http://settysoutham.wordpress.com/2010/06/07/dont-write-to-me-about-this-post-i-will-permanently-block-your-e-mail-address/#more-467

Don’t write to me about this post. I will permanently block your e-mail address.

Another step in the Las Cristinas saga.

Someday, son, all this will be yours. Las Cristinas mine site, aerial view, January 2009. Courtesy of BEAM. And no, you shouldn't write him either.

June 7, 2010
Crystallex Forms Strategic Partnership With the Resource Subsidiary of China Railway Engineering Corporation, the World’s Largest Construction and Engineering Company, for the Las Cristinas

...

To those of you who have never written about Crystallex, sorry for the bitchy tone in the headline. Readers in the mass media understand.

Crystallex is one of the many companies that has risen and fallen on the Treasure of the Sierra Madre Las Cristinas gold deposit in Bolivar state, Venezuela. A nice history of the site is here. As a minable resource, Cristinas looks tasty. It’s a mixture of near-surface bedrock and soils that have weathered out of the bedrock. Bolivar state is mostly a swamp, so the highway from Venezuela to Brazil runs along the bedrock, putting Cristinas right by a nice paved road.

It is a big resource, with 17 million ounces of proved and probable gold at a pretty conservative price projection (reserves refer to how much gold can be economically mined, not how much is in the ground). That’s more than $20 billion in sales at today’s prices, to be mined over decades from a half-kilometer-deep hole in the ground. (Let’s be like Crystallex investors and not think, for now, about costs.)

Artesanal miners with hose, Las Cristinas, January 2009. Also courtesy of BEAM. And you still shouldn't write him, call him, text him, stalk him or skype him. Kapiche?

Today, the site is home to anywhere from dozens to hundreds of “artesanal” miners who use bootleg diesel to run big pumps to wash the soils into sluices and pan for gold. They pollute the ground with mercury. Entire families live in plastic-tarp shacks without sewers. They deforest the land to search for new placers, creating a wasteland ripe for malaria transmission.

Venezuela’s Central Bank says the majority of the country’s gold is laundered into other countries rather than being sold into the domestic regulated market, and they’d love to get the illegal miners out of there and get their hands on that gold.

So you have geology, environment, social justice and politics all lined up. What could possibly go wrong?

Oh wait, this is gold. So that should be: you have geology, environment, social justice and politics all lined up. What could possibly go right?

The short of it is that when you put a few billion dollars worth of gold in front of people, they start acting badly. (This despite the fact that all the gold at that mine, extracted over decades, is worth about the same as three months of PDVSA oil production. Maybe it’s just a function of convenience: it’s easier to put $1000 worth of gold in your pocket than it is to lug around 14 barrels of oil.)

Crystallex could have had their mine years ago. It’s not 100% clear what happened, but one theory is that the government never wanted Crystallex and Gold Reserve to split the site and build two mines. The companies weren’t able to agree on terms to combine, so the state never let the permit go through. Another, much simpler, theory is that the companies didn’t grease enough palms. Anyway, Gold Reserve is now in international arbitration. So is Infinito Gold, for their earlier swing-and-a-miss on the mine. And Crystallex is now making the above-mentioned deal, bringing in the well funded Chinese.

Regardless of the merits of the deal, this is sure to fire up the Crystallex fan club. Crystallex shareholders are, from what I can tell, susceptible to a group mental illness that combines paranoia, manipulativeness, a sense of victimization and an inability to listen to contrary evidence. That is to say, they are more or less average human beings.

But rather than watching Glenn Beck and joining the Tea Party, or setting up an antenna to speak directly to the aliens that the government is hiding from them, they have become obsessed with a stock. Like those who believe Obama is part of a socialist illuminati or those who want to believe in Area 51, Crystallex speculators are always seeking the secret on-the-ground information from reporters. And bloggers, and risk analysts, and just about anyone else who dares to mention this stock. If you so much as fart in the direction of Yahoo’s KRY message board, you are doomed to receive e-mails that will on the one hand embarrass you for your species and on the other hand, perhaps, pull at your heartstrings — there are people who say they got in on the original pump and dump scheme and who continue to hold, hoping to get rich quick, albeit slowly. Most of the e-mails request more information. Some will talk like co-conspirators, because they just know that the MainStreamMedia is hiding something from them. Others will just beg for on-the-ground intel, as if people Caracas (or New York) knew or cared about the day to day gossip out of Clarines, Venezuela.

So. Now China Railway Resources Group joins the parade of those who try to mine Las Cristinas. The company has the advantage of knowing what a shovel looks like. It has the disadvantage of being prone to big announcements that never lead to anything. Viz: a supposed $7.5 billion nationwide rail system in a country that still runs circa-1975 subway cars and where “high-speed” internet runs comparably to my San Francisco dial-up of a decade ago. Oh, I forgot — a $7.5 billion nationwide rail system announced in a rush press conference by Diosdado Cabello, rumored to be one of the more corrupt members of Chavez’s inner circle. (I have no independent evidence to back up accusations of corruption, other than some evidence that he is indeed flush with cash.)

Good luck folks. Count me surprised if a legally mined ounce comes out of Las Cristinas this decade.

update, 1:05 pm Toronto time:
Humanity is really, really depressing sometimes.

KRY 5-day chart, 1-minute candles, courtesy of TSX.