By John Mackie (Canada)

China has come riding to the rescue of Canadian gold company >GMP Securities L.P. and http://www.westlawbusiness.com/find/default.wl?rs=ZCGE0129&findtype=bcf&db=WLB-CMPNYBCSRBD&cite=TS(T.KIH)&vr=2.0&mt=WLBDueDiligence&tempinfo=WLB-CMPNYBCSRB%7CTNC%7Cdat%3dsed&sp=">Kingsway International Holdings Limited and its legal advisors are Cassels Brock & Blackwell. Blake, Cassels & Graydon are representing the Chinese rescuers (CRRG, as noted below).

Crystallex announced it has signed an agreement with China Railway Resources Group (CRRG) to create a strategic partnership for the development of the Las Cristinas project. CRRG is a subsidiary of state-owned China Railway Engineering Corporation, the world’s largest contracting and engineering company. Crystallex’s Las Cristinas project has been in limbo for years, mired in disputes with Venezuela’s Ministry of Environment and Natural Resources.

Under the agreement, final definitive terms are to be settled by July 30, 2010, with a meeting of Crystallex’s shareholders expected to be held in August to approve the transactions. As proposed, Crystallex will receive a one-third interest in the joint venture in return for the contribution of the mine operating contract and other project assets. CRRG will receive a two-thirds interest as consideration for its commitment to lead the efforts in unblocking the stalled environmental permitting process, and providing the necessary project capital to develop the project to commercial production.

CRRG will also assist Crystallex in retiring obligations to the company’s outstanding note-holders, provide a construction guarantee, and make a yet-to-be-determined equity investment in Crystallex.

One section of particular interest in the agreement concerns a non-solicitation and termination fee payable to CRRG in the event Crystallex is acquired, merges, or sells a stake of 20% or more in the Las Cristinas project. The amount? The greater of $10 million or 4% of the market capitalization of the company. Should Crystallex be unable to close on the CRRG deal, it will be subject to the fee provision for a period of nine months, suggesting the company has “bet the farm” on CRRG.

Certainly the deal has caught the attention of the street. Crystallex subsequently announced a $35 million bought deal financing of shares and warrants.