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=================== CYRIUSS' NOTES: MARCH 18TH, 1998 ===================
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"RE: Stockwatch points missles at Crystallex (KRY-T)
Mr. Cyriuss, the report below was released by Canada Stockwatch last
night, on KRY. I am a KRY shareholder and this report has confused me
tremendously. They say the President of Venezuela's mining commission
is accusing KRY of, "...promoting its stock based in part on a Venezuelan
concession that he says the company does not own. The dispute is
not over the Las Cristinas property, which is the company's chief asset."
But later in the article they write, "Mr. Acosta announced from Miami that
he had scheduled a press conference for March 18 at 10:30 am EST
to "discuss a congressional investigation, and allegations of false claims
being made about mining rights to one of Latin America's largest gold
mines, Las Cristinas."
HELP! ...Joe (Stockwatch link is canada-stockwatch.com)
"You don't have title, congressman says"
by Stockwatch Business Reporter
Crystallex International Corporation KRY
Shares issued 34,000,000 Mar 17 close $7.15
Tue 17 Mar 98 Street Wire
The president of Venezuela's mining commission, Congressman Rafael
Rodriguez Acosta, has accused Vancouver-based Crystallex International of
promoting its stock based in part on a Venezuelan concession that he says
the company does not own. The dispute is not over the Las Cristinas
property, which is the company's chief asset.
Mr Acosta says the Carabobo concession, which Crystallex has not yet
explored or worked, was declared "nulidad absoluta" (absolutely nullified)
in an official gazette dated July 4, 1995. Nullification of title to the
concession, which actually includes title to three other concessions --
Santa Elena 7 and 8, and San Miguel, which altogether are referred to by Mr
Acosta as Carabobo -- was the result of a detailed investigation headed by
the congressman and completed 10 months before the declaration was made.
Mr Acosta outlined his charges in a letter to the outgoing Ontario
Securities Commission chairman Jack Geller. In the letter, Mr Acosta says
what was declared null and void was the "mining transfer between ACOMISUR
Mining Association and Crystallex of Venezuela." Contacted in Toronto, Mr
Geller told Stockwatch he received the letter late last week but that he
still had not determined its contents because it was written in Spanish. Mr
Geller added that even if he knew its contents, he would not be able to
comment because the allegations would first need to be investigated.
The Venezuelan mining commission's report into the transfer itemized bribes
and kickbacks between the parties, which apparently included the mining
cooperative ACOMISUR, government officials, and people with ties to
Crystallex. Dated September 14, 1994, the report was entitled "Special
Commission to Investigate Allegations Made of Corruption and Other
Irregularities in a Mining Copperative in the South of Bolivar State."
On March 17, Mr Acosta announced from Miami that he had scheduled a press
conference for March 18 at 10:30 am EST to "discuss a congressional
investigation, and allegations of false claims being made about mining
rights to one of Latin America's largest gold mines, Las Cristinas."
Crystallex is embroiled in a long-running court battle involving title to
the Las Cristinas 4 and 6 concessions, also located in Venezuela. In this
affair, Crystallex has claimed three successive Supreme Court victories
over a six-year period, and believes it soon will emerge with clear title.
Placer Dome, which has spent $110 million exploring and developing the
properties since it was granted title to Las Cristinas in 1991, says what
is before the courts are purely procedural matters that will not result in
a change of title. Placer Dome, however, suspended its operations there in
January, saying it wanted the matter resolved before it continues its work.
In his letter to Mr Geller, Mr Acosta also took a swipe at Crystallex's Las
Cristina's claims before the court. "I am informing you that the suit set
by Crystallex of Venezuela on the supposed ownership of Cristinas 4 and 6 .
. has as its main objective to speculate on the stock market and to
deceive the present and future stock holders of Crystallex."
Earlier this month, New York short seller Manuel Asensio issued a strong
short-sell recommendation, also alleges Crystallex is knowingly misleading
investors. His comments sent the stock down $2.35 on March 5 to $6.90. It
closed on March 17 down $0.60 at $7.15.
Mr Acosta's comments at the press conference in Miami are of great interest
to the former shareholders of Eurus Resource, which was merged with
Crystallex in September 1995. The former Murray Pezim company -- Mr Pezim
had sold out, however, before the Crystallex amalgamation -- brought to the
marriage the Albino concession (held 50-50 with Crystallex and also located
in Venezuela), which now is being open-pit mined.
In return, Eurus shareholders got about one sixth of Crystallex. According
to former Eurus director Jack Caplan, part of the reason they received so
little in the deal was because the Crystallex's valuation included high
values assigned to the Carabobo, St Elena and St Miguel concessions. Mr
Caplan, a civil engineer, could not remember the precise vaulation figure,
but said it was probably around what Crystallex itself paid for the
concessions -- US$11 million.
In a statement by Crystallex on October 2, 1995, Eurus shares were
exchanged for 1,583,333 shares of KRY and 1,583,333 warrants (at $3.15 to
September 30, 1996) of KRY. On the deal's effective date, September 29,
1995, Crystallex closed at $2.65.
Mr Caplan said that during negotiations, he raised question about the
concessions' titles but was told repeatedly that if there were problems
with title, they were mere "technicalities" and of no bearing to
Crystallex's bedrock contention that it held title. "They sloughed it off,"
he says. In fact, according to Mr Acosta, title had been stripped from
Crystallex in July 1995 -- two months before the amalgamation.
Today, Mr Caplan believes Mr Acosta's version of events. "They're not
Crystallex's," he says of the concession. "They're not registered in their
name." As a result, he says, Eurus shareholders should have secured around
half of Crystallex, instead of one sixth.
Mr Caplan said the valuation of the properties was performed by Maison
Placements Canada of Toronto. It is not known what, if anything, the Maison
representative had to say about the special mining commission's findings,
or the alleged nullification of title that occurred two months before Eurus
and Crystallex tied the knot.
The former Eurus director, who was appointed shortly after Mr Pezim left
the company around early 1995, says a lawsuit may result if enough
shareholders believe they were misled by Crystallex and Maison over the
company's assets and valuation. "There would have been a tremendous
reduction in the value of Crystallex shares if we can prove they never
owned Carabobo," he says.
Mr Caplan adds that Crystallex can expect a lawsuit over the matter if
there is compelling evidence the company did not have title to the
properties when it merged with Eurus. He stresses, however, that
shareholders are awaiting the outcome of the title struggle with Placer
Dome before making a move. "We're waiting to see what happens with Placer
Dome," Mr Caplan says. "If they're successful (meaning, if Crystallex wins
title to Las Cristinas) we can get our money back. But I don't want them to
be successful."
Stockwatch tried repeatedly to obtain comment from Crystallex officials,
leaving messages with three senior figures in the company, including
vice-president Richard Marshall and president Marc Oppenheimer. A
receptionist in Mr Oppenheimer's New Jersey office asked a Stockwatch
reporter if he had any information about what was going on because the
office had received so many calls following Mr Acosta's media advisory.
In its public information, Crystallex makes little or no references to a
title problem regarding Carabobo, St Elena and St Miguel, although the
latter property, St Miguel, does not appear in many recent publications.
Its brochures refer to Carabobo and the St Elena as having "strong
potential" and "excellent potential" respectively.
In its disclosure documents, Crystallex is quite a bit more forthcoming. In
a disclosure to the SEC that was filed on SEDAR on May 28, 1997, the TSE-
and AMEX-listed company stated "the status of the company's interests in
the Santa Elena 7 and 8 concessions, the Carabobo concession, and the San
Miguel concession is uncertain at the present time, pending the outcome of
the company's application to the Supreme Court of Venezuela for an order
affirming its right to such concessions."
(c) Copyright 1998 Canjex Publishing Ltd. canada-stockwatch.com
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