The curse of Las Cristinas. Gold miner Crystallex faces TSX delisting
The beleaguered Canadian gold mine developer which has had its principal assets expropriated by the Venezuelan government now looks as though it will lose its TSX main listing.
Author: Lawrence Williams
Posted: Friday , 25 Nov 2011
LONDON -
The poisoned chalice that is Las Cristinas - the huge gold deposit in the Venezuelan jungle - looks as though it may have claimed its latest victim as the deposit's would-be developer, Canadian junior Crystallex, looks likely to be delisted from the Toronto Stock Exchange, where it has its main listing. It is also traded on the OTCQB market in the US, having already been delisted from the NYSE Amex earlier this year. This follows Venezuela's Chavez government effectively expropriating the huge Las Cristinas deposit on which Crystallex had been operating. The deposit, though, is a major one by any standards with the most recent Proven and Probable Reserve figure 16.86 million ounces of gold - calculated at a price of only $550 an ounce back in 2008 - which suggests a far bigger resource still at the current gold price of three times that level.
The history of Las Cristinas is said to go back to the discovery of the Angel Falls from the air in 1935 by Americans looking for gold in a remote part of Venezuela. As a reward for finding what was to become one of the country's key tourist sites, the two pilots of the aircraft were, so the story goes, given titles to areas of land which included Las Cristinas, but the low gold price and the remote location made mining anything there problematic and probably uneconomic at the time.
Fast forward to the late 1970s-early 1980s when the widow of one of the pilots, American citizen Dot Lemon, was trying to generate some interest in the huge gold deposit, but seems to have been swindled out of her supposed inheritance, which ultimately ended up in the hands of some Venezuelan companies. Then in the 1990s Placer Dome, now part of Barrick Gold, became involved in ownership of the deposit, but eventually, mired in a legal quagmire, sold its stake for a pittance to Canadian junior Vannessa Ventures which in its turn lost out to Crystallex. The latter, then led by venture capitalist Marc Oppenheimer, had managed to wrest seeming control through some legal manoeuvrings which, in retrospect have proved to be a stone around that company's shareholders' necks after a promising start.
Crystallex set up a venture with Venezuela's state-owned mining company, CVG, to develop the project and did manage to start mining and developed and increased Las Cristinas ore reserves to their current level, but then Crystallex could somehow never get the necessary approvals to develop the full scale mining operation, and CVG finally withdrew from the operating agreement early this year.
Venezuela's President Chavez then nationalised the gold mining sector and the matter is now in the international courts where Crystallex is claiming some $3.8 billion compensation (and appears to be rapidly running out of money with notes for $100 million due to be repaid next month). Legal battles could rage for years and even if the company wins any compensation there is no guarantee that that Venezuela will pay it.
The likelihood would thus be that Crystallex will lose its main listing in Toronto. The company itself states that "There can be no assurance that the Company will be able to meet the OLR [Original Listing Requirement] and may be delisted. Management is evaluating alternative listing options." What its options actually are going forward are uncertain. Its stock price is effectively 15 cents. It reached its peak of over $11 back in February 1998.
