CRYSTALLEX INTERNATIONAL CORPORATION (TSX: KRY)(AMEX: KRY) today
reported its financial results for the quarter ended June 30, 2008.
The Company prepares its consolidated financial statements in U.S.
dollars and in accordance with Canadian Generally Accepted
Accounting Principles. The consolidated financial statements along
with management's discussion and analysis will be available for
viewing on the Crystallex International Corporation website at
www.crystallex.com. The Documents have been filed with SEDAR
(www.sedar.com) and should be available on SEDAR.
Overview
The Company is engaged in the production of gold and related
activities including exploration, development, mining and
processing in Venezuela. The Company's principal asset is its
interest in the Las Cristinas gold project located in Sifontes,
Bolivar State, Venezuela. The Company's other assets include the
Tomi operations, the Lo Increible properties (which include the La
Victoria deposit), and the Revemin mill, all of which are located
in Bolivar State, Venezuela (the "El Callao operations").
Highlights
Las Cristinas Permitting to Impact the Environment
To date, the Company has not been granted the Permit required to
begin mine construction at the Las Cristinas site. Below is a
chronology of the recent steps that have been taken to secure the
Permit:
- During 2007, the Corporacion Venezolana de Guayana ("CVG") was
formally notified by the Ministry of Environment and Natural
Resources ("MinAmb") that all requirements had been fulfilled for
the issuance of the Authorization to Affect Natural Resources (the
"Permit") which will enable construction of the mine to begin.
MinAmb approved the EIS for the Las Cristinas gold project, and
requested the CVG post a construction compliance guarantee bond and
pay certain environmental taxes. Crystallex posted the requested
bond and paid the requested taxes. No impediments were raised in
discussions with Government officials at that time; they
subsequently confirmed that the Company was in good standing for
the issuance of the Permit.
- In early 2008, Mr. Rodolfo Sanz was appointed Minister of the
Ministry of Basic Industries and Mining ("MIBAM") and President of
the CVG, both titles giving him direct responsibility for the Las
Cristinas project. Crystallex officials have met with the Minister
on an ongoing basis.
- On April 30, 2008, the Company reported that the Director
General of the Administrative Office of Permits at MinAmb had
issued a letter to the CVG denying its request for the Permit for
the Las Cristinas project.
- On May 12, 2008, the Company filed a legal rebuttal to the
position taken by the Director General of Permits at MinAmb.
- Crystallex argues that the position taken by the Director
General, which led to the existing appeal against the Minister of
MinAmb, is in conflict with the Las Cristinas EIS approval, the
Construction Compliance Guarantee Bond request and Environmental
Tax request already issued by MinAmb. Both the posting of the Bond
and payment of the requested Tax were satisfied in 2007 and
Crystallex obtained receipt of acceptance. In addition, the Company
has said that the Ministry's position appears to contradict normal
mineral mining practices in the Imataca Forest Region and does not
conform to the treatment of either current and/or historic
projects. In addition, Crystallex believes that the position of
this official and statements made by the Minister of MinAmb
contradict Presidential Decrees, National Assembly Resolutions,
MinAmb Resolutions, and MIBAM Resolutions.
- On May 30, 2008, the Company reported that the Director
General denied the legal rebuttal and advised the Company of its
rights under Venezuelan law to appeal directly to the Minister of
MinAmb.
- On June 4, 2008, the Company appeared by invitation at a
public hearing of the Economic Development Committee of the
Venezuelan National Assembly. At the hearing, Crystallex gave a
presentation addressing plans for mining at Las Cristinas. The
presentation included the Company's plan for remediation and
dealing with the environmental issues at the project and its
planned social projects for the local communities such as
employment and training projects. Senior representatives of MIBAM
who appeared before the Committee hearings supported the position
presented by Crystallex.
- The resolution issued by the Committee states that the Las
Cristinas project has been in development for a significant period
of time with the support of several different branches of the
Government. The resolution further notes that there was a lack of
coordination between the various Government branches, and calls for
a positive solution which should take into consideration the
macroeconomic policies and goals of Venezuela, as well as the
social needs of the people and the pre-existing environmental
damage at Las Cristinas.
- On June 16, 2008, the Company filed an appeal with the
Minister of MinAmb. The Minister has 90 business days in which to
issue a decision on the appeal. If no decision is issued within the
90 business days, the appeal is deemed to be denied.
- On June 18, 2008, the Company was invited by the Vice-Minister
of MinAmb to a meeting where Crystallex was informed that MinAmb
was instructed by the Government of Venezuela to reconsider
issuance of the Permit by discussing with Crystallex possible
modifications of the Las Cristinas project to diminish the
environmental impacts of the project and thus enable the Permit to
be issued.
- In early August, 2008, the Company filed with MinAmb a report
which dealt with the MinAmb requests for (i) further improvements
to the social projects in the area, (ii) mitigating the impact of
open vein deposit mining in the currently affected areas of the
Imataca Forest Reserve, and (iii) improving the remediation plans
at the end of the mine life as well as repairing existing
environmental damage caused by illegal mining.
- On August 8, 2008, as part of the ongoing process towards
issuance of the Permit, a team from MinAmb led by the Vice-Minister
of MinAmb concluded a two-day site visit of the Las Cristinas
project.
Liquidity and Capital Resources
- Cash and cash equivalents at June 30, 2008 were $61.5
million.
- Assuming expenditures at approximately the reduced rate
following cost reductions in the first half of 2008, the Company
forecasts that it will have cash to fund its operations until the
third quarter of 2009 (see "Liquidity and Capital Resources").
Financial Performance
- Six months loss of $21.2 million, or $0.07 per share; second
quarter loss of $10.0 million, or $0.03 per share.
- Loss of $2.8 million and $2.2 million for six months and three
months ended June 30, 2008, respectively, from operations at El
Callao (the loss is inclusive of exploration expenditures of
approximately $1.6 million and $0.8 million, respectively).
- Expenditures of $12.7 million and $7.3 million on Las
Cristinas for the six months and three months ended June 30, 2008,
respectively.
Summary of Quarterly Results (Unaudited)
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$,000 except per share 2008 2007
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Q3
Q2 Q1 Q4 (Amended)
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Revenue $5,233 $5,901 $4,809 $2,188
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Net loss previously
reported - - - ($9,256)
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Adjustment to unrealized
gain - - 2,534
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Net loss as amended $(9,995) $(11,202) $(8,787) $(6,722)
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Per share - Basic and
diluted $(0.03) $(0.04) $(0.03) $(0.03)
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$,000 except per share 2007 2006
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Q2 Q1
(Amended) (Amended) Q4 Q3
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Revenue $2,848 $3,720 $5,720 $9,769
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Net loss previously
reported ($13,703) ($12,071)($11,617) ($8,815)
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Adjustment to unrealized
gain 1,580 9,252 - -
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Net loss as amended $(12,123) $(2,819)($11,617) ($8,815)
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Per share - Basic and
diluted $(0.05) $(0.01) $(0.04) $(0.04)
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Financial Results Overview
The Company recorded a net loss for the first six months and
second quarter of 2008 of $21.2 million, (($0.07) per share) and
$10.0 million, (($0.03) per share) respectively, as compared with
net losses of $14.9 million, (($0.06) per share) and $12.1 million
(($0.05) per share) for the comparable periods in 2007. The losses
in the first six months and second quarter of 2008 are principally
attributable to the aggregate of corporate general and
administrative costs, interest expense, foreign exchange losses and
losses at the El Callao mining operations.
The increase in the net loss for the first six months of 2008
compared to the first six months in 2007 is due primarily to
recording a foreign currency loss of $6.7 million in 2008 compared
to a foreign currency gain of $7.2 million in 2007. These amounts
include an unrealized foreign currency translation loss of $9.9
million in 2008 compared to an unrealized gain of $10.8 million in
2007 as a result of translation of future income tax liabilities in
the Venezuelan Branch. The increased exchange loss was offset in
part by a $5.3 million reduction in general and administrative
expenses (2008: $7.1 million vs 2007: $12.4 million) and a 2008
gain on sale of equipment of $1.6 million. The decrease in the net
loss in Q2 2008 compared to Q2 2007 is due primarily to a reduction
in general and administrative expenses, and offset by an increase
in the unrealized foreign exchange loss.
Mining revenue at the El Callao operations was $11.1 million for
the first six months of 2008 compared to $6.6 million for the first
six months of 2007. The Company recorded an operating loss of $2.8
million at the El Callao operations for the first six months of
2008 compared to an operating loss of $3.4 million for the first
six months in 2007. The loss was reduced despite higher spending on
exploration as revenue from gold sales increased in the first half
of 2008 compared to the comparable period in 2007 due to higher
average gold prices. This higher realized price more than offset
the reduction in ounces sold and higher operating and exploration
costs.
Cash flow used in operating activities was a deficit of $12.8
million for the first six months of 2008 compared to a deficit of
$23.4 million for the comparable period in 2007. The cash flow
deficit incurred in the first six months of 2008 was largely
attributable to $7.1 million of corporate general and
administrative expenses, cash interest payments of $4.7 million and
cash used to fund exploration at the El Callao operations. Cash
flow from operations for Q2 2008 was a deficit of $4.6 million and
similarly, principally reflects cash payments for general and
administrative expenses and funding exploration at El Callao.
The Company's cash position at June 30, 2008 decreased to $61.5
million from $67.2 million at March 31, 2008. Capital expenditures
for Las Cristinas were $7.3 million in Q2 2008 compared to $5.5
million in Q1 2008.
El Callao Operations Review
Key Mine Operating Statistics (USD)
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Three months ended Six months ended
June 30, June 30,
2008 2007 2008 2007
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Operating Statistics
Gold Production (ounces) 6,838 7,814 14,099 18,055
Gold Sold (ounces) 6,830 7,416 14,885 17,182
Per Ounce Data:
Total Cash Cost(1)(2) $960 $628 $822 $526
Total Cost(1)(2) $973 $635 $833 $532
Average Realized Gold Price(2) $766 $384 $748 $382
Average Spot Gold Price $896 $668 $911 $659
Key Mine Operating Statistics (Bolivars)
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Three months ended Six months ended
June 30, June 30,
2008 2007 2008 2007
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Operating Statistics
Gold Production (ounces) 6,838 7,814 14,099 18,055
Per Ounce Data: (Bolivars)
Average Realized Gold Pric 2,597 1,427 3,074 1,411
Total Cash Cost(1)(2) 3,254 2,334 3,372 1,943
Financial Results (Bolivars, 000's)
Mining Revenues 17,740 10,580 45,761 24,240
Total Cash Operating Cost(1) 22,221 17,312 50,191 33,380
Average Foreign Exchange Rate 3.39 3.72 4.11 3.69
(1) Total Cost represents the total cost of gold production, including
amortization, depletion, accretion and revisions to asset retirement
obligations. For an explanation, refer to the section on Non-GAAP
measures at the end of this MD&A. The calculation is based on ounces of
gold sold. Since the second quarter of 2005, all costs at the El Callao
operations are expensed due to the short life of these mines.
(2) Based on the average parallel (market) exchange rate in effect
during the period.
Production Summary
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Three months ended Six months ended
June 30, June 30,
2008 2007 2008 2007
Gold Production (ounces)
Tomi Open Pits 2,388 1,366 4,197 4,710
Tomi Underground 1,589 3,375 3,845 7,634
La Victoria 2,148 1,812 5,300 3,955
Purchased Material 713 1,261 765 1,756
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Total Gold Production (ounces) 6,838 7,814 14,099 18,055
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Total Ore Processed(1) (tonnes) 75,650 72,808 153,489 159,489
Head Grade of Ore Processed (g/t) 3.15 3.88 3.22 4.07
Total Recovery Rate (%) 89% 86% 89% 86%
Total Gold Recovered (ounces) 6,838 7,814 14,099 18,055
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Total Cash Cost Per Ounce Sold $960 $628 $822 $526
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Mine Operating Cash Flow ($,000)(2) ($1,322) ($1,812) ($1,078) ($2,477)
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Capital Expenditures ($000)(3) - - - -
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Net Mine Cash Flow ($000) (1,322) ($1,812) ($1,078) ($2,477)
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(1) Ore from Tomi, La Victoria and purchased material is processed at the
Company's Revemin mill.
(2) Mining Revenues less Operating Expenses adjusted for non-cash items and
excludes exploration costs of $0.84 million in the three months ended
June 30, 2008 (2007: $0.46 million) and $1.6 million in the six months
ended June 30 2008 (2007: $0.79 million).
(3) Capital expenditures at the El Callao operating mines, excludes Las
Cristinas. Since the second quarter of 2005, all costs at the El Callao
operations have been expensed due to the short reserve life of these
mines.
About Crystallex
Crystallex International Corporation is a Canadian based gold
producer with significant operations and exploration properties in
Venezuela. The Company's principal asset is the Las Cristinas
property in Bolivar State that is currently under development at
the initial planned production rate of 20,000 tonnes of ore per
day. Other key assets include the Tomi Mine, certain Lo Increible
properties and the Revemin Mill. Crystallex shares trade on the TSX
(symbol: KRY) and AMEX (symbol: KRY) Exchanges.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS: Certain
statements included or incorporated by reference in this news
release, including information as to the future financial or
operating performance of the Company, its subsidiaries and its
projects, constitute forward-looking statements. The words
"believe," "expect," "anticipate," "contemplate," "target," "plan,"
"intends," "continue," "budget," "estimate," "may," "schedule" and
similar expressions identify forward-looking statements.
Forward-looking statements include, among other things, statements
regarding targets, estimates and assumptions in respect of gold
production and prices, operating costs, results and capital
expenditures, mineral reserves and mineral resources and
anticipated grades and recovery rates. Forward-looking statements
are necessarily based upon a number of estimates and assumptions
that, while considered reasonable by the Company, are inherently
subject to significant business, economic, competitive, political
and social uncertainties and contingencies. Many factors could
cause the Company's actual results to differ materially from those
expressed or implied in any forward-looking statements made by, or
on behalf of, the Company. Such factors include, among others,
risks relating to additional funding requirements, reserve and
resource estimates, gold prices, exploration, development and
operating risks, illegal miners, political and foreign risk,
uninsurable risks, competition, limited mining operations,
production risks, environmental regulation and liability,
government regulation, currency fluctuations, recent losses and
write-downs and dependence on key employees. See "Risk Factors"
below or in the Company's 2007 40-F/Annual Information Form. Due to
risks and uncertainties, including the risks and uncertainties
identified above, actual events may differ materially from current
expectations. Investors are cautioned that forward-looking
statements are not guarantees of future performance and,
accordingly, investors are cautioned not to put undue reliance on
forward-looking statements due to the inherent uncertainty therein.
Forward-looking statements are made as of the date of this
Management Discussion and Analysis and the Company disclaims any
intent or obligation to update publicly such forward-looking
statements, whether as a result of new information, future events
or results or otherwise.
Contacts: Investor Relations Contact: Crystallex International
Corporation A. Richard Marshall, VP 1-800-738-1577 Email:
info@crystallex.com Website: www.crystallex.com
Crystallex (AMEX:KRY)
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