Placer Dome Inc -
Crystallex undaunted by Cristinas restart
Placer Dome Inc PDG
Shares issued 250,058,657 1999-03-25 close $17.4
Friday Mar 26 1999
See Crystallex International Corporation (KRY) Street Wire
'WE HAVE NO INTENTION OF WRITING OFF LAS CRISTINAS'
by Stockwatch Business Reporter
Placer Dome's go-ahead on Friday to resume construction of the Cristinas mine has not affected Crystallex International's much-awaited plans to mount a fresh legal challenge that would see Placer removed from the gold-rich property.
"No, I don't think this has changed our position at all," says Richard Marshall, Crystallex's vice-president of corporate development. "As we've stated, we have no intention of writing off Las Cristinas and we're still reviewing avenues for advancing a claim."
Placer, which first gained encouraging results from drilling at Las Cristinas in early 1993, began constructing the mine in August 1997 after defining a 11.8-million-ounce deposit. The Vancouver-based giant halted construction in January 1998, citing the uncertainty created by a lawsuit in Venezuelan Supreme Court brought by Crystallex subsidiary Inversora Mael.
In June 1998, however, Mael lost its case in what was thought to be a definitive and final ruling on Placer's right to mine the property. At that point, Placer began talks with a syndicate of banks on financing the $575-million (U.S.) mine. After a series of embarrassing delays, Placer in February 1999 rejected a pricey financing offer from the CS First Boston-led syndicate, which raised its offer following Brazil's monetary crisis.
Placer then decided to finance construction itself, but it still needed approval for the move from its 30 per cent partner, Corporacion Venezolana de Guayana (CVG). After more delay, a new CVG board approved the self-financing plans in which Placer carries CVG's portion of the costs for the time being. CVG, however, risks losing most of its interest in the project if it does not ultimately contribute to the construction cost.
CVG, Venezuela's cash-strapped state-owned industrial conglomerate, has so far contributed a $41-million hydro line to the Cristinas project.
Asked for specifics on the legal challenge, such as the basis for a claim, Mr. Marshall said the company's lawyers were continuing to review Crystallex's options in Venezuela -- "just full due diligence on our legal standing and appropriate courses of action of those rights," he told Stockwatch.
Placer spokesman Hugh Leggatt is unimpressed with Crystallex's threat to exhume the court challenge. "They're welcome to try," he says.
Crystallex now has the dubious distinction of taking longer to restart its legal challenge than Placer took to restart construction. In the meantime, Crystallex has suffered a series of class-action lawsuits from disgruntled investors who saw Crystallex shares collapse from their all-time high of $11.85 reached in March 1998, to a low of 52 cent on the Toronto Stock Exchange on Aug. 31, 1998. It closed Friday at $1.25, down 13 cents on a volume of 51,600 shares.
Crystallex's highs were based almost exclusively on the hype that surrounded its court challenge.
During a company meeting in December 1998, president Marc Oppenheimer told shareholders the new administration of Venezuelan President Hugo Chavez may be sympathetic to Crystallex's position. "I think we have to wait and see what happens with the government," he said. "Let's see how the next little while plays out."
Mr. Marshall remains undaunted by recent events, including the new administration's endorsement of the CVG-Placer alliance. "We're committed to our properties, we're committed to our projects, we're committed to Venezuela and we're committed to our ownership of Mael."
Crystallex plans also to restart operations at its 280,000-ounce Albino mine which, like Cristinas, is located in the Kilometre 88 region of Bolivar state. The company shut down the open-pit operation in September 1998 in anticipation of deep-rock rights, which were granted in November 1998.
While there has been no activity at the site since shutdown, Mr. Marshall says Crystallex's geologists and engineers are reviewing various options as to the underground mine's construction and a report for board consideration should be ready presently. "Based on the engineering work we expect to make a commitment on that some time in the coming weeks or months," he says. "We've also been talking with banks for financing the project. As we move it forward we expect to have banks behind us for project finance."
Based on drilling at Albino from as recently as last year, the company's underground target is a high-grade deposit with around 140,000 ounces called La Conductora.
Crystallex's main focus of activity is in neighbouring Uruguay, at the 70,000-ounce-per-year San Gregorio mine which was acquired from a receiver in October 1998.
At the December meeting, Mr. Oppenheimer was vague about when he thought construction of the underground operation at Albino would begin or finish. "We are now finalizing our engineering reviews to prepare for the construction of the hard-rock gold facility and deep-rock mine," he said. "We anticipate construction to be completed and mining to commence approximately 12 months after engineering reviews are complete," but gave no indication when construction might begin.
Mr. Oppenheimer added that combined San Gregorio-Albino production "should be over 100,000 ounces" a year. As for completion of Albino, he told shareholders that would be "possibly as early as the year 2000."
(c) Copyright 1999 Canjex Publishing Ltd. canada-stockwatch.com
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