Crystallex partners with Chinese firm

An unlicensed Venezuelan miner uses a water jet to hose down earth as he hunts for gold near the Las Cristinas mine.

Joins with China Railway Engineering on Cristinas gold project in Venezuela

Toronto — The Canadian Press Published on Monday, Jun. 07, 2010 8:19AM EDT Last updated on Monday, Jun. 07, 2010 8:21AM EDT

A Chinese construction and engineering giant has become the strategic partner of Toronto-based Crystallex International Corp. (KRY-T0.55----%), developer of the stalled Cristinas gold project in Venezuela.

State-owned China Railway Engineering Corp. will lead efforts to unblock the Venezuelan environmental approval process for Las Cristinas, which is the junior Canadian mining company's flagship project and chief asset.

China Railway Engineering will also provide the necessary project capital to develop the project to commercial production. It will also help Crystallex retire its outstanding debt obligations.

Crystallex would end up with about one-third ownership in Las Cristinas, which has been dogged by a variety of political, regulatory, and economic issues, and China Railway would own the remaining two-thirds.

China Railway could also eventually own up to 19.9 per cent of Crystallex by investing in equity of the publicly traded Canadian company.

CRRC had previously advanced Crystallex $2.5-million (U.S.) during the negotiation of this strategic partnership agreement. This advance is convertible into common shares of Crystallex at a price of 40 cents per share.

CRRC shall also have a onetime option to convert a portion of funds advanced to Crystallex to satisfy its obligation to the note holders into common shares of Crystallex at a price of 40 cents per share for up to five years.