KRY Crystallex International Corp. Common Stock

Crystallex Reports 2004 First Quarter Results TORONTO, May 14 /PRNewswire-FirstCall/ -- Crystallex International Corporation Toronto today reported financial results of the Company for the first quarter ending March 31, 2004. All dollar figures are in US Dollars unless otherwise indicated. Highlights * Las Cristinas 20,000 tonne per day feasibility study approved by the Corporacion Venezolana de Guayana, (CVG) on March 8. * SNC-Lavalin Engineers & Constructors Inc., (SNCL) commenced EPCM work for Las Cristinas. * SNCL completed a feasibility study for a 40,000 tonne per day (tpd) operation at Las Cristinas. * Johan van't Hof appointed as an independent member of the Board of Directors of Crystallex and as Chairman of the Audit Committee. * Reduced gold hedges by 33,550 ounces, or approximately 10% since year- end 2003. * Net loss for the quarter of $6.7 million. * Subsequent to quarter end, closed a common share financing for net proceeds of $82.2 million. * On April 15, the Las Cristinas Environmental Impact Study (EIS) was submitted to the CVG and The Ministry of the Environment and Natural Resources. "Our first quarter results reflect both excellent progress at Las Cristinas and a meaningful improvement at our producing operations," said Todd Bruce, President and Chief Executive Officer. "We have assembled a first rate team with many years of project experience to direct the development of Las Cristinas. SNC-Lavalin completed a 40,000 tonne per day feasibility study for Las Cristinas during the first quarter. The results of this study provide Crystallex with the flexibility to establish early in the project life an expanded operation subject to financing capacity. "During the quarter, in keeping with our stated policy of reducing our gold hedge book, we settled outstanding gold contract positions by 10%, or approximately 33,000 ounces. "Our financial position has improved considerably since year-end. The net proceeds of $82.2 million we raised in a common share financing subsequent to quarter end will fund the ongoing development of Las Cristinas throughout 2004." Management's Discussion and Analysis For the Three Month Period Ended March 31, 2004 (All dollar amounts in US dollars, unless otherwise stated) Management's Discussion and Analysis ("MD&A") of the financial condition and results of the operations of Crystallex International Corporation ("Crystallex" or the "Company") should be read in conjunction with the unaudited consolidated financial statements and the related notes. Effective January 1, 2004, the Company prepares and files its unaudited consolidated financial statements and MD&A in United States dollars. Key Statistics Three Months Ended March 31, 2004 2003 Operating Statistics Gold Production (ounces) 12,006 4,325 Gold Sold (ounces) 9,614 4,166 Per Ounce Data: Total Cash Cost (1) $277 $477 Average Realized Gold Price $401 $346 Average Spot Gold Price $408 $352 Financial Results ($ thousands) Revenues $3,943 $1,358 Net Income (Loss) ($6,651) $4,444 Net Income (Loss) per Basic Share $(0.04) $0.05 Cash Flow from Operating Activities (2) ($8,856) ($3,766) Financial Position ($ thousands) At March 31, At Dec. 31, 2004 2003 Cash and Equivalents $13,751 $26,204 Working Capital (Deficiency) $(13,768) $3,640 Total Debt $6,973 $7,488 Shareholders' Equity $73,465 $78,998 Common Shares Outstanding 148,897,845 135,403,523 (1) Total Cash Costs are calculated in accordance with The Gold Institute Standards. For an explanation, refer to the section on Non-GAAP measures. The calculation is based on ounces of gold sold, not ounces produced. (2) Cash flow after working capital changes and before capital expenditures. Financial Results Overview Gold sales revenue for the quarter ended March 31, 2004 more than doubled to $3.9 million, as compared with $1.4 million for the corresponding quarter in 2003. The increase in revenue was attributable to selling more ounces of gold and realizing a higher average gold price. The Company produced 12,006 ounces of gold and sold 9,614 ounces during the first quarter of 2004, compared with 4,325 ounces produced and 4,166 ounces sold in the year earlier quarter. The average realized price during the first quarter of 2004 was $401 per ounce, as compared with an averaged realized price of $346 per ounce in the first quarter of 2003. The higher realized price reflects higher spot gold prices, which averaged $408 per ounce during the first quarter of 2004, as compared with $352 per ounce for the same period in 2003. For the three months ended March 31, 2004, Crystallex recorded a loss of $6.7 million or $0.04 per share, inclusive of a non-hedge derivative loss of $2.7 million. For the same period in 2003, Crystallex had net income of $4.4 million or $0.05 per share, including a non-hedge derivative gain of $5.7 million. Cash flow from operating activities for the first quarter of 2004 was negative $8.9 million as compared with negative $3.8 million for the comparable quarter in 2003. A positive mine operating margin (revenue less mine operating costs) of approximately $1.3 million was offset by $2.7 million of general and administrative expenses. In addition, the Company spent $3.6 million to financially settle gold contract positions during the quarter, which contributed to the cash flow deficit. The impact of the cash expenditures on the gold hedge book is reflected in the non-hedge derivative loss. Cash flow was also negatively impacted by a $3.4 million net change in working capital items during the quarter. Project Development and Operations Review Las Cristinas Crystallex continued to further advance the exploitation and development of Las Cristinas during the first quarter of 2004. As reported recently, Crystallex is building an experienced project development team and during the first quarter hired a VP Technical Services, a Corporate Manager, Projects and a VP Environment. In addition, a Manager, Mining and a Manager, Health and Safety have been hired for Las Cristinas. Work commenced under the Engineering, Procurement and Construction Management (EPCM) contract that was awarded to SNCL on March 25, 2004. The Corporate Manager, Projects for Crystallex has moved to SNCL's offices to oversee the EPCM work. Progress on the EPCM contract to date includes: * The process plant flowsheet was confirmed and the layout was determined. * Specifications for long lead-time equipment have been issued to vendors for competitive quotes. * The mine equipment fleet has been simplified from two fleets to one. The Feasibility Study contemplated a fleet of smaller trucks for mining the softer saprolite ore and a fleet of larger trucks and shovels for the harder bedrock ore. Based upon a review and tour of mining practices at operations with similar mining characteristics, the Company has decided to use 100 tonne trucks for mining in both saprolite and bedrock ores. In addition, geotechnical and hydrogeological drill programs are underway under the supervision of SNCL. The geotechnical drilling is designed to determine soil conditions in the area of the process plant and the tailings management facility, while the hydrogeological drilling will assist in determining and monitoring below surface water flows. The drilling should be completed by the end of May. Further studies are also being conducted at Lakefield Research on waste rock and ore chemistry. The second phase of the Las Cristinas socio-economic study has recently started and will take approximately three months in the field to complete. The second phase includes completing the socio-economic baseline data collection, undertaking a socio-economic impact study and developing a socio- economic mitigation plan. During the first quarter of 2004, SNCL completed a full feasibility study for Las Cristinas based on a 40,000 tpd processing rate. The initial (base case) feasibility study completed by SNCL in September 2003 contemplated a 20,000 tpd processing rate. The 40,000 tpd study demonstrates that the already favourable economics of the 20,000 tpd base case can be materially improved by constructing a larger scale operation. The 40,000 tpd study will provide Crystallex with the flexibility to establish early in the project life a 40,000 tpd operation subject to sufficient financing capacity in the equity and/or debt markets. Crystallex is designing the 20,000 tpd operation to allow for an expansion to 40,000 tpd while minimizing expenditures for alterations to the 20,000 tpd operation during the expansion. Under the 40,000 tpd case, proven and probable reserves, at a $325 per ounce gold price, are estimated at 11.1 million ounces. Gold production averages almost 500,000 ounces per year over a twenty-year mine life, and is approximately 550,000 ounces per year for the first five years. Average annual cash costs are $153 per ounce for the first five years and $193 per ounce over the project life. Using a $325 per ounce gold price, the unleveraged, pre-tax IRR is 16.8%. At $375 per ounce, the IRR rises to 24.3%. Key project highlights contained in the 20,000 tpd and 40,000 tpd feasibility studies are tabled below: 20,000 TPD 40,000 TPD Reserves (1) (at $325 per ounce) 246 million 297 million tonnes tonnes @ 1.29 g/t @ 1.17 g/t 10.2 million 11.1 million ounces ounces Mine Life 34 Years 21 Years Strip Ratio 1.34 1.04 Metallurgical Recovery 89 % 89 % Average Annual Production - Life of Mine 266,000 490,000 Average Annual Production - First Five Years 311,000 549,000 Average Cash Cost with Royalties - Life of Mine $197/oz $193/oz Average Cash Cost with Royalties - First Five Years $144/oz $153/oz Average Operating Cost - Life of Mine $6.70/t ore $5.97/t ore Development Capital Cost $243 million $365 million VAT Estimate $39 million $59 million Undiscounted Free Cashflow @ $325 Gold $742 million $745 million Undiscounted Free Cashflow @ $375 Gold $1.2 billion $1.2 billion IRR @ $325 Gold Pre-Tax 13.8 % 16.8 % IRR @ $325 Gold After-Tax 10.5 % 12.1 % IRR @ $375 Gold Pre-Tax 19.4 % 24.3 % IRR @ $375 Gold After-Tax 14.6 % 17.5 % (1) Mineral reserve estimates in the Feasibility Studies have been estimated in accordance with the standards of the Canadian Institute of Mining, Metallurgy, and Petroleum as adopted by the Canadian Securities Regulators in National Instrument 43-101 and also meet SEC Industry Guide 7 reserve definitions. Production Three Months Ended March 31, Gold Production (ounces) 2004 2003 La Victoria 0 3,176 Tomi Open Pits 10,214 387 Tomi Underground 824 0 Purchased Material 968 762 Total Gold Production (ounces) 12,006 4,325 Gold production in the first quarter of 2004 was 12,006 ounces, an improvement on the 4,325 ounces produced in the comparable period in 2003. The production gains are attributable, in the main, to improvements in equipment availability and utilization, which provided for a steady supply of ore to the Revemin mill, and improved operating performance at the mill itself. Revemin processed eighty percent more ore in the first quarter of 2004 than in the same quarter in 2003. In addition, both higher gold recoveries and higher ore grades contributed to the increase in production. In the first quarter of 2004, gold recovery averaged 92% and the average grade was 3.92 g/t, while in the same period in 2003 gold recovery averaged 71% and the average grade was 2.84 g/t. The improvements in mine equipment and mill operating performance are a result of providing capital to the operations in the fourth quarter of 2003 for spare parts, equipment maintenance, new equipment and mill reagents. Higher recoveries and ore grades were achieved by mining exclusively at the Tomi deposits in the first quarter of 2004. The Tomi ore is higher grade and higher gold recoveries are achieved than when processing the refractory ore from the La Victoria deposit. Tomi Three Months Ended March 31, 100% Basis 2004 2003 Tomi Open Pits (100% Crystallex) Tonnes Ore Mined 104,000 9,000 Tonnes Waste Mined 826,000 17,000 Tonnes Ore Processed 98,000 8,000 Average Grade of Ore Processed (g/t) 3.52 2.17 Recovery Rate (%) 93 % 73 % Production (ounces) 10,214 387 Tomi Underground (100% Crystallex) Tonnes Ore Mined 5,400 0 Tonnes Ore Processed 4,500 0 Average Grade of Ore Processed (g/t) 6.01 0 Recovery Rate (%) 94 % 0 % Production (ounces) 824 0 On the Tomi concession, the Company is conducting mining activities at the Milagrito and Mackenzie open pit mines and the Charlie Richards underground mine. At the open pit mines, all ore production in the first quarter came from the Milagrito mine, while the focus at Mackenzie was waste stripping. Gold production from the open pits was 10,214 ounces during the first quarter of 2004, as compared with 387 ounces for the comparable period in 2003. The Company did not make a decision to reactivate mining at the open pits until late in March, 2003 (and did not shift all open pit mining activities to Tomi until the end of the third quarter of 2003 after the decision to temporarily suspend mining at La Victoria). Reserves are expected to be depleted at Milagrito later in the year, at which time production will move to the Mackenzie pit and possibly the Fosforito deposit which is presently under evaluation. Ramp development and mining operations continue to advance toward design levels at the Charlie Richards underground mine, however, progress during the first quarter was slowed due to delays in releasing new equipment from customs. At the end of April, a scooptram, an underground truck, man carriers and two drills arrived at the mine site. A second scooptram and underground truck have arrived at port. The receipt of the second truck and scooptram at site, expected by the end of May, should allow operations to achieve the planned mining rate of 200 tonnes of ore per operating day by the fourth quarter of the year. La Victoria Three Months Ended March 31, 100% Basis 2004 2003 La Victoria (51% Crystallex) (1) Tonnes Ore Mined 0 48,000 Tonnes Waste Mined 82,000 146,000 Tonnes Ore Processed 0 48,000 Average Grade of Ore Processed (g/t) 0 2.91 Recovery Rate (%) 0 % 71 % Production (ounces) 0 3,176 (1) Crystallex owns 80% of El Callao Mining Corp, which in turn has an indirect 51% equity interest in La Victoria through the Venezuelan holding company, Osmin Holdings Limited. However, Crystallex has an 87.5% share of the distributable cashflow from Osmin until the first $4.0 million of debt owing from Osmin is repaid. Thereafter, Crystallex has a 75% share of the cashflow until the total debt from Osmin due indirectly to Crystallex (approximately $23.6 million at March 31, 2004) is fully repaid and a 51% share thereafter. Presently, there is no distributable cashflow, and Crystallex reports all production and reserves for its account. At the end of the third quarter of 2003, the Company suspended operations at the La Victoria mine. It was determined that a large proportion of the unoxidized ore is refractory and, as a result of low gold recoveries, the ore is uneconomic to process in a conventional cyanide-in-leach processing circuit. Preliminary metallurgical bench testwork demonstrated that the ore is amenable to pre-treatment with a Bio-Oxidation process and the Company has shipped an ore sample to South Africa to further assess the Bio-Oxidation process in a pilot plant test. As reported, at year-end 2003, the Company wrote-down the carrying value of La Victoria by $14.5 million, reducing the carrying value to zero as it was determined that the asset value, based upon reserves at December 31, 2003, was less than the net book value. A drilling program is currently underway at La Victoria and when the new reserve estimate and Bio-Oxidation pilot plant results are available in the third quarter, the Company will undertake an evaluation to determine if installation of a Bio-Oxidation plant is economically viable. Revemin Mill Three Months Ended March 31, 100% Basis 2004 2003 Revemin Mill La Victoria Ore Processed(tonnes) 0 48,000 Tomi Open Pit Ore Processed (tonnes) 98,000 8,000 Tomi Underground Ore Processed (tonnes) 4,500 0 Purchased Material Ore Processed (tonnes) 18,000 11,000 Total Ore Processed (tonnes) 120,500 67,000 Head Grade of Ore Processed (g/t) 3.39 2.84 Total Recovery Rate (%) 92 % 71 % Total Gold Recovered (ounces) 12,006 4,325 Venezuela - Costs (US$/ounce) (1) Total Cash Cost Per Ounce Sold $256 $516 Cost Per Tonne of Ore Processed $8.94 $9.47 (1) Ore from Tomi, La Victoria and purchased material is processed at the Company's Revemin mill. The Revemin mill operated at full capacity of approximately 1,350 tonnes per day during the first quarter of 2004. This compares favourably with an operating rate of just 55% of capacity during the first quarter of 2003. The low rate in the first quarter of 2003 was due to insufficient ore feed from the La Victoria mine. Improved equipment availability and utilization at the Tomi open pits ensured a steady feed of ore to Revemin during the first quarter of 2004. Crystallex continued with a $1.0 million modernization project at Revemin in the first quarter of 2004. The project entails upgrading a number of areas in the plant including the grinding circuit, the carbon-in-leach circuit, carbon conditioning, air and water distribution and automation. The project is designed to improve efficiency and safety and increase the processing capacity to approximately 1,500 tonnes per day upon completion by the middle of 2005. Income Statement Gold Sales Revenue Gold sales revenue for the first quarter of 2004 was $3.9 million, as compared with $1.4 million for the comparable period in 2003. The increase in revenue was a result of selling more ounces of gold at a higher average realized price. Crystallex produced 12,006 ounces of gold in the first quarter of 2004 and sold 9,614 ounces of gold as compared with production of 4,325 ounces and sales of 4,166 ounces in the first quarter of 2003. The ounces recognized as sold during the quarter are less than ounces produced as revenue is recognized when the gold is sold. Crystallex receives the spot price of gold for its gold sales and realized an average price of $401 per ounce on gold sales in the first quarter of 2004. The average realized price during the first quarter of 2003 was $346 per ounce. The spot price of gold averaged $408 per ounce during the first quarter of 2004, as compared with $352 per ounce for the comparable period in 2003. Operating Expenses The total cash cost during the first quarter of 2004 was $277 per ounce of gold sold, an improvement over the $477 per ounce for the comparable period in 2003. As noted, the improvement is largely due to improved mill throughput, higher equipment availability, the processing of higher grade ore and better gold recoveries. General and Administrative Expenses General and Administrative expenses were $2.7 million for the first quarter of 2004, up from $2.1 million for the corresponding quarter in 2003. The current quarter was primarily impacted by higher compensation due to hiring five executives who were not employees during the first quarter of 2003. Forward Sales and Written Call Options During the first quarter of 2004, the Company continued towards its goal of eliminating its gold contract positions. A total of 33,550 ounces of call options were settled financially during the quarter at a cost of $3.6 million. Crystallex intends to continue to settle financially contract positions at opportune times throughout the remainder of the year. The Company also plans to negotiate with its counterparties to roll certain 2004 contract positions to future periods. As tabled below, at March 31, 2004, the Company's derivative position was comprised of 125,856 ounces of fixed forward contracts at an average price of US$305 per ounce, and 190,619 ounces of call options sold at an average price of US$303 per ounce. 2004 2005 2006 Total Fixed Forward Gold Sales(ounces) 43,430 42,430 39,996 125,856 Average Price (US$/ounce) $300 $305 $310 $305 Written Gold Call Options (ounces) 93,687 94,932 2,000 190,619 Average Exercise Price (US$/ounce) $298 $309 $348 $303 Total (ounces) 137,117 137,362 41,996 316,475 Average Price (US$/ounce) $299 $308 $312 $304 Accounting for Derivative Instruments The Company's existing forward sales and call options are designated as derivatives so they do not qualify for the normal sales exemption, (or hedge accounting) for accounting treatment. The Company's metal trading contracts are recorded on the Balance Sheet at fair market value. Crystallex has no off-balance sheet gold contracts. Changes in the fair value of derivatives recorded on the Balance Sheet are recorded in earnings as an unrealized non- hedge derivative (loss) gain in the Statement of Operations. The gains and losses occur because of changes in commodity prices and interest rates. The variation in the fair market value of options and forwards from period to period can cause significant volatility in earnings. This fair market value adjustment is an unrealized loss that may impact the Company's cash flow. For the first quarter of 2004, the total unrealized mark-to-market gain on the non-hedge derivative positions was approximately $900,000. In addition, realized losses of $3.6 million arising from financial settlement of contracts were also recognized. Mark-to-Market (Fair Value) At March 31, 2004, the unrealized mark-to-market value of the Company's gold forward sales and call options, calculated at the quarter end spot price of US$424 per ounce was negative $39.8 million. This fair value is recorded on the Balance Sheet as a liability (Deferred Credit) and represents the replacement value of these contracts based upon the spot gold price at March 31, 2004 and does not represent an obligation for payment. The Company's obligations under the forward sales contracts are to deliver an agreed upon quantity of gold at a predetermined price by the maturity date of the contract, while delivery obligations under the call options sold are contingent upon the price of gold and will take effect if the gold price is above the strike price of the relevant contract at its maturity date and the option is exercised by the option holder. In circumstances where the Company is unable to meet the obligations under the fixed forward sales or call options, the Company may negotiate with the counterparty to defer the expiry date of the forward sale or call option, or purchase gold in the market, or settle the positions financially. If the Company were to purchase gold in the market or settle financially the contracts, it would result in a reduction of the Company's cash. The table below illustrates the cash requirement if the Company had to financially settle contract positions in excess of planned production. The analysis assumes the Company resumes operations at La Victoria, the Albino mine is developed on schedule and excludes future Las Cristinas production. It also assumes the Company is unable to roll existing contracts to future periods. The March 31, 2004 spot gold price of US$424 per ounce is used. US$ millions 2004 2005 2006 Total Total ounces Committed 137,117 137,362 41,996 316,475 Planned Production (2) 36,000(1) 75,000 65,000 176,000 Excess Committed Ounces 101,117 62,362 nil 163,479 Average Committed Price (US$/oz) $298 $309 $348 $302(3) Average Assumed Spot Price (US$/oz) $424 $424 $424 $424 Cash Required to Settle Excess Positions $12.7 $7.2 nil $19.9 (1) Represents forecast production for the period April-December 2004. (2) Production forecast excludes Las Cristinas. (3) Represents the average price for the years 2004 and 2005 in which there are excess committed ounces. The Company cautions readers not to place undue reliance on the projected production figures illustrated above. As noted under "Forward Looking Statements" in the Company's Annual Report, predictions and forecasts involve inherent risks and uncertainties. A number of factors could cause actual results to differ from plans. Liquidity and Capital Resources Working Capital At March 31, 2004, the Company's working capital position was negative $13.8 million. The working capital deficiency is largely due to a $26.9 million deferred credit related to the mark-to-market value of the Company's gold contract position that is included in current liabilities. Cash and cash equivalents decreased by $12.4 million during the first quarter of 2004, from $26.2 million at December 31, 2003 to $13.8 million at March 31, 2004. Operating activities utilized $8.9 million of cash, while capital expenditures utilized $4.1 million, with financing activities contributing $0.5 million. Subsequent to quarter end, the Company improved its cash position with an $82.2 million common share financing. Cash at April 30, 2004 was $89 million. Cash Flow form Operations Crystallex's operating cash flow (before capital expenditures) was negative $8.9 million for the first quarter of 2004. For the comparable period in 2003, operating cash flow was negative $3.8 million. Cash from gold sales during the first quarter of 2004 generated a $1.3 million margin over direct costs of gold production, however, this was insufficient to cover $2.7 million of general and administrative expenses and $3.6 million spent during the quarter to financially settle gold contract positions. Cash flow was also negatively impacted by a $3.4 million net change in working capital items during the quarter. The operating cash flow deficit for the first quarter of 2004 was $5.0 million higher than the deficit for the same period in 2003. The increase in the cash flow deficit was mainly due to increases in cash utilized for changes in working capital items and for settling gold contracts. These increases were partially offset by an improvement of approximately $2.0 million in the mine operating margin (revenues less mine operating costs), from a deficit of $629,000 for the first quarter of 2003 to positive mine operating cash flow of $1.3 million in the current quarter. Investing Activities Capital expenditures during the first quarter totalled $4.1 million, as compared with $1.5 million for the same period in 2003. The increase in the current quarter was attributable to higher spending on the Las Cristinas project as well as on the Tomi concession and the Revemin mill. Capital expenditures for the first quarters of 2004 and 2003 were as follows: US$ millions First Quarter 2004 First Quarter 2003 Las Cristinas $2.7 $1.1 Revemin and Tomi $1.1 $0.0 El Callao (La Victoria) $0.0 $0.1 Corporate $0.3 $0.3 Total $4.1 $1.5 The Company is forecasting capital expenditures of $80 million on the Las Cristinas project in 2004, although the timing of the expenditures is dependent upon the receipt of all required project permits. Crystallex intends on funding the planned expenditures for 2004 with existing cash balances. Financing Activities Debt repayments were $515,000 during the first quarter of 2004. The next scheduled principal repayment of $515,000 is due on July 2004. At March 31, 2004, total debt amounted to approximately $7 million. Subsequent to quarter end, on April 5, 2004, the Company closed an equity financing of 25 million common shares at C$4.00 per share raising net proceeds of $71.7 million. The common share financing had an over-allotment option of 3.75 million shares at C$4.00 per share, which closed on April 28, 2004 and raised additional net proceeds of $10.5 million. Total gross proceeds amounted to $82.2 million. Outstanding Share Data At April 30, 2004, 179,498,492 of common shares of Crystallex were issued and outstanding. In addition, at April 30, 2004 options to purchase 10,286,500 common shares of Crystallex were outstanding under the Company's stock option plan and warrants to purchase 18,209,905 common shares of Crystallex were issued and outstanding. Critical Accounting Policies and Estimates Critical accounting estimates are those estimates that have a high degree of uncertainty and for which changes in those estimates could materially impact the Company's results. Critical accounting estimates for the Company include property evaluations, capitalization of exploration and development costs and commodity derivative contracts. Accounting Changes Change in Functional and Reporting Currency -- Effective January 1, 2004, the Company changed its functional currency from the Canadian to US dollar. Concurrent with this change, the Company adopted the US dollar as its reporting currency. Refer to Note 2 of Notes to the Consolidated Financial Statements. Accounting for asset retirement obligations -- On January 1, 2004, the Company adopted CICA Handbook Section 3110 and changed its accounting policy to recognizing the fair value of liabilities for asset retirement obligations in the period incurred. There was no impact in the first quarter 2004 as a result of this change. Refer to Note 3 of Notes to the Consolidated Financial Statements. Stock Based Compensation -- Effective January 1, 2004, the Company changed its accounting policy for stock-based compensation and adopted the fair value method of accounting for all its stock-based compensation. Refer to Note 3 of the Notes to the Consolidated Financial Statements. Total stock option expense for the first quarter of 2004 was approximately $46,000. Impairment of Long Lived Assets -- Effective January 1, 2004, the Company adopted the new recommendations with respect to impairment of long lived assets. There was no material impact on the consolidated financial statements. Refer to Note 3 of the Notes to the Consolidated Financial Statements. Quarterly Information US$,000 (except per share data) First Second Third Fourth Quarter Quarter Quarter Quarter 2003 2002 2003 2002 2003 2002 2003 2002 Revenue 1,358 2,119 2,508 2,247 2,809 2,098 4,655 1,833 Net Income (Loss) 4,444 (11,070) (3,537) (5,777) (24,322) (4,917) (38,071) (14,935) Net Income (Loss) Per Share $0.05 ($0.14) ($0.04) ($0.07) ($0.21) ($0.06) ($0.32) ($0.16) Revenue for the fourth quarter of 2003 was positively impacted by higher gold production and higher gold prices. Net income in the fourth quarter of 2003 as compared with the same period in 2002 reflects the impact of a C$23 million write-down of mineral properties. This was partly offset by a reduction in the non-hedge derivative loss from $34.8 million in 2002 to $21.7 million in 2003. Refer to discussions in the 2003 annual Management's Discussion and Analysis, (MD&A) for additional information. The quarterly trends are consistent with the explanations of the annual trends set out in the annual MD&A. Risk Factors The profitability of the Company depends upon several identified factors including levels of production, commodity prices, costs of operation, financing costs, the successful integration of acquired assets and the risks associated with mining activities. Profitability will further vary with discretionary expenditures such as investments in technology, exploration and mine development. The Company operates in an international marketplace and incurs exposure to risks inherent in a multijurisdictional business environment including political risks, varying tax regimes, country specific employment legislation and currency exchange fluctuation. The Company seeks to minimize its exposure to these factors by implementing insurance and risk management programs, monitoring debt levels and interest costs, and maintaining employment and social policies consistent with sustaining a trained and stable workforce. NON GAAP MEASURES Total cash costs per ounce are calculated in accordance with the Gold Institute Production Cost Standard, (the "Standard"). The total cash cost per ounce data are presented to provide additional information and are not prepared in accordance with Canadian or U.S. GAAP. The data should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. The measures are not necessarily indicative of operating profit or costs of operations as determined under Canadian or U.S. GAAP. The total cash cost per ounce calculation is derived from amounts included in the Operating Expense line on the Statement of Operations. As this line item is unchanged under U.S. GAAP, the total cash cost per ounce figure is similarly unchanged using U.S. GAAP results of operations. Data used in the calculation of total cash costs per ounce may not conform to other similarly titled measures provided by other precious metals companies. Management uses the cash cost per ounce data to access profitability and cash flow from Crystallex's operations and to compare it with other precious metals producers. Total cash costs per ounce are derived from amounts included in the Statement of Operations and include mine site operating costs such as mining, processing, administration, royalties and production taxes but exclude amortization, reclamation, capital expenditures and exploration costs. Total cash costs per ounce may be reconciled to our Statement of Income as follows: Three Months Ended March 31, 2004 2003 Operating Costs per Financial Statements $2,659,210 $1,986,686 By-Product Credits -- -- Reclamation and Closure Costs -- -- Operating Costs for Per Ounce $2,659,210 $1,986,686 Calculation Gold Ounces Sold 9,614 4,166 Total Cash Cost Per Ounce Sold $277 $477 Additional information relating to Crystallex, including the 2003 Annual Report, is available on SEDAR at http://www.sedar.com/ . 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. Other key assets include the Tomi Mine, the La Victoria Mine and the Revemin Mill. Crystallex shares trade on the TSX (symbol: KRY) and AMEX (symbol: KRY) Exchanges. For Further Information: Visit us on the Internet: http://www.crystallex.com/ or Email us at: NOTE: This may include certain "forward-looking statements" within the meaning of the United States Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact, included in this presentation, including, without limitation, statements regarding potential mineralization and reserves, exploration results, and future plans and objectives of Crystallex, are forward-looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from the Company's expectations are disclosed under the heading "Risk Factors" and elsewhere in documents, including but not limited to its annual information form ("AIF") and its annual report on Form 20-F, filed from time to time with the Canadian provincial securities regulators, the United States Securities and Exchange Commission ("SEC"), and other regulatory authorities. Cautionary Note to Investors - We use certain terms in this release, such as "resource," "measured resource," "indicated resource" and "inferred resource," that the SEC guidelines strictly prohibit us from including in our filings with the SEC. Furthermore, reserves have been calculated in accordance with NI 43-101, as required by Canadian securities regulatory authorities. For United States reporting purposes, however, a full feasibility study is required in order to classify mineral deposits as reserves, since the SEC permits mining companies, in their filings with the SEC, to disclose only those mineral deposits that a company can economically and legally extract or produce. Therefore, the amount of reserves may differ for Canadian and US reporting purposes. The Toronto Stock Exchange has not reviewed this release and does not accept responsibility for the adequacy or accuracy of this news release. DATASOURCE: Crystallex International Corporation CONTACT: Investors, A. Richard Marshall, VP of Crystallex International Corporation, +1-800-738-1577 Web site: http://www.crystallex.com/ http://www.sedar.com/ Company News On-Call: http://www.prnewswire.com/comp/114620.html

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