SOURCE: Apex Silver Mines Limited

November 10, 2008 21:53 ET

Apex Silver Reports Third Quarter 2008 Results

DENVER, CO--(Marketwire - November 10, 2008) - Apex Silver Mines Limited (AMEX: SIL) today announced results for the third quarter 2008. The company also announced that it has entered into discussions with Sumitomo Corporation ("Sumitomo") regarding the sale to Sumitomo of the company's interest in the San Cristobal mine.

Income from Operations and Net Income

Loss from operations for the quarter totaled $488.0 million, including a $163.0 million gain on metal derivative positions and $615.0 million impairment of property, plant and equipment. The impairment resulted from rapidly declining metals prices and continued high operating costs during the third quarter 2008, which have reduced current and projected operating margins at the company's San Cristóbal mine. Net loss for the quarter was $332.0 million, or $5.63 per diluted share, including the gain on metal derivative positions, the impairment and a writedown of inventories of $34.0 million due to declining metals prices.

Based on the existing and potential breaches of covenants under the San Cristóbal project financing facility (the "Facility"), the company has reclassified all of its debt under the Facility, the liability under its related metal derivatives positions and its 2.875% and 4.0% convertible subordinated notes (the "Notes") as short-term as at September 30, 2008.

Liquidity and Capital Resources

Declining metals prices, among other factors, have caused continued significant deterioration in the company's liquidity, and the company has relied increasingly on borrowings under a line of credit provided by Sumitomo to fund its cash needs at San Cristóbal. The company has been in discussions regarding certain covenants and metals derivatives payments under the project finance facility (the "Facility"), liquidity issues and other matters with the Facility lenders, the counterparties under the metal derivatives positions and Sumitomo. Based on discussions to date, the company believes that these matters can be resolved only by a comprehensive restructuring of its operations and capital structure.

The company has been in discussions with Sumitomo regarding the sale to Sumitomo of the company's interest in the San Cristóbal mine for a limited amount of cash and the assumption by Sumitomo of the related liabilities, including borrowings under the Facility and liabilities under the metal derivatives positions, net of the $91.0 million of restricted cash used as a margin against the derivatives. The discussions also contemplate the company's continued management of the mine and its receipt of limited contingent value rights. Any agreement in principle with Sumitomo on these matters would be subject, among other conditions, to definitive documentation and a restructuring of the Facility and the Notes. There can be no assurance that the parties will reach a definitive agreement. Concurrent with its discussions with Sumitomo, the company, in consultation with its financial advisor, Jefferies & Company, Inc., is continuing to explore strategic and financial alternatives, including a sale of the company, a sale of its interest in the San Cristóbal mine or in one or more of its exploration properties, and a voluntary filing under chapter 11 of the U.S. Bankruptcy Code.

September 30, 2008 Cash and Investments

At September 30, 2008, the company's aggregate cash, restricted cash, short- and long-term investments totaled $153.8 million, compared to an aggregate of $220.7 million in cash, restricted cash, short- and long-term investments and restricted investments at December 31, 2007. Cash and investments at September 30, 2008 includes $34.0 million of unrestricted cash and cash equivalents, $10.6 million of unrestricted short-term investments, $13.9 million of currently illiquid auction rate securities ("ARS") classified as long-term, $91.0 million of cash that is restricted to collateralize the open metal derivative positions required by the Facility, and $4.3 million of cash held in a collateral account that is restricted to the operating requirements at the San Cristóbal mine and interest and principal payments on the Facility. At September 30, 2008, the company's aggregate unrestricted cash and investments (excluding ARS) totaled $44.6 million. During October and through November 7, 2008, the company has used $9.1 million of this amount to fund Minera San Cristóbal, S.A. ("MSC"), the company's 65% owned subsidiary that owns and operates the San Cristóbal mine.

Funding of San Cristóbal and Other Cash Requirements

During the first nine months of 2008, the company and Sumitomo provided $202.0 million in funding to MSC, including $105.0 million in the third quarter, to augment cash flow from concentrate sales in order to settle metal derivative positions required in connection with the Facility and to fund operating costs, income and other taxes, capital costs and financing costs. The company funded $94.2 million of this amount, and the remaining $107.8 million was funded by Sumitomo, including $50.0 million advanced under a separate line of credit provided by Sumitomo. In October and through November 7, 2008, the company and Sumitomo have funded an additional $46.0 million to MSC, of which the company funded $9.1 million and Sumitomo funded $36.9 million, including $32.0 million advanced under the increased Sumitomo line of credit.

Operating cash flow of MSC was adversely affected during 2008 by falling metals prices. From January 1 through November 6, 2008 metals prices have declined by about 30% for silver, 55% for zinc, and 40% for lead, and from July 1 through November 6, 2008 prices have fallen about 40% for silver, 40% for zinc, and 20% for lead. Operating margins in 2008 were also adversely affected by increased costs for reagents, diesel fuel and other materials consumed in the operation. Operating margins for 2008 are also negatively affected by industry-wide increases in treatment and refining charges, which have approximately doubled from 2007 for lead concentrates and risen about 30% for zinc concentrates.

In addition to operating costs, sustaining capital expenditures and taxes payable, the company expects that MSC will have aggregate debt service and derivative settlement requirements of approximately $220.0 million during the next 12 months (from October 2008 through September 2009). This amount includes $95.0 million in scheduled principal and interest payments under the Facility, $72.0 million to fund the operating and debt service reserve accounts required under the Facility by December 2008, and approximately $53.0 million to settle derivative positions maturing during the period based on metal prices at November 6, 2008 ($10.41 per ounce of silver, $0.50 per pound of zinc, and $0.67 per pound of lead). The company projects that cash flow from operations will be insufficient to fund these amounts and that MSC will require approximately $386.0 million of funding from October 2008 through September 2009 based on November 6, 2008 metal prices. The company's share of this funding requirement would be approximately $251.0 million, which exceeds its current cash and investment balances and expected sources of funding (including MSC operating cash flow) during the period.

Facility Compliance

The San Cristóbal mine has not initiated certain performance tests required to achieve "completion," and thus will not achieve completion by year-end 2008 as required by the Facility. In the absence of a waiver or other relief, this failure will constitute an event of default under the Facility as of January 1, 2009. In addition, the Facility requires the company to maintain a minimum consolidated tangible net worth ("TNW") of $280.0 million. The writedown of the San Cristóbal assets has reduced the company's TNW below this amount. The company believes that it will be unable to cure this breach of covenant, and the failure to do so for 30 days following notice from the lenders would also constitute an event of default under the Facility. The occurrence of an event of default would entitle the Facility lenders to accelerate all indebtedness under the Facility and the counterparties to terminate the related metals derivative positions. The company's 65% share of the $225.0 million Facility and approximately $225.0 million outstanding derivative position liability at September 30, 2008 totals approximately $293.0 million. The company does not have, and does not expect to have, sufficient cash and investments to settle fully its share of these obligations if they were to be immediately due and payable and believes that it would face significant challenges in obtaining additional funding to do so. If the company were unable to repay these obligations when due, the lenders and the counterparties under the derivative positions would be entitled to enforce their liens and take possession of collateral securing indebtedness under the Facility and the metals derivative positions, including the assets that comprise the San Cristóbal mine and $91.0 million of cash and investments that is pledged as security for the derivative positions. A failure to pay amounts due and payable under the Facility and the derivative positions, including upon acceleration, would also result in a default under the terms of the Notes, entitling the holders to accelerate the maturity thereof. The Notes had an aggregate principal amount outstanding of $290.0 million at September 30, 2008.

Operations Update

Concentrator throughput, metal recovery, concentrate production and payable metals production continued to improve during the third quarter 2008 at our San Cristóbal mine. Concentrator throughput for the third quarter averaged 36,700 tonnes per day, approximately 92% of the 40,000 tonnes per day designed capacity. During August throughput averaged 39,200 tonnes per day but was down slightly in September as the result of a planned maintenance shutdown. During the first half of October the plant experienced an unscheduled shutdown as the result of the failure of certain electronics controlling the SAG mill. MSC was able to restart the SAG mill using components from one of the two ball mills and continued operating with the SAG mill and a single ball mill until the components were replaced in mid-October. As a result, October throughput averaged approximately 30,000 tonnes per day. However, after resumption of full operations in mid-October average throughput for the last 14 days of October were 40,800 tonnes per day.

Total throughput during the third quarter exceeded second quarter throughput by 10%. Zinc concentrate production of approximately 103,000 dry tonnes during the third quarter exceeded second quarter production by 23% and lead concentrate production during the third quarter exceed second quarter production by 35%.


                                                           % variation
                            =======  =======  =======  ===================
                              1Q08     2Q08     3Q08   2Q08   3Q08   3Q08
                             Month    Month    Month    vs.    vs.    vs.
                            Average  Average  Average  1Q08   2Q08   1Q08
                            =======  =======  =======  =====  =====  =====
 Total tonnes mined (000's)   3,222    3,867    3,505     20%    -9%     9%
 Total tonnes milled
  (000's)                       803    1,025    1,126     28%    10%    40%
                            =======  =======  =======  =====  =====  =====
 Recovery rate - silver          65%      68%      67%     4%    -1%     3%
 Recovery rate - zinc            78%      77%      81%    -1%     5%     4%
 Recovery rate - lead            68%      70%      76%     3%     9%    12%
                            =======  =======  =======  =====  =====  =====
Concentrate produced
 (000's)
 Zinc (dry tonnes)               20       28       34     41%    23%    73%
 Lead (dry tonnes)                5        8       10     53%    35%   106%
                            =======  =======  =======  =====  =====  =====





Costs                                                1Q08    2Q08    3Q08
                                                    ======= ======= =======
Total mining cost / tonne of rock                   $  1.80 $  1.49 $  2.19
Total milled cost(1) / tonne of ore                 $ 10.91 $ 10.88 $  9.60
Total site support costs / tonne of con. produced(2)$   196 $   202 $   167
Mining Royalty / tonne of con. produced             $   118 $   106 $    80
Sea freight cost / tonne of con. produced           $   112 $   121 $   123
                                                    ======= ======= =======

(1) Includes plant, maintenance and engineering costs
(2) Includes all ther site support costs and land freight costs

Payable production during the third quarter totaled approximately 4.7 million ounces of silver, 50,000 tonnes of zinc and 20,000 tonnes of lead, reflecting increases of 12%, 21% and 33% respectively over second quarter payable production.

                                                           % 2Q08  % 3Q08
                                                              vs      vs
Payable Production (000's)   2007    1Q08    2Q08    3Q08    1Q08    2Q08
                            ======= ======= ======= ======= ======  ======
Silver (oz)                   2,200   2,948   4,191   4,701     42%     12%
Zinc (tonnes)                    19      29      42      50     43%     21%
Lead (tonnes)                     8      10      15      20     50%     33%
                            ======= ======= ======= ======= ======  ======





                                                  1Q08   2Q08   3Q08
                               ================== =====  =====  =====
Strip ratio                                         1.0    1.0    1.1
                               ------------------ -----  -----  -----
Average Mill Feed Grades       Silver (g/t)          63     68     72
                               Zinc                1.88%  2.04%  2.28%
                               Lead                0.62%  0.70%  0.79%
                               ------------------ -----  -----  -----
Average Concentrate Grades     Silver in Zn (g/t)   585    505    404
                               Silver in Pb (g/t) 4,668  4,537  4,038
                               Zinc                  58%    58%    58%
                               Lead                  68%    68%    68%
                               ================== =====  =====  =====
Notes:
Strip ratio =  waste mined / [sulfide ore + oxide ore mined ] , where the
ore mined includes stockpiled sulfides and oxides as well as sulfide ore
fed to mill

With the improved process water availability of 40,000 cubic meters per day the company has sufficient water to sustain concentrator throughput at design levels and believes that sustainable throughput of 40,000 tonnes per day or more should be achievable going forward.

Sales of Concentrates

Declining lead and zinc prices resulted in a net reduction to sales of $4.1 million as the result of marking previous period provisional sales to market during the third quarter 2008. The company received an additional $8.8 million in the third quarter for concentrates shipped in the second quarter, which was recorded as deferred revenue. This amount, net of market adjustments, will be recorded as sales in the fourth quarter when risk of loss passes at the port of destination.

Payable Metal Sold (000's)     2007  1Q08  2Q08  3Q08
                               ===== ===== ===== =====
Silver (Oz)                      999 3,473 1,645 4,687
                               ----- ----- ----- -----
Zinc (Tonnes)                     29    25    26    60
                               ----- ----- ----- -----
Lead (Tonnes)                      7    12     5    18
                               ===== ===== ===== =====

Cash Costs

Due to the increase of costs for reagents, transportation costs and for other materials consumed in the operation, in addition to the industry-wide increases in treatment and refining charges and along with the significant decline in by product credits due to the decline in metals prices, cash costs for the third quarter have increased.

Cash Cost Production Basis       1Q08     2Q08     3Q08     YTD
                               =======  ======== ======== ========
Ag ($/oz.)                     $ (1.37) $   1.42 $   4.26 $   2.08
Zn ($/lb.)                     $  0.26  $   0.24 $   0.37 $   0.30
                               =======  ======== ======== ========

Summary Financial and Operating Data


                                Three Months Ended      Nine Months Ended
                                   September 30           September 30
                              ----------------------  --------------------
                                2008         2007       2008       2007
                              ---------    ---------  ---------  ---------
                              (in thousands, except   (in thousands, except
                                    share data)             share data)
Revenues:
   Sales of concentrates      $ 148,789  a $       -  $ 345,320  $       -
Costs and expenses:
   Costs applicable to sales
    (exclusive of amounts
    shown separately below)    (124,080) b         -   (255,840)         -
   Write down of inventories    (34,413) c         -    (34,413)         -
   Gain (loss) on commodity
    derivatives                 163,286  d  (136,895)   358,924   (194,236)
   Impairment of long lived
    assets                     (615,032) e         -   (615,032)         -
   Loss on auction rate
    securities                   (4,902) f   (21,130)    (8,002)   (21,130)
   Income taxes                   7,634  g      (394)   (14,168)      (488)

Net loss per Ordinary Share -
 diluted                      $   (5.63)   $   (2.59) $   (2.18) $   (3.13)
                              =========    =========  =========  =========


a.  During the third quarter 2008 the company recorded sales of
    concentrates of $148.8 million. The $148.8 million is net of a negative
    $4.1 million mark-to-market adjustment related to sales made in prior
    periods.
b.  These costs relate to mining, milling, marketing, mining royalties and
    transportation of concentrate sold to customers.
c.  As the result of deteriorating metals prices and increasing operating
    costs the company wrote down the carrying value of its sulfide ore
    stockpile and concentrate inventories at September 30, 2008, to net
    realizable value.   The company reduced the carrying value of its
    concentrate inventories by $4.2 million, its sulfide ore stockpile
    inventories by $30.2 million and recorded a $34.4 million charge to
    inventory write down on the accompanying consolidated statements of
    operations and comprehensive income (loss).
d.  For the third quarter 2008, the company recorded a gain related to its
    metal derivative positions in the amount of $163.3 million compared to
    a loss of $136.9 million on its metal derivative positions for the
    third quarter 2007. Gains and losses are the result of
    marking-to-market its open metal derivative positions and metal
    derivative positions settled during the period, as compared to the
    previous quarter, based upon changes in spot and forward prices for
    silver, zinc and lead. The gain for the third quarter 2008 was the
    result of declining silver, lead and zinc prices during the period.
    During the periods that the metal derivative positions are outstanding,
    gains and losses may fluctuate substantially from period to period
    based on spot prices, forward prices and quoted option volatilities.
e.  Following the guidance of FAS 144, the company has used a probability
    weighted analysis of various cash flow scenarios in determining that
    future cash flows are not sufficient to recover the carrying value of
    the San Cristóbal asset group.  The asset group includes all plant,
    property, and equipment, inventories.  An impairment of $615 million
    has been recorded in the income statement and as an offset against
    property, plant and equipment on the balance sheet for the period ended
    September 30, 2008.
f.  During the third quarter 2008 the company recognized a $4.9 million
    loss related to an impairment charge on its securities (ARS).  The
    impairment charge is the result of deteriorating markets for certain of
    the ARS held by the company for which the auctions continue to fail.
    During the third quarter 2007 the company recognized an initial
    impairment charge of $21.1 million related to its ARS as the first
    auctions began to fail during that period.
g.  During the third quarter 2008, the company recorded an income tax
    benefit of $7.6 million as compared to income tax expense of $0.4
    million for the third quarter 2007. The income tax benefit is the
    result of losses during the period, primarily due to the writedown of
    inventories at the San Cristóbal mine.

Forward-Looking Statements

Apex Silver is a mining, exploration and development company. It's 65%-owned San Cristóbal mine is the world's largest development in silver and zinc. The ordinary shares of Apex Silver trade on the American Stock Exchange under the symbol "SIL."

This press release contains forward-looking statements regarding the company, within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, including statements regarding the company's ongoing discussions with Sumitomo regarding a possible sale of the company's interest in the San Cristóbal mine and the restructuring of its operations and capital structure; the company's expected inability to comply with certain covenants in the Facility and the potential amendments to the Facility that may be sought from its lenders; anticipated additional funding requirements for San Cristóbal, including the expectation that sales from San Cristóbal will not cover operating, derivative settlements and other costs for the mine during 2008 and 2009 and that the Company will be required to contribute additional amounts to San Cristóbal in 2008 and 2009; production and recovery rates for the San Cristóbal mine, including the adequacy of process water for production, improvements during 2008 in metal recovery rates and the timing of achieving constant mill throughput at designed capacity; projected costs at the San Cristóbal mine, including anticipated cash operating costs in 2008, spending on sustaining capital expenditures and taxes; and the anticipated settlement costs of the metal derivative positions.

Actual results relating to any and all of these subjects may differ materially from those presented. Factors that could cause results to differ materially include the company's ability to reach a definitive agreement with Sumitomo with respect to the sale of its interest in the San Cristóbal mine, including resolution of terms under which the company would continue as the manager of the mine and to reach a comprehensive restructuring of its capital structure with the Facility lenders and the holders of the Notes, among others; the company's ability to continue to retain key management and mining personnel during the pendency of its restructuring to assure continued production at the San Cristóbal mine; the potential impact of the company's proposed restructuring on its relations with the Bolivian government and key suppliers and customers as they relate to the continued operation of the San Cristóbal mine; the company's ability to manage its remaining liquidity to meet its cash requirements as it pursues its restructuring, including its ability to achieve, as necessary, a restructuring of its operations or indebtedness; the nature of the company's business if it achieves a comprehensive restructuring of its operations, including the impact on the presentation of its results of operations and financial condition of the reclassification of the San Cristóbal asset group as assets held for sale and of any sale of its interest in that asset group, if completed; the company's ability to achieve amendments to the Facility and the Notes to avoid the defaults that will result from its failure to achieve "completion" as defined in the Facility, to maintain consolidated tangible net worth as required by the Facility, or to comply with other covenants under the Facility, and its ability to comply with the amended covenants, if the company is unable to achieve a comprehensive restructuring of its operations and capital structure; the company's ability to manage operational issues it faces to avoid further impairments of its liquidity; worldwide economic and political events affecting the supply of and demand for silver, zinc and lead and related market prices for each metal; political and economic instability in Bolivia, including the communities located near the San Cristóbal mine. and in other countries in which the company conducts business; future actions of the Bolivian government with respect to nationalization of natural resources or other changes in the mining or taxation policies of the Bolivian government, including the approval by the Bolivian people of a draft constitution which could have a significant effect on mining operations in Bolivia; material handling problems in the stockpile reclaim system, difficulties in blending ore types and variations in ore grade; inability to improve recoveries without affecting throughput; plant availability and delivery of operating supplies to the site, operating or maintenance problems or delays; concentrate train derailments; continued training needs of the plant workforce labor disputes or strikes; higher than anticipated mine, concentrator and other operating costs; and inability to complete planned exploration activities on exploration properties or at San Cristóbal. The company assumes no obligation to update this information. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements can be found in the company's Form 10-K filed for the year ended December 31, 2007 and the company's Form 10-Q for the quarter ended September 30, 2008, each of which have been filed with the SEC.

Non GAAP Financial Measures

The company uses the terms "estimated cash operating cost" and "average cash operating costs," which differ from measures of performance determined in accordance with generally accepted accounting principles ("GAAP"). The company has included this information to provide investors with data about the average costs associated with its mining activities so that investors may have information regarding the cash generating capabilities of the San Cristóbal mine. This information should not be considered in isolation or as a substitute for measures of performance that will be prepared in accordance with GAAP. These measures are not necessarily indicative of operating profit or cash flow from operations to be determined under GAAP and may not be comparable to similarly titled measures of other companies.

The term "estimated cash operating cost" includes actual mining, milling and mine related overhead costs, mine royalty taxes, inland freight costs, and marketing costs incurred on concentrate production during the period. Estimated cash operating costs also includes estimated ocean freight and insurance costs for concentrates produced during the period. Estimated cash operating costs for silver also includes projected off-site costs related to silver refining charges. Estimated cash operating costs for zinc also includes projected off-site costs related to treatment and smelting charges for zinc-silver concentrates. Estimated cash operating costs exclude income taxes, depreciation, amortization and provisions for reclamation. This measure differs from costs applicable to sales determined in accordance with GAAP. Costs applicable to sales in accordance with GAAP reflect costs incurred for concentrates sold during the period, as opposed to produced, and includes actual costs for ocean freight and insurance. In addition, costs applicable to sales do not include refining, treatment and smelting charges, which in accordance with GAAP are netted against revenue.

The average cash operating cost per ounce of silver is equal to the total of estimated cash operating costs for the period reduced by the estimated value of lead and zinc by-product credits for the period and divided by the number of "payable ounces" of silver. The "payable ounces" are the estimated number of ounces of silver produced during the period reduced by the ounces required to cover estimated refining charges. The lead by-product credits are equal to the estimated revenue from "payable pounds" of lead produced during the period, less estimated treatment and smelting charges for lead-silver concentrates. The "payable pounds" are the number of pounds of lead produced during the period, reduced by the estimated number of pounds required to cover refining and treatment charges. The zinc by-product credits are equal to the estimated revenue from "payable pounds" of zinc produced during the period, less estimated treatment and smelting charges for zinc-silver concentrates. The "payable pounds" are the number of pounds of zinc produced during the period, reduced by the estimated number of pounds required to cover refining and treatment charges.

The average cash operating cost per pound of zinc is equal to the total of estimated cash operating costs for the period, reduced by the estimated value of silver and lead by-product credits for the period, divided by the number of "payable pounds" of zinc. The lead by-product credits are equal to the estimated revenue from "payable pounds" of lead produced during the period, less estimated treatment and smelting charges for lead-silver concentrates. The silver by-product credits are equal to the estimated revenue from "payable ounces" of silver produced during the period, less estimated silver refining charges.



                     APEX SILVER MINES LIMITED
                    CONSOLIDATED BALANCE SHEETS
                (Expressed in United States dollars)
                            (Unaudited)

                                              September 30,  December 31,
                                                  2008           2007
                                              -------------  -------------
                                                  (in thousands, except
                                                       share data)
                   Assets
Current assets
  Cash and cash equivalents                   $      33,973  $      40,736
  Restricted cash                                    95,340         12,313
  Investments                                         9,246         52,243
  Trade receivables                                   6,002          3,110
  Inventories                                        76,618         44,211
  Derivatives at fair value                           7,302              -
  Deferred tax asset                                  7,019              -
  Prepaid expenses and other assets                  16,295         16,195
                                              -------------  -------------
    Total current assets                            251,795        168,808

Property, plant and equipment, net                  215,990        841,981
Ore stockpile inventories                            70,806         76,914
Deferred financing costs                             12,734         15,990
Value added tax recoverable                         149,501         95,327
Restricted cash                                          10         91,000
Investments                                          15,261         24,407
Derivatives at fair value                             5,002          8,475
Other                                                   244          2,009
                                              -------------  -------------
    Total assets                              $     721,343  $   1,324,911
                                              =============  =============

      Liabilities and Shareholders' Deficit

Current liabilities
  Accounts payable and other accrued
   liabilities                                $      73,413  $      55,957
  Deferred revenue                                    8,782              -
  Accrued interest payable                            3,001          4,982
  Derivatives at fair value                         237,434        266,820
  Current portion of long term debt                 523,978         41,155
                                              -------------  -------------
    Total current liabilities                       846,608        368,914
Long term debt                                       61,743        546,981
Derivatives at fair value                                 -        482,683
Deferred gain on sale of asset                          945            945
Asset retirement obligation                           8,723          6,981
Deferred tax liability                                8,086              -
Other long term liabilities                           4,803          2,508
                                              -------------  -------------
    Total liabilities                               930,908      1,409,012
                                              -------------  -------------
Commitments and contingencies

Shareholders' equity (deficit)
  Ordinary Shares, $.01 par value,
   175,000,000 shares authorized; 58,955,475
   and 58,909,625 shares issued and
   outstanding at respective dates                      590            589
  Additional paid-in capital                        680,115        677,203
  Accumulated deficit                              (890,300)      (761,783)
  Accumulated other comprehensive (loss)                 30           (110)
                                              -------------  -------------
    Total shareholders' deficit                    (209,565)       (84,101)
                                              -------------  -------------
    Total liabilities and shareholders'
     deficit                                  $     721,343  $   1,324,911
                                              =============  =============



                     APEX SILVER MINES LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
                (Expressed in United States dollars)
                            (Unaudited)

                              Three Months Ended      Nine Months Ended
                                 September 30            September 30
                            ----------------------  ----------------------
                               2008        2007        2008        2007
                            ----------  ----------  ----------  ----------
                            (in thousands, except   (in thousands, except
                                  share data)             share data)
Revenues:
  Sales of concentrates     $  148,789  $        -  $  345,320  $        -
Costs and expenses:
  Costs applicable to sales
   (exclusive of amounts
   shown separately below)    (124,080)          -    (255,840)          -
  Write down of
   inventories                 (34,413)          -     (34,413)          -
  Production startup
   income/expense, net               -     (12,423)          -     (12,423)
  Exploration                   (6,306)     (2,975)    (21,437)     (9,341)
  Administrative                (7,756)     (7,457)    (18,282)    (19,193)
  Gain (loss) on commodity
   derivatives                 163,286    (136,895)    358,924    (194,236)
  Gain on foreign currency
    derivatives and
    transactions                 4,798       2,572      15,631       4,792
  Asset retirement
   accretion expense              (208)       (154)       (574)       (439)
  Impairment of long lived
   assets                     (615,032)          -    (615,032)          -
  Depreciation, depletion
   and amortization            (17,490)     (4,675)    (36,225)     (4,865)
                            ----------  ----------  ----------  ----------
    Total operating
     expenses, net            (637,201)   (162,007)   (607,248)   (235,705)
                            ----------  ----------  ----------  ----------
  Loss from operations        (488,412)   (162,007)   (261,928)   (235,705)

Other income and expenses:
  Interest and other income      1,285       5,479       5,219      19,073
  Loss on auction rate
   securities                   (4,902)    (21,130)     (8,002)    (21,130)
  Gain on sale of interest
   in subsidiary                     -           -      63,071           -
  Interest expense and
   other borrowing costs       (15,555)     (7,290)    (45,751)     (7,290)
                            ----------  ----------  ----------  ----------
    Total other income and
     expenses                  (19,172)    (22,941)     14,537      (9,347)
                            ----------  ----------  ----------  ----------
  Loss before minority
   interest and income
   (taxes) benefit            (507,584)   (184,948)   (247,391)   (245,052)

  Income taxes                   7,634        (394)    (14,168)       (488)
  Minority interest in loss
   of consolidated
   subsidiaries                168,172      33,501     133,042      61,833
                            ----------  ----------  ----------  ----------
  Net loss                  $ (331,778) $ (151,841) $ (128,517) $ (183,707)
                            ----------  ----------  ----------  ----------
  Other comprehensive loss:
    Unrealized gain (loss)
     on securities          $   (1,524) $       96  $      140  $      (65)
                            ----------  ----------  ----------  ----------
  Comprehensive loss        $ (333,302) $ (151,745) $ (128,377) $ (183,772)
                            ==========  ==========  ==========  ==========

Net loss per Ordinary Share
 - basic                    $    (5.63) $    (2.59) $    (2.18) $    (3.13)
                            ==========  ==========  ==========  ==========
Net loss per Ordinary Share
 - diluted                  $    (5.63) $    (2.59) $    (2.18) $    (3.13)
                            ==========  ==========  ==========  ==========
Weighted average
 Ordinary Shares
 outstanding - Basic        58,954,820  58,644,407  58,934,882  58,635,980
                            ==========  ==========  ==========  ==========
Weighted average
 Ordinary Shares
 outstanding - diluted      58,954,820  58,644,407  58,934,882  58,635,980
                            ==========  ==========  ==========  ==========

Contact Information

  • CONTACT:
    Apex Silver Mines Corporation
    Jerry W. Danni
    (303) 839-5060
    Sr. Vice President Corporate Affairs