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TODD BRUCE - CRYSTALLEX INTERNATIONAL CORPORATION (KRY)
CEO Interview - published 12/20/2004

DOCUMENT # ZAS602

TODD BRUCE is President, Chief Executive Officer and Director of
Crystallex International Corporation. Mr. Bruce brings to Crystallex
extensive experience in the gold mining industry, having most recently
served from February 1996 through January 24, 2003, as President and
Chief Operating Officer of IAMGOLD Corporation, a TSX and AMEX listed
company whose principal assets, the major Sadiola gold mine and the
Yatela gold mine, commenced commercial production in 1997 and 2001,
respectively. Mr. Bruce played a leadership role in the growth and
financing of IAMGOLD, in the implementation of the IAMGOLD's innovative
Gold Money policy, and in the merger of Repadre and IAMGOLD in January
2002. Prior to joining IAMGOLD, Mr. Bruce served from 1980 through
January 1996 in a number of senior management positions with the South
African company, Johannesburg Consolidated Investment Co. and its
successor company, Anglo American Platinum Corporation. Immediately
prior to joining IAMGOLD, Mr. Bruce served as Executive Director:
Marketing, Business Development and Strategic Planning for Anglo
American Platinum Corporation. Mr. Bruce has a BSc in Geology from the
University of Rhodesia and a Graduate Diploma in Engineering (Mineral
Economics) from University of the Witwatersrand in South Africa

Sector: PRECIOUS METALS

TWST: Give us a brief history of Crystallex International and a picture
of where you are at this time.


Mr. Bruce: Crystallex is a gold mining company that's been around for
some time. While recent interest is focused upon the Las Cristinas
project, we have had ongoing mining operations in Venezuela for many
years. For the past several years, our operations have been concentrated
in what we call our El Callao Mining and Processing Complex. We also
previously had a mining operation in Uruguay, also in South America. As
I noted, the main focus of interest by the investment community
regarding Crystallex is the fact that the company controls what we
consider one of the world's best undeveloped gold deposits, the Las
Cristinas Project in Bolivar State. On the current schedule, we are
looking at commercial production at our Las Cristinas project in
probably five to six quarters from now, sometime in the first half of
2006.

TWST: Where is your current production coming from and what are some of
the other properties besides Las Cristinas?


Mr. Bruce: Our current Venezuelan operations produce around 50,000
ounces of gold a year. As I mentioned earlier, we have several mining
operations in the vicinity of the town of El Callao in Venezuela, some
owned exclusively, and some held in a joint venture. We have a central
processing facility, the Revemin Mill, at which we process ore from the
mining operations. That is the main focus of our non-Las Cristinas work.
Of course, a good deal of our time and attention is spent on advancing
the enormous Las Cristinas deposit into production.

TWST: Could you bring us up to date with the economics of the Las
Cristinas project?


Mr. Bruce: In September 2003, we released a full feasibility study on
Las Cristinas for a 20,000 tonne per day (tpd) operation that would cost
some US$243 million to establish and which would produce some 300,000
ounces per year for the first 5 years and some 270,000 ounces over the
34 year projected life of the operation. The feasibility study was
produced by SNC Lavalin, one of the world's pre-eminent engineering and
project management companies. We commenced the project in March 2004
when the formal approval of the feasibility study by the Venezuelan
authorities was received. One of the first steps undertaken was a 90-day
review by SNC Lavalin to convert the feasibility study capital estimate
into a full capital budget estimate. In the last year, several companies
have found this transition from a feasibility study capital estimate to
the actual project capital control budget to be a difficult transition.
Companies have experienced some very nasty surprises when they upgraded
their feasibility study capital cost estimates to a final project
capital control budget number. We've successfully progressed through
this potentially risky phase now and I'm very pleased to say that we've
come through that very well.  The capital increase as we moved from the
feasibility study to the controlled budget number was about US$23
million, which was less than a 10% increase over the feasibility cost
estimate of US$243 million. However, only about US$12 million of that
increase was due to cost increases beyond our control, e.g. increases in
the price of oil as a feedstock for manufacturing products like HDPE
piping. This US$12 million represented only a 4.9% increase on the
original feasibility study capital cost. The remaining US$11 million
increase in the capital budget represented discretionary investment
choices that we made, and those were twofold. The primary one is that we
decided that the company will actually do owner-operated mining of the
entire ore body. Previously, the feasibility study had assumed we would
do owner-operated mining only on the hard rock and that we would get a
contractor to mine the saprolite material. In return for a net capital
increase of some US$5 million in extra mining fleet expense, we reduced
mining costs by some US$70 million over the first 10 years of the
project. As a consequence, even though we've seen this modest capital
increase of only 9% to 10% (in total, US$23 million), we have materially
improved an already outstanding project by reducing operating costs
significantly. We've driven the total average cash operating cost down
to an average of US$128 per ounce for the first five years and we've
consequently increased the return on capital invested from about 14% to
15.7% using a conservative gold price of US$325/oz. We're very pleased
that, not only have we successfully negotiated the transition from
feasibility study cost to genuine project budget cost, but we've
actually been able to enhance and improve the project by reducing the
operating costs and increasing the overall return to shareholders at the
same time.

TWST: What is going to be the ultimate recovery cost of gold per ounce
at Las Cristinas in your estimate?


Mr. Bruce: The current estimate would be about US$128 per ounce in total
cash cost for the first five years. If we look at the life-of-mine
estimate, that covers about 34 years, the average total cash cost is
about US$190 per ounce.

TWST: What is your estimated reserve there? As I understand, you did
some work recently to up the reserve. Where do you stand on that?


Mr. Bruce: The existing gold reserves amount to 10.2 million ounces,
which certainly makes Las Cristinas one of the largest gold deposits in
the world, and it's perhaps the characteristic that allows it to be
described as possibly the best undeveloped gold project in the world. It
has considerable potential to continue to grow even further as the ore
body is still open at depth as well as in certain areas at surface. We
have just completed an 18-hole in-fill drill program at Las Cristinas
that was targeted at increasing the reserves even further. We have
released the results of all 18 holes and certainly we're very pleased
with the results. We expect that we will now be producing a revised
reserve that should show a nice increase in reserves. We would hope to
have that revised reserve estimate produced by the middle of November.
(Subsequent to this interview, on November 9, 2004, Crystallex announced
increased reserves at Las Cristinas bringing the total reserve estimate
to 12.8 million ounces.)

TWST: What is the cost of recovery per ounce at your Tomi deposits?


Mr. Bruce: The current total cash cost of the Tomi and the operations
around El Callao are approximately US$325 an ounce. We're still in the
process of turning that operation around. It went through a very
difficult period over the previous couple of years. There was an awful
lot of capital rationing that had to go on in the company and there were
metallurgical challenges. When I joined the company in September 2003,
one of the things that we immediately focused on was getting a
successful financing in place that not only continued to ensure that the
Las Cristinas deposit would go forward on a fast track, but also insured
that we'd be able to restructure and invigorate our El Callao
operations. We've seen production on an annualized basis go from
probably a low of 15,000 to 20,000 ounces to approaching 50,000 ounces
this year and we've probably seen costs come down from over US$450 per
ounce at their worst to now about US$325. Certainly as we go forward
into next year, we would expect to see further optimizations of the El
Callao operations and we expect to see costs drop down below the US$300
per ounce level.

TWST: How does politics and operating a mine play out in a country such
as Venezuela?


Mr. Bruce: I can report that having operated gold mines in Venezuela for
over nine years now, our experience has indeed been very positive. The
center for gold mining in Venezuela is Bolivar State, which is in the
southeastern part of the country. It's an average of 600-900 kilometers
away from Caracas, the capital of Venezuela. It's very much the
industrial and mining heartland of Venezuela, and therefore the business
of the province is very much focused on mining and natural resources.
Our experience has been extremely positive there, as has also been the
case with other companies like Hecla Mining, which I believe has been so
pleased with its experience on its La Camorra gold mine in Bolivar State
that it's putting the bulk of its new capital investment back into
Venezuela and opening up a brand new gold mine called Mina Isadora. I
think that across the spectrum, for ourselves and people like Hecla and
also Bolivar Gold, all of our experiences have been positive and we
certainly judge Venezuela as a vastly under-rated jurisdiction for
mining investment.

TWST: Give us your view on the prospects for the price of gold.


Mr. Bruce: I belong to that camp that believes we're dealing with a
secular long-term change in the price of gold. I think there are very
many parallels to the 1960s and 1970s in terms of an environment whereby
you've got a guns and butter policy in the United States, where you have
this enormous financial burden of an expensive war in which there's no
visible and easy exit. You've also got an internal domestic environment
in which nobody is cutting back expenditures, so as a consequence, both
federal deficits and state deficits are going higher and higher. You've
got the trade deficit, which continues to spiral upward at a seemingly
ever-faster rate. As I say, there are many similarities to the 1960s and
1970s in terms of the need for fiscal discipline. If you look at that
environment, you can see the dramatic secular change that the gold price
went through for that 10 plus year period, and I think that's what we
may be looking at again. I certainly believe that in the medium to
longer term, you're going to continue to look at a strong gold price.
There are clearly going to be ups and downs as we progress, but I think
on balance, what we're expecting is, in general, that the gold price
will sort of make higher highs and lower lows. I think that like most
things in life, timing is everything and I think that over the next five
to 10 years, it's probably going to be a very good time to be in the
gold mining business.

TWST: You don't seem to be a very big proponent of hedging.


Mr. Bruce: No. I'm definitely not a proponent of hedging. I'm very much
of the view that it's the right of shareholders to, in fact, determine
their tolerance and interest in gold prices rather than having
management unilaterally fix it on a company-by-company basis. I think
that shareholders are far more efficient in balancing their portfolios,
when allowed to reflect their views on gold price prospects, rather than
have companies eliminate gold price exposure by hedging the gold price.
Shareholders can buy and sell gold shares to reflect their view on the
gold price.  As a consequence, even during the difficult years, based
upon statistical analysis and some very interesting studies done at
various business schools, those companies that have offered the cleanest
and purest profile to gold with minimal or no hedging, over time have
maximized shareholder returns and been rated accordingly. We think
that's important.  Certainly there is an expanding school of valuation
that actually seeks to partially capture or reflect the value that
shareholders in general will place on gold equities as partially an
option on the gold price. So in addition to buying your existing cash
flow stream at the current gold price, shareholders also view equities
as long-dated open-ended call options on the gold price. Again, if you
keep yourself unfettered and you're not constraining your gold price
volatility by hedging, then, ultimately, it is consistent that
shareholders will pay you more for that option volatility than they will
when that option volatility is taken away by hedging. Generally
speaking, even during the difficult days, companies that offered an
unhedged profile have generated better returns over the long run and
have received better multiples from gold investors than those that
haven't.

TWST: How much has the gold price appreciated this year vis-…-vis
Canadian currency?


Mr. Bruce: Fortunately, with respect to that issue we have no operations
in Canada. We're not like the South African, Australian or Canadian
mines that have seen their revenues increase by a lot less than the
increase in the US dollar price of gold because of a strengthening of
their local currencies against the US dollar. That also usually means
that their cost structures have also gone up when expressed in US
dollars which may result in flat or even declining profits since
obviously their revenues have not gone up at the same rate when
expressed in local currency. It's not something that impacts directly on
a company like ours, whose existing producing assets and future
producing assets are in Venezuela where the local currency has continued
to decline or been flat against the dollar.

TWST: Normally, when gold prices go up, supplies come into the market.
Do you pay any attention to that? Are you concerned about extra supplies
out there?


Mr. Bruce: At the end of the day, my perspective is that gold is nothing
more than money. It's not a commodity in the sense of nickel or copper
that is obviously materially influenced on supply/demand balances or
imbalances. There are two fundamental characteristics that make gold a
better form of money than any other that's ever been invented by mankind
in the last 3,000 years or so. The first characteristic is that gold is
the only form of money that can't be created out of thin air at no cost.
The other great characteristic about it is that because there is a
substantial pool of monetary gold in existence, the incremental addition
to that pool is, generally speaking, almost insignificant. As a
consequence, as a form of money, gold is not like paper currencies which
governments and politicians can inflate like crazy and add vast amounts
to the money supply since such fiat currencies are created out of thin
air at no cost. Undoubtedly, higher gold prices will obviously encourage
the markets and investors to employ their risk capital by investing in
new gold mines, but I think at the end of the day, when you view gold as
money, the incremental addition to the pool of available gold that is
governing the monetary nature of it is always going to be very modest
and you can't say that about any form of fiat paper currency.

TWST: Besides Las Cristinas, are there any other projects that you're
working on?


Mr. Bruce: Las Cristinas is so big that it has the capacity to provide
significant organic growth. There's no doubt that we are in the
privileged position of having an incredible growth asset. If we take our
current base case, which is a 20,000 tpd operation, that 20,000 tpd
operation will generate close to 300,000 ounces a year, just from Las
Cristinas. If you take our current state as a company, we produce 50,000
ounces a year. That means that by 2007 we could see this company
producing, say, 300,000 to 350,000 ounces a year. That's a six to
sevenfold growth in the volume output in approximately three years from
now. In addition to such a remarkable growth profile, we will also
benefit from a significant increase in our profit margin. As I said
earlier, our current profit margin is constrained by our current total
cash cost of about US$300 per ounce. Three years from now, with Las
Cristinas at 20,000 tpd, we expect to see those unit costs come down to
somewhere around US$160 an ounce. Thus, not only are we going to get a
sevenfold increase in production, but we're going to get an expansion in
our profit and cash generation margins.  If we look at the upside, we
have already done a full bankable feasibility study for a 40,000 tpd
operation at Las Cristinas. At 20,000 tpd, as I mentioned earlier, we
have a 34-year mine life, just based on the current reserves. At 40,000
tpd, that is, if we double the size of the operation, the mine life is
20 or 21 years, still an inordinately long mine life by industry
standards. A 40,000 tpd operation would produce in the region of
500,000-550,000 ounces of gold per year. If we take our current
production level of 50,000 ounces, that means that in three to four
years from now, if we could finance a 40,000 tpd operation, you'd be
looking at an 11 or 12 fold increase in gold production to some 550,000
to 600,000 ounces in this Company and, of course, a further increase in
our profit margins and cash flows because our unit cost would be
expected to again come down to somewhere around the US$160 per ounce
level. When you're looking at an asset that can grow your company
anywhere from 6 or 7 fold to 11 or 12-fold in a matter of a three or
four-year period, then you're obviously going to make sure that you
fully extract the maximum benefit from that identified low risk organic
opportunity for shareholders before you get distracted and look for
other possible opportunities. We certainly have an interest in looking
at other opportunities, but we obviously want to assure our shareholders
that our eye is very much on the Las Cristinas ball. We've recruited an
absolutely extraordinary team of people both for the project design and
construction as well as the operating side of things to bring this value
home for our shareholders.

TWST: What should investors expect from you financially?


Mr. Bruce: Again, that's a function of what investors would forecast as
the gold price and depends upon the scenario by which we get Las
Cristinas into production, the base case of 20,000 tpd or the upside
scenario of 40,000 tpd. I don't think I can give anybody a helpful
single figure, but we might anticipate that, between those two
scenarios, the shareholders and the market in general, over a three to
four year period, could see this company growing by either 6 to 7 fold
or 11 to 12 fold on production, with increased cash flow and profits
being generated since we're reducing our unit operating costs
materially.

TWST: Do you have the management team in place to accomplish all of your
goals or are you still building it up?


Mr. Bruce: We have basically gone a long way in getting the total
management team together. Our Chief Operating Officer is

Dr. Ken Thomas who spent 15 or 16 years with Barrick Gold Corporation as
their Senior Vice President of Projects and Technical Services. He was
very much responsible for building the plant and surface facilities of
many of the great Barrick assets such as the Goldstrike complex and the
Meikle Mine in Nevada, the Pierina Mine in Peru and the Bulyanhulu Mine
in Tanzania. Subsequently, in the early part of this year, he was able
to reassemble one of his former specialist project teams from Barrick,
bringing in three senior executives from Barrick, two of whom had worked
with him for almost 20 years. So we've got an absolutely outstanding
project design and execution team. We've now gone on to the next stage
and as we've recruited all the senior management staff for the Las
Cristinas operation once it's ready to go into production in the first
half of 2006. We've identified a General Manager, a Manager of Mining, a
Manager of Processing and a Superintendent of Electrical and
Instrumentation. All of those senior department heads have been brought
up into the design team in Toronto where they are fully integrated in
designing this operation. Our intent is to purposefully engineer out, in
advance, the high risk transition phase that many companies fall down
on, which is going from the design and construction of a mine to
actually operating it. We're going to have our full senior operating
management fully involved in the design of the project. Therefore
there's no issue that on the day that the mine is handed over to them to
operate of them saying, 'Why did you do this? Why did you do that?' I
think that it's unusual for a company of our size and situation to be
planning that far ahead and eliminating those kinds of risks for
shareholders.

TWST: How does the balance sheet look?


Mr. Bruce: The balance sheet looks very substantive, I'm pleased to say.
We currently have probably close to US$65 million in the bank.
Obviously, with a project of this size, even if it's at a 20,000 tpd
level, we will be continuing to put financing together. That will
probably include a component of non-recourse bank project financing. We
have appointed BNP Paribas as our project financing advisor and we're
now quite a ways down the road in terms of working with them to put a
project financing syndicate together. As to the balance of the funding
that we're looking at, assuming roughly 50% project finance debt, we
will look to source that funding from either the equity market and/or
the mezzanine finance market at an appropriate time. I think we're very
well based where we are now, and certainly we have a lot of interest
from the marketplace and the banks. I'm very confident that we'll be
able to put together an optimal financial package and probably get it
all tied up between now and the end of the second quarter of next year.

TWST: What's your view on how Wall Street or financial markets perceive
your company?


Mr. Bruce: I think they perceive it, first of all, as a turnaround
company. When I joined the company, it was under followed and had a
minimal number of institutional shareholders. It was overwhelmingly
dominated by retail shareholders, so we basically have been working hard
at turning the company around, turning the El Callao operations around,
setting milestones that shareholders can measure us against and then
executing against those milestones. I think that's the first thing that
most people think about, that it is a turnaround opportunity and in the
last year to 18 months, the company has executed and has hit its
milestones. The real focus now is transforming into a value play. I
think if the market goes to the MineWeb site which provides an industry
comparison of relative valuations in terms of market capitalization per
ounce of recoverable reserves, it will find that Crystallex is very much
an undervalued company compared to almost the entire industry.
Therefore, I think people are now focusing on us as one of those
relatively rare value opportunities that, with such an inordinate growth
profile, you don't have to require any heroic assumptions on gold prices
to see real value. We're all looking forward to better gold prices, but
I think our numbers demonstrate that even at US$325, which is the price
we have used to date for calculating reserves and doing feasibility
studies, that the company is significantly undervalued versus the peer
group and obviously, that undervaluation probably increases as you go to
$350-$375 gold prices. I think that's what the market is now. Having
established our credibility and trust in the marketplace, we are now
meeting with success in persuading an ever-increasing number of
investors, both institutional and retail, that we are a real value
opportunity with an identified growth profile. Experience to date
confirms that more and more people are finding it a very compelling
investment opportunity.

TWST: How aggressive is your PR or investor relations program to get
your message out?


Mr. Bruce: I think we've been very conscientious about that. In the year
that I've been in the company, I would estimate that I've probably done
one-on-one presentations to well over 215-220 institutional investors in
Canada, the States and in Europe. We regularly attend most of the
important retail gold shows and institutional gold shows. We present at
the Denver Gold Show, the San Francisco Gold Show, the New York Gold
Show, the Las Vegas show and the Toronto show. We take this very
seriously and conscientiously in terms of our need to make sure that the
story is properly communicated, that people have an opportunity to
understand, to meet with us and put faces to names. I would say we're
pretty committed and very conscientious about that.

TWST: Would you give us, in summary, a key investment message you would
wish to convey to shareholders?


Mr. Bruce: It boils down again to that growth profile. We're a gold
company that we believe, on current comparative measures, is materially
undervalued compared to the peer group. We're a company that offers the
marketplace a growth opportunity, and that, in three years' time, based
on a 20,000 tpd scenario, has the potential to increase gold production
by 6 or 7 times and has the further potential to increase cash flow and
profits significantly. The project is underway; to date we have
committed some US$80 million in contracts for long lead items. On the
upside, with a 40,000 tpd scenario, in three to four years' time, you
could see a company producing 11 to 12 times more gold as we are today,
and an even greater increase in cash flows and profits. What we would
stress is that even with those lofty aspirations, there is still further
growth to Las Cristinas because, as we reported earlier, we believe that
there are opportunities to further increase reserves. It is our belief
that this deposit still has a long way to grow and we have aspirations
even beyond the projected 550,000-600,000 ounce level that could come
about if we achieve that 40,000 tonnes per day scenario in the next
three or four years.

TWST: Thank you. (WT)


TODD BRUCE
 President, CEO & Director
 Crystallex International Corporation
 18 King Street East
 Suite 1210
 Toronto, Ontario M5C 1C4
 Canada
 (416) 203-2448
 (416) 203-0099 - FAX
 www.crystallex.com
 e-mail: info@crystallex.com

Copyright 2004 The Wall Street Transcript Corporation
All Rights Reserved


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