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Crystallex ponders new CVG boss in silence
Placer Dome Inc PDGShares issued 2500169631998-06-01 close $17Monday Jun 1 1998See Crystallex International Corporation (KRY) Street Wire Ynaty's departure okay with us, says Placer by Stockwatch Business Reporter The resignation of outspoken Placer Dome supporter Elias Ynaty from his position as president of Venezuela's state-owned industrial conglomerate CVG will not harm the company's prospects, says Placer's top executive in Caracas. "The arrival of (Mr. Ynaty's replacement) Efrain Carrera has been praised by virtually everyone in the region, including ourselves," says Carl Gagnier, president of the CVG-Placer joint venture Minera Las Cristinas (Minca). "We've dealt with him before and we know exactly who he is, and we're very comfortable with him." Supporters of Crystallex International -- especially those who exchange views on Internet chat forums -- had greeted Mr. Ynaty's downfall with shrieks of approval when it was announced on May 26. Crystallex itself has no position one way or the other about the appointment, vice-president Richard Marshall says. A strong supporter of Crystallex, VENews, an English-language publication found on the Internet, was particularly upbeat about the development. In a story headed "CVG czar Elias Ynaty finally declared toast," VENews correspondent Patrick O'Donoghue reported "Ynaty's star had been waning for some time after a serious (sic) of disastrous decisions in the mining sector, hastened by his handling of the first public tender of the aluminum privatization process . . . which ended in complete failure." This assessment was met with great approval by leading chat forum thinkers who claim to be independent shareholders. VENews editor Roy Carson has campaigned against the former CVG chief almost as long and as loudly as he has championed Crystallex. For instance, Mr. Carson ran stories in both February and April of 1997 with the same colourful headline: "CVG boss Elias Ynaty caught out in another outright lie!" As a member of the economic cabinet and vocal supporter of Vancouver-based mining giant Placer, Mr. Ynaty's support was seen by Placer and its supporters as a very positive sign in the battle for public support in both the resource-rich Bolivar state, where it holds development rights, and in the capital of Caracas. Crystallex is seeking permission from the Venezuelan Supreme Court to sue the government over how it handed out the gold and copper rights to the rich Las Cristinas 4 & 6 concessions in the Kilometre 88 region of Bolivar. The company, which is operating a money-losing mine called Albino in the region, says it holds title to the Las Cristinas concessions, and that it wants the court to enforce its "ownership rights" over the properties. In a ruling on July 15, 1997, the admissions court refused to allow Crystallex to sue over gold rights because Inversora Mael, now owned by Crystallex, failed to notify the ministry of mines of its objections to the government's transfers of title in 1989. Crystallex emerged in March 1997 with its claim to ownership of the concessions, after it bought out Mael, which it says holds title to the properties irrespective of what the government did. It points to three court cases that have affirmed transfer of title to Mael took place in 1986. Placer-Minca was granted a work permit for Las Cristinas in 1992. The next year it discovered significant quanitities of gold, which eventually reached 11.8 million ounces, along with ecomonic quantities of copper. The copper rights were granted in 1996. In January 1998, during a severe downturn in gold prices, Placer announced a halt to construction of the $600-million (U.S.) open-pit mine, citing the uncertainty generated by Crystallex's litigation. As president of CVG -- the diversified but badly managed Corporacion Venezolana de Guayana -- Mr. Ynaty viewed Crystallex's court challenges as harming the country's efforts to attract major international companies to develop the country's resources. As a result, Mr. Ynaty earned the deep enmity of Crystallex supporters, who rudely called him a holdover from an earlier time that is even more corrupt than current times. While Crystallex's Mr. Marshall declines to comment on the significance of Mr. Ynaty's departure, Placer's Mr. Gagnier is upbeat. Mr. Gagnier notes that although Mr. Ynaty was an ally of Placer-Minca, his was a political appointment and that his skills at a politician were probably more celebrated than his skills at running a large business. Mr. Gagnier says that while Mr. Carrera also was politically appointed, he is a skilled bureaucrat with a keen sense of how to run a company. "He has amply demonstrated his skill at managing," Mr. Gagnier says, noting that Mr. Carrera was highly regarded as the president of CVG's Edelca unit. Reuters news service refers to Edelca, the Caroni Electrification plant, as "efficient" -- a word rarely applied to CVG operations. Edelca accounts for most of the country's energy. According to Reuters, Planning Minister Teodoro Petkoff says Mr. Carerra will help speed the privatization of CVG's aluminum operation, the Venezeula Aluminum Corporation. Mr. Gagnier says Mr. Ynaty eventually got blamed for a privatization plan that went off the rails earlier this year when three international consortia baulked at a number of terms such as environmental liabilities, its $2.1-billion (U.S.) price tag, as well as the deteriorated state of its equipment. One US-based aluminum executive said the company was in such poor shape that Venezuela should pay someone to take it off their hands. During the economic crisis of 1993-94, the International Monetary Fund provided assistance to Venezuela, and in return demanded that a number of CVG companies be sold. These included its major aluminum and iron-ore assets. Mr. Carerra has a mandate from Mr. Petkoff and the government to not only clear the way for the aluminum company's sale, but to help with its plans to reform the economy. While a shake-up of the status quo and long-term economic reforms may sound on the surface like good news to an upstart junior with big-company pretentions like Crystallex, Mr. Gagnier points out that Placer also approves of the free-market reforms taking place in Venezuela. Further, he says, Placer already has established a relationship with Mr. Carerra. Mr. Gagnier points out that their relationship extends to the negotiations of what CVG would bring to the Minca joint venture. One major element it brought was a 350-kilometre, power line that is currently under construction by European consortium ASEA Brown Boveri (ABB). Mr. Gagnier says the Crystallex cheering squad needs to learn about what is taking place in Venezuela, and how the country works. He says the notion that Mr. Ynaty's departure will help KRY is unfounded. "It's a non-starter," Mr. Gagnier says. "They really do not have any idea what the situation is here politically, economically or socially in the area." In a separate development, Crystallex appears to confirm that it has a first-class problem with its public image. In its quarterly report for the period ending March 31, 1998, the company says "significant advances" were made to improve its environmental record through a reforestation and reclamation program. These environmental improvements have boosted its goodwill generally, it says. "The effect of these contributions by Crystallex at Albino are reflected in a marked warming of relations in Venezuela," the KRY statement reads. Up until now, Crystallex has always maintained it is extremely popular in Venezuela, in spite of its lawsuit against the government, shooting at illegal miners at Albino and getting blamed for the loss of 600 jobs at Las Cristinas when Placer shut down the mine. Previous Crystallex statements, such as a March 25 full-page advertisement in the Financial Post, says the company "enjoys a good working relationship with Venezuela and its government." While Crystallex may be happy to report an improvement in relations due to its conscientious environmental work, there is still no word yet on progress over its lawsuit with New York short seller Manuel Asensio. In early March, Mr. Asensio issued a number of statements which in Crystallex's view were defamatory. Among other things, Mr. Asensio has called the stock a pump-and-dump fraud. Crystallex reacted by claiming legal proceedings against Asensio & Co, a merchant-banking operation controlled by Mr. Asensio. In a March 4 statement, Crystallex chairman Bob Fung accused Mr. Asensio of disseminating false and misleading statements about KRY and its officers. Named to handle the matter on behalf of KRY was New York law firm Cleary Gottlieb Steen Hamilton. "We haven't disclosed anything yet," KRY's Mr. Marshall says. "As developments happen, we'll disclose them." A call to Cleary Gottlieb lawyer Ed Mishkin, who has the case, went unanswered. Mr. Asensio also has not heard anything more about the lawsuit, nor does he expect to hear more about it. "You know the answer," he says. "We think that they're claims of having a cause of action against Asensio & Co. are not credible," he says, adding such threats are standard operating procedure from companies he has targeted in the past. (c) Copyright 1998 Canjex Publishing Ltd. canada-stockwatch.com
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