New Crystallex boss says its personal
By: Tim Wood
Posted: 2003/09/24 Wed 08:49 ZE2 | © Mineweb 1997-2003
DENVER -- In an interview with Mineweb, newly installed president and chief executive of hapless Crystallex [KRY], Todd Bruce, says he would not have accepted the position if he was not absolutely sure that the Las Cristinas project was viable. Bruce is essentially staking his reputation on an asset that many in the professional investment community doubt can be developed without enormous risks. Bruce is the well-regarded former chief operating officer of Iamgold [IAG] until its merger with Repadre.
?The best way to build a top class company is quite simple ? you assemble a top class team, you construct a solid balance sheet and you use those two to lever the full value out of a world class deposit. It?s easier said than done, but from my perspective, that is exactly what Crystallex has achieved,? Bruce said in opening comments to an audience at the Denver Gold Forum.
Key Crystallex shareholders put previous chief executive, Marc Oppenheimer, on notice after a series of corporate pratfalls. Oppenheimer has been shifted out of the limelight, but will be rewarded in a Vice Chairman?s role for his work in extracting Cristinas out of its title imbroglio.
The company is anxious to put its serial dramas behind as it moves toward production.
Twinned with Bruce as the market face for Crystallex is Ken Thomas, the chief operating officer with a raft of experience in Barrick Gold. He says Cristinas is every bit as good as the Goldstrike Mine in Nevada.
Bruce says: ?substantial revaluation potential exists within Crystallex. We as the management group are focused on capturing this potential for shareholders.?
Addressing key issues put to him by Mineweb, Bruce was forthright and transparent:
Garimpiros
Photographs are circulating in the broker community of ?thousands? of artisinal miners said to have invaded Cristinas recently. Bruce says there has always been a mixture of legal and illegal informal miners on the project and noted that this was common throughout Venezuela.
?The number is closer to 700 and they are working old tailings where there are easy pickings. They haven?t gone much below 5 meters in 30 years. There is a process to address the issue and we are presently doing so,? said Bruce.
Company spokesman Richard Marshall said Crystallex?s other projects had been similarly affected but that this had not prevented commercial production.
Title
Crystallex has a contract to mine Cristinas on behalf of a state enterprise rather than owning title to it directly. The contract was awarded one year ago, but only after a prolonged and brutal legal squabble with previous owners.
Bruce says this was a critical issue in his personal due diligence investigation and he declares himself fully satisfied. ?I was very careful and methodical in addressing the default question. I went back to first principles and it is clear that Cristinas is safely in Crystallex?s hands.?
He says the contract arrangement is not extraordinary. ?This is how mining is done in West Africa and it still represents secure title.?
He also dismisses the threat of Minca, the Venezuelan arm of Vannessa Ventures which has emerged as the Cristinas gadfly, replacing the role Crystallex played against Placer Dome before the latter quit the project. ?The National Assembly has conducted several investigations to satisfy a high level of paranoia about any favouritism. Minca clearly has no claim. Even if it went to international arbitration it becomes a problem for the government of Venezuela since Cristinas is a national asset.?
Marshall adds that even if Minca prevailed in arbitration, it could only sue for damages against Venezuela. ?The current arrangment cannot be reversed,? he says.
Dewatering
Several experts tell Mineweb that Cristinas will struggle to dewater its operations. Bruce disagrees, saying a comprehensive hydrology study has been undertaken by SRK, and that Cambior?s Omai and Gross Rosebel projects are models since they operate in similar conditions.
Marshall notes that Crystallex has successfully operated the Albino mine just 1 kilometer from Cristinas.
Board composition
Recent management changes will require the addition of a new independent director or the loss of an executive director to satisfy compliance. Marshall says the Toronto Stock Exchange allows companies some leeway to achieve this and assures investors it will be taken care of shortly.
Financing
Bruce says he is confident of securing debt financing, but says the project will be mostly equity financed. The company continually alludes to supportive comments by Deutsche Bank on the likelihood of obtaining financing though there are no guarantees.
Bruce confirmed to Mineweb that although he is averse to hedging gold production, some price protection will have to be locked in, but only on a small scale. He has stated his commitment to make Crystallex hedge free as soon as possible.
?There is a trade-off to be made; compromise between leverage, growth and volatility. But we will be in control of the agenda. It will probably just be some put options to cover incremental capital costs.?
Sovereign risk
A recent Reuters report said the government in Venezuela was taking possession of some mining titles and Crystallex was mentioned. Bruce says the comments of a government official were misreported by the wire agency and that Crystallex was unaffected.
Marshall reiterated that there is no precedent in Venezuelan history for companies operating in the natural resources sector to lose their title.
Bruce is also adamant that Crystallex will survive the inevitable exit from power of President Hugo Chavez who has been conducting a homespun revolution with dubious results.
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