To E,
RSA Update KRY Volume 3 # 10.2 Oct 31 1997
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Crystallex KRY on TSE
My last brief update on KRY I said KRY announced a delay in the court
ruling. This was incorrect. I should have stated it was reported by the
press. Apparantly when a reporter called Venezuela court they said, call back
in 4 or 5 weeks. Whether you consider this a delay is debatable
I have had numerous email requests and have been asked to post on forums
concerning KRY and will post this on SI and perhaps S10. As we all know KRY
and the court is a gamble or a risk/reward play you could say.
The stock already has a significant premium built into it for a favorable
court ruling. The risk has increased. As the gold market has tanked, KRY
can now fall much lower on a bad outcome Between $1 to $2.
I believe Mael was wronged and does deserve something, however a 100% award
to KRY/Mael seems unlikely. This would send a bad message to other seniors
investing in the country, including the oils. The government/CVG would be
very reluctant to give up all their share
Placer had and still has the backing of the government right or wrong. It is
obvious there is a political power struggle going on between the Court and
government on this issue and in the country in general.
If KRY was confident of a win they would be bringing mining people on board
as directors, not politicians. It is obvious that KRY needs these people to
influence opinion within the court and government
I have looked into and spoke to people involved on both sides a well as
impartial and believe Venezuela will come up with a compromise if at all
posible. The question is what will both sides accept as a win.
I expect KRY could get 5 to 10% easily but would be tough to get much more.
There is all the money and effort Placer has already put in to consider. How
much will the government/CVG be willing to give up?
If this was North America, we could look to the supreme court only, but it is
not. A solution will be worked out that is favorable politically and to the
court. Some kind of interest or royalty or JV seems likely. I think an
outcome like that is already priced into the stock and since I recommended
KRY at $2.30, a good profit at $7 seemed much better than the risk to be
greedy. With todays gold price, the gold in the ground KRY will win is being
valued at less. The Albino has not been profitable at higher prices so there
is less support on the downside for the stock here. I did mention it would
not hurt to leave a few shares in the game for a gamble
I am not totally ruling out a big win for KRY but those odds seem small.
There is many mining stocks beaten down that have little risk left in them
but potential for large rewards. Seems prudent to have money in some good
exploration plays at $0.50 rather than $6.50.
If we look at KRYs current value by making some assumptions
With the recent equity credit line we could use a figure of 38M shares fully
diluted. This does not include and dilution that would be necessary for KRY
to reimburse Placer for any exploration work if they won a working interest.
This would amount to $10 millions
Assume Albino with 350,000 ozs of reserves, Las Cristinas 10 million ozs.
If we assume that KRY wins 50%. Pretty optimistic in my books.
Gold in the ground in Venezuela with todays lousy gold market could be valued
at $50 cdn. This could be considered generous compared to other multi-million
oz deposits.
KRYs 5.35M ozs would be valued at $267.5M
Divide by 38M shares comes to $7.04. Close to todays price and where RSA
suggested to sell
GOLDIGER. |
