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For
Immediate Release
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August
14, 2008
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RM:
12 – 08
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Crystallex
Reports Q2 2008 Financial Results
TORONTO, ONTARIO,
August
14
,
2008 –
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 Incréible 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:
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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.
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§
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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.
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§
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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.
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§
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On
May 12, 2008, the Company filed a legal rebuttal to the position taken by
the Director General of Permits at MinAmb.
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§
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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
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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.
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§
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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.
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§
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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.
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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.
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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.
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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.
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§
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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.
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§
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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.
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Liquidity
and Capital Resources
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§
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Cash
and cash equivalents at June 30, 2008 were $61.5
million.
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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”).
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Financial
Performance
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§
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Six
months loss of $21.2 million, or $0.07 per share; second quarter loss of
$10.0 million, or $0.03 per share.
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§
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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).
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§
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Expenditures
of $12.7 million and $7.3 million on Las Cristinas for the six months and
three months ended June 30, 2008,
respectively.
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Summary
of Quarterly Results (Unaudited)
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$,000 except per
share
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2008
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2007
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Q2
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Q1
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Q4
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Q3
(Amended)
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Revenue
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$
5,233
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$5,901
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$4,809
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$2,188
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Net loss previously
reported
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-
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-
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-
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($9,256)
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Adjustment to unrealized
gain
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-
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-
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2,534
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Net loss as
amended
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$(9,995)
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$(11,202)
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$(8,787)
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$(6,722)
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Per share
–
Basic and
diluted
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$(0.03)
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$(0.04)
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$(0.03)
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$(0.03)
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$,000 e
xcept per
share
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2007
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2006
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Q2
((Amended))
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Q1
(Amended)
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Q4
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Q3
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Revenue
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$2,848
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$3,720
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$5,720
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$9,769
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Net loss previously
reported
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($13,703)
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($12,071)
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($11,617)
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($8,815)
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Adjustment to unrealized
gain
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1,580
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9,252
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-
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-
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Net loss as
amended
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$(12,123)
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$(2,819)
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($11,617)
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($8,815)
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Per share
–
Basic and
diluted
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$(0.05)
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$(0.01)
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$(0.04)
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$(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 June 30,
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Six
months ended June 30,
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2008
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2007
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2008
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2007
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Operating
Statistics
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Gold
Production (ounces)
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6,838
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7,814
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14,099
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18,055
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Gold
Sold (ounces)
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6,830
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7,416
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14,885
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17,182
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Per
Ounce Data:
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Total
Cash Cost
1,2
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$960
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$628
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$822
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$526
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Total
Cost
1,2
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$973
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$635
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$833
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$532
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Average
Realized Gold Price
2
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$766
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$384
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$748
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$382
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Average
Spot Gold Price
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$896
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$668
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$911
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$659
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Key
Mine Operating Statistics (Bolivars)
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Three
months ended June 30,
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Six
months ended June 30,
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2008
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2007
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2008
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2007
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Operating
Statistics
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Gold
Production (ounces)
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6,838
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7,814
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14,099
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18,055
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Per
Ounce Data: (Bolivars)
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Average
Realized Gold Price
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2,597
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1,427
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3,074
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1,411
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Total
Cash Cost
1,2
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3,254
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2,334
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3,372
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1,943
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Financial
Results (Bolivars, 000’s)
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Mining
Revenues
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17,740
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10,580
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45,761
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24,240
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Total
Cash Operating Cost
1
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22,221
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17,312
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50,191
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33,380
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Average
Foreign Exchange Rate
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3.39
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3.72
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4.11
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3.69
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1
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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 t
hese
mines.
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2
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Based
on the average parallel (market) exchange rate in effect during the
period.
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Production
Summary
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Three
months ended June 30,
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Six
months ended June 30,
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2008
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2007
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2008
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2007
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Gold
Production (ounces)
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Tomi
Open Pits
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2,388
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1,366
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4,197
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4,710
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Tomi
Underground
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1,589
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3,375
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3,845
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7,634
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La
Victoria
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2,148
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1,812
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5,300
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3,955
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Purchased
Material
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713
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1,261
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765
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1,756
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Total
Gold Production (ounces)
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6,838
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7,814
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14,099
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18,055
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Total
Ore Processed
1
(tonnes)
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75,650
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72,808
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153,489
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159,489
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Head
Grade of Ore Processed (g/t)
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3.15
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3.88
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3.22
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4.07
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Total
Recovery Rate (%)
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89%
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86%
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89%
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86%
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Total
Gold Recovered (ounces)
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6,838
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7,814
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14,099
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18,055
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Total
Cash Cost Per Ounce Sold
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$960
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$628
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$822
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$526
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Mine
Operating Cash Flow ($,000)
2
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($1,322)
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($1,812)
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($1,078)
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($2,477)
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Capital
Expenditures ($000)
3
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----
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---
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---
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---
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Net
Mine Cash Flow ($000)
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(1,322)
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($1,812)
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($1,078)
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($2,477)
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1
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Ore
from Tomi, La Victoria and purchased material is processed at the
Company’s Revemin mill.
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2
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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).
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3
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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.
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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.
For
Further Information:
Investor
Relations Contact: A. Richard Marshall, VP at (800) 738-1577
Visit us on the
Internet:
http://www.crystallex.com
or Email us at:
info@crystallex.com
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.