gutierrez's comments about the permits having been prepared and that Mr. Chavez could speed up the process are derived from an earlier account of his that is based upon an unproven account of a conversation he claims to have had as was detailed in a August 13th Vheadline article in which he says that " in a meeting with Environmental vice-minister Merli Garcia, she gave assurances that all permits have been processed and that the technical studies have been ready and waiting since June of this year but that because of media reports claiming questionable decisions had been made, the environmental permits had been forwarded directly to the Head of State (President Chavez)."
While I am reticent to believe anything that is printed by Vheadline , several questions do raise their respective heads for consideration. Are Mr. Gutierrez's comments true ? If they are then what is of greater import is that Environmental vice-minister Merli Garcia has said that the permit and studies have been forwarded to President Chavez's office . This is not a part of the normal screening process as described by the company. As this new information does not seem to jive with Crystallex's comments that "the environmental permit for Las Cristinas remains on track" it is the responsibility of Crystallex's management to explain the apparent discrepancy. Needless to say, I am not holding my breath for an explanation.
A move by the Environment Ministry to shuffle the ultimate decision to President Chavez seems decidedly off track . What is there to decide? The EISA has been approved, Crystallex has acquiesced to the demands of the MinAmb to pay its taxes owed and to arrange the placement of a required bond. At this point the elusive permit should be shoe-in.
Have all permits been forwarded to the office of Mr. Chavez for approval due to "media reports claiming questionable decisions " or is this the only one and if it is the only one, what are these "questionable decisions" and why has Crystallex been singled out ?
Crystallex, it seems is playing on both sides of the fence. They promote Mr. Gutierrez's comments as being of a reliable nature but fail to address the primary question created by his comments about the permit having been forwarded to the offices of Mr. Chavez or why there was a need for this step to occur. Conversely, Crystallex claims that everything is on track and that they are in continuous contact with senior government officials to move this process forward so if they know that the Mr. Gutierrez's information is faulty, there is no good reason other than for the sake of promotion, to quote him at all.
There is nothing else to be said of Crystallex's press release other than what the reader now knows. It looks designed to display only the attractive parts of the overall puzzle with an apparent disregard for addressing the whole truth or its consequences. That is the consumate definition of Crystallex's operating procedure
Caveat Emptor.
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Disclosure: none
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This article has 19 comments:
- D. Metzer
- 7 Comments
Aug 22 09:30 AMThat still hasn't stopped companies like Tradewinds from scooping up 15 million shares on the cheap the past week, as well as a large chunk of GRZ shares.
Since you get a kick out of beating up down companies, why don't you go write something on Birch Mountain. You'll be absolutely giddy once you see their finances, Bane.
I am sure Seekingalpha only allows this to go on due to the fact that these types of articles only incite others to respond (see this post).
By the way, "Bullocks"? Who else besides the British use the word "Bullocks"? Nothing against the British, but I do find it interesting.
- bane2007
- 11 Comments
Aug 22 03:09 PMYou said that Tradewinds purchased 15 million Crystallex shares on the cheap the past week. That is an unduly erroneous comment. If you have access to EDGAR, you should use it. The 13F was filed for the quarter ended June 29th. Any purchases were therefore done at least two months ago. Tradewinds also did not purchase the shares you claim. The 13F was also filed on behalf of Nuveen Inv., Inc. which has held a majority of those shares for quite a long time. You are doing can more or less be called a double reporting due to the affiliation of the companies involved.
Tradewinds Global Investors, LLC, Nuveen Asset Management, NWQ Investment Management Company, Rittenhouse Asset Management, Inc., Santa Barbara Asset Management, LLC, and Symphony Asset Management LLC. All are registered investment advisors and subsidiaries of Nuveen Investments,
If this is too complicated for you, buy a book or take a course.
You published a rebuttal to an article I wrote in April. The share price at that time was in excess of 30 percent higher than today. By your very own measures the stock is failing. Do I need to say anything more ?
In that same article I addressed how Crystallex likes to blame inaccurate reports from the media for its woes. It is ironic then that they are now using what can only loosely be termed as media to promote their stock without concern for accuracy.
You are still a very confused investor.
Regards,
JLB
- beragland
- 5 Comments
Aug 23 08:16 AM- beragland
- 5 Comments
Aug 22 01:53 PM- bane2007
- 11 Comments
Aug 22 03:30 PMAs to giving any merit to my articles, should you decide to check, when I initially opted to write about Crystallex, the share price was much higher and fanatics like you peppered it with accusations and responses telling me I was wrong and presenting false evidence. This would be proven when the permit arrived shortly and KRY became a success.
The critics were wrong. Should anything more be said ?
Regards,
JLB
- beragland
- 5 Comments
Aug 22 03:53 PM- beragland
- 5 Comments
Aug 22 04:05 PM1) Bane has written 5 KRY articles in one year
2) He does not write any other articles on seekingalpha (at least not under this alias)
3)He responded to my post within hours
4)Says he has no position in this stock
Who in their right mind would believe this lying manipulative little squatter???
- wq7x
- 1 Comment
Aug 22 02:09 PMJ.L Bane- Get a life.
Just this year:
Crystallex Flounders as Circumstances Worsen
on Aug 22nd, 2007 with stocks: KRY
Crystallex’s Las Cristinas Contract in Doubt
on Jun 7th, 2007 with stocks: KRY
Crystallex’s Speculative Shine Begins to Tarnish
on May 30th, 2007 with stocks: KRY
Crystallex: Promotion, Politics and Permits
on May 7th, 2007 with stocks: KRY
Crystallex Continues to Confuse Investors
on Apr 3rd, 2007 with stocks: KRY
- bmesigma
- 1 Comment
Aug 22 03:30 PM(1) We need to go back to PlacerDome when they broke the contract with the Venezuela agency as they found unprofitable to proceed back in the 1990's. Then PlacerDome at the last minute of contract cancellation for non-performance sold all its interest for $ 50.00 to VANNESSA (based in Canada, Calgary) and without any notification to the Venezuela government agency.
(2) Now, to sell one of the largest gold deposit in the world for $50.00 is a fraud in any country in the world; thus there is a legal battle that need to be settle before las Cristinas can proceed. SO THE DELAY IS BEING CAUSED BY A CANADIAN GALGARY COMPANY THAT COMMITTED A FRAUD AND IS NOT WILLING TO LET IT GO. Behind this scheme is a billionaire from Calgary and a slew of lawyers trying to get some money from the Venezuela government WHO REFUSE TO PAY THESE CROOKS A CENTS!
(3) Of curse, the government of Venezuela has been winning all the legal recourses against this fraud. However, in last and final desperate attempt, Vannessa and its subsidiary in Caracas, cancelled all the appeals to the Supreme Court in Venezuela and proceed to the World Bank to pressure Venezuela government.
(4) The World Bank has no financial leverage whatsoever against Venezuela; furthermore, Venezuela is a sovereign country and the sole owner of their resources. So it is just question of this final hurdle to get settle AND IT WILL BE OVER FOR VANNESSA AND HIS GANGS.
(5) But the good news here is that the NEW CONSTITUTION OF VENEZUELA WILL BE APPROVED BY DECEMBER FIRST WEEK. I am sure this new constitution is addressing this type of fraud and closing the legal vacuum, lobby loops, close back doors that allow corruption and legal vices in the previous law. The constitution always takes precedence over all other legal aspects.
(6) So whenever I see these nonsense postings I question myself who is paying these guys to discredit Venezuela Government, President Chavez, Crystallex management INSTEAD OF GOING AFTER THE CROOKS that for years have been unable to get a mine into operation!
(7) Bane needs to post his view on Vannessa fraud and the Venezuela subsidiary.
(8) Probably Crystallex management and the Venezuela government would not tell you this story as it is legal issue already in court and they are part of or interested party.
IN THE MEAN TIME ENJOY THIS ACCUMULATION PERIOD
Cheers
- D. Metzer
- 7 Comments
Aug 22 04:24 PMYou are correct. My Tradewinds comment was not correct. The information was brought to my attention last week, with the 13F mentioned. It was early and my mind not quite clear. But I feel much better now.
I do not write op-eds on Crystallex anymore. As you see, the stock really makes fools out of the people who write about it.
Crystallex made a nice comeback with the rest of the gold markets today, so maybe the market's downturn has affected Crystallex more than Crystallex' issues themselves for investors.
I just wonder why you waste your time on such a dead in the water stock? The answer for me is simple. Massive Gold reserves in a world of dwindling major Gold discoveries, but my patience is wearing thin. Confused, no, but becoming more cautious every day.
- Fred Roth
- 9 Comments
Aug 23 01:26 PM- bane2007
- 11 Comments
Aug 23 03:37 PMThe one constant among the critics of my articles is that they make accusations but no one is actually able to say what it is that I am being untruthful about.
- P.C. Witham
- 1 Comment
Aug 24 10:39 AMSo far, you have failed miserabily on all counts. Without irrefutable evidense, you must be considered just another scumball, with a hidden agenda. If that is indeed the case, you are probably also being paid to write you unsubstantiated vagories by someone who also has ulterior motives.
Here are just a few examples of your desperation: "Crystallex's recently released financial statements are a disgrace."
Everybody knows Crystallex it as a stage of their development from a junior miner to
an intermediate miner, when they will start to mine Las Cristinas or be taken out by a major. Las Cristinas and Crystallex's other assets are what drive the share price...........not there P&L. Nobody expects them to make money at this stage of their development. But you knew that...........Right.....
You just choose to ignore the truth and hope that your readers are as gullible as you think they are.
Isn't that why you get paid for writing your negative half truths.....I mean why would anyone bother to spend as much time and research on writing articles, for the soul purpose of intentionally bashing a company, unless of course, they were paid to do it. What reason could you possibly have that would justify you writing these articles, if you can call them that.
Answer this question and we'll judge your reply on it's merits.
That's just one of the many statements I could pick apart in your article as misleading, vague, unsubstantiated clap trap. But seeing as I'm not paid to do it........like you undoubtably are.....
I think I"ve wasted enough time on you. Oh and speaking of transparent.......you surely are.
You sound an awful lot like "Banana". He had ulterior motives also.
Only Time Will Tell.
- bane2007
- 11 Comments
Aug 24 12:51 PMYour defence of Crystallex fails in that you attempt to portray the losses listed in the financial statements as being a result of normal course expenditures for a junior producer. They are anything but. I don't expect you to know that as that type of knowledge is derived from reading the financial statements and the management's discussion of the results which is something you have not done.
As far as Crystallex mining Las Cristinas, that is a question that is still up the in air.
Thank you again for your interest in my article.
- yippeecallao
- 7 Comments
My Website
Aug 27 12:26 PM<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.
- yippeecallao
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Aug 27 12:27 PM- beragland
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Aug 28 08:38 AM- AvidInvestor
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Aug 28 11:31 AM- Kryzy investor
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Oct 07 08:38 PMOne thing I think Bane fails to mention is the 9.9% ownership of the shares by GG, don't you think they did some due diligence before investing last year?
Also, what about the fact that KRY carries the right to occupy the land, signed by Chavez's gov't, not the previous admin, has a permit to mine aggregate signed by the gov't, has a legal binding contract to OPERATE the mine. KRY does not own anything but an operating contract. One reason why it's hard to value the company compared to other juniors that actually own a deposit. IF their operating contract is pulled, and or they are forced to renegotiate the operating contract they have recourse in the courts due to CA and VZ treaties.
This deposit is over 20 million ounces and has taken 30 years from initial discover to get to this point. What's another couple of months?