Crystallex CEO says stock is cheap-- Company declines comment on M&A speculation

By Thom Calandra, <a href=cbs.marketwatch.com>CBS.MarketWatch.com Last Update: 2:15 PM ET June 10, 2003

SAN FRANCISCO (CBS.MW) - The chief executive of Crystallex International Corp. on Tuesday called the gold miner's shares "severely undervalued" and said he is confident the company will develop its vast gold deposits in Venezuela.

"We are not going to speculate on M&A at this time," Chief Executive Marc Oppenheimer said in an interview at the San Francisco Gold Forum.

Crystallex (KRY: news, chart, profile) shares rose more than 20 percent earlier in the week after The Calandra Report, a subscription service owned by CBS MarketWatch, quoted a mining analyst as saying he expects a bid for the entire company before its June 26 annual shareholder meeting.

Crystallex shares have been under a cloud for years as it struggled to win government approvals to develop the vast Las Cristinas deposit amid the political turmoil of Venezuela. Those approvals came in September 2002, but investors are skeptical the tiny Toronto company can raise the several hundred million dollars necessary to turn the holding into a full-fledged gold mine.

The first phase of the project would cost $250 million, Oppenheimer estimated on Tuesday.

Robert Bishop of Gold Mining Stock Report told The Calandra Report that shares of Crystallex would double or triple after an offer from a mid-sized or large bullion miner. The size of Crystallex's Las Cristinas proven and probable gold reserves is almost 10 million ounces.

"I think the company is building itself to be taken out," Bishop, a longtime mining analyst and financial writer, said. More later this week in The Calandra Report.

Crystallex's Oppenheimer said his company fully intends to pursue financing of the Venezuela deposit. "Our objective is to build the project. We've built the management team."

A former Barrick Gold Corp. (ABX: news, chart, profile) officer, Ken Thomas, is now Crystallex chief operating officer, Oppenheimer noted.

Crystallex had $34 million Canadian of debt as of March 31. Oppenheimer estimated that each $1 worth of Crystallex's Amex-traded shares is backed by $45 an ounce of gold as measured by the company's reserve assets - proven and provable gold ounces in the ground. That's at a $350-an-ounce gold price. Crystallex shares Tuesday midday were selling for $1.20 on the American Stock Exchange. They also trade in Toronto (CA:KRY: news, chart, profile).

"Our ability to produce gold will not be limited by our reserves," he said at the gold forum, sponsored by Denver Gold Group, a trade organization. The CEO said he expects a feasibility study on the development of Las Cristinas into a 20,000-tonne-per-day open-pit mine to be published by SNC-Lavalin by September of this year.

The company has hired Deutsche Bank to help arrange project financing. "Deutsche Bank has met with the Venezuela government, and I think that speaks for itself," he said. "I would make the argument that Crystallex's shares are severely undervalued."

Oppenheimer and his fellow executives now must hope the investing public begins to feel the same way. Thom Calandra's StockWatch is CBS MarketWatch's flagship column. The regular report is in its eighth year at CBS.MarketWatch.com. Thom Calandra is also author of subscription service The Calandra Report.