UPDATE 1-Crystallex spikes on Venezuela mine optimism

(Adds details, stock price)

By Cameron French

TORONTO, Aug 22 (Reuters) - Crystallex International (KRY.TO) shares spiked briefly to a four-month high on Friday after the Venezuelan government hinted the much-delayed Las Cristinas gold project may be closer to an official go-ahead.

Crystallex shares soared nearly 20 percent before retreating again on news that Venezuela was open to proposed modifications to the project. The stock has dropped 60 percent over the past 12 months as the permitting process for the 17-million-ounce gold mine has dragged on.

The company learned in April Venezuelan's Environment Ministry was planning to deny the permit, but then was told in June it would reconsider the application if certain modifications to the project were made.

On Friday, Crystallex said it had received an official letter from the ministry saying the modifications it proposed are viable and "conform to the environmental and social guidelines of the Venezuelan government."

The ministry also said that the modifications must be taken into account in making the decision on the environmental permit, according to Crystallex.

"This is yet another step in the right direction," said John Ing, a long-time gold analyst and president of Toronto investment house Maison Placements.

"It shows that they're well on the road ... but, still, investors will not be satisfied until they get the environment permit."

Crystallex said the ministry had suggested modifications that would improve social projects in the area, reduce the environmental impact of the open-pit mine and improve remediation plans at the end of the mine's life.

The company's shares, which have fluctuated wildly amid sometimes confusing statements coming out of Venezuela, initially charged ahead 19 percent on the news, but then eased, and were down 2 Canadian cents at C$1.20 by late Friday morning on the Toronto Stock Exchange.

The stock is still up over the last two days, however, as it rose 22 percent on Thursday on anticipation of the Venezuelan statement, Ing said.

Until the final permit is issued, worries that Venezuelan President Hugo Chavez's government could nationalize the project -- as it has in other industries -- are expected to continue to dog the stock. ($1=$1.05 Canadian) (Reporting by Cameron French; editing by Rob Wilson)