November 25, 2009

A very peculiar thing happened in the world of mining stocks on Nov. 16, 2009. For lack of anything else to call it, I've dubbed it the Crystallex Mystery. Here are the details: Crystallex International Corporation has an exclusive stake in the Las Cristinas property in Venezuela; one of the largest undeveloped gold deposits in the world.

Estimates say there's more than 20 million ounces of gold in the ground there. Unfortunately, Venezuela seems to be balking on their end of the agreement on their end of the mining agreement struck in 2002. Negotiations are ongoing, but investors grew so disillusioned with the company's stock (NYSE AMEX:KRY) that they've kept it under $1 per share for more than a year.

For most of 2009, Crystallex's shares traded at an average of about $0.28 per share. That embroiled the company in a lawsuit by shareholders who felt they were misled on the Las Cristinas agreement. Still, something changed on Nov. 16. It's just not entirely clear what.

The stock closed at $0.26 per share on Friday, Nov. 13, then, without rhyme or reason, shot up some 75 percent on starting Monday morning. Someone or some institution had gobbled up 5.8 million shares in one go (not bad for a stock that normally trades just 2 million shares per day).

The change in price and trading volume was so extreme that the Toronto Stock Exchange asked Crystallex to issue a press release detailing changes or lack of changes in the company's outlook.

"Crystallex is issuing this press release to confirm that it is not aware of any material undisclosed corporate developments which would account for the recent increase in its stock price and trading volume," the company wrote on Nov. 16 at 4:06 p.m. EST.

"Due to the ongoing dispute with the Venezuelan Government regarding the issuance of the Environmental Permit for the Las Cristinas Project, Crystallex has been exploring various alternatives to mitigate the impasse and protect its investments under the Mine Operating Contract ('MOC') that it has with the Venezuelan Government.

"These alternatives include a number of possible transactions and structures. While discussions are ongoing, there can be no assurance that definitive agreements can be reached. The Company continues to work on behalf of all of our stakeholders to identify and progress alternatives in the context of the Las Cristinas dispute with the Venezuelan government to maximize stakeholder value."

Sounds like nothing has changed, but then, something must have in order for the stock to have catapulted up 75 percent in a single day.

The powerful stock move came just three trading days after Crystallex announced its third quarter operating results, but there wasn't much exciting there. The company sold mining equipment at two closed mines to help fund operations through the first quarter of 2010. Sounds like a company that's treading water to me.

Is it a pump-and-dump scheme? Or is there a chance that Crystallex really will wrest a mine out of the hands of Socialist leader Hugo Chavez? I'm not sure, but I don't feel comfortable jumping on the bandwagon just yet.

http://www.egold.com/understanding-the-crystallex-gold-mystery/