Crystallex International

DOW JONES NEWSWIRES

A joint-venture development agreement with China Railway Engineering Corp. for the Las Cristinas gold project in Venezuela could put an end to Crystallex International Corp.'s (KRY) ongoing dispute with the Venezuelan government over project permits.

Crystallex, whose principal asset is Las Cristinas, was blocked from developing the deposit in mid-2008 by the Venezuelan government.

The proposed partnership deal with the resource division of state-run China Railway has received an expression of support for a building permit for the mine from the Venezuelan government, according to Richard Marshall, vice-president of investor relations for Crystallex. "We expect the project to advance and permitting to advance," he said.

Marshall declined to estimate when Crystallex expects to get the go-ahead and he added that Crystallex and China Railway will proceed through the permitting process together.

Under the terms of the partnership, Crystallex said China Railway will "lead the efforts" to unblock the stalled environmental permitting process and will provide the necessary project capital for development.

Crystallex will hold a one-third stake in the Las Cristinas joint venture under the partnership, with China Railway holding the remaining two-thirds. Crystallex will contribute the mine operating contract, feasibility study and all other design and engineering already completed, while China Railway will be responsible for construction. China Railway provided Crystallex with $2.5 million during the negotiation of the partnership agreement and has also agreed to make an undisclosed equity investment following closing of the transactions.

Crystallex shareholders are expected to vote on the partnership agreement in August and closing is expected in the third quarter.

Las Cristinas has estimated proven and probable reserves of almost 17 million ounces of gold.

China Railway Engineering is a major construction and engineering-services company. It's currently constructing a $7.5 billion railway project in Venezuela linking southwestern Cojedes State and the eastern Anzoategui State.

In Toronto Monday, Crystallex is up 4 Canadian cents, or 7.3%, to 59 Canadian cents on 16.5 million shares. It traded as high as 82 Canadian cents earlier Monday, for a gain of 49%.

-By Judy McKinnon, Dow Jones Newswires; 416-306-2100; judy.mckinnon@dowjones.com

(Laura Kusisto in Toronto contributed to this article.)

(END) Dow Jones Newswires

June 07, 2010 11:51 ET (15:51 GMT)