I have no opinion on this, but this opinion makes it look less appealing, IMO:
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Crystallex International Corporation -
Crystallex's win another legal dead end
Crystallex International Corporation KRY
Shares issued 37,616,966 2000-05-08 close $3.31
Monday May 8 2000
Also Placer Dome Inc (PDG)
VICTORY HAS NO BEARING ON OWNERSHIP; NO OTHER SUITS PLANNED
by Stockwatch Business Reporter
Shares of Crystallex International lost around a quarter of their value on Monday after the company issued a statement about its legal victory in Venezuela. Crystallex ended at $3.31 on the Toronto Stock Exchange, down 94 cents on 266,100 shares. Far from being a simple sell-off on good news, it appears as though Crystallex's supposed big win was in fact, little more than a technical victory in a minor legal sideshow that has little or no implication over ownership of Placer Dome's Las Cristinas 4&6 concessions in Venezuela.
Neither Crystallex nor Placer officials were able to provide copies of the 61-page decision issued on May 3, which has not yet been translated. Crystallex's carefully worded statement said the matter related to the supreme court of Venezuela's refusal to admit an action filed by Crystallex unit Inversora Mael in August, 1999. That legal challenge sought to declare void a 1991 agreement in which Mael signed away any and all rights then and in the future to contest its ownership of the properties.
The clearest thing Crystallex said about this latest legal twist in its years-long legal manoeuvrings in Venezuela was that, "by reviewing and ruling individually against each of the Minca and CVG arguments, those parties are barred from raising and cannot again present these arguments before the Supreme Court in this lawsuit."
That is fine with Placer, which says it does not plan to argue this matter in court. It adds that the ramifications of the decision are insignificant anyway. Placer contends the case only relates to the manner in which the supreme court of Venezuela in September, 1999, threw out Crystallex's challenge of the Mael settlement with Corporacion Venezolana de Guayana (CVG) and the Republic of Venezuela.
"The court has basically given (Crystallex) the right to appeal how it was thrown out the last time and does not relate to the original decision," says Placer spokeswoman Brenda Radies. The original decision is the court's approval of the October, 1991, settlement agreement, which took place that same month. Another court confirmed the settlement agreement the following month. "That still stands and is clearly not touched," she says, adding that the decision only relates to the court throwing out Crystallex's application to have the September, 1999, decision reversed. Ms. Radies stresses that the present decision does not, however, reverse the earlier decision.
In addition, Placer says the current decision grants Mael leave to appeal the decision relating to only the first of three separate statutes of limitations. Those statutes govern to limitations that apply in six months, five years and 10 years. "They were given leave to appeal on the six-month one, but there's a proviso that they haven't dealt with -- the five-year and the 10-year. "The latest decision says that the court that threw it out ... needed to look at these other statutes of limitations," Ms. Radies says. "That's all it gives them. It gives them squat."
Placer has held a work contract for the properties since 1992 through its majority-controlled joint venture with CVG, Minca. Under Venezuela's new mining law, Minca in December, 1999, applied to have the work contract turned into a concession, which would grant Minca title to LC 4&6.
Ms. Radies compares Crystallex's efforts to that of someone selling a house and then deciding several years later that they could have sold it for more. The parties then appealing to court to have the deal unwound, even though the house has been sold on at least one subsequent occasion.
Tellingly perhaps, Crystallex, the "winning" party in this matter, has far less to say about the decision than Placer, which has only a remote interest in the junior's never-ending legal contortions. Placer's sentiment that the decision does not mean much of anything is, in fact, echoed by Crystallex itself. Richard Marshall, Crystallex's vice-president of corporate development, was short on specifics about what the decision means for the company. "It means we're one step closer to being able to put this project into development," he says.
Asked if it means the company is now in a position to sue the Venezuelan ministry of energy and mines over how it issued mineral rights to the Placer-CVG, which was what the landmark June 11, 1998, decision was all about, Mr. Marshall responded: "I don't think we're expecting to file an additional lawsuits." Asked if the decision means Crystallex -- which has been asserting its "ownership rights" to LC 4&6 -- will be moving its equipment onto the properties any time soon, he replied: "No, we're not in that position, either. As we indicated we are in discussions with the government and we'll see where that takes us. That's about all I can comment on at this point."
Asked if the decision places Crystallex back to the point it was just ahead of the June 11, 1998, decision, Mr. Marshall said it does -- at least by comparing the number of pages of each decision: "It certainly has asserted our status and lack of (being) outside of the statute of limitations and, obviously, more. I think the decision of June 11 was some 30 pages. This was 61. The supreme court doesn't just go and ramble on 61 pages."
Is the present decision the equivalent of a win on June 11, 1998? "I think I would classify this certainly as a win," Mr. Marshall says. "Can I say it's an equivalent of a win on June 11? I don't have an answer for you at this stage."
Placer's Ms. Radies counters that the decision "doesn't go anywhere near June 11; it doesn't touch that decision, it has nothing to do with that decision." She adds: "One reason that they aren't launching anymore lawsuits is this decision doesn't give them any lawsuit avenues. All it says is they can appeal the thing that was thrown out but they've still got these two other statutes of limitations before they could make it a case." What that case could be escapes Ms. Radies, as it does most of the market. "I can't imagine what the case would be because they've received compensation for something they sold."
Further, she says, the June 11 decision cited the waiving of its rights as only one of several reasons why Mael did not have title. That means that even if Crystallex were successful, ultimately, in reversing the October, 1991, waiver settlement, it still does not get the company into court, nor does it deal with the other legs of the argument, "which was they didn't have title to start with."
Ms. Radies says Placer was not a participant in the latest court case and she was unable to say whether CVG or the government of Venezuela were represented -- either in person or in submissions. "It doesn't have anything to do with either Placer Dome or, frankly, CVG," she says, pointing a reporter to Crystallex for those answers.
While Mr. Marshall was less than forthcoming, he stressed that the decision has boosted the company's discussions with the government. Ever since Placer suspended construction in July, 1999, amid then-record-low gold prices of $255 an ounce, Crystallex has pushed its claims to any politician that would hear its case, and it claims to have had face-to-face discussions with senior members of the government. "The next step is what we've been discussing with the government, and until that happens, that's as far as it can go," he says.
Crystallex's legal manoeuvrings over the years have cost investors dearly. At last count, more than a year ago, Crystallex's legal bill was around $15-million. Mr. Marshall was unable to say what the bill is today, advising that the information will be contained in the company's annual report, which will soon be out.
Canaccord Capital analyst Brian Christie says it is beginning to look like the game may be over for Placer holding onto Las Cristinas, but his reasons have little to do with Crystallex's legal efforts. "I think the handwriting is already on the wall here for Placer," he said from Toronto. Mr. Christie says the politics of Las Cristinas may be shifting away from Placer, in part because of Crystallex's tireless efforts lobbying key political figures. "My sense here is that if they're making the right friends in Venezuela, then the Venezuelans might say, Hmm, Placer wants to put Las Cristinas on hold forever, and these guys are telling us we're going to have a mine, so ... "
Mr. Christie points out that CVG has the right to challenge legally Placer's work suspension come July 15, which will add more pressure on the giant gold miner. "This could be a totally politically dominated thing here" by July, he says. The problem for Crystallex is that even with Placer's economies of scale -- mining the deposit under full production -- it is still not economic. "If Crystallex somehow think they can make it economic, then I would say, 'Good luck.'" What could make sense is for Crystallex to mine the easiest 400,000 ounces at a smaller-scale production of between 60,000 and 100,000 ounces annually, he says. Those are figures that would not appeal to Placer, but certainly would appeal to Crystallex.
"Let's say they win it, then, who cares because now you've got to build it," the analyst says. "And even if it's on a smaller scale, you've still got to come up with the money." There is one other problem, Mr. Christie muses. "The Venezuelan government screwed over Placer, so, what's the chance they're going to screw you guys over, too? I'd think that's probably pretty good."
(c) Copyright 2000 Canjex Publishing Ltd. canada-stockwatch.com
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