Apex Silver Reports on Second Quarter 2006 Results.DENVER -- Apex Silver Mines Limited (AMEX AMEX See: American Stock Exchange : SIL See safety integrity level. 1. SIL - "SIL - A Simulation Language", N. Houbak, LNCS 426, Springer 1990. 2. SIL - SNOBOL Implementation Language. Intermediate language forming a virtual machine for the implementation of portable interpreters. ) today reported a net loss of $63.4 million or $1.10 per share for the second quarter 2006 compared to a net loss of $2.8 million or $0.06 per share for the same 2005 period. The loss in the second 2006 quarter was mainly due to a $61.1-million charge related to the previously announced commodity-related hedge position required by the company's lenders in connection with the $225-million project financing Project financing A form of asset-based financing in which a firm finances a discrete set of assets on a stand-alone basis. for its 100%-owned San Cristobal San Cris·tó·bal A city of extreme western Venezuela in a mountainous region near the Colombian border south-southwest of Maracaibo. Founded in 1561, it was severely damaged by an earthquake in 1875. Population: 298,000. open-pit silver-zinc-lead project located in southwestern Bolivia and certain hedge positions unrelated to the project financing. The charge mostly stems from the application of Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments Derivative instruments Contracts such as options and futures whose price is derived from the price of an underlying financial asset. and Hedging Activities" (FAS No. 133), which requires that all derivative instruments be recorded on the balance sheet at fair value and that changes in the fair value be recorded each period in current earnings. To date, the company has spent $33.1 million to close or establish caps on most of the hedge positions unrelated to the project financing. This amount includes $5.5 million spent since June 30. Potential additional cash requirements for these hedge positions have been capped at approximately $12 million. Apex Silver's all remaining hedge positions are summarized in Table I attached. The project financing-related portion of the hedge position, which is collateralized by future mine production and thus is not subject to margin calls, will be settled over the repayment period of the project financing beginning in the third quarter of 2007 when San Cristobal is scheduled to begin production. The June 30 year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. net hedge loss totaled $120.1 million (in 2005, the second-quarter year-to-date commodity-related net hedge gain totaled $2.1 million). At June 30, 2006, the company's aggregate cash, short- and long-term investments and restricted investments and cash amounted to $384.3 million. This figure included the restricted amount of $259.3 million which together with the secured project financing should provide Apex Silver with sufficient funding to complete construction and development of San Cristobal. At June 30, 2006, the company had spent approximately $371 million on the project ($159 million in 2006). Development of San Cristobal Continues on Track During the second 2006 quarter, Apex Silver continued advancing the San Cristobal development which at June 30 was approximately 70% complete. Engineering and procurement The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. were 99% complete and construction approximately 52% complete. The construction work force continues to increase with approximately 3,000 people on site (about 80% of future plan). The project is now at a stage of mechanical equipment placement, steel erection erection /erec·tion/ (e-rek´shun) the condition of being rigid and elevated, as erectile tissue when filled with blood. e·rec·tion n. 1. and initiation of electrical work. At June 30, all but one major concrete pour had been completed totaling approximately 34,000 cubic meters Noun 1. cubic meter - a metric unit of volume or capacity equal to 1000 liters cubic metre, kiloliter, kilolitre metric capacity unit - a capacity unit defined in metric terms or 85% of the plan. The primary crusher crusher, machine used to reduce materials such as ore, coal, stone, and slag to particle sizes that are convenient for their intended uses. Crushers operate by slowly applying a large force to the material to be reduced. has now been put in place and installation of related piping and structural steel is continuing as planned. The wall section surrounding sur·round tr.v. sur·round·ed, sur·round·ing, sur·rounds 1. To extend on all sides of simultaneously; encircle. 2. To enclose or confine on all sides so as to bar escape or outside communication. n. the primary crusher is about 30% complete. The stator stator: see generator; motor, electric. sections of the Semi-Autogenous Grinding grinding, process by which surface material is removed from an object, usually metal, by the abrasive action of a rotating wheel or a moving belt that contains abrasive grains. (SAG (1) A momentary drop in voltage from the power source. Contrast with spike. (2) (SAG) (SQL Access Group) See CLI. ) and two ball mills have been installed. All the cells and corresponding agitators in the flotation flotation or froth flotation Most widely used process for extracting many minerals from their ores. The method separates and concentrates ores by altering their surfaces so that they are either repelled or attracted by water. area have been placed. Structural steel erection has begun in the filter and load-out facilities. The railroad railroad or railway, form of transportation most commonly consisting of steel rails, called tracks, on which freight cars, passenger cars, and other rolling stock are drawn by one locomotive or more. spur project is advancing with earthwork earth·work n. 1. An earthen embankment, especially one used as a fortification. See Synonyms at bulwark. 2. Engineering Excavation and embankment of earth. 3. activities and construction of drainage drainage, in agriculture drainage, in agriculture, the removal of excess water from the soil, either by a system of surface ditches, or by underground conduits if required by soil conditions and land contour. and sub-grade foundations. All ties, rail, switches and associated superstructure superstructure /su·per·struc·ture/ (soo´per-struk?chur) the overlying or visible portion of a structure. su·per·struc·ture n. A structure above the surface. components have been procured. Construction of power delivery systems is progressing as planned with foundations, cable wire and conductor conductor Any of various substances that allow the flow of electric current or thermal energy. A conductor is a poor insulator because it has a low resistance to such flow. stringing fully completed. The company is now concentrating its efforts on civil construction and installation of the Punutuma substation. Activity is increasing at the port of Mejillones where efforts are focused on civil work in the loading and unloading Unloading Selling securities or commodities whose prices are dropping to minimize loss. areas and excavation excavation In archaeology, the exposure, recording, and recovery of buried material remains. The techniques employed vary by the type of site, but all forms of archaeological excavation require great skill and careful preparation. for the railroad spur construction. Mine development is proceeding at a planned pace. By June 30, approximately 10.7 million tonnes of material had been moved. Of that amount, the stockpiled ore constituted about 1.6 million tonnes. Mining activities are expected to increase with the addition of two new CAT 789 200-tonne trucks scheduled for imminent arrival. Eight more trucks should be delivered before year-end. The new haulage equipment will be complemented by two PC 4000 Komatsu shovels and a CAT 994 front-end loader front-end loader n. An earthmoving machine with a hydraulic scoop in front for lifting and loading earth or rubble. . The project remains on schedule to commence operations in the third quarter 2007. With the advancement of mining activities and with project construction well underway, the company commenced a review of the development plan. This review is expected to be completed by the end of 2006. Findings to date indicate that in the early years of operation, San Cristobal is expected to experience higher annual rates of production of zinc zinc, metallic chemical element; symbol Zn; at. no. 30; at. wt. 65.38; m.p. 419.58°C;; b.p. 907°C;; sp. gr. 7.133 at 25°C;; valence +2. Zinc is a lustrous bluish-white metal. It is found in Group 12 of the periodic table. and lower annual rates of production of silver than originally forecasted. These findings are not expected to have a significant effect on the project. San Cristobal remains the world's largest mining development in silver, zinc and lead. Apex Silver is a mining exploration and development company. The Ordinary shares of Apex Silver trade on the American Stock Exchange American Stock Exchange (AMEX) Stock exchange in the U.S. Originally known as “the Curb,” it began as an outdoor marketplace in New York City c. 1850. It moved indoors to its present location in the Wall Street area in 1921. under the symbol "SIL." This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. regarding the company, within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, including statements regarding the San Cristobal project including the commencement of production in the third quarter of 2007, projected timing for equipment delivery, settlement of commodity hedges, capital expenditures, the company having sufficient funds to complete project development and startup and the company's expectation to complete the review of the mine development plan by the end of the year. Actual results relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc any and all of these subjects may differ materially from those presented. Factors that could cause results to differ materially include fluctuations in silver, zinc and lead prices, problems or delays in construction and startup, variations in ore grade Ore grade is a measure that describes the concentration of a valuable natural material (such as metals or minerals) in its surrounding ore. Ore grade is used to assess the economic feasibility of a mining operation: the cost of extracting a natural material from its ore is directly and processing rates, problems in emerging financial markets and political unrest Unrest is a sociological phenomenon, for instance:
A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. filed with the SEC for the year ended December 31, 2005.
APEX SILVER MINES LIMITED
Summary Financial Information
(In thousands of United States dollars,
except for shares and per-share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2006 2005 2006 2005
Income and expenses
Interest and other
income $5,264 $3,643 $8,168 $7,043
Gain on extinguishment
of debt - - 2,875 -
Trading gains (losses) -
commodities (61,076) 2,430 (120,055) 2,056
Trading gains (losses) -
foreign currency 123 (666) 236 (1,284)
Exploration expense (1,557) (1,435) (3,007) (2,761)
Other operating expense (94) - (142) -
Administrative expense (5,686) (4,917) (10,999) (8,846)
Interest expense & other
borrowing costs (255) (1,872) (774) (3,862)
Amortization and
depreciation (101) (17) (196) (33)
--------------------------------------------
Loss before minority
interest (63,382) (2,834) (123,894) (7,687)
Income tax expense (53) - (107) -
Minority interest - 11 (7) 11
--------------------------------------------
Net loss $(63,435) $(2,823) $(124,008) $(7,676)
Other comprehensive
income (loss) 77 (22) 962 (157)
--------------------------------------------
Comprehensive loss $(63,358) $(2,845) $(123,046) $(7,833)
============================================
Net loss per Ordinary
Share - basic and diluted $(1.10) $(0.06) $(2.28) $(0.16)
============================================
Weighted average Ordinary
Shares outstanding 57,551,214 47,983,111 54,483,319 47,831,454
============================================
June 30, December 31,
SUMMARY BALANCE SHEET DATA 2006 2005
in thousands of U.S. dollars ----------------------------
(Unaudited)
=============
Cash & cash equivalents $11,851 $4,808
Restricted cash 37,934 135,182
Short-term investments 113,165 132,000
Restricted investments 144,061 67,491
Other current assets 14,643 5,824
----------------------------
Total current assets 321,654 345,305
Property, plant and equipment (net) 505,741 379,138
Ore inventories 8,909 -
Deferred financing costs 20,134 21,604
Value-added tax recoverable 34,881 20,052
Restricted investments 77,258 12,392
Other assets 2,098 2,020
----------------------------
Total assets $970,675 $780,511
============================
Accounts payable and accrued current
liabilities 56,060 74,487
Accrued interest payable 3,267 3,096
Derivatives 13,845 5,652
Current portion of long-term debt 2,708 2,270
----------------------------
Total current liabilities 75,880 85,505
Long-term debt 382,275 320,021
Derivatives 130,265 50,621
Asset retirement obligation 4,936 2,003
----------------------------
Total liabilities 593,356 458,150
Minority interest in subsidiaries 41 34
Shareholders' equity 377,278 322,327
----------------------------
Total liabilities & shareholders' equity $970,675 $780,511
============================
Table I
Apex Silver's Remaining Hedge Positions
August 9, 2006
Year 1 Years Years Thereafter Total
Forward Contracts 2 & 3 4 & 5
----------------------------------------------------------------------
Silver (000 ozs) --- 230 185 200 615
Average Price (per oz) --- $7.27 $7.21 $7.13 $7.21
Zinc (000 lbs) --- 370,756 365,356 39,683 775,795
Average Price (per lb) --- $0.48 $0.48 $0.48 $0.48
Lead (000 lbs) --- 226,850 96,120 --- 322,970
Average Price (per lb) --- $0.30 $0.29 --- $0.30
Put Option Contracts Owned
--------------------------
Silver (000 ozs) --- 1,150 2,790 5,160 9,100
Average Price (per oz) --- $5.43 $5.71 $5.89 $5.78
Zinc (000 lbs) 24,251 --- --- --- 24,251
Average Price (per lb) $0.57 --- --- --- $0.57
Call Option Contracts Written
-----------------------------
Silver (000 ozs) 1,110 4,700 4,590 510 10,910
Average Price (per oz) $16.02 $8.38 $8.16 $9.21 $9.10
Zinc (000 lbs) 31,416 10,472 3,307 --- 45,194
Average Price (per lb) $1.30 $0.57 $0.57 --- $1.07
Lead (000 lbs) 4,409 20,944 6,614 --- 31,967
Average Price (per lb) $0.70 $0.39 $0.39 --- $0.43
Call Option Contracts Owned
---------------------------
Zinc (000 lbs) 28,660 --- --- --- 28,660
Average Price (per lb) $1.59 --- --- --- $1.59
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