VANCOUVER - CRYSTALLEX INTERNATIONAL CORPORATION (KRY on TSE and Amex) said that during 2001 it achieved its highest level of gold production since the Company began mining operations in 1995. Furthermore, management expects that expanded mining operations and mill upgrades should enable it to accelerate growth and increase cash flows in 2002 and 2003.
Reviewing 2001, the Company noted that it operated mines in Uruguay and Venezuela and conducted drilling programs in each country aimed at extending its production profile. Gold production for the year increased 15 percent to approximately 109,000 ounces with the Company's annualized run-rate increasing to approximately 120,000 ounces in the fourth quarter.
Marc J. Oppenheimer, Crystallex's President and Chief Executive Officer, said Crystallex made great strides in reducing costs and increasing its production profile. "We have assimilated the acquisitions made over the past few years and are bringing our operations in Venezuela up to the same operating standards that have produced lower costs and higher production at our San Gregorio mine in Uruguay."
"We have not only increased our reserves and resources, but have built a flexible infrastructure to handle additional processing that will drive costs down further as our production increases. In 2002, our new underground mines in Venezuela will complement our existing open pit operations, and the Revemin mill will be expanded to accommodate the growth," Mr. Oppenheimer said.
The Company expects to be producing gold from the Tomi underground mine early in the third quarter of 2002 and the Albino mine, also underground, should start producing late in the fourth quarter of 2002.
URUGUAY
San Gregorio: The Company's Uruguayan operations center on the San Gregorio mine in that country's Rivera Crystalline Island region. In 2001, 1.1 million tonnes were processed at the mill to produce 66,957 ounces of gold at a cash cost of US$218.55 per ounce. In the fourth quarter, the San Gregorio mill operated at a rate of 3,118 tonnes per day processing nearly 280,630 tonnes with a head grade of 2.17 grams per tonne and yielding nearly 18,000 ounces, a considerable increase over previous quarters. In addition to the better head grades, the Company was able to reduce soluble losses, thus improving the mill's recovery rate to nearly 92 percent. With further research and adjustments, Crystallex hopes to further increase the recovery rate. These factors and certain cost cutting measures implemented by management personnel at the San Gregorio operation resulted in a cash cost per ounce of approximately US$218. The Company anticipates producing approximately 70,000 ounces with similar cash costs during 2002.
In the third quarter of 2001, Crystallex began extracting material from the Santa Teresa ore bodies located one kilometre west of the San Gregorio main pit. Initial production from Santa Teresa has exceeded the geological model's projections in terms of tonnes and grades.
VENEZUELA
El Callao Acquisition: In February of 2001, Crystallex completed a share exchange take-over bid, acquiring 80 percent of the shares of the El Callao Mining Corp. (ECM : CDNX), a British Columbia company. Through a holding company, ECM (Venco) Limited, El Callao Mining Corp. owns a fifty-one percent interest in Osmin Holdings Ltd. (Osmin), which is the sole owner of the operating company, Auriferous El Callao. The other portion of Osmin is owned by an unrelated private Venezuelan company. Concurrently, Crystallex completed its acquisition from Bema Gold Corporation of assets related to El Callao Mining Corp. Those assets consisted primarily of debt amounting to approximately US$14.3 million in the form of loans extended by Bema Gold Corporation to fund the exploration activities of Auriferous El Callao.
Due to the ownership by Crystallex of mining properties in the immediate vicinity of the La Victoria property and its familiarity with the geology of the area, the shareholders of Osmin agreed in March, 2001 that production might be initiated by Crystallex at La Victoria, as a development site, to confirm ore characteristics and metallurgy on the understanding that Crystallex would bear initial costs followed by a more detailed accounting reflecting allocations of revenue and expense approved by the parties. Permits were obtained in April 2001, allowing production to commence. Crystallex has since undertaken an extensive and ongoing drilling program to expand its reserve and resource base in the El Callao region. This ongoing investment together with the completion of requisite environmental and related studies will provide the platform for future expansion at La Victoria as appropriate permitting is obtained.
Pursuant to agreement between the shareholders of Osmin, net revenues are recognized in Auriferous El Callao. After reimbursing Crystallex for its expenses, Auriferous El Callao distributes the cash available from its operations in repayment of debt and by distribution to its shareholders such that the distribution ultimately received by ECM (Venco) amounts to 87.5 percent of distributable cash until the first C$4 million of debt is repaid, and thereafter, the distribution amounts to 75 percent of distributable cash until the debt is repaid in full. The percentage to ECM (Venco) Limited may be subsequently increased if Crystallex funds certain future development. All of the payments received by ECM (Venco) Limited can be applied to the debt owing to El Callao Mining Corp., which in turn may be applied toward its debt owed to Crystallex in accordance with the original arrangement structured by Bema Gold Corporation.
Lo Increible (La Victoria): The acquisition gave Crystallex controlling interest in the Lo Increible project in Venezuela's El Callao gold district. Consisting of six contiguous deposits, Lo Increible contains indicated resources of 8.87 million tonnes grading 3.39 grams per tonne gold and inferred resources of 15.08 million tonnes grading 3.26 g/t Au. MRDI of San Mateo, California, estimated these resources at a cutoff grade of 1.0 g/t Au. The largest of these deposits is La Victoria, which accounts for more than half of Lo Increible's resources and reserves. In April 2001, Crystallex began mining at La Victoria and by the end of the year had produced 26,504 ounces of gold consisting of 297,343 tonnes grading 3.09 g/t Au with a recovery rate of 89.7%. The Company is also continuing its 10,000 metre infill drill program at La Victoria aimed at upgrading resources and reserves.
Tomi: Earlier in 2001, Crystallex produced gold from the Tomi Mine in Venezuela, which comprises four open pit deposits. In addition, drilling below Tomi's Charlie Richards pit has identified an underground deposit that, according to a feasibility study conducted by Mine Development Associates of Reno, Nevada (MDA), contains probable reserves of 163,000 tonnes grading 14.48 grams per tonne to a vertical depth of 200 metres below surface. The Charlie Richards underground deposit is open at depth and there is potential to add significant resources both in the vicinity of the existing mineralization and down plunge. These reserves were calculated using a gold price of US$265 per ounce and a cutoff grade of 5.0 g/t Au. In the fourth quarter 2001, Crystallex collared the portal and started developing the access to this underground ore-body. By year-end, the decline had been advanced by 50 metres. The Company plans to extract first ore from the mine in July 2002. During 2001, 121,565 tonnes with a grade of 3.11 g/t Au were processed yielding 11,132 ounces of gold from the Tomi deposits with a recovery rate of 91.6%.
Albino 1: The Company will also develop an underground mine at its Albino 1 concession in Venezuela's Kilometre 88 region. The Tomi study conducted by MDA also included portions of the Albino 1 deposit. It concluded that the Conductora portion of the deposit contains 82,000 tonnes of proven reserves grading 14.81 g/t Au and 96,830 tonnes of probable reserves grading 14.66 g/t Au. The Albino reserves were calculated using a gold price of US$270 per ounce and a cutoff grade of 8.0 g/t Au. These mineable reserves are included in a global Measured and Indicated resource of 3.27 million tonnes grading 4.02 g/t Au at a 0.5 g/t Au cutoff. Crystallex plans to begin the development for underground mining in the second quarter 2002 with the first ore being accessed late 2002.
Revemin mill: The Revemin mill, located in Venezuela's El Callao district, is accessible by truck to all of the Company's current Venezuelan concessions and is a major component in Crystallex's "hub and spoke" strategy to contain costs. Recent modifications to the mill allow processing of ores from both the Tomi and La Victoria mines. This allows ore to be stockpiled at the mill and feed from each of the mines managed to achieve an appropriate blend of material to be fed to the mill. During the fourth quarter, the Revemin mill operated at a rate of 1,441 tonnes per day. Crystallex is commencing a phased expansion of the mill that will increase its capacity to 1,800 tonnes per day in 2002, and to 3,000 tonnes per day in 2003. Currently processing ore from La Victoria, Tomi and nearby concessions, the mill will have the capacity to handle material trucked in from the Albino 1 and Charlie Richards underground mines as well. The high-grade ore from these underground operations will supplement that from the open pit mines and will result in further reductions in Crystallex's operating unit costs as well as greater production levels. In addition to the material mined from La Victoria and Tomi, Revemin processed an additional 19,383 tonnes of material from nearby concessions grading 8.98 g/t Au to yield 5,054 ounces at a recovery rate of 90.3%.
Hedging: Since 1998, the Company has selectively used "non-exotic" financial derivatives within conservative parameters in connection with its bank syndications in order to maintain a targeted margin between its operating mining costs and the market price for gold. The Company's trading policy had been to price forward a portion of its reserves in order to obtain a measure of margin and revenue certainty no matter what the associated volatility of the gold market was. With a variety of trading techniques including rollbacks, deferrals, and scaling, the Company has been able to generate significant premiums to the spot price.
During the latter part of 2001, the Company believed that the multi-year decline in average gold prices had abated for a variety of factors. Included in these would be the lowering of short term interest rates by the U.S. Federal Reserve Bank, thereby eliminating the arbitrage opportunities associated with the "cash and carry" trade. Additionally, the reduction in the realizable forward contango had been compressed, significantly reducing the financial incentive for selling forward. Another bullish factor was the near completion of the Bank of England auction process, with the final auction taking place in March, 2002. Although the gold market was able to absorb the 25/20 tonnes of each tranche, the fact that there were auctions every few months had a depressive psychological impact on the commodity price. Finally, of recent impact was the decision by the Japanese banking authorities to significantly reduce the insurance coverage on yen denominated savings accounts, thereby stimulating significant gold purchases by Japanese investors and the burgeoning monetary investment flows being marginally redeployed into gold from general equities as a result of the weakened global economies post September 11, 2001 and the most recent concerns surrounding the Enron Corporation implosion.
The Company believes that the commodity price has an upward bias to it and that firming should continue to be a factor. Accordingly, the Company will continue to maintain a flexible position with regard to enjoying the upside of the gold price movement, while protecting its balance sheet during periods of depressed prices. As of December 31, 2001, the Company had sold forward 287,000 ounces of gold or 27% of reserves, deliverable over the next 5 years at prices in excess of US$300. Given the Company's view that the commodity price has based, coupled with the low interest rate environment, the Company will be decreasing its trading book as a percentage of reserves. This percentage reduction will occur by the Company delivering production into these trading positions as well as by the Company increasing its reserve base.
Cristinas 4 & 6: Crystallex believes that it continues to make progress regarding the issue of ownership of the Cristinas 4 & 6 concessions, and is encouraged by the decisions made by the Venezuelan authorities during the past twelve months. In November of 2001, the Venezuelan government cancelled the mining rights held by Minca and took possession of the contested properties.
About Crystallex: Crystallex International Corporation gold mining company that owns or controls a number of strategic properties in South America. Crystallex's strategy for growth is to develop its portfolio of properties in South America as well as to diversify geographically by investing in producing or near-production projects and by exploring properties of merit in other areas of the world.
On Behalf of the Board:
Marc J. Oppenheimer, President & CEO
For Further Information:
Contact: A Richard Marshall, VP at (201) 541-6650 or Andrea Boltz at (604) 683-0672
To receive previous Company releases: (800) 758-5804 ext.114620
Visit us on the Internet: http://www.crystallex.com
Note: This news release may contain 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 release, 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 filed from time to time with The Toronto Stock Exchange, the United States Securities and Exchange Commission and other regulatory authorities.
The Toronto Stock Exchange has not reviewed this release and does not accept responsibility for the adequacy or accuracy of this news release.
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