Exhibit
1.2
 Crystallex International Corporation
 Consolidated Financial Statements
 December 31, 2008 and 2007




---



##### 



Crystallex International Corporation
 RESPONSIBILITY FOR FINANCIAL REPORTING
    MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING




---



##### 



Crystallex International Corporation
 MANAGEMENTS REPORT ON DISCLOSURE CONTROLS AND PROCEDURES
  Johan vant Hof
    
    Robert Fung
    
    Hemdat SawhChairman of the Audit Committee
    
    Chief Executive Officer
    
    Chief Financial Officer




---



##### 



Crystallex International Corporation
 INDEPENDENT AUDITORS REPORT
   Consolidated financial statements
    Internal control over financial reporting
 Internal Control  Integrated
Framework




---



##### 



Crystallex International Corporation
 INDEPENDENT AUDITORS REPORT (continued)
     
 Comments by Auditors for US Readers on Canada-US Reporting Difference




---



##### 



Crystallex International Corporation
Consolidated Balance Sheets
As at December 31, 2008 and 2007
(In thousands of United States dollars except for share and per share amounts)
 2008
    
    
    2007AssetsCurrentCash and cash equivalents (Note 9)
    
    $
    34,520
    
    
    $
    16,065Accounts receivable
    
    
    172
    
    
    
    182Prepaid expenses, deposits and other assets
    
    
    1,145
    
    
    
    604Discontinued operations (Note 4)
    
    
    1,689
    
    
    
    4,50537,526
    
    
    
    21,356Property, plant and equipment (Note 5)
    
    
    343,652
    
    
    
    317,179Other
    
    
    1,286
    
    
    
    705$
    382,464
    
    
    $
    339,240LiabilitiesCurrentAccounts payable and accrued liabilities
    
    $
    7,767
    
    
    $
    9,853Discontinued operations (Note 4)
    
    
    3,494
    
    
    
    1,58211,261
    
    
    
    11,435Notes payable (Note 6)
    
    
    86,746
    
    
    
    83,291Discontinued operations  asset retirement obligations (Note 4)
    
    
    
    
    
    
    1,864Future income taxes (Note 8)
    
    
    16,661
    
    
    
    14,243114,668
    
    
    
    110,833Shareholders equityShare capital (Note 7)
    
    
    561,751
    
    
    
    503,489Contributed surplus
    
    
    33,971
    
    
    
    27,124Accumulated other comprehensive income
    
    
    11,959
    
    
    
    11,959Deficit
    
    
    (339,885
    )
    
    
    (314,165
    )267,796
    
    
    
    228,407$
    382,464
    
    
    $
    339,240
 
  Robert Fung, Director
    
    Johan vant Hof, Director
  Page 1 of 30




---



##### 



Crystallex International Corporation
Consolidated Statements of Operations, Comprehensive Loss and Deficit
Years ended December 31, 2008 and 2007
(In thousands of United States dollars except for share and per share amounts)
 2008
    
    
    2007(Expenses) incomeGeneral and administrative
    
    $
    (13,349
    )
    
    $
    (21,738
    )Interest on debt
    
    
    (12,830
    )
    
    
    (12,595
    )Foreign exchange gain
    
    
    2,115
    
    
    
    11,072Amortization of property, plant and equipment
    
    
    (77
    )
    
    
    (63
    )Gain on sale of equipment
    
    
    1,751
    
    
    
    Interest and other income
    
    
    583
    
    
    
    1,094Loss from continuing operations
    
    
    (21,807
    )
    
    
    (22,230
    )Loss from discontinued operations, net of tax (Note 4)
    
    
    (3,913
    )
    
    
    (8,221
    )Net loss and comprehensive loss
    
    
    (25,720
    )
    
    
    (30,451
    )Deficit, beginning of year
    
    
    (314,165
    )
    
    
    (283,714
    )Deficit, end of year
    
    $
    (339,885
    )
    
    $
    (314,165
    )Loss per share from continuing operations Basic and diluted
    
    $
    (0.07
    )
    
    $
    (0.09
    )Loss per share Basic and diluted
    
    $
    (0.09
    )
    
    $
    (0.12
    )Weighted average number of shares outstanding
    
    
    290,958,931
    
    
    
    256,668,551
  Page 2 of 30




---



##### 



Crystallex International Corporation
Consolidated Statements of Cash Flows
Years ended December 31, 2008 and 2007
(In thousands of United States dollars except for share and per share amounts)
 2008
    
    
    2007Cash flows from (used in) operating activitiesLoss from continuing operations
for the year
    
    $
    (21,807
    )
    
    $
    (22,230
    )Items not affecting cash:Amortization
    
    
    77
    
    
    
    63Interest accretion on debt
    
    
    3,455
    
    
    
    3,567Stock-based compensation
    
    
    496
    
    
    
    3,112Directors fees paid in shares
    
    
    254
    
    
    
    148Unrealized gain on translation of
future income taxes
    
    
    (808
    )
    
    
    (14,322
    )Unrealized foreign exchange (gain) loss
    
    
    (135
    )
    
    
    2,275Gain on sale of equipment
    
    
    (1,751
    )
    
    
    Changes in operating assets and liabilities:Decrease in accounts receivable
    
    
    62
    
    
    
    1Increase in prepaid expenses, deposits and other assets
    
    
    (533
    )
    
    
    (1,794
    )Decrease in accounts payable and accrued liabilities
    
    
    (2,085
    )
    
    
    (213
    )(22,775
    )
    
    
    (29,393
    )Cash flows from (used in) investing activitiesInvestment in property, plant and equipment
    
    
    (28,097
    )
    
    
    (26,893
    )Proceeds from sale of equipment
    
    
    6,039
    
    
    
    (22,058
    )
    
    
    (26,893
    )Cash flows from (used in) financing activitiesIssuance of common shares
    
    
    64,326
    
    
    
    52,792Debt repayments
    
    
    
    
    
    
    (1,472
    )64,326
    
    
    
    51,320Increase (decrease) in cash and cash equivalents
from continuing operations
    
    
    19,493
    
    
    
    (4,966
    )Decrease in cash and cash equivalents
from discontinued operations (Note 4)
    
    
    (1,049
    )
    
    
    (7,021
    )Effects of exchange rate fluctuations on cash
    
    
    11
    
    
    
    (521
    )Cash and cash equivalents, beginning of year
    
    
    16,065
    
    
    
    28,573Cash and cash equivalents, end of year
    
    $
    34,520
    
    
    $
    16,065
   Page 3 of 30




---



##### 



Crystallex International Corporation
Consolidated Statements of Shareholders Equity
Years ended December 31, 2008 and 2007
(In thousands of United States dollars except for share and per share amounts)
 
 Number of
    
    
    
    
    
    
    Number of
    
    
    
    
    
    
    Accumulated othercommon shares
    
    
    
    
    
    
    warrants
    
    
    Contributed
    
    
    comprehensive(thousands)
    
    
    Amount
    
    
    (thousands)
    
    
    surplus
    
    
    income
    
    
    Deficit
    
    
    TotalBalance at December 31, 2006
    
    
    245,424
    
    
    $
    448,101
    
    
    
    18,688
    
    
    $
    23,135
    
    
    $
    11,959
    
    
    $
    (283,714
    )
    
    $
    199,481Shares issuedPublic offering
    
    
    14,375
    
    
    
    50,701
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,701Exercise of options
    
    
    859
    
    
    
    1,622
    
    
    
    
    
    
    
    (412
    )
    
    
    
    
    
    
    
    
    
    
    1,210Settlement of promissory note
    
    
    461
    
    
    
    1,800
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,800Exercise of warrants
    
    
    502
    
    
    
    1,117
    
    
    
    (502
    )
    
    
    (236
    )
    
    
    
    
    
    
    
    
    
    
    881Directors fees
    
    
    38
    
    
    
    148
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    148Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,637
    
    
    
    
    
    
    
    
    
    
    
    4,637Loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,451
    )
    
    
    (30,451
    )Balance at December 31, 2007
    
    
    261,659
    
    
    $
    503,489
    
    
    
    18,186
    
    
    $
    27,124
    
    
    $
    11,959
    
    
    $
    (314,165
    )
    
    $
    228,407Shares issuedPublic offering
    
    
    32,890
    
    
    
    57,730
    
    
    
    16,445
    
    
    
    6,414
    
    
    
    
    
    
    
    
    
    
    
    64,144Exercise of options
    
    
    96
    
    
    
    278
    
    
    
    
    
    
    
    (96
    )
    
    
    
    
    
    
    
    
    
    
    182Directors fees
    
    
    173
    
    
    
    254
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    254Warrants expired
    
    
    
    
    
    
    
    
    
    
    (5,936
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    529
    
    
    
    
    
    
    
    
    
    
    
    529Loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,720
    )
    
    
    (25,720
    )Balance at December 31, 2008
    
    
    294,818
    
    
    $
    561,751
    
    
    
    28,695
    
    
    $
    33,971
    
    
    $
    11,959
    
    
    $
    (339,885
    )(1)
    
    $
    267,796
 
 (1)
    
    Includes total comprehensive deficit for the twelve months ended December 31, 2008
of $327,926 (2007  $302,206)  Page 4 of 30




---



##### 



Crystallex International Corporation
Notes to the Consolidated Financial Statements
December 31, 2008 and 2007
(In thousands of United States dollars except for share and per share amounts)
 
 1.
    
    Nature of operations and going concernCrystallex International Corporation (Crystallex or the Company) is engaged in the
development of gold properties in Venezuela.(a)  BackgroundThe Companys principal asset is the Las Cristinas project, currently under pre-development in
Venezuela. On September 17, 2002, the Company entered into a non-assignable Mine Operating
Contract (the Mine Operating Contract) with the Corporación Venezolana de Guayana (CVG),
acting under the authority of the Ministry of Energy and Mines of Venezuela, pursuant to
Venezuelan mining law, under which the Company was granted the exclusive right to explore,
develop and exploit the Las Cristinas 4, 5, 6 and 7 properties including the processing of
gold for its subsequent commercialization and sale.The Company is currently awaiting the decision of the Venezuelan Ministry of the Environment
and Natural Resources (MinAmb) for the issuance of the Authorization to Affect Natural
Resources (the Permit) to commence construction at Las Cristinas.The construction and ultimate commencement of commercial production at Las Cristinas are
dependent upon receipt of the Permit which will allow management to proceed to put in place
financing to fund construction. In addition, the Las Cristinas project is subject to
sovereign risk, including political and economic instability, changes in existing government
regulations, government regulations relating to mining which may withhold the receipt of
required permits, as well as currency fluctuations and local inflation. The April 2008
communication from the Director General of Permits at MinAmb and subsequent denial of the
Companys appeal, followed by an appeal to the Minister of MinAmb in June 2008 with no
decision being received to date, demonstrate the significant risks that the Las Cristinas
project faces. The Company, nonetheless, has made specific decisions to continue to meet its
obligations under the Mine Operating Contract and in March 2009 received confirmation from the
CVG that the Mine Operating Contract remains in full force and effect which provides the
Company with continued control over the Las Cristinas project. These risks may adversely
affect the investment and may result in the impairment or loss of all or part of the Companys
investment which could be material.(b)  Basis of presentation and going concernThese financial statements have been prepared in accordance with Canadian generally accepted
accounting principles (GAAP) and on the going concern basis of accounting which contemplates
the realization of assets and the satisfaction of liabilities in the normal course of
business. Management has considered all available information in assessing the Companys
ability to continue as a going concern and satisfy its obligations as they fall due in the
normal course of business, which is at least, but is not limited to, having sufficient cash
resources to fund twelve months of operations from the balance sheet date.
 Page 5 of 30




---



##### 



Crystallex International Corporation
Notes to the Consolidated Financial Statements
December 31, 2008 and 2007
(In thousands of United States dollars except for share and per share amounts)
 
 1.
    
    Nature of operations and going concern (continued)As at December 31, 2008, the Company has positive working capital of $26,265 including cash
and cash equivalents of $34,520. Management estimates that these funds will be sufficient to
meet the Companys obligations and budgeted expenditures at least until December 31, 2009, but
may not be sufficient to cover its obligations falling due in January 2010. This uncertainty
raises substantial doubt as to the validity of the going concern basis of accounting.The anticipated funding shortfall may be met in the future in a number of ways including a
future liquidity event. Accordingly, the Company has a number of financing options available
to generate sufficient cash to fund ongoing operations and service its debt requirements as
they come due in order to meet such a test in the future including, but not limited to, the
following:
 
 There is, however, no assurance that these sources of funding or initiatives will be available
to the Company, or that they will be available on terms which are acceptable to the Company.
Accordingly, these financial statements do not reflect the adjustments to the carrying values
of assets and liabilities, the reported expenses and the balance sheet classifications used,
that would be necessary should the Company be unable to continue as a going concern in the
normal course of operations. Such adjustments could be material.2.
    
    Significant accounting policiesThe principal accounting policies followed by the Company, which have been consistently
applied in the preparation of these consolidated financial statements, except for certain new
pronouncements which have been adopted effective January 1, 2008 as described in Note 3, are
summarized as follows.Basis of presentation of consolidated financial statementsThe consolidated financial statements of Crystallex have been prepared in accordance with
accounting principles generally accepted in Canada. These policies are consistent with
accounting principles generally accepted in the United States in all material respects except
as outlined in Note 15.Principles of consolidationThese consolidated financial statements include the accounts of the Company and its
majority-owned subsidiaries, all of which are controlled through the ownership of a majority
voting interest. All inter-company balances and transactions have been eliminated.
 Page 6 of 30




---



##### 



Crystallex International Corporation
Notes to the Consolidated Financial Statements
December 31, 2008 and 2007
(In thousands of United States dollars except for share and per share amounts)
 
 2.
    
    Significant accounting policies (continued)Translation of foreign currenciesThe U.S. Dollar is the Companys functional and reporting currency. The currency of
measurement for all of the Companys operations including its integrated Venezuelan operations
is the U.S. dollar. In each of these operations, the temporal method is used to re-measure
local currency transactions and balances into U.S. dollars. Under the temporal method,
monetary assets and liabilities are translated into U.S. dollars at year-end exchange rates
and non-monetary assets and liabilities are translated at historical exchange rates.
Revenues, expenses and cash flows are translated at average exchange rates, except for items
related to non-monetary assets and liabilities, which are at historical rates. Exchange gains
and losses on translation of monetary assets and liabilities are included in income.In 2003, the Venezuelan government implemented foreign exchange controls which fixed the rate
of exchange between the Venezuelan Bolivar and the U.S. dollar. Since March of 2005, the rate
has been fixed at 2,150 Bolivares (Bs) to U.S. $1.00 ($). In October of 2005, the government
enacted the Criminal Exchange Law which imposes sanctions on the exchange of Bs with foreign
currency unless the exchange is made by officially designated methods. The exchange
regulations do not apply to transactions with certain securities denominated in Bs which can
be swapped for securities denominated in another currency effectively resulting in a parallel
market for the Bs. Through 2006, the Company re-measured its Bs denominated transactions at
the official exchange rate of Bs 2,150/$. In 2007, based on new guidance from the AICPAs
International Practices Task Force, the Company concluded that parallel market rate was the
most appropriate rate to use to re-measure Bs transactions. Accordingly, in 2007 the Company
used the average rate received in the parallel market of Bs 4,341/$ to re-measure Bs
transactions and at December 31, 2007, and subsequently, used the parallel rate to translate
Bs denominated monetary items. Effective January 1, 2008, each B was converted to
1/1000th of a Bolivar Fuerte (BsF) and accordingly the official exchange rate was
changed to BsF 2.15/USD.Cash and cash equivalentsCash and cash equivalents include highly liquid investments with original maturities of three
months or less.Property, plant and equipmentProperty, plant and equipment are recorded at cost less accumulated amortization.
Amortization of plant and equipment used directly in the mining and production of gold is
included in operating costs. Amortization is being provided for using the straight-line
method over the following periods, not to exceed the mines estimated life:
 Buildings
    
    5 yearsField vehicles
    
    5 yearsFurniture and equipment
    
    5 yearsMill and plant
    
    20 yearsMining equipment
    
    10 years
 Page 7 of 30




---



##### 



Crystallex International Corporation
Notes to the Consolidated Financial Statements
December 31, 2008 and 2007
(In thousands of United States dollars except for share and per share amounts)
 
 2.
    
    Significant accounting policies (continued)Mineral properties and deferred exploration and development expendituresMineral exploration costs such as topographical, geochemical and geophysical studies are
capitalized and carried at cost until the properties to which they relate are placed into
production, sold or where management has determined there to be a impairment in value.
Development costs incurred to access ore bodies identified in the current mining plan are
expensed as incurred after production has commenced. Development costs necessary to extend a
mine beyond those areas identified in the current mining plan and which are incurred to access
additional reserves are deferred until the incremental reserves are mined. Once a mine has
achieved commercial production, mineral properties and development costs, including the
mineral acquisition and direct mineral exploration costs relating to the current mining plan,
are depleted and amortized using the unit-of-production method over the estimated life of the
ore body based on proven and probable reserves.Asset retirement obligationsThe Company records a liability for its long-term asset retirement obligations, equal to the
fair value of the obligation for asset retirement, and records a corresponding increase to the
carrying amount of the related asset which is amortized and charged to amortization expense
over the life of the associated asset. The liability is increased over the period of expected
cash flows with a corresponding charge to operating expenses. The fair value of the
obligation for asset retirement is re-assessed annually.Impairment of long lived assetsThe Company evaluates the recoverability of the carrying amounts of all its producing
properties and related plant and equipment when events or changes in circumstances indicate
that their carrying values may not be recoverable. This evaluation requires the comparison of
the undiscounted future net cash flows derived from these assets with the carrying value of
the assets. Estimated future net cash flows, on an undiscounted basis, are calculated using
estimated recoverable ounces of gold (considering current proven and probable mineral reserves
and the value beyond proven and probable which includes those mineral resources expected to be
converted into mineral reserves), estimated future commodity price realization (considering
historical and current prices, price trends and related factors) and operating costs, future
capital expenditures, project financing costs and reclamation costs. The amount of the
impairment loss is determined as the excess of the carrying value of the asset over its fair
value, which is measured using discounted cash flows.Non-producing mineral properties are evaluated for impairment based on managements intentions
and are written down when the long-term expectation is that the net carrying amount will not
be recovered.Production inventoriesGold in doré, gold in process and stockpiled ore are stated at the lower of average production
cost which includes all direct and indirect costs, including amortization of equipment and
facilities, and net realizable value.Consumables and spare parts inventory are valued at the lower of average and replacement cost.
 Page 8 of 30




---



##### 



Crystallex International Corporation
Notes to the Consolidated Financial Statements
December 31, 2008 and 2007
(In thousands of United States dollars except for share and per share amounts)
 
 2.
    
    Significant accounting policies (continued)Income taxesThe Company uses the asset and liability method of accounting for income taxes whereby future
income taxes are recognized for the tax consequences of differences between the financial
statement carrying amounts and the tax basis of certain assets and liabilities by applying
substantively enacted statutory income tax rates applicable to future years. A valuation
allowance is provided against the recorded future income tax asset when it is not more likely
than not that some or all of the future income tax assets will be realized.Revenue recognitionRevenue from mining operations are recognized upon shipment of gold, when title has passed to
the customer, when persuasive evidence of an arrangement exists, and collection of the sale is
reasonably assured.Deferred financing fees and debtUntil December 31, 2006, transaction costs related to the Companys debt financings were
deferred and amortized over the term of the related financing. Effective January 1, 2007, the
Company records debt net of transaction costs. Debt is subsequently stated at amortized cost;
any difference between the proceeds (net of transaction costs) and the redemption value is
recognised in the income statement over the period of the debt using the effective interest
method.Loss per shareLoss per share is calculated by dividing net loss by the weighted-average number of common
shares outstanding during the year plus outstanding warrants that are unconditionally
convertible into common shares. Diluted per share amounts are calculated using the treasury
stock method. In 2008 and 2007, the potential effect of the outstanding stock options and
warrants were anti-dilutive.Stock-based compensation planThe Company accounts for stock options using the fair value method, whereby compensation
expense for stock options is measured at the fair value at the grant date using the
Black-Scholes valuation model and is recognized over the vesting period of the options
granted. The Company does not incorporate an estimated forfeiture rate for stock options that
will not vest; rather the Company accounts for actual forfeitures as they occur.Estimates and UncertaintiesThe preparation of financial statements in conformity with accounting principles generally
accepted in Canada requires management to make estimates and assumptions that affect the
reported amount of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the consolidated financial statements. Significant estimates used include
those relating to the recoverability of property, plant and equipment, tax provisions and
future income tax balances, costs of asset retirement obligations, and fair value of stock
options and warrants.While management believes these estimates and assumptions are reasonable, actual results could
vary significantly. The carrying value of the Companys principal asset, the Las Cristinas
project, could be subject
to material adjustment in the event that the Company is not successful in obtaining the Permit
and financing necessary for its development.
 Page 9 of 30




---



##### 



Crystallex International Corporation
Notes to the Consolidated Financial Statements
December 31, 2008 and 2007
(In thousands of United States dollars except for share and per share amounts)
 
 2.
    
    Significant accounting policies (continued)Comprehensive incomeComprehensive income is composed of net income and other comprehensive income (OCI). OCI is
the change in shareholders equity, which results from transactions and events from sources
other than the Companys activities. These transactions and events include changes in the
currency translation adjustment relating to self-sustaining foreign operations and unrealized
gains and losses resulting from changes in fair value of certain financial instruments. The
Company has included a Consolidated Statement of Operations and Comprehensive Operations for
changes in these items commencing in the year ended December 31, 2007, while the cumulative
changes in OCI are included in accumulated other comprehensive income (AOCI), which is
presented as a separate category of shareholders equity in the consolidated balance sheet.Financial instruments  recognition and measurementFinancial assets, financial liabilities and derivatives are initially recognized at fair value
and their subsequent measurement depends on their classification as described below. All
financial assets or liabilities, with the exception of those securities designated as
held-to-maturity (HTM), financial assets designated as available-for-sale (AFS),
financial assets that are loans and receivables and other financial liabilities, are measured
at fair value on each balance sheet date, with changes in fair value recorded in the
Consolidated Statement of Operations and Comprehensive Loss. Financial instruments classified
as HTM, loans and receivables or other financial liabilities are recorded at amortized cost.
Financial instruments classified as AFS are measured at fair value, with changes in fair value
recorded in OCI, with the exception of AFS equity securities that do not have quoted market
prices in an active market which are measured at cost.Derivative instruments are carried at fair value, including those derivative instruments that
are embedded in financial or non-financial contracts which are not closely related to the host
contracts. Changes in the fair values of derivative instruments are recognized in income of
the current period, with the exception of derivative instruments designated in effective cash
flow hedges or hedges of foreign currency exposure in a self-sustaining foreign operation.Comparative figuresThe comparative figures have been reclassified, where necessary, to conform to the
presentation adopted for 2008.Fair value of financial instrumentsThe balance sheet carrying amounts for cash and cash equivalents, accounts receivable and
accounts payable and accrued liabilities approximate fair value due to their short-term
nature. The fair value of debt is disclosed in Note 6.
 Page 10 of 30




---



##### 



Crystallex International Corporation
Notes to the Consolidated Financial Statements
December 31, 2008 and 2007
(In thousands of United States dollars except for share and per share amounts)
 
 3.
    
    Changes in accounting policies and future accounting pronouncementsChanges in accounting policies  Sections 1400 and 3031The CICA issued new accounting standards which are effective for interim and annual
consolidated financial statements for the Company beginning on January 1, 2008.Handbook Section 1400, General Standards of Financial Statement Presentation, was amended so
as to include the criteria for determining the Companys ability to continue as a going
concern and presentation in such event. Handbook Section 3031, Inventories, establishes
standards for the measurement of inventories, allocations of overhead accounting for
write-down and disclosures.There was no material impact to the Companys consolidated financial statements on adoption of
these new accounting standards.Future accounting pronouncements
 (i)
    
    The CICA has issued a new accounting standard, Handbook Section 3064 Goodwill and
Intangible Assets, which is effective for the Companys interim and annual financial
statements commencing January 1, 2009. This standard establishes revised standards for
recognition, measurement, presentation and disclosure of goodwill and intangible assets.
Concurrent with the introduction of this standard, the CICA withdrew EIC 27, Revenues
and Expenses during the Pre-Operating Period.There is expected to be no impact to the Companys consolidated financial statements on
adoption of Section 3064 effective January 1, 2009.(ii)
    
    The CICA has issued EIC-173 Credit Risk and the Fair Value of Financial Assets and
Financial Liabilities which is effective for the Companys interim and annual financial
statements commencing January 1, 2009. In this EIC, the Committee reached a consensus
that in determining the fair value of financial assets and financial liabilities an
entity should take into account the credit risk of the entity and the counterparty. The
Company has not yet determined the impact of the adoption of this standard on its
consolidated financial statements.(ii)
    
    In February 2008, the Canadian Accounting Standards Board confirmed that
International Financial Reporting Standards (IFRS) will replace current Canadian GAAP
for publicly accountable companies. The official change over date is for interim and
annual financial statements for fiscal years beginning on or after January 1, 2011. IFRS
will be required for the Companys interim and annual consolidated financial statements
for the fiscal year beginning on January 1, 2011. The Company is currently formulating
and developing an implementation plan to comply with the new standards and its future
reporting requirements.
 Page 11 of 30




---



##### 



Crystallex International Corporation
Notes to the Consolidated Financial Statements
December 31, 2008 and 2007
(In thousands of United States dollars except for share and per share amounts)
 4. Discontinued operations
 On October 1, 2008, the Revemin mill and related assets located in El Callao, Venezuela
reverted by contract to the State of Venezuela as a result of the expiry of the operating
agreement relating to the mill. At the same time the Company ceased all mining operations at
the Tomi and La Victoria mines which supplied ore to this mill. The Company is currently
negotiating with the State of Venezuela the transfer of all of the Tomi and La Victoria mining
concessions which did not form part of the mill contract. Until final negotiations are settled
and definitive resolutions reached, the liability for the asset retirement obligations for all
previous mining and processing activities at El Callao will remain a liability in the
Companys financial statements. In the event that the Company is not successful in negotiating
such transfers, the Company estimates that $2,343 may be incurred to remediate the areas
affected by mining activities at El Callao.The results of operations at El Callao have been treated as discontinued operations as the
Company has no intention of mining the concessions in this location. The Company has
estimated asset retirement obligations based on conditions as at December 31, 2008, and any
gains or losses from final settlement will be recorded in the period of determination.Assets and liabilities on the consolidated balance sheet include the following amounts for
discontinued operations at El Callao.
 2008
    
    
    2007Current assetsAccounts receivable
    
    $
    28
    
    
    $
    987Inventories
    
    
    
    
    
    
    2,142Prepaid expenses and other assets
    
    
    1,661
    
    
    
    1,376$
    1,689
    
    
    $
    4,505Current liabilitiesAccounts payable and accrued liabilities
    
    $
    1,151
    
    
    $
    1,015Current portion of asset retirement obligations
    
    
    2,343
    
    
    
    567$
    3,494
    
    
    $
    1,582Long term portion of asset retirement obligations
    
    $
    
    
    
    $
    1,864
 The results of operations at El Callao shown as discontinued operations in the consolidated
statements of operations and comprehensive loss for the years ended December 31 are as
follows:
 2008
    
    
    2007Mining revenue
    
    $
    14,421
    
    
    $
    13,565Expenses (income)Operations
    
    
    19,746
    
    
    
    19,629Accretion of asset retirement obligations
    
    
    365
    
    
    
    211Foreign exchange loss (gain)
    
    
    (2,040
    )
    
    
    1,289Interest
    
    
    
    
    
    
    415Total expenses
    
    
    18,071
    
    
    
    21,544Loss before income taxes
    
    
    (3,650
    )
    
    
    (7,979
    )Income tax
    
    
    (263
    )
    
    
    (242
    )Net loss
    
    $
    (3,913
    )
    
    $
    (8,221
    )
 Page 12 of 30




---



##### 



Crystallex International Corporation  Notes to the Consolidated Financial Statements  December 31, 2008 and 2007  (In thousands of United States dollars except for share and per share amounts)
 4. Discontinued operations (continued)
 The cash flows used in discontinued operations for the years ended December 31 are as
follows:
 2008
    
    
    2007Operating activities
    
    $
    (1,049
    )
    
    $
    (4,916
    )Financing activities
    
    
    
    
    
    
    (2,105
    )$
    (1,049
    )
    
    $
    (7,021
    )
 Asset retirement obligations of discontinued operations as at December 31 are as follows:
 2008
    
    
    2007Asset retirement obligations, beginning of year
    
    $
    2,431
    
    
    $
    1,211Accretion expense
    
    
    365
    
    
    
    211Revisions in estimated cash flows
    
    
    (453
    )
    
    
    1,009Asset retirement obligations, end of year
    
    
    2,343
    
    
    
    2,431Less: current portion
    
    
    2,343
    
    
    
    567$
    
    
    
    $
    1,864
 5. Property, plant and equipment
 2008Accumulatedamortization
    
    
    Net bookCost
    
    
    and depletion
    
    
    valuePlant and equipment
    
    $
    111,800
    
    
    $
    430
    
    
    $
    111,370Mineral properties
    
    
    232,282
    
    
    
    
    
    
    
    232,282$
    344,082
    
    
    $
    430
    
    
    $
    343,652
 2007Accumulatedamortization
    
    
    Net bookCost
    
    
    and depletion
    
    
    valuePlant and equipment
    
    $
    113,267
    
    
    $
    443
    
    
    $
    112,824Mineral properties
    
    
    204,355
    
    
    
    
    
    
    
    204,355$
    317,622
    
    
    $
    443
    
    
    $
    317,179
 Page 13 of 30




---



##### 



Crystallex International Corporation
Notes to the Consolidated Financial Statements
December 31, 2008 and 2007
(In thousands of United States dollars except for share and per share amounts)
 5. Property, plant and equipment (continued)
 The aggregate costs incurred on Las Cristinas by the Company to December 31, 2008 are
summarized as follows:
 Cash
    
    
    Non-cash
    
    
    TotalPlant and equipment
    
    $
    111,370
    
    
    $
    
    
    
    $
    111,370Exploration, development and related expenses
    
    
    153,592
    
    
    
    5,732
    
    
    
    159,324Property payment and finders fees
    
    
    24,978
    
    
    
    11,192
    
    
    
    36,170Future income taxes
    
    
    
    
    
    
    35,230
    
    
    
    35,230Stock-based compensation
    
    
    
    
    
    
    1,558
    
    
    
    1,558$
    289,940
    
    
    $
    53,712
    
    
    $
    343,652
 6. Notes payable
 In conjunction with a unit offering on December 23, 2004, the Company issued $100,000
principal amount senior unsecured notes (the Notes) with a coupon rate of 9.375%, due on
December 23, 2011 for net proceeds of $75,015 after expenses and equity allocation. Interest
is payable semi-annually on January 15 and July 15 of each year, beginning July 15, 2005. The
Company may redeem the Notes, in whole or in part, at any time after December 31, 2008 at a
redemption price of between 100% and 102% of the principal amounts of the Notes, depending on
the redemption date, plus accrued and unpaid interest and additional interest, if any, to the
date of the redemption. In addition, the Company may be required to redeem the Notes for cash
under certain circumstances, such as a change in control in the Company where the acquirors
debt rating is below the debt rating of the Company before or after the change in control, or
where the Company ceases to beneficially own, directly or indirectly, at least a majority
interest in the Las Cristinas Project. The Company may also redeem the Notes, in whole but
not in part, for cash at its option under certain circumstances, such as a change in the
applicable Canadian withholding tax legislation.As described in Note 11, the trustee for the Noteholders has commenced an action that, if
successful, could result in Crystallex having to redeem all of the outstanding Notes of each
Noteholder who has so requested at a price equal to 102% of the principal amount of the notes,
together with accrued and unpaid interest to the date of purchase. The Company believes this
action is without merit and is vigorously defending this action. On this basis, the Notes
continue to be classified as a long term obligation of the Company.The initial carrying value of the Notes was derived from a unit structure that contained both
a Note and a share component. As a result, the share component was allocated based on the
fair value of the shares issued with the Unit offering, calculated at $21,450 with $78,550
being the discounted fair value of the Notes. The discounted fair value of the Notes, net of
expenses, is accreted up to the face value of the Notes using the effective interest rate
method over its seven year term, with the resulting charge recorded to interest expense.
Interest accretion of $3,455 (2007  $3,567) on the Notes was expensed during the year ended
December 31, 2008 as a component of interest expense.
 Fair value of debtThe fair value of the debt is approximately $30,000 (2007  $82,000), calculated using a
discounted cash flow methodology. The methodology uses the risk-free interest rate and the
Companys credit spread as inputs. As the Companys credit spread is an unobservable input
due to limited trading of the Companys debt in the market, the Company has estimated its
credit spread by reference to current yields to maturity for debt with similar terms and risks
and also by reference to the yield to maturity implicit in the prices obtained from the
limited trading of the Companys debt.
 Page 14 of 30




---



##### 



Crystallex International Corporation  Notes to the Consolidated Financial Statements  December 31, 2008 and 2007  (In thousands of United States dollars except for share and per share amounts)
 
 7. Share capital
 2008
    
    
    2007AuthorizedUnlimited common shares, without par valueUnlimited Class A preference shares, no par valueUnlimited Class B preference shares, no par valueIssued294,817,719 (2007 - 261,659,072) common shares
    
    $
    561,751
    
    
    $
    503,489
 WarrantsAs at December 31, 2008 common share purchase warrants were outstanding enabling the holders
to acquire common shares as follows:
 Number ofwarrantsExercise Price
    
    (thousands)$2.45 (CDN $3.00)
    
    
    16,445
    1$4.25
    
    
    12,250
    228,695
 1.
    
    These warrants expire on the later of: (i) August 11, 2009; and (ii) six months
following the date which is 45 days following the receipt of the Permit for the Companys
Las Cristinas project.2.
    
    These warrants become exercisable for an eighteen month period commencing on the
date which is 45 days following the receipt of the Permit for the Companys Las Cristinas
project.
 A summary of common share purchase warrants outstanding as at December 31 and changes during
each of the years then ended is as follows:
 2008
    
    
    
    
    
    
    2007Weighted
    
    
    
    
    
    
    WeightedNumber of
    
    
    average
    
    
    Number of
    
    
    averagewarrants
    
    
    exercise price
    
    
    warrants
    
    
    exercise price(thousands)
    
    
    ($)
    
    
    (thousands)
    
    
    ($)Balance  beginning of year
    
    
    18,186
    
    
    
    4.25
    
    
    
    18,688
    
    
    
    4.01Granted
    
    
    16,445
    
    
    
    2.45
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    (502
    )
    
    
    1.76Expired
    
    
    (5,936
    )
    
    
    4.17
    
    
    
    
    
    
    
    Balance  end of year
    
    
    28,695
    
    
    
    3.22
    
    
    
    18,186
    
    
    
    4.25
 Page 15 of 30




---



##### 



Crystallex International Corporation
Notes to the Consolidated Financial Statements
December 31, 2008 and 2007
(In thousands of United States dollars except for share and per share amounts)
 7. Share capital (continued)
 Stock optionsDuring fiscal 2008, the Company had an Incentive Share Option Plan (the Plan) that provided
for the granting of options to executive officers, directors, employees and service providers
of the Company. Under the Plan, the exercise price of each option cannot be less than the
closing price of the Companys common shares on the Toronto Stock Exchange, on the trading day
immediately preceding the date of the grant. Stock options granted to service providers and
employees, executive officers, and directors have a life of two, five and ten years,
respectively. Stock options may vest immediately, or over periods ranging from one year to
three years. In June 2007 the shareholders of the Company approved amendments to the Plan
whereby the Board of Directors may permit an optionee to elect to receive without payment by
the optionee of any additional consideration, common shares equal to the value of options
surrendered. Effective June 25, 2008, the shareholders of the Company did not confirm the
Plan, with the result that the Company is not permitted to grant additional stock options
without shareholders approval.
 The Company determines the fair value of the employee stock options using the Black-Scholes
option pricing model. The estimated fair value of the options is expensed over their
respective vesting periods. The fair value of stock options granted was determined using the
following weighted average assumptions:
 2008
    
    
    2007Risk free interest rate
    
    
    
    
    
    
    4.10
    %Expected life (years)
    
    
    
    
    
    
    3.0Expected volatility over expected life
    
    
    
    
    
    
    111
    %Expected dividend rate
    
    
    
    
    
    
    0
    %
 The fair value compensation recorded for options that have vested during the year ended
December 31, 2008 was $529 (2007  $4,636) of which $496 (2007  $3,112) was expensed and $33
(2007  $1,525) was capitalized to mineral properties.
 2008
    
    
    2007Weighted average fair value of
options granted during the year  CDN$
    
    $
    
    
    
    $
    2.49
 As at December 31, 2008 stock options were outstanding enabling the holders to acquire common
shares as follows:
 Outstanding options
    
    
    Exercisable optionsWeighted average
    
    
    Weighted
    
    
    
    
    
    
    Weightedremaining
    
    
    average
    
    
    
    
    
    
    averageRange of
    
    Number
    
    
    contractual
    
    
    exercise
    
    
    Number
    
    
    exerciseexercise price
    
    of options
    
    
    life
    
    
    price
    
    
    exercisable
    
    
    price(CDN$)
    
    (thousands)
    
    
    (years)
    
    
    (CDN$)
    
    
    (thousands)
    
    
    (CDN$)$1.00 to $1.50
    
    
    273
    
    
    
    2.00
    
    
    $
    1.37
    
    
    
    273
    
    
    $
    1.37$1.75 to $2.60
    
    
    3,776
    
    
    
    2.69
    
    
    
    2.23
    
    
    
    3,723
    
    
    
    2.23$2.65 to $3.60
    
    
    3,254
    
    
    
    4.62
    
    
    
    3.12
    
    
    
    3,232
    
    
    
    3.12$4.00 to $4.65
    
    
    3,214
    
    
    
    4.16
    
    
    
    4.34
    
    
    
    2,829
    
    
    
    4.3010,517
    
    
    
    3.72
    
    
    $
    3.14
    
    
    
    10,057
    
    
    $
    3.09
 Page 16 of 30




---



##### 



Crystallex International Corporation
Notes to the Consolidated Financial Statements
December 31, 2008 and 2007
(In thousands of United States dollars except for share and per share amounts)
 7. Share capital (continued)
 A summary of the status of the Plan as at December 31 and changes during each year then ended
is as follows:
 2008
    
    
    
    
    
    
    2007Weighted
    
    
    
    
    
    
    Weightedaverage
    
    
    
    
    
    
    averageNumber
    
    
    exercise
    
    
    Number
    
    
    exerciseof options
    
    
    price
    
    
    of options
    
    
    price(thousands)
    
    
    (CDN$)
    
    
    (thousands)
    
    
    (CDN$)Balance  beginning of year
    
    
    12,527
    
    
    $
    3.04
    
    
    
    11,394
    
    
    $
    2.80Granted
    
    
    
    
    
    
    
    
    
    
    2,067
    
    
    
    3.66Exercised
    
    
    (96
    )
    
    
    1.90
    
    
    
    (864
    )
    
    
    1.62Expired
    
    
    (1,451
    )
    
    
    2.27
    
    
    
    
    
    
    
    Forfeited
    
    
    (463
    )
    
    
    3.64
    
    
    
    (70
    )
    
    
    3.81Balance  end of year
    
    
    10,517
    
    
    $
    3.14
    
    
    
    12,527
    
    
    $
    3.04
 Financing TransactionsFiscal 2008 ActivityOn February 11, 2008, the Company completed a public offering of 32.89 million units at
CDN$2.10 per unit for gross proceeds of CDN$69.1 million.Each unit consisted of one common share of the Company and one-half of one common share
purchase warrant. Each whole warrant entitles the holder to purchase a further common share
of the Company at an exercise price of CDN$3.00 for a period expiring on the later of: (i)
August 11, 2009; and (ii) six months following the Permit date, where the Permit date is the
45th day following the receipt by the Company of the Permit. Each common share and
one-half warrant were ascribed values of CDN$1.89 and CDN$0.21, respectively.The net proceeds received by the Company, after payment of issuance costs of $4,622, was
$64,144, of which $57,730 was recorded as share capital and $6,414 was recorded as
contributed surplus.Fiscal 2007 ActivitiesOn April 24, 2007, the Company issued 14,375,000 common shares at CDN$4.25 per common share,
in a bought deal with a syndicate of underwriters, for proceeds of CDN$57.1 million
(US$50,701) after underwriting fees and expenses.In January and July, 2007, under the terms of the exchangeable promissory note issued by ECM
(Venco) Ltd (ECM), an indirect wholly-owned subsidiary, to Corporación Vengroup, S.A.
(Vengroup), the Company issued a total of 460,900 common shares to Vengroup as settlement of
the remaining $1,800 due to Vengroup.
 Page 17 of 30




---



##### 



Crystallex International Corporation  Notes to the Consolidated Financial Statements  December 31, 2008 and 2007  (In thousands of United States dollars except for share and per share amounts)
 7. Share capital (continued)
 Shareholder Rights Plan
 On October 30, 2006 the shareholders of the Company voted to ratify, confirm and approve a new
shareholder Rights Plan (the Rights plan) which was originally approved by the Board of
Directors of the Company on June 22, 2006. The rights issued under the Rights plan are
subject to reconfirmation at every third annual meeting of shareholders and will expire at the
close of the Companys annual meeting in 2016 (the Expiration Time).
 Pursuant to the Rights plan, the Board of Directors declared a distribution of one right (a
Right) for each outstanding Common Share of the Company to shareholders of record at the
close of business on the Record Date and authorized the issuance of one Right for each Common
Share issued after the Record Date and prior to the Separation Time (described below) and the
Expiration Time. The Rights will separate from the Common Shares at the time (the Separation
Time) which is the close of business on the eighth trading day (or such later day as
determined by the Board of Directors) after the public announcement of the acquisition of, or
intention to acquire, beneficial ownership of 20% of the Common Shares of the Company by any
person other than in accordance with the terms of the Rights plan.In order to constitute a Permitted Bid, an offer must be made in compliance with the Rights
plan and must be made to all shareholders (other than the offeror), must be open for at least
60 days and be accepted by shareholders holding more than 50% of the outstanding voting shares
and, if so accepted, must be extended for a further 10 business day period.
 8. Income taxes
 The Company did not record a benefit for income taxes for the years ended December 31, 2008
and 2007, due to the recurrence of operating losses and the Companys determination that it is
not more likely than not that future income tax assets will be realized.The provision for income taxes reported differs from the amounts computed by applying the
cumulative Canadian federal and provincial income tax rates to the loss before tax provision
due to the following:
 2008
    
    
    2007Statutory tax rate
    
    
    31.06
    %
    
    
    35.08
    %Loss from continuing operations
before income tax provision
    
    $
    (21,807
    )
    
    $
    (22,230
    )Expected income taxes recoverable
    
    $
    (6,773
    )
    
    $
    (7,798
    )Change in valuation allowance
    
    
    (7,873
    )
    
    
    13,007Change in substantively enacted tax rates
    
    
    2,291
    
    
    
    4,870Change in foreign exchange rates
    
    
    10,592
    
    
    
    (13,221
    )Non-deductible items
    
    
    1,155
    
    
    
    3,142Reduction in loss carry forwards
    
    
    608
    
    
    
    Actual income tax provision
    
    $
    
    
    
    $
    
 Page 18 of 30




---



##### 



Crystallex International Corporation
Notes to the Consolidated Financial Statements
December 31, 2008 and 2007
(In thousands of United States dollars except for share and per share amounts)
 8. Income taxes (continued)
 The tax effects of temporary differences that would give rise to significant portions of the
future tax assets and future tax liabilities at December 31 are as follows:
 2008
    
    
    2007Future income tax assets:Losses carried forward
    
    $
    51,754
    
    
    $
    59,349Financing fees
    
    
    1,306
    
    
    
    1,390Asset retirement obligations
    
    
    797
    
    
    
    827Less: valuation allowance
    
    
    (50,940
    )
    
    
    (57,938
    )Net future income tax asset
    
    
    2,917
    
    
    
    3,628Future income tax liabilitiesProperty, plant and equipment
    
    
    (19,578
    )
    
    
    (17,871
    )Net future income taxes
    
    $
    (16,661
    )
    
    $
    (14,243
    )
 Future income tax assets are recognized to the extent that realization is considered more
likely than not. Since the Company has determined that it is not more likely than not that
the future income tax assets are recoverable, the net future income tax assets have been fully
offset by a valuation allowance.
 The components of the Companys future income tax balance include a future income tax estimate
of 34% of the carrying value of the Las Cristinas asset recorded in the parent entity for
accounting purposes which may not have deductibility for income tax purposes in the Venezuela
Branch in the foreseeable future. The Company recognized unrealized non-cash foreign currency
translation gains of $808 during the year ended December 31, 2008 (2007  $14,322). These
translation gains result from the translation into U.S. dollars at the end of the year of the
Venezuelan-denominated future income tax liabilities that are recognized in connection with
these expenditures on the Las Cristinas asset. Such currency translation gains and losses
have been recorded in the determination of net loss.
 At December 31, 2008 the Company had the following unused tax losses available for tax
purposes:
 CountryYear of Expiry
    
    Canada
    
    
    Venezuela2009
    
    $
    37,090
    
    
    $
    1492010
    
    $
    31,439
    
    
    $
    12011
    
    $
    
    
    
    $
    4,9682014
    
    $
    14,258
    
    
    $
    2015
    
    $
    29,979
    
    
    $
    2026
    
    $
    22,864
    
    
    $
    2027
    
    $
    20,253
    
    
    $
    2028
    
    $
    22,137
    
    
    $
    
 Page 19 of 30




---



##### 



Crystallex International Corporation  Notes to the Consolidated Financial Statements  December 31, 2008 and 2007  (In thousands of United States dollars except for share and per share amounts)
 9. Supplemental disclosures with respect to cash flows
 2008
    
    
    2007Cash and cash equivalents consist of:Cash
    
    $
    1,600
    
    
    $
    2,157Canadian Treasury Bills
with interest rate of 0.05% (2007: 2.05%)
    
    
    32,920
    
    
    
    13,908$
    34,520
    
    
    $
    16,065
 Cash paid during the years ended December 31
 2008
    
    
    2007For interest
    
    $
    9,375
    
    
    $
    9,459For income taxes
    
    $
    340
    
    
    $
    386
 Investment in property, plant and equipment for the years ended December 31
 2008
    
    
    2007Net book value of property, plant and equipment
January 1
    
    $
    317,179
    
    
    $
    283,407Net book value of property, plant and equipment
December 31
    
    
    343,652
    
    
    
    317,179Net increase in property, plant and equipment
    
    
    (26,473
    )
    
    
    (33,772
    )Capitalization of stock compensation
    
    
    33
    
    
    
    1,525Future income taxes
    
    
    3,226
    
    
    
    5,051Amortization
    
    
    (77
    )
    
    
    (63
    )Net book value of equipment sold
    
    
    (4,161
    )
    
    
    Net increase before working capital items
    
    
    (27,452
    )
    
    
    (27,259
    )Changes in working capital related to
property, plant and equipment acquisitions
    
    
    (645
    )
    
    
    366Cash investment in property, plant and equipment
    
    $
    (28,097
    )
    
    $
    (26,893
    )
 Page 20 of 30




---



##### 



Crystallex International Corporation
Notes to the Consolidated Financial Statements
December 31, 2008 and 2007
(In thousands of United States dollars except for share and per share amounts)
 9. Supplemental disclosures with respect to cash flows (continued)
 Issuance of common shares for cash for the years ended December 31
 2008
    
    
    2007Cash received from:Public offering
    
    $
    64,144
    
    
    $
    50,701Exercise of options
    
    
    182
    
    
    
    1,210Exercise of warrants
    
    
    
    
    
    
    881$
    64,326
    
    
    $
    52,792
 Significant non-cash transactions for the years ended December 31
 2008
    
    
    2007Issuance of common shares for:Settlement of promissory note (2007 - 460,900)
    
    $
    
    
    
    $
    1,800Directors fees, 172,489 (2007 - 38,508)
    
    $
    254
    
    
    $
    148
 10. Segmented information
 The Company has one operating segment which is the development of mining properties with Las
Cristinas as its principal asset.
 Substantially all of the property, plant and equipment held by the Company are in Venezuela,
except for long-lead time equipment required for the development of Las Cristinas, of which
significant amounts are located temporarily in the U.S.A. and various other countries.
 Property, plant and equipment include $343,652 (2007  $317,079) and $NIL (2007  $100)
associated with Las Cristinas and Canada, respectively
 11. Commitments and contingencies
 Las CristinasUnder the terms of the Las Cristinas Mine Operation Contract with the CVG, the Company has
undertaken to make all investments necessary to develop and exploit the Las Cristinas
deposits.The capital cost of the project was revised to $356,000 in November 2007 (previous estimate
August 2005 $293,000), of which $102,000 has been spent to date. The capital cost estimate is
subject to revision due to changing construction and equipment costs.The Company is committed to spend approximately $1,500 to complete certain social projects at
Las Cristinas.Claim by former employeeOn May 23, 2006 the Company and certain directors and officers were served with a Statement of
Claim by an individual alleging misrepresentation, conspiracy and breach of contract, and
claiming damages of approximately CDN$1.75 million. The Company has filed its Statement of
Defence and believes that there is little likelihood of any ultimate liability. However, as
the outcome of this matter cannot be determined at this time, the Company has made no
provision for this contingency as at December 31, 2008.
 Page 21 of 30




---



##### 



Crystallex International Corporation  Notes to the Consolidated Financial Statements  December 31, 2008 and 2007  (In thousands of United States dollars except for share and per share amounts)
 11. Commitments and contingencies (continued)
 Action by NoteholdersIn December 2008, the Company was served with a Notice of Application (the Application) by
the trustee for the holders (the Noteholders) of the $100,000 senior unsecured notes
described in Note 6. The trustee, on behalf of certain Noteholders, is, among other things,
seeking a declaration from the Court that there has been a project change of control (a
Project Change of Control) event as defined in the First Supplemental Indenture made as of
December 23, 2004 thereby requiring Crystallex to accelerate payment and purchase all of the
notes of each Noteholder who has so requested at a price equal to 102% of the principal amount
of the notes, together with accrued and unpaid interest to the date of purchase.A Project Change of Control is defined as the occurrence of any transaction as a result of
which Crystallex ceases to beneficially own, directly or indirectly, at least a majority
interest in the Las Cristinas project asset.In the alternative, the trustee is seeking permission from the Court to commence a derivative
action in the name of and on behalf of Crystallex. The proposed derivative action is one which
would require the Company to bring an action against its entire Board of Directors. The
essence of the proposed derivative action is that the Board of Directors pursued the Las
Cristinas project for longer than it ought to have pursued it and that the directors have
allegedly mismanaged certain aspects of Crystallexs operations in Venezuela.The Company has strong defences to this action and is vigorously defending the Application. In
particular, the Company believes that the Noteholders allegation that there has been a
Project Change of Control has no merit. At this stage in the process and as the parties are
still exchanging materials, the Company cannot provide an assignment of what, if any, losses,
it may suffer as a result of this proceeding.Proposed Class ActionThe Company and certain officers and directors have been named as defendants in a putative
securities fraud class action commenced on December 8, 2008, in the United States District
Court for the Southern District of New York. The plaintiffs in the lawsuit are described as
investors who acquired the Companys common stock during the period of July 28, 2005 and April
30, 2008, inclusive (the Proposed Class Period). The complaint alleges that the defendants
made several statements during the Proposed Class Period about the Companys Las Cristinas
Gold Project located in Sifontes, Venezuela, and that the issuance of the required Venezuelan
government permit in connection with that project was imminent and guaranteed to be issued to
the Company. The complaint asserts that the defendants did not have, during the Class
Period, a reasonable expectation that the Company would receive the required permit, and that
on April 30, 2008, the Permit was, in fact, denied. The proposed class action seeks
compensatory damages plus costs and fees, alleging violations of Section 10(b) of the
Securities Exchange Act of 1934 (the Exchange Act) and Rule 10b-5 promulgated thereunder by
each of the defendants and violations of Section 20(a) of the Exchange Act by the individual
defendants.On February 6, 2009, certain purported purchasers of Crystallex common stock and their
respective counsel have filed motions for Appointment of Lead Plaintiff and Lead Counsel
pursuant to Section 21D of the Exchange Act (the Lead Plaintiff Motions). Pursuant to
Stipulation and Order, dated February 12, 2009, defendants time to respond to the complaint
is adjourned until a time to be agreed upon after the resolution of the Lead Plaintiff
Motions.
 Page 22 of 30




---



##### 



Crystallex International Corporation  Notes to the Consolidated Financial Statements  December 31, 2008 and 2007  (In thousands of United States dollars except for share and per share amounts)
 11. Commitments and contingencies (continued)
 Crystallex believes that the complaint is without merit and intends to vigorously defend
itself against the action. However, because the action is in preliminary stages, the Company
cannot provide assurances as to the outcome of the action, nor can the range of losses, if
any, be estimated. Accordingly, no losses have been accrued.Advisory servicesThe Company has engaged a financial advisor to assist the Company in assessing options to
settle the Noteholders claim and if appropriate assist in negotiating, structuring and
executing the selected option. The Company has agreed to grant to such advisor 3,000,000
warrants to acquire common shares of the Company at CDN$0.30 per common share with an expiry
date of three years from the impending date of approval of these warrants by the TSX. In
addition, the Company has agreed to pay a success fee of CDN$1 million to such advisor.GeneralIn the normal course of business, the Company may enter into contracts that contain
commitments to pay amounts dependent upon future events. Such amounts, if any, are not
determinable as yet; consequently, no amounts have been accrued in the financial statements
with respect to these commitments.
 12. Related party transactions
 During the year, the Company entered into the following transactions with related and other
parties:
 a)
    
    Paid underwriting fees of $2,279 (2007  $2,278) to a company which retains the
Chairman of the Company as an employee.b)
    
    Paid consulting fees of $NIL (2007  $94) and office rent of $11 (2007  $NIL) to a
company which retains the Chairman of the Company as a director.
 The amounts charged to the Company for the services provided have been determined by
negotiation among the parties. These transactions were in the normal course of operations and
were measured at the exchange value which represented the amount of consideration established
and agreed to by the related parties.
 13. Risk Management
 Credit RiskThe Companys credit risk is primarily attributable to cash and cash equivalents that are held
in investment accounts with major Canadian chartered banks. The Companys investment policy
limits its investments to Canadian Government Treasury Bills.The Company is exposed to the credit risk of Venezuelan banks which hold cash for the
Companys Venezuelan operations. The Company limits its exposure to this risk by maintaining
minimal cash balances to fund the immediate needs of its Venezuelan subsidiaries.The Companys credit risk is also attributable to value added taxes receivable from the
government of Venezuela.
 Page 23 of 30




---



##### 



Crystallex International Corporation
Notes to the Consolidated Financial Statements
December 31, 2008 and 2007
(In thousands of United States dollars except for share and per share amounts)
 13.
    
    Risk Management (continued)Interest Rate RiskInterest rate risk is the risk that the future cash flows of a financial instrument will
fluctuate because of changes in market interest rates. The Companys cash and cash equivalents
include highly liquid investments that earn interest at market rates. Fluctuations in market
rates of interest do not have a significant impact on the Companys results of operations due
to the short term to maturity of the investments held.Currency RiskThe Company has operations in Venezuela, where currently there is an exchange control regime
and is exposed to foreign exchange risk from the exchange rate of the Venezuelan BsF relative
to the U.S. dollar. Foreign exchange risk is mainly derived from assets and liabilities shown
in Venezuelan BsF.The Company limits its foreign exchange risk by the acquisition of short-term financial
instruments and, when possible, minimizes its BsF monetary asset position.As of December 31, 2008 and 2007 the Company had the following monetary assets and liabilities
denominated in foreign currencies other than the U.S. dollar, shown at their equivalent
amounts in Venezuelan BsF with its carrying value in U.S. dollars:
 2008
    
    
    2008
    
    
    2007
    
    
    2007BsF(000)
    
    
    US $
    
    
    BsF(000)
    
    
    US $Monetary assets
    
    
    17,833
    
    
    
    3,242
    
    
    
    23,813
    
    
    
    4,330Monetary liabilities
    
    
    (13,142
    )
    
    
    (2,389
    )
    
    
    (8,437
    )
    
    
    (1,534
    )Total net monetary assets
    
    
    4,691
    
    
    
    853
    
    
    
    15,376
    
    
    
    2,796
 At December 31, 2008, if the BsF had weakened or strengthened by 15% against the U.S. dollar,
with all other variables held constant, post-tax income for the year would have been $111
lower or higher, respectively, as a result of the change in the fair value of the Companys
net monetary asset denominated in U.S. dollars.Liquidity RiskThe Company faces liquidity risk to the extent that it will be unable to settle liabilities as
they come due. In order to manage this risk, management monitors rolling forecasts of the
Companys liquidity reserve on the basis of expected cash flow. The maturities of the
Companys financial liabilities are as follows:
 1 to 3
    
    
    3 Months to
    
    
    1 Year to1 Month
    
    
    Months
    
    
    1 Year
    
    
    5 YearsAccounts payable and accrued
liabilities
    
    $
    1,492
    
    
    $
    5,772
    
    
    $
    3,997
    
    
    $
    Debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000Total
    
    $
    1,492
    
    
    $
    5,772
    
    
    $
    3,997
    
    
    $
    100,000
 Page 24 of 30




---



##### 



Crystallex International Corporation
Notes to the Consolidated Financial Statements
December 31, 2008 and 2007
(In thousands of United States dollars except for share and per share amounts)
 14.
    
    Capital managementThe Companys objective when managing capital is to maintain adequate funds to safeguard its
ability to continue as a going concern and to bring the Las Cristinas property into
production. In order to achieve this objective, the Company invests its capital in highly
liquid, highly rated financial instruments. The Company manages its capital structure and
makes adjustments to it, based on the level of funds available to the Company to manage its
operations. In order to meet the Companys objectives for managing capital, new common shares,
warrants, options and/or debt may be issued. There are no assurances that such sources of
funding will be available on terms acceptable to the Company.There were no changes in the Companys approach to capital management during the year ended
December 31, 2008. The Company is not subject to externally imposed capital requirements.15.
    
    Differences between Canadian and United States generally accepted accounting principlesThe Company prepares its consolidated financial statements in accordance with accounting
principles generally accepted in Canada (Canadian GAAP) which differ from those principles
that the Company would have followed had its consolidated financial statements been prepared
in accordance with accounting principles generally accepted in the United States of America
(U.S. GAAP). The following adjustments would be required in order to present the financial
statements in accordance with U.S. GAAP.Balance SheetsThe impact of differences between Canadian GAAP and U.S. GAAP on the consolidated balance
sheets is as follows:
 2008Canadian
    
    
    
    
    
    
    U.S.GAAP
    
    
    Adjustments
    
    
    GAAPCurrent assets
    
    $
    35,837
    
    
    $
    
    
    
    $
    35,837Current assets of discontinued operations
    
    
    1,689
    
    
    
    
    
    
    
    1,689Property, plant and equipment
    
    
    343,652
    
    
    
    (245,888
    )(a)
    
    
    97,764Other assets
    
    
    1,286
    
    
    
    
    
    
    
    1,286$
    382,464
    
    
    $
    (245,888
    )
    
    $
    136,576Current liabilities
    
    $
    7,767
    
    
    $
    
    
    
    $
    7,767Current liabilities of discontinued operations
    
    
    3,494
    
    
    
    
    
    
    
    3,494Long-term debt
    
    
    86,746
    
    
    
    
    
    
    
    86,746Future income taxes
    
    
    16,661
    
    
    
    (16,661
    )(b)
    
    
    Shareholders equity
    
    
    267,796
    
    
    
    (229,227
    )
    
    
    38,569$
    382,464
    
    
    $
    (245,888
    )
    
    $
    136,576
 Page 25 of 30




---



##### 



Crystallex International Corporation
Notes to the Consolidated Financial Statements
December 31, 2008 and 2007
(In thousands of United States dollars except for share and per share amounts)
 15.
    
    Differences between Canadian and United States generally accepted accounting principles
(continued)
 2007Canadian
    
    
    
    
    
    
    U.S.GAAP
    
    
    Adjustments
    
    
    GAAPCurrent assets
    
    $
    16,851
    
    
    $
    
    
    
    $
    16,851Current assets of discontinued operations
    
    
    4,505
    
    
    
    
    
    
    
    4,505Property, plant and equipment
    
    
    317,179
    
    
    
    (60,306
    )(a)
    
    
    256,873Other assets
    
    
    705
    
    
    
    
    
    
    
    705$
    339,240
    
    
    $
    (60,306
    )
    
    $
    278,934Current liabilities
    
    $
    9,853
    
    
    $
    
    
    
    $
    9,853Current liabilities of discontinued operations
    
    
    1,582
    
    
    
    
    
    
    
    1,582Asset retirement obligations of discontinued operations
    
    
    1,864
    
    
    
    
    
    
    
    1,864Long-term debt
    
    
    83,291
    
    
    
    
    
    
    
    83,291Future income taxes
    
    
    14,243
    
    
    
    (3,565
    )
    
    
    10,678Shareholders equity
    
    
    228,407
    
    
    
    (56,741
    )
    
    
    171,666$
    339,240
    
    
    $
    (60,306
    )
    
    $
    278,934
 For the purposes of reporting in accordance with U.S. GAAP, amounts referred to as contributed
surplus under Canadian GAAP are referred to as additional paid in capital.Statements of OperationsThe impact of the differences between Canadian GAAP and U.S. GAAP on the net loss for the year
would be as follows:
 2008
    
    
    2007Net loss for the year per Canadian GAAP
    
    
    
    
    
    $
    (25,720
    )
    
    $
    (30,451
    )Capitalization of interest to mineral properties
    
    
    (a
    )
    
    
    12,830
    
    
    
    13,009Writedown of mineral properties
    
    
    (a
    )
    
    
    (198,412
    )
    
    
    Writeoff of future income tax liability
    
    
    (b
    )
    
    
    13,096
    
    
    
    Adjustment to unrealized gain on translation
of future income taxes
    
    
    (b
    )
    
    
    
    
    
    
    (5,554
    )Net loss for the year per U.S. GAAP
    
    
    
    
    
    $
    (198,206
    )
    
    $
    (22,996
    )Net loss per share  basic and diluted
    
    
    
    
    
    $
    (0.68
    )
    
    $
    (0.09
    )Weighted average number of shares outstanding
    
    
    
    
    
    
    290,958,931
    
    
    
    256,668,551
 Loss per discontinued operations, net of tax, is the same for Canadian GAAP and U.S. GAAP.
 Page 26 of 30




---



##### 



Crystallex International Corporation
Notes to the Consolidated Financial Statements
December 31, 2008 and 2007
(In thousands of United States dollars except for share and per share amounts)
 
 15.
    
    Differences between Canadian and United States generally accepted accounting principles
(continued)Statement of Cash FlowsThe impact of the above differences between Canadian GAAP and U.S. GAAP on the combined
statements of cash flows would be as follows:
 2008
    
    
    2007Cash flows used in operating
activities, Canadian GAAP
    
    $
    (22,775
    )
    
    $
    (29,393
    )Adjustments to interest (a)
    
    
    12,830
    
    
    
    13,009Adjustment to unrealized gain on translation
of future income taxes (b)
    
    
    
    
    
    
    (5,554
    )Cash flows used in operating activities,
U.S. GAAP
    
    
    (9,945
    )
    
    
    (21,938
    )Cash flows provided by (used in) investing
activities, Canadian GAAP
    
    
    (22,058
    )
    
    
    (26,893
    )Adjustments to interest (a)
    
    
    (12,830
    )
    
    
    (13,009
    )Adjustment to unrealized gain on translation
of future income taxes (b)
    
    
    
    
    
    
    5,554Cash flows provided by (used in) investing
activities, U.S. GAAP
    
    
    (34,888
    )
    
    
    (34,348
    )Cash flows provided by financing activities,
Canadian and U.S. GAAP
    
    
    64,326
    
    
    
    51,320Net increase (decrease) in cash and cash
equivalents during the year
    
    
    19,493
    
    
    
    (4,966
    )Increase (decrease) in cash and cash
equivalents from discontinued operations
    
    
    (1,049
    )
    
    
    (7,021
    )Effects of exchange rate fluctuations on cash
and cash equivalents
    
    
    11
    
    
    
    (521
    )Cash and cash equivalents, beginning of year
    
    
    16,065
    
    
    
    28,573Cash and cash equivalents, end of year
    
    $
    34,520
    
    
    $
    16,065
 
 (a)
    
    Mineral Properties and Exploration and Development Costs Under Canadian GAAP, mineral properties, including exploration, development and acquisition
costs, are carried at cost until the properties to which they relate are placed into
production, sold or where management has determined there to be a permanent impairment in
value.Under U.S. GAAP and practices established by the United States Securities and Exchange
Commission (SEC) all mine project related costs incurred before a commercially mineable
deposit is established are expensed as incurred. A commercially mineable deposit is defined as
one with proven and probable reserves which could be legally extracted or produced based on a
final feasibility study. Once a commercially mineable deposit is established all additional
costs incurred to bring the mine into production are capitalized as development costs.
 Page 27 of 30




---



##### 



Crystallex International Corporation
Notes to the Consolidated Financial Statements
December 31, 2008 and 2007
(In thousands of United States dollars except for share and per share amounts)
 
 15.
    
    Differences between Canadian and United States generally accepted accounting principles
(continued)
 (a) Mineral Properties and Exploration and Development Costs (continued)
   (b) Future Income Taxes
   (c) Recent United States Accounting Pronouncements
 (i)
    
    Effective January 1, 2008, the Company adopted FASB Statement No. 157, Fair
Value Measurements (SFAS 157). The Company also applied FSP FAS 157-2 (SFAS
157-2), which allows for the delay of implementation of SFAS No. 157 for certain
nonfinancial assets and nonfinancial liabilities until its fiscal year beginning
January 1, 2009. SFAS 157 provides enhanced guidance for using fair value to measure
assets and liabilities and provides expanded disclosure about the extent to which
companies measure their assets and liabilities at fair value, the information used to
measure fair value, and the effect of fair value measurements on earnings. SFAS 157
applies whenever other standards require (or permit) assets or liabilities to be
measured at fair value; however, it does not expand the use of fair value in any new
circumstances. The adoption of this standard did not have a material impact on the
Companys consolidated financial position or results of operations. Also, the Company
does not expect that the adoption of SFAS 157-2 for non-financial assets and
non-financial liabilities will have a material impact on consolidated its financial
position or results of operations under U.S. GAAP.(ii)
    
    In May 2008, FASB Statement No.162, The Hierarchy of Generally Accepted
Accounting Principles (SFAS 162). Under SFAS 162, the US GAAP hierarchy will now
reside in the accounting literature established by the FASB. SFAS No. 162 identifies
the sources of accounting principles and the framework for selecting the principles
used in the preparation for the financial statements in conformity with US GAAP. The
adoption of SFAS No 162 is not expected to have a material impact on the Companys
consolidated results of operations and financial position as the Company currently
adheres to the hierarchy of GAAP as presented in SFAS No. 162 in preparing its
reconciliation to U.S. GAAP.
 Page 28 of 30




---



##### 



Crystallex International Corporation
Notes to the Consolidated Financial Statements
December 31, 2008 and 2007
(In thousands of United States dollars except for share and per share amounts)
 
 15.
    
    Differences between Canadian and United States generally accepted accounting principles
(continued)
 (c) Recent United States Accounting Pronouncements (continued)
 (iii)
    
    In March 2008, the FASB issued FASB Statement No. 161, Disclosure about
Derivative Instruments and Hedging Activities  an amendment of FASB Statement No.
133 (SFAS 161) which provides revised guidance for enhanced disclosures about how
and why an entity uses derivative instruments, how derivative instruments and the
related hedged items are accounted for under FAS 133, and how derivative instruments
and the related hedged items affect an entitys financial position, financial
performance and cash flows. SFAS 161 is effective for the Companys fiscal year
beginning January 1, 2009. The adoption of SFAS No 161 is not expected to have a
material impact on the Companys consolidated results of operations and financial
position.(iv)
    
    In December 2007, FASB Statements No. 141(R) (SFAS 141(R)), Business
Combinations and No. 160 (SFAS 160), Non-controlling Interests in Consolidated
Financial Statements. SFAS 141(R) and 160 provide standards with respect to
improving, simplifying and converging the prevailing FASB accounting and reporting
standards for business combinations and non-controlling interests in consolidated
financial statements with International Accounting Standards Board (IASB) standards
for business combinations with an acquisition date in the fiscal year beginning after
December 15, 2008.SFAS 141 (R) requires an acquiring entity in a business combination to recognize all
(and only) the assets acquired and liabilities assumed in the transaction;
establishes the acquisition-date fair value as the measurement objective for all
assets acquired and liabilities assumed; and requires the acquirer to disclose to
investors and other users all of the information they need to evaluate and understand
the nature and financial effect of the business combination. SFAS 160 requires all
entities to report non- controlling (minority) interests in subsidiaries in the same
way  as equity in the consolidated financial statements. The Company is currently
evaluating the impact of the adoption of SFAS 141(R) and SFAS 160 on its consolidated
financial position and results of operations under U.S. GAAP with respect to any
business combination with acquisition dates subsequent to January 1, 2009.(v)
    
    In April 2008, the FASB issued FSP No. FAS 142-3, Determination of the
Useful Life of Intangible Assets (FSP 142-3) which amends the factors that should
be considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under FASB Statement No. 142, Goodwill
and Other Intangible Assets (SFAS 142). The intent of this FSP is to improve
consistency between the useful life of a recognize intangible asset under SFAS 142 and
the period of expected cash flows used to measure the fair value of the asset under
FASB Statement No. 141, Business Combinations. FSP142-3 is effective for the
Companys fiscal year beginning January 1, 2009 and will be applied prospectively to
intangible assets acquired after the effective date. The Company is in the process of
determining the effect, if any, the adoption of FSP 142-3 will have on the Companys
consolidated financial position, results of operations or cash flows.
 Page 29 of 30




---



##### 



Crystallex International Corporation
Notes to the Consolidated Financial Statements
December 31, 2008 and 2007
(In thousands of United States dollars except for share and per share amounts)
 
 15.
    
    Differences between Canadian and United States generally accepted accounting principles
(continued)
 (c) Recent United States Accounting Pronouncements (continued)
 (vi)
    
    In February 2007, the FASB issued FAS 159 (SFAS 159), Fair Value Option
for Financial Assets and Financial Liabilities, which allows an irrevocable option,
the Fair Value Option, to report selected financial assets and liabilities at fair
value. Changes in fair value for these instruments are recorded in earnings. The
objective of SFAS 159 is to improve financial reporting by providing entities with the
opportunity to mitigate volatility in reported earnings caused by measuring related
assets and liabilities differently without having to apply complex hedge accounting
provisions. SFAS 159 is effective for fiscal years beginning after November 15, 2007.
The adoption of SFAS 159 did not affect the Companys consolidated financial position
or results of operations under U.S. GAAP as it has not adopted the Fair Value Option
for any of its eligible financial instruments.(vii)
    
    In June 2008, the FASB ratified EITF 07-05, Determining Whether an
Instrument (or Embedded Feature) Is Indexed to an Entitys Own Stock. EITF 07-05
provides that an entity should use a two-step approach to evaluate whether an
equity-linked financial instrument (or embedded feature) is indexed to its own stock,
including evaluating the instruments contingent exercise and settlement provisions. It
also clarifies the impact of foreign currency denominated strike prices and
market-based employee stock option valuation instruments on the evaluation. EITF 07-05
is effective for the Companys fiscal year beginning January 1, 2009. The Company is
currently evaluating the impact EITF 07-05 may have on its consolidated financial
position and results of operations.
 Page 30 of 30