KRY Report from June 14:
(Taglich)
taglichbrothers.com
1370 Avenue of the Americas, 31st Floor, New York, N.Y. 10019
(800) 456-1220 ! Fax (212) 265-4744
www.taglichbrothers.com
Research Report-Update
Crystallex International Corporation Rating: Speculative Buy
Luis Martins
KRY US$1.95(AMEX) C$2.86 (Toronto) June 14, 2002
FY1999A FY2000A FY2001A FY2002E FY2003E
Revenues (thousands $C) $35,908 $47,723 $55,593 $60,149 80,886
Earnings per share(diluted $C) $0.06 $0.06 $0.00 $0.00 $0.03
52-Week Range US$2.47- 0.81 Fiscal Year Ends December
Shares Out-fully dil (000’s) 79,598 Revenues/Share (TTM) C$0.62
Approximate Float (000’s shares) 74,025 C$ Price/Sales (TTM) 4.6X
Insider Holdings 7% C$ Price/Sales (2003)E 3.3X
Book value per share C$1.80 C$ Price/Earnings (TTM) NM
C$ Price/Book 1.6X C$ Price/Earnings (2003)E 95.3X
Crystallex International Corporation is a gold mining and exploration company, with its primary focus in Latin America.
Key Investment Considerations:
• We are reiterating our Speculative Buy rating on KRY and are establishing an 18-month price target of
US$2.79 per share. Our previous price target was US$5.05 per share. The decrease in our price target is due to
a decrease in our estimate for 2003 gold production and our conservative stance on Las Cristinas, offset by
expansion of multiples for gold equities.
• The Company's gold production in 1Q02 was 23,877 ounces, this compares to 25,882 ounces in 1Q01. The
average realized price per ounce was US$297 versus US$290 in the year ago period. The decrease in gold
production and net income was partly due to a delay in obtaining a blasting permit for the La Victoria mine in
Venezuela. This delay led to a temporary suspension of operations.
• The Company reported a net loss in 1Q02 of C$1.2 million or C$(0.01) per share as compared to net income of
C$424,965 or $0.01 per fully diluted share in the year ago period.
• We are projecting 2002 EPS C$0.00 per share on revenues of C$60.1 million and for fiscal 2003, we are
projecting EPS of C$0.03 per share on revenues of C$80.9 million. We are projecting gold production ounces
of 125,000 ounces and 170,000 ounces in fiscal 2002 and 2003, respectively.
• The price of gold has moved well above the US$300 per ounce level. Many industry insiders are predicting that
the price of gold will increase steadily through 2003. This has caused the price of many gold related equities
(as measured by the XAU index) and industry multiples to significantly increase. KRY utilizes financial
instruments to hedge its positions relative to gold prices. In a market with steady price gains, this strategy may
not allow the Company to fully participate in the appreciation of the market.
Company Brief
Crystallex International Corporation (KRY) is engaged in mining, development and exploration for gold, with its
primary focus in Latin America. KRY has increased its gold production and revenues over the last few years
during one of the toughest gold markets in recent years. The Company's gold production in 2001 was 109,647
ounces. This compares to 95,563 ounces and 76,889 ounces in 2000 and 1999, respectively.
The Company is currently pursuing its rights to the Las
Cristinas 4 & 6 concessions, one of the largest
undeveloped gold discoveries in the world with reported reserves of 326 million tonnes at 1.1 g/t Au or 11.8
million ounces of gold and approximately 850 million lbs of copper. The Company believes that it is continuing
to make progress towards the enforcement of its rights and anticipates further developments in the near-future.
Recent Financials –1Q02 (Canadian $ & Canadian GAAP)
On May 31, 2002, Crystallex (KRY) reported results for its first quarter of 2002. The Company reported total
revenues of C$11.3 million and a net loss of C$1.2 million or C$(0.01) per share. In the year ago quarter,
revenues were C$14.9 million and net income was C$424,965 or $0.01 per fully diluted share.
Gold production in the first quarter was 23,877 ounces compared to 25,882 ounces in the year ago quarter. The
average realized price per ounce was US$297 versus US$290 in the year ago period. The decrease in gold
production and net income was partly due to a delay in obtaining a blasting permit for the La Victoria mine in
Venezuela, which led to a temporary suspension of operations. Revenues and gold production from its Uruguay
operations were C$7.86 million and 16,445, respectively. This compares to revenues and gold production from
Venezuela its operations of C$3.44 million and 7,432, respectively.
The Company’s results were below our expectations. Taglich Brothers’ estimates called for total revenues of
C$14.5 million and net income of C$76,000 or C$0.00 per share. Gold production fell short of our estimate of
30,000 ounces.
As of the end of the first quarter, KRY had approximately C$8.9 million in cash, working capital of C$4.8
million, and long-term debt of C$22.0 million. This compares to the end of the fiscal year when KRY had
approximately C$14.4 million in cash, working capital of C$7.9 million, and long-term debt of C$24.8 million.
Recent Developments
In February 2002, KRY performed a new analysis of the La Victoria mine. The analysis, incorporating 2,894
meters of drilling data, points to greater than expected resources and reserves. KRY believes that La Victoria has
resources of 5.48 million tonnes as compared to the previously indicated 4.95 million tonnes. Probable reserves
were also increased to 4.3 million tonnes from 2.84 million tonnes. We believe that the Company’s resources and
reserve profile are significant assets. BMO Nesbitt Burns recently reported that replacing reserves will be a major
challenge for the top gold mining companies and the acquisitions of smaller companies will be an important
strategy for the these companies.
* 1 tonne = 32,151 ounces |
