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Crystallex International Corporation -
Stock mauled in lead-up to court ruling
Crystallex International Corporation KRYShares issued 340000001998-06-11 close $2.55Thursday Jun 11 1998Also Placer Dome Inc (PDG) VICTORIOUS PLACER TAKES SWIPE AT KRY, INTERNET TOUTS by Stockwatch Business Reporter Both the Supreme Court of Venezuela and the market had their way with Crystallex International on Thursday, and Crystallex came out the loser on both accounts. The stock was halted 18 minutes after trading closed and an announcement from the company is expected early on Friday. Crystallex shares plunged $2.80 to close at $2.55 on very heavy volume of 1.36-million shares on the Toronto Stock Exchange. It closed on the AMEX at 1-7/8, down 1-3/4. Both closes were 52-week lows for the stock. The meltdown began on Wednesday, when the stock closed down 65 cents on the TSE at $5.35 on 785,400 shares. A face-saving high close on Wednesday failed to help matters, as the stock gapped down 35 cents on the opening bell on Thursday, dropping a further $1.50 in value in the next six minutes. Placer is upbeat about having work resume on its $600-million (U.S.) mine at Las Cristinas. However, a company spokesman expressed irritation with vocal and libel-filled Internet chat forums which appeared to be controlled by small groups of people. "Yes, I believe there was a concerted and calculated misinformation campaign going on," says Hugh Leggatt. "To a certain extent it was fuelled by honestly held opinions, but to a large extent it was artificial. It was very frustrating because there was such a lot of this wrong information being distributed publicly. And to some extent it was designed to put us in a bad light." At least one Internet forum was under the control of three or four anonymous posters who would ensure that skeptics or non-believers were swarmed and shouted down at all times. This pattern began in the spring of 1997, around the same time Crystallex started its multi-sided campaign concerning ownership and title of the Las Cristinas concessions in Venezuela. Forum insiders were known for having remarkably insightful information about the company's activities, and in spite of posting comments and reports all day long, maintained that they had full-time jobs -- and not the kind that involved touting stocks. Mr. Leggatt says the worst of it was misinformation about what the court case was all about. The campaign was aided considerably by statements from Crystallex, which repeatedly said KRY owned the properties and that the court was considering a petition to enforce its ownership rights. The end of KRY's legal road came in a 4 p.m. (Eastern time) announcement by the Venezuelan court that ended KRY's legal minuet. According to Placer Dome, the court ruled finally and irrevocably against Crystallex on two appeals before the admissions division. "All counts were in our favour," says PDG spokesman Hugh Leggatt. "That's what I understand; both cases went Placer's way," he says of the decision. Mr. Leggatt says finalizing financing will take three or four months, after which hundreds of laid-off employees can expect to return to work. "They will be pleased, and the local economy will get a shot in the arm," he says. Construction will take two years, with production beginning in 2001 "at the earliest." Average cash production costs will be around $200 (U.S.) and output is projected at 450,000 ounces a year. In spite of Crystallex's misleading theme to the contrary, the court's Thursday rulings indicated that affirmation of ownership rights were never on the table. Crystallex and Placer Dome, both based in Vancouver, had been on opposite sides of this legal debate since Crystallex emerged in March 1997 with a purported title claim to the concessions. In 1991, the courts had ruled that a transfer to Crystallex subsidiary Inversora Mael in 1986 was legal. Subsequent events, however, quashed that title. The state had assumed ownership in 1989, and there it stayed throughout the affair. The case that was decided on Thursday stemmed from appeals resulting from a series of rulings on mineral rights it made on July 15, 1997. At that time the court denied Crystallex's right to sue the government over how it granted the gold rights to a joint venture involving state agency Corporacion Venezolana de Guayana (CVG) and Placer, called Minca. Placer is majority owner of Minca, short for Minera Las Cristinas, which was granted a work contract for Las Cristinas in 1992. The court admitted Crystallex's claims over the copper rights, which were granted to Minca in 1996. Both Placer and Crystallex appealed against the rulings they didn't like -- Placer the copper rights, and Crystallex the gold rights. In a stunning refutation of Crystallex's claims, the court on Thursday sided with Placer and overturned its previous admission of the copper rights, while upholding its earlier denial of its gold-rights claims. Crystallex has reported that it has spent over $15 million on the legal case. Now that its legal avenues have come to an abrupt end, the company and its shareholders are left to ponder not only the value of its expenditures, but also what is left in terms of assets. Its major asset is the money-losing Albino mine, located near Las Cristinas, which holds around 300,000 ozs of gold. It also owns unexplored properties in Brazil and Venezuela. In a late statement from Crystallex's Caracas office and carried on Reuters, the company says it will soon announce "new investments in other mining concessions in Venezuela shortly." (c) Copyright 1998 Canjex Publishing Ltd. canada-stockwatch.com
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