Final days for Crystallex?

If reports out of Venezuela are accurate, Crystallex International‘s (KRY-T) long saga in the country may be coming to a close — and not in a manner the Toronto-based company imagined.

In a prepared statement the Venezuelan ministry of mines said ore at the massive Las Cristinas gold project in the country would be “recovered and operated under state administration.”

And while such words sound like a death blow to the company, Crystallex’ head of IR Richard Marshall says that it has not received any such word from the government and it is still going forward in the process to attain the permit it needs to begin mining.

That process has been an excruciatingly long one for investors.

“Rome was built a lot faster than Crystallex,” say John Ing, an analyst with Maison Placements. It has been over four years since Crystallex first said the attainment of its environmental permit was imminent.

Still, Ing isn’t ready to write Crystallex off quite yet.

“Any news that comes from Venezuela has to be taken with a grain of salt,” he says. “It tends to be clarified later on by the government or the company.”

As a case in point, Ing points out that many reports out of the country are claiming the government is taking over the Las Cristinas. But as those familiar with story already know, the government has long been the owner of the project, with Crystallex being contracted to mine the deposit along with state mining firm CVG.

The market, however, signaled that it was taking the news seriously, slashing Crystallex shares by 28% or 13 to 33 on roughly 3.75 million shares traded.

And while the combination of political risk and tight credit is pushing some miners to the brink, Ing says Crystallex is somewhat protected because it already did the financing necessary to go into production should the final permits come down.

The Company has purchased some US$80 million worth of equipment and has little burn rate to speak of beyond administrative costs.

But being on relatively solid financial footing might not be enough if rumours about growing Russian and Chinese influence in Venezuela are true.

Rusoro Mining (RML-V), a firm with Russian management, has been increasing its stature in the country by acquiring mines and is said to have strong political ties with the government in Caracas.

Not a surprising turn of events perhaps, considering Venezuelan president Hugo Chavez has made no secret of his disdain for all things American and has actively reached out for more Chinese and Russian support.

Such favoritism for China and Russia over North American firms is combined with a penchant for nationalizing key industries in the country.

Beyond Chavez’ much publicized moves to take control of the country’s oil stocks, he has also moved on electricity, telecoms, cement and steel companies operating there.

It all points to continuing tough days ahead for Crystallex.

But then, Ing says, it’s all part of being in the mining business.

“Whether you’re Crystallex, Centerra Gold (CG-T) or Ivanhoe Mines (IVN-T), it’ s a fact of life,” he says. “While logic would put these projects into production quickly when metal prices were high, there are always other factors. Mining is not a sure thing.”