A long-running bid by Crystallex International Corp. (TSX: T.KRY, Stock Forum) to develop the Las Cristinas project in Venezuela has taken a fresh twist.
The company said it is forming a strategic partnership with the China Railway Resources Group Co. Ltd. to develop the project, which is located in Bolivar State and ranks as one of the world’s largest gold finds, with a measured and indicated gold resources of 20.8 million ounces.
Crystallex said China Railways (CRRC) is one of the largest state-owned companies in China. Under the agreement, Crystallex said CRRC is leading the efforts to unblock a stalled environmental process for Las Cristinas and will provide the necessary project capital to develop the project to commercial production.
Crystallex’s permit for Las Cristinas was denied in 2008.
Upon closing of the agreement, Crystallex will hold a one third carried interest in Las Cristinas, leaving CRRC with the other two thirds.
CRRC will also have the option to acquire a 19.9% stake in Crystallex by acquiring shares at 40 cents each, and converting a portion of the funds it advanced to the mining company to enable it to meet its obligations to company noteholders.
On Monday, Crystallex shares rose 4% to 57 cents.
News of the deal comes just weeks after Crystallex warned that it is quickly running out of cash. The company said it finished 2009 with US$6.9 million in cash, down from $34.5 million at the end of 2008.
Last month, it also indicated that it doesn’t have sufficient funds to meet its obligations over the next 12 months.
Crystallex’s doesn’t own the mining claims on which the Las Cristinas project is located, but retains the right to operate the mine.
On Monday, Crystallex said that it and CRRC have met with the Venezuelan government to inform them of their strategic partnership. Crystallex said it is pleased with the government’s 'expression of support.'