The information on this web page should be read in connection with Crystallex’s press release of February 16, 2011 entitled, "Crystallex files Request for Arbitration before the World Bank’s International Centre for Settlement of Investment Disputes". Click here to read the press release.
In September 2002, Crystallex signed a Mine Operating Contract (the "MOC") with the Corporacion Venezolana de Guayana (CVG) which granted Crystallex exclusive rights to develop and exploit the gold deposits on the Las Cristinas property. At a US$550 per ounce gold price, reserves of 16.9 million ounces of gold, contained in a measured and indicated resource of 20.8 million ounces, rank Las Cristinas as one of the largest undeveloped gold deposits in the world.
A positive Feasibility Study was completed by SNC Lavalin Engineers and Constructors Inc. (SNCL) in September 2003 and the study was approved by the CVG on March 8, 2004. In August of 2005, a comprehensive update to the 2003 Feasibility Study (Las Cristinas Development Plan 2005) was completed by SNC Lavalin. In November 2007, a second update (2007 Technical Report) was produced largely to detail the increase in reserves as a result of Crystallex drill programs. The 2007 update was a National Instrument 43-101 compliant Technical Report produced by Mine Development Associates, along with other consultants, including SNCL.
The process for obtaining the required mining permits was formally initiated with the submission of the Environmental Impact Study (EIS). An Engineering, Procurement and Construction Management (EPCM) contract to provide services for the development of Las Cristinas was awarded to SNCL in March 2004. Las Cristinas engineering and design work is essentially complete.
Based on the 2007 Technical Report, average production in the first five years of full operation at Las Cristinas for the 20,000 tpd base case will amount to approximately 252,000 ounces a year at total cash costs of US$258 per ounce.
Location and Infrastructure
The Las Cristinas property is located in the southeast corner of Venezuela in Bolivar State at Kilometre 88. Access to the property is via the main paved highway from the Venezuelan port of Puerto Ordaz to the Brazilian border. Puerto Ordaz is a major industrial city located on the Orinoco River, some 360 kilometres from Las Cristinas. Current access to the site from the paved highway is along a six kilometre dirt road from the village of Las Claritas. To bypass local villages, an upgraded nineteen kilometre road was built by Crystallex and is currently in use.
A long history of mining and industrial projects in Bolivar State makes the region very suitable for the development of a large gold mining project. Power for Las Cristinas will be from the national hydroelectric power grid. An existing 400 kV power line parallels the main highway from Puerto Ordaz and, in 2001, a new substation was constructed six kilometres from Las Cristinas to service the Las Cristinas project and the surrounding area. Two 150 MVA power transformers have been installed at the substation and provision has been made to supply Las Cristinas via a new six kilometre 230 kV overhead power line. The power line, which has a 300 MW capacity can adequately supply a 20,000 tonne per day operation or an expansion to 40,000 tonnes per day, which require 30 MWs and 60 MWs respectively.
The positive Feasibility Studies completed by SNCL and Mine Development Associates demonstrate the technical and economic viability of developing Las Cristinas as a large open pit mine, employing conventional carbon-in-leach (CIL) gold processing technology. Mill throughput is planned at 20,000 tonnes per day; however, the process plant has been designed to accommodate an expansion to 40,000 tonnes per day, which will be implemented as soon as practicable.
The Feasibility Study was approved by the CVG on March 8, 2004. On March 26, 2006, Crystallex received official notice from the Ministry of Basic Industry and Mining (“MIBAM”) advising that MIBAM has formally approved the technical, economic and financial Feasibility Study for Las Cristinas.
Calculated at a US$550 per ounce gold price, Las Cristinas’ proven and probable reserves currently stand at 464 million tonnes, grading 1.13 grams of gold per tonne for a total of approximately 17 million ounces of gold. The reserves are included in a measured and indicated resource of 20.8 million ounces of gold. In addition to the measured and indicated resources, Las Cristinas contains inferred resources of 6.3 million ounces of gold.
Las Cristinas Reserve Sensitivities - Lerchs-Grossman Pit Shell Sensitivity
Gold Price Ore Grade Contained Strip Ratio
(million tonnes) (g/t) (million ozs)
$450 337 1.30 14.16 1.76
$500 414 1.20 15.98 1.55
$550 489 1.12 17.56 1.39
$600 552 1.06 18.83 1.30
$650 614 1.01 19.91 1.21
$700 675 0.96 20.90 1.11
$750 735 0.93 21.90 1.11
$800 774 0.90 22.45 1.08
Reserves calculated by Mine Development and Associates in accordance with Canadian NI 43-101
Source: November 7, 2007 Technical Report filed on SEDAR
At a processing rate of 20,000 tonnes per day, gold production is forecast to average 233,000 ounces per year over the 65 year mine life at a cash cost, including royalties, of US$346 per ounce. However, over the first five years of operation, gold production is expected to average 252,000 ounces per year at an average cash cost, including royalties, of US$258 per ounce.
Engineering, Procurement and Construction Management (EPCM)
Crystallex awarded SNCL an EPCM contract to provide services for the design, construction and commissioning of a 20,000 tonne per day gold processing facility at Las Cristinas. Detailed engineering commenced upon the awarding of the EPCM mandate and is largely complete.
Social Development Programs
Crystallex is committed to employing the highest standards of corporate citizenship at its operations and recognizes the importance of developing a long term partnership with the local communities. At Las Cristinas, a number of local infrastructure and community projects have been completed, including:
- Thirty new homes were constructed for local residents.
- Installed one new water treatment plant and upgraded two existing plants.
- Built and installed a new sewage treatment plant and related sewerage network.
- Upgraded and paved local community roads.
- Constructed a new 10,000 square foot, 20 person hospital with housing for medical staff.
- Upgraded the local medical centre
- Provide medicine and doctors and dentists to the local clinic.
- Providing ongoing job training programs to small miners' associations.
- Sponsoring training programs to local communities.
- Established anti-malaria facility at site.
In addition, the Company employed over 125 local residents and provided programs for technical assistance training and the Company funded and administered a scholastic scholarship program.
On January 26, 2004, the mayor of the Municipality of Sifontes and the Governor of Bolivar State presented Crystallex and the Las Cristinas Project with the “Orden (Order of) General Dimingos Sifontes – Primera Clase”. This annual award is the highest award bestowed by the Municipality and recognizes Crystallex’s contribution to the Municipality and its residents.
Environmental Impact Study (EIS)
Crystallex and SNCL completed an updated EIS in 2004. The EIS updates the Las Cristinas EIS submitted by the previous operator of Ls Cristinas in 1996. The 1996 EIS was approved by the Ministry of Environment and Natural Resources (MinAmb - formerly MARN) in 1997 and the two permits required for conducting mining activities in Venezuela, namely, the Land Occupation Permit and the Permit to Impact Renewable Natural Resources were issued. The 1996 EIS was updated by Crystallex to reflect changes in the project design and environmental characteristics. Some of the project changes include: (i) reducing the initial processing capacity from 40,000 to 20,000 tonnes per day, (ii) changing the processing flowsheet to produce gold only, (iii) changing the design of the tailings management facility from two cells to one and (iv) the socio-economic baseline has changed with the presence of small scale miners on the property.
The 2004 EIS includes additional baseline studies carried out by Crystallex and various consultants. The baseline database has been updated in several areas: additional acid rock drainage testwork and initial cyanide destruction tests by SGS Lakefield, additional socio-economic surveys and a census of unauthorized small scale miners conducted by Proconsult of Venezuela.
Crystallex submitted the EIS to the CVG and the MinAmb on April 15, 2004. This initiated the final process for environmental permitting for Las Cristinas. The CVG approved a program of additional environmental baseline data collection, including drilling in the tailings management facility, pit and dump areas to confirm soils and groundwater characteristics, additional acid rock drainage tests, a second phase of socio-economic studies and a characterization of the small scale miners. The results of this additional work was submitted during the second and third quarters of 2004 as addenda to the EIS. The EIS includes a Site Closure and Rehabilitation Plan and an Environmental Management Plan that meets Venezuelan and World Bank standards.
In May 2007, MinAmb formally approved the EIS and set out the two remaining requirements Crystallex had to fulfill in order for the Permit to be issued: the posting of a Construction Compliance Guarantee Bond and payment of certain environmental duties.
The formal approval notice MinAmb sent to the CVG stated, "the Environmental permit will be issued following the payment of taxes and posting of the bond". On May 18, 2007, Crystallex, through the CVG, posted the bond and paid the requisite taxes. Following the posting of the bond, the Government of Venezuela acknowledged that Crystallex had satisfied all of the conditions in order to be granted the Permit. The Company received additional support for the issuance of the Las Cristinas permit in the fall of 2007, when the Venezuelan National Assembly's Commission of Economic Development reviewed the protracted timeline for the issuance of the Las Cristinas environmental permit. Following their October 4th, 2007 hearings, the Commission issued a report noting that representatives from MinAmb, the Ministry of Basic Industry and Mines ("MIBAM"), the CVG, and Crystallex had testified at their hearings. The Commission's report concluded that the CVG and Crystallex had complied with the feasibility study and other legal and technical requirements, thus allowing for the permit to be granted by MinAmb. The Chairman of the Commission recommended MinAmb grant the permit.
In contradiction to the applicable legal framework as well as the Government approvals and assurances, the Permit was denied in April 2008. Despite continuing to remain in compliance with the terms of the MOC and notwithstanding prior assurances as to the validity of compliance with the MOC, the Government unilaterally and unlawfully rescinded the MOC.