Apr 30, 2008
Love it or hate it, few would dispute that the decision on Crystallex’s (KRY) mining permit application was a make or break event. Unfortunately for Crystallex investors, Venezuela denied the permit. The decision effectively ends KRY’s plans to exploit Las Cristinas, one of the world’s premier gold formations.
CRYSTALLEX INTERNATIONAL CORPORATION (Toronto:KRY.TO - News)(AMEX:KRY - News) has become aware that the Director General of the Administrative Office of Permits at the Ministry of the Environment and Natural Resources of Venezuela (”MinAmb”) has issued a communication to the Corporacion Venezolana de Guayana (”CVG”), the owner of the Las Cristinas concessions, denying a request for the authorization to affect natural resources to carry out exploration activities in the mining area of Las Cristinas in Sifontes, Bolivar State.
In issuing the communication, the Director General cites sensitivities surrounding indigenous peoples, the small miners and the environment in the area generally known as the Imataca Forest Reserve, which contains a number of mining projects, which like those of Crystallex, are seeking the required permits to continue their development and exploitation.
On the news, Crystallex shares dropped as low as $.50 and closed at $.91. The company says it is considering options “including an application for reconsideration.” Its time for Crystallex to be honest with investors. If Chavez wanted Crystallex to get the permit, it would have received the permit. As I stated last August, the fact that the permit decision was taking so long suggested that Chavez was not lending his support.
I think its game over for Crystallex and Las Cristinas. I’m not sure what the company is worth without its flagship venture, but it sure isn’t worth its current market cap of over $280M.
DISCLOSURE: No position.
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Jan 25, 2008
Junior mining company Crystallex [[KRY]] announced today a public offering of units. According to the press release, the company “plans to use the net proceeds from the financing to develop the Las Cristinas Project, for debt service and for general corporate purposes.”
As longtime readers know I was once bullish on Crystallex, but soured on the stock after the long-anticipated environmental permit never materialized. That was several months ago, and the company still has not received the environmental permit.
I firmly believe that if the permit was forthcoming, Crystallex would do everything in its power to avoid a dilutive financing at these low levels. Today’s announcement suggests that Crystallex remains in the same position it was one month, six months, and a year ago — burning cash and praying that one day Hugo Chavez will deliver the permit. Until that happens, I will avoid Crystallex. Hope is not an investment thesis.
DISCLOSURE: No position.
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Aug 23, 2007
I bought shares several months ago in Crystallex: KRY, a junior gold miner attempting to develop a premier mineral reserve in Venezuela called Las Cristinas, based on a simple calculus. I reasoned that it was more likely than not that the company would receive the final environmental permit needed to begin mining, and that if it received the permit shares would at least double. I still believe the second part to be true, but as time passes it seems less likely that Crystallex will receive the permit (at least not on the terms of the previously-negotiated mining contract).
In June, the company announced that the Las Cristinas environmental impact study had been approved and a bond posted. Management said that the permitting was in the “very final stages.” Perhaps it is. But that statement is less probable now that two months have passed with no action (especially in light of the fact that competitor Gold Reserve (GRZ) has already been granted a permit).
Two additional factors reinforced my decision to sell. First, other junior miners such as Goldenstar Resources: GSS and Western Goldfields: WGDFF.OB have come down so much in recent weeks that they are more attractive on a risk-adjusted basis. Second, Crystallex bears the burden of servicing heavy carrying costs for its debt so the delay hurts its balance sheet as well as investor patience.
Bottom line: For Crystallex longs, I hope the company does get the permit. The stock can now be seen as a call option on that probability possibility. I was happy to cash in my position for a slight (~10%) profit. I see better opportunities in this market than making a binomial bet on Hugo Chavez.
DISCLOSURE: No position in KRY. Long GRZ, GSS, WGDFF.OB.
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Aug 15, 2007
- Commerce Planet: CPNE.OB took a beating after announcing mediocre earnings. CEO Michael Hill said he was pleased with the quarter (I’m not), adding: “we executed on initiatives to more effectively spend our advertising dollars increasing our efficiencies and performance results. We expect this strategy to lower our future operating costs and protect the quality of our ongoing revenue stream.” Frankly, I think companies that blow their quarter could do with a little less corporate doublespeak. I was wrong on this position, but I don’t plan to stay wrong.
- Investors also punished China 3C Group: CHCG.OB after its quarterly earnings announcement. I didn’t think it was that bad but if the stock continues to trade down I will exit this position as well.
- Air Industries: AIRI.OB reported a slight loss, but promised a strong second half on a record backlog. “The improvements in revenue and gross margin, as well as progress with our consolidation strategy, as exhibited in the second quarter of 2007 are a harbinger of the growth to come in the second half of the year,” said Peter Rettaliata, Air Industries Group President and Chief Executive Officer. “Importantly, resulting from our growth initiatives, we look forward to a return to profitability in the second half of the year.”
- What’s going on with gold shares? All kinds of miners including Western Goldfields: WGDFF.OB, US Gold: UXG, Crystallex: KRY, and Agnico-Eagle: AEM are off almost 10% today, yet gold futures were only off slightly. We’ll find out soon whether it was a fund liquidation or, as James Sinclair has posited, OTC derivatives blowing up. I have cut my gold exposure considerably but still own some Goldenstar Resources: GSS, a little Crystallex, and a few other small positions.
- As expected, Accredited Home Lenders: LEND sued to enforce their buyout contract. However, Lone Star pushed back the deadline for the tender until August 28, which indicates they are likely to try to renegotiate on price. I am told that LEND has a strong argument in the pending litigation.
- I’m doing some very exciting things at my primary job that will slow down my pace of posting until mid-October. Please stay patient and understand if I don’t get to your questions right away. Thanks.
DISCLOSURE: Long GSS, KRY, CHCG.OB, AIRI.OB, CPNE.OB.
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