THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT
TO SAID SECTION 8(a), MAY DETERMINE.
The information in this prospectus is not complete and may be
changed. The selling shareholders may not sell these securities pursuant to this
prospectus until the registration statement filed with the Securities and
Exchange Commission becomes effective. This preliminary prospectus is not an
offer to sell these securities and it is not soliciting offers to buy these
securities in any state where the offer or sale is not
permitted.
PROSPECTUS
Subject
to Completion, dated May 17,
2005
6,413,713
ORDINARY SHARES
APEX
SILVER MINES LIMITED
The
6,413,713 ordinary shares, par value $0.01 per share, offered hereby are being
offered from time to time by certain Apex Silver Mines Limited shareholders. See
“Selling Shareholders.” The price at which the selling shareholders may sell the
shares will be determined by the prevailing market price for the shares, in
negotiated transactions or otherwise as set forth herein. See “Plan of
Distribution.”
Our
ordinary shares are traded on the American Stock Exchange under the symbol
“SIL.” On May 2,
2005, the
last reported sales price of our ordinary shares on the American Stock Exchange
was $12.86.
We are
filing this registration statement pursuant to a registration rights agreement
made as of October 28, 1997 among Apex Silver Mines Limited, Silver
Holdings LDC, Argentum LLC, Consolidated Commodities Ltd., Thomas S.
Kaplan, Litani Capital Management LDC and Aurum LLC.
Investing
in the securities offered in this prospectus involves risk. See “Risk Factors”
beginning on page 6
of this prospectus.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal
offense.
The date
of this prospectus is ____________,
2005.
TABLE
OF CONTENTS
WHERE
YOU CAN FIND MORE INFORMATION |
1 |
|
|
ENFORCEABILITY
OF CIVIL LIABILITIES UNDER UNITED STATES LAWS |
2 |
|
|
FORWARD-LOOKING
STATEMENTS |
2 |
|
|
SUMMARY |
4 |
|
|
RISK
FACTORS |
6 |
|
|
SELLING
SHAREHOLDERS |
16 |
|
|
USE
OF PROCEEDS |
17 |
|
|
PLAN
OF DISTRIBUTION |
17 |
|
|
DESCRIPTION
OF ORDINARY SHARES |
19 |
|
|
CERTAIN
TAX CONSIDERATIONS |
24 |
|
|
LEGAL
MATTERS |
29 |
|
|
EXPERTS |
29 |
As used
in this prospectus, the terms “Apex Silver,” “we,” “our,” “ours” and “us” may,
depending on the context, refer to Apex Silver Mines Limited or to one or more
of Apex Silver Mines Limited’s consolidated subsidiaries or to all of them taken
as a whole. When we refer to “ordinary shares” throughout this prospectus, we
include all rights attaching to our ordinary shares under any shareholder rights
plan then in effect.
WHERE
YOU CAN FIND MORE INFORMATION
We file
annual, quarterly and special reports, proxy statements and other information
with the SEC. You may read and copy any of these documents at the SEC’s public
reference room at 450 Fifth Street N.W., Washington, D.C. 20549. Please call the
SEC at 1-800-SEC-0330 for further information on the public reference room. Our
SEC filings are also available to the public at the SEC’s website at
http://www.sec.gov.
The SEC
allows us to “incorporate by reference” the information we file with the SEC,
which means that we can disclose important information to you by referring you
to those documents. The information incorporated by reference is considered part
of this prospectus, and information that we file later with the SEC will
automatically update and supersede the information in this
prospectus.
The
following documents, which were previously filed with the SEC pursuant to the
Securities Exchange Act of 1934, or the Exchange Act, are hereby incorporated by
reference:
· |
our
Annual Report on Form 10-K for the year ended December 31, 2004, as
amended; |
· |
our Quarterly Report on Form 10-Q for the quarter ended March 31,
2005; |
· |
our
Current Reports on Form 8-K, filed on January 13, 2005 (two
reports); and Current |
· |
the
description of the ordinary shares and other classes or series of shares
contained under the caption “Description of Ordinary Shares” in our
registration statement on Form S-1, as amended (File No. 333-34685), and
incorporated by reference into the Registration Statement on Form 8-A
under the Securities Exchange Act of 1934 filed with the SEC on
November 18, 1997. |
All
reports and other documents filed by us pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this prospectus and prior to
the termination of this offering shall be deemed to be incorporated by reference
into this prospectus and shall be a part hereof from the date of filing of such
reports and documents.
Any
statement contained in a document incorporated or deemed to be incorporated by
reference in this prospectus shall be deemed modified, superseded or replaced
for purposes of this prospectus to the extent that a statement contained in this
prospectus, or in any subsequently filed document that also is deemed to be
incorporated by reference in this prospectus, modifies, supersedes or replaces
such statement. Any statement so modified, superseded or replaced shall not be
deemed, except as so modified, superseded or replaced, to constitute a part of
this prospectus. Subject to the foregoing, all information appearing in this
prospectus is qualified in its entirety by the information appearing in the
documents incorporated by reference.
Statements
contained in this prospectus as to the contents of any contract or other
document are not necessarily complete, and in each instance we refer you to the
copy of the contract or document filed as an exhibit to the registration
statement or the documents incorporated by reference in this prospectus, each
such statement being qualified in all respects by such reference.
You may
receive a copy of any of these filings (excluding exhibits to those documents
unless they are specifically incorporated by reference in those documents), at
no cost, by writing or calling Apex Silver Mines Corporation, 1700 Lincoln
Street, Suite 3050, Denver, Colorado 80203, Attention: Vice President, Investor
Relations and Corporate Development, telephone (303) 839-5060.
ENFORCEABILITY
OF CIVIL LIABILITIES UNDER UNITED STATES LAWS
Apex
Silver is a Cayman Islands exempted company and some of our directors reside in
jurisdictions outside of the United States. At any one time, all or a
substantial portion of our assets and directors are or may be located in
jurisdictions outside of the United States. Therefore, it could be difficult for
investors to effect within the United States service of process on us or any of
our directors who reside outside the United States. Further, it could be
difficult to recover against us or such directors judgments of courts in the
United States, including judgments based upon civil liability under U.S. federal
securities laws and similar state laws. Notwithstanding the foregoing, we have
irrevocably agreed that we may be served with process with respect to actions
based on offers of the securities offered by this prospectus in the United
States by serving Apex Silver Mines Corporation, 1700 Lincoln Street, Suite
3050, Denver, Colorado 80203, our U.S. agent appointed for that
purpose.
Walkers,
our Cayman Islands counsel, has advised us that there may be circumstances where
the courts of the Cayman Islands would not enforce:
· |
judgments
of U.S. courts obtained in actions against us or our directors that are
not resident within the United States that are based upon the civil
liability provisions of U.S. federal securities laws and similar state
laws; or |
· |
original
actions brought in the Cayman Islands against us or such persons based
solely upon U.S. federal securities laws. |
There is
no treaty in effect between the United States and the Cayman Islands providing
for such enforcement. There are grounds upon which Cayman Islands courts may not
enforce judgments of U.S. courts. In addition, some remedies that are available
under the laws of U.S. jurisdictions, including certain remedies under U.S.
federal securities laws, may not be allowed in Cayman Islands courts as being
contrary to public policy.
FORWARD-LOOKING
STATEMENTS
Some
information contained or incorporated by reference in this prospectus may
contain forward-looking statements. These statements include comments
regarding San Cristobal development and construction plans, costs, grade,
production and recovery rates, permitting, infrastructure arrangements, Bolivian
political and economic conditions, financing needs, the availability of
financing on acceptable terms, the timing of construction at San Cristobal, and
the markets for silver, zinc and lead.
The use
of any of the words “anticipate,” “continue,” “estimate,” “expect,” “may,”
“will,” “project,” “should,” “believe” and similar expressions are intended to
identify uncertainties. We believe the expectations reflected in these
forward-looking statements are reasonable. However, we cannot assure you that
these expectations will prove to be correct. Our actual results could differ
materially from those anticipated in these forward-looking statements as a
result of the risk factors set forth below and other factors set forth in this
prospectus:
· |
worldwide
economic and political events affecting the supply of and demand for
silver, zinc and lead; |
· |
political
and economic instability in Bolivia and other developing countries in
which we conduct business; |
· |
volatility
in market prices for silver, zinc and lead; |
· |
financial
market conditions, and the availability of financing on terms acceptable
to Apex Silver; |
· |
uncertainties
associated with developing a new mine, including potential cost overruns
and the unreliability of estimates in early stages of mine development;
|
· |
variations
in ore grade and other characteristics affecting mining, crushing, milling
and smelting operations and mineral recoveries; |
· |
geological,
technical, permitting, mining and processing problems;
|
· |
the
availability and timing of acceptable arrangements for power,
transportation, water and smelting; |
· |
the
availability, terms, conditions and timing of required government permits
and approvals; |
· |
uncertainties
regarding future changes in applicable law or implementation of existing
law, including Bolivian laws related to tax, mining, environmental matters
and exploration; |
· |
the
availability, terms and timing of arrangements for smelting and variations
in smelting operations and capacity; |
· |
the
availability of experienced employees; and |
· |
the
factors discussed under “Risk Factors.” |
Many of
these factors are beyond our ability to control or predict. You should not
unduly rely on these forward-looking statements. These statements speak only as
of the date of this prospectus. Except as required by law, we are not obligated
to publicly release any revisions to these forward-looking statements to reflect
future events or developments. All subsequent written and oral forward-looking
statements attributable to us and persons acting on our behalf are qualified in
their entirety by the cautionary statements contained in this section and
elsewhere in this prospectus.
SUMMARY
This
summary contains basic information about us and the resale by shareholders of
the Offered Shares. Because it is a summary, it does not contain all of the
information that you should consider before investing. You should read this
entire prospectus carefully, including the section entitled “Risk Factors” and
our financial statements and the related notes contained elsewhere or
incorporated by reference in this prospectus, before making an investment
decision.
Our
Company
Apex
Silver Mines Limited, incorporated under the laws of the Cayman Islands in 1996,
is engaged in the exploration and development of silver properties in South
America and Mexico. Our exploration efforts have produced our first development
property, our 100% owned San Cristobal project located in southern Bolivia. San
Cristobal’s proven and probable reserves, based on $5.37 per ounce silver, $0.40
per pound zinc and $0.28 per pound lead, total approximately 219 million tonnes
of ore grading 64.69 grams per tonne of silver, 1.60% zinc and 0.59% lead,
containing approximately 456 million ounces of silver, 7.7 billion pounds of
zinc and 2.8 billion pounds of lead. The prices used represent the three-year
average price for each of the metals as per guidelines established by the
Securities and Exchange Commission.
Based on
recently completed evaluations for our updated life-of-mine development plan, we
expect San Cristobal to have annual average payable production of
approximately 17 million ounces of silver, 165,000 tonnes of zinc
and 64,000 tonnes of lead over a mine life of approximately 16 years.
We have commenced construction at San Cristobal, and, assuming that metals
markets remain favorable and that we are able to complete the additional
financing required for the project, we expect to commence start-up and
production in 2007.
We also
have a large diversified portfolio of privately owned and controlled silver
exploration properties. We have rights to or control over 100 silver and other
mineral exploration holdings, divided into approximately 50 property groups,
located in or near the traditional silver producing regions of Bolivia, Mexico
and Peru. None of our properties is in production, and consequently we have no
operating income or cash flow.
We are
managed by a team of seasoned mining professionals with significant experience
in the construction, development and operation of large scale, open pit and
underground, precious and base metals mining operations, as well as in the
identification and exploration of mineral properties.
Our
principal executive office is located at 1700 Lincoln Street, Suite 3050,
Denver, Colorado 80203, and our telephone number is (303) 839-5060. Our
internet address is www.apexsilver.com. Information on our website is not
incorporated into this prospectus and is not a part of this
prospectus.
Our
Strategy
Apex
Silver is one of a limited number of silver companies with significant
exposure to other metals. Our strategy is to capitalize on the San Cristobal
project and our sizeable portfolio of silver exploration properties in order to
achieve long-term profits and growth and to enhance shareholder
value.
The
principal elements of our business strategy are to:
· |
secure
financing for and proceed to develop the San Cristobal project as a large
scale open pit mining operation; |
· |
continue
to explore and develop those properties which we believe are most likely
to contain significant amounts of silver and/or other metals
and divesting those properties that are not of continuing interest;
and |
· |
identify
and acquire additional mining and mineral properties that we believe
contain significant amounts of silver and/or other metals or have
exploration potential. |
Certain
Tax Considerations
We
believe that we likely were a passive foreign investment company (“PFIC”) with
respect to 2004, and likely will be a PFIC in 2005 as well as potentially with
respect to future years. If we are a PFIC, U.S. Holders of ordinary
shares will be
subject to certain adverse U.S. federal income tax rules. Under the PFIC rules,
a U.S. Holder who disposes or is deemed to dispose of ordinary
shares at a
gain, or who receives or is deemed to receive certain distributions with respect
to ordinary shares, generally will be required to treat such gain or
distributions as ordinary income and pay an interest charge on the tax imposed
with respect thereto. Certain elections that may sometimes be used to reduce the
adverse impact of the PFIC rules for holders of ordinary shares(so-called “QEF elections” and “mark-to-market” elections), but these
elections may accelerate the recognition of taxable income and may result in the
recognition of ordinary income. The PFIC rules are extremely complex, and
prospective investors are urged to consult their own tax advisers regarding the
potential consequences to them of Apex Silver being classified as a PFIC. See
“Certain Tax Considerations.”
The
Offering
We are
registering an aggregate of 6,413,713 ordinary shares (“Offered Shares”) to be
offered for sale by certain of our shareholders (“Selling
Shareholders”).
The
Offered Shares were issued to the Selling Shareholders or their predecessors in
a private placement completed in 1996, approximately one year before the
Company’s initial public offering.
Use
of Proceeds
We will
not receive any of the proceeds from the sale of the Apex Silver ordinary shares
offered by the Selling Shareholders in this prospectus. The Selling Shareholders
will receive all proceeds from the sale of the ordinary shares offered by this
prospectus.
RISK
FACTORS
You
should carefully consider the risk factors set forth below as well as the other
information included in this prospectus before deciding to purchase any shares.
The risks described below are not the only risks that we face. Additional risks
and uncertainties not currently known to us or that we currently deem immaterial
may also impair our business operations. Any of these risks may have a material
adverse effect on our business, financial condition, results of operations and
cash flows. In that case, you may lose all or part of your investment in the
shares.
Risks
Related to the Business
We
have identified a material weakness in our internal controls over financial
reporting.
Section 404
of the Sarbanes-Oxley Act of 2002 requires management to make an assessment of
the design and operating effectiveness of our internal controls and our auditors
to audit the design and operating effectiveness of our internal controls as well
as forming an opinion on management’s assessment. As of December 31, 2004,
we had a material weakness in our internal controls because we lacked
a sufficient complement of personnel with a level of accounting expertise that
is commensurate with our financial reporting requirements. This material
weakness resulted in certain adjustments to our financial
statements.
· |
In
January 2005, it was determined that the accounting for capitalized
interest relating to our San Cristobal development project asset was
incorrect. Generally accepted accounting principles require the
capitalization of a portion of the interest incurred on debt borrowed for
the construction of certain qualifying assets (such as our San Cristobal
project). We restated our consolidated financial statements for the first,
second and third quarters of 2004 to capitalize additional interest and to
reduce interest expense. |
· |
We
had a material adjustment to reclassify cash and cash equivalents to short
and long term investments prior to filing our second quarter 2004
financial statements and an adjustment to stock compensation expense and
related disclosures associated with our adoption of Statement of Financial
Accounting Standards 123, Accounting for Stock-Based
Compensation, prior to filing our third quarter 2004 financial
statements. |
· |
We
had an audit adjustment to the 2004 financial statements to increase costs
capitalized related to our San Cristobal development project asset and to
reduce administration expense. |
We have
retained the public accounting firm currently assisting in our Section 404
compliance effort to assist us in preparing our financial statements and to
provide technical expertise in the proper application of generally accepted
accounting principles to various transactions and other financial statement
matters. We have hired additional personnel and continue to evaluate the need
for additional personnel for our accounting department, including personnel with
technical expertise in the application of generally accepted accounting
principles. However, we have not yet been able to test and assess the
operating effectiveness of our internal controls, including these mitigating
steps, surrounding the financial reporting process and testing may reveal
similar or additional weaknesses in the design and effectiveness related to the
financial reporting process. Since this material weakness was not effectively
remediated, management has concluded that Apex Silver’s controls are
ineffective. Further, our independent registered public accounting firm has
issued an adverse opinion on our internal controls as of December 31, 2004.
Because opinions on internal controls have not been issued in the past, it is
uncertain what impact an adverse opinion would have on our company or our stock
price.
We
have no history of production.
We have
no history of producing silver or other metals. The development of our San
Cristobal project will require the construction or rehabilitation and operation
of mines, processing plants and related infrastructure. As a result, we are
subject to all of the risks associated with establishing new mining operations
and business enterprises. There can be no assurance that we will successfully
establish mining operations or profitably produce silver or other metals at any
of our properties.
We
have a history of losses and we expect losses to continue for at least the next
three years.
As an
exploration and development company that has no production history, we have
incurred losses since our inception, and we expect to continue to incur
additional losses for at least the next three years. As of December 31,
2004, we had an accumulated deficit of $97.7 million. There can be no assurance
that we will achieve or sustain profitability in the future.
The
calculation of our reserves and other mineralization is subject to significant
estimates.
Unless
otherwise indicated, reserves and other mineralization figures presented in our
filings with the SEC, press releases and other public statements that may be
made from time to time are based on estimates of contained silver and other
metals made by independent geologists or our own personnel. These estimates are
imprecise and depend on geological interpretation and statistical inferences
drawn from drilling and sampling which may prove to be unreliable. There can be
no assurance that:
· |
these
estimates will be accurate; |
· |
reserves
and other mineralization figures will be accurate;
or |
· |
reserves
or mineralization could be mined and processed
profitably. |
Since we
have not commenced production on any of our properties, reserves and other
mineralization estimates may require adjustments or downward revisions based on
actual production experience. Extended declines in market prices for silver,
zinc and lead may render portions of our reserves uneconomic and result in
reduced reported reserves. Any material reductions in estimates of our reserves
and other mineralization, or of our ability to extract these reserves or
mineralization, could have a material adverse effect on our results of
operations, financial condition and cash flows.
We have
not established the presence of any proven or probable reserves at any of our
mineral properties other than the San Cristobal project. There can be no
assurance that subsequent testing or future feasibility studies will establish
additional reserves at our properties. The failure to establish additional
reserves could restrict our ability to successfully implement our strategies for
long term growth beyond the San Cristobal project.
The
San Cristobal project is subject to risks including delays in commencement and
completion and we may be unable to achieve anticipated production volume or
manage cost increases.
Completion
of the development of the San Cristobal project is subject to various factors,
including the availability, terms, conditions and timing of acceptable
arrangements for financing, transportation, construction, and smelting;
required government approvals, and the performance of our engineering and
construction contractors, mining contractor, suppliers and consultants. The lack
of availability on acceptable terms or the delay in any one or more of the items
listed above could also delay or prevent the development of San Cristobal as
currently planned. Further, completion of the development of the San Cristobal
project may be compromised in the event of a prolonged decline in price levels
for silver and zinc. There can be no assurance:
· |
when
or whether the San Cristobal project will be
completed; |
· |
whether
the resulting operations will achieve the anticipated production volume;
or |
· |
that
the construction costs and ongoing operating costs associated with the
development of the San Cristobal project will not be higher than
anticipated. |
We have
never developed or operated a mine or managed a significant mine development
project. We cannot assure you that the development of San Cristobal will be
completed at the cost and on the schedule predicted, or that silver, zinc and
lead grades and recoveries, production rates or anticipated capital or operating
costs will be achieved.
If the
actual cost to complete the development of the San Cristobal project is
significantly higher than currently expected, there can be no assurance that we
will have enough funds to cover these costs or that we would be able to obtain
alternative sources of financing to cover these costs. Unexpected cost
increases, reduced silver and zinc prices or the failure to obtain necessary
project financing on acceptable terms to commence or complete the development of
the San Cristobal project on a timely basis, or to achieve anticipated
production capacity, could have a material adverse effect on our future results
of operations, financial condition and cash flows.
The
successful development of the San Cristobal project is also subject to the other
risk factors described herein.
We
depend on a single mining project.
We
anticipate that the majority, if not all, of any revenues for the next few years
and beyond will be derived from the sale of metals mined at the San Cristobal
project. Therefore, if we are unable to complete and successfully mine the San
Cristobal project, our ability to generate revenue and profits would be
materially adversely affected.
Our
success will depend on our ability to manage our
growth.
As we
increase our development activity at San Cristobal, we are experiencing
significant growth in our operations, which we expect to continue and accelerate
over the next several years now that construction has commenced and we
anticipate the commencement of production in 2007. This growth has created and
will continue to create new positions and responsibilities for management
personnel and will substantially increase demands on our operating and financial
systems. There can be no assurance that we will successfully meet these demands
and manage our anticipated growth.
Our
profitability will be affected by changes in the prices of
metals.
Our
profitability and long-term viability depend, in large part, on the market price
of silver, zinc, lead and other metals. The market prices for these metals are
volatile and are affected by numerous factors beyond our control,
including:
· |
global
or regional consumption patterns; |
· |
supply
of, and demand for, silver, zinc, lead and other
metals; |
· |
speculative
activities; |
· |
expectations
for inflation; and |
· |
political
and economic conditions. |
The
aggregate effect of these factors on metals prices is impossible for us to
predict. Decreases in metals prices have delayed, and could in the future
adversely affect, our ability to finance the development of the San Cristobal
project and the exploration and development of our other properties, which would
have a material adverse effect on our financial condition, results of
operations and cash flows. There can be no assurance that metals prices
will not decline.
The
following table sets forth for the periods indicated (1) the Comex nearby
active silver futures contract’s high and low price of silver in U.S. dollars
per troy ounce and (2) the London Metals Exchange’s high and low settlement
prices of zinc and lead in U.S. dollars per pound.
|
|
Silver |
|
Zinc |
|
Lead |
|
Year |
|
High |
|
Low |
|
High |
|
Low |
|
High |
|
Low |
|
2000 |
|
$ |
5.57 |
|
$ |
4.62 |
|
$ |
0.58 |
|
$ |
0.46 |
|
$ |
0.26 |
|
$ |
0.18 |
|
2001 |
|
|
4.83 |
|
|
4.03 |
|
|
0.48 |
|
|
0.33 |
|
|
0.24 |
|
|
0.20 |
|
2002 |
|
|
5.13 |
|
|
4.22 |
|
|
0.42 |
|
|
0.33 |
|
|
0.24 |
|
|
0.18 |
|
2003 |
|
|
5.99 |
|
|
4.35 |
|
|
0.46 |
|
|
0.34 |
|
|
0.34 |
|
|
0.19 |
|
2004 |
|
|
8.29 |
|
|
5.49 |
|
|
0.56 |
|
|
0.42 |
|
|
0.45 |
|
|
0.29 |
|
2005* |
|
|
7.57 |
|
|
6.41 |
|
|
0.66 |
|
|
0.54 |
|
|
0.45 |
|
|
0.39 |
|
* Through
April 29, 2005
The
closing prices of silver, zinc and lead on April 29, 2005 were $6.90 per troy
ounce, $0.59 per pound and $0.43 per pound,
respectively.
We
may not be successful in hedging against price, currency and interest rate
fluctuations and may incur mark to market losses and lose money through our
hedging programs.
We have
engaged in limited metals trading activities to hedge against commodity and base
metals price risks, using puts and calls. We are in the process of securing
additional project debt financing for the San Cristobal project and in
connection with that financing we will be required to utilize various price
hedging techniques to hedge a limited amount of the metals we produce at San
Cristobal. The level of hedging we are required to maintain in the future will
be determined based on negotiations with our lenders.
We may
also engage in activities to hedge the risk of exposure to currency and interest
rate fluctuations related to the development of the San Cristobal project in
Bolivia or to exploration or development in other countries in which we incur
substantial expenditures. Further, terms of our financing arrangements may
require us to hedge against these risks.
There can
be no assurance that we will be able to successfully hedge against price,
currency and interest rate fluctuations. In addition, our ability to hedge
against zinc and lead price risk in a timely manner may be adversely affected by
the smaller volume of transactions in both the zinc and lead markets. Further,
there can be no assurance that the use of hedging techniques will always be to
our benefit. Hedging instruments that protect against market price volatility
may prevent us from realizing the benefit from subsequent increases in market
prices with respect to covered production, which would limit our revenues and
profits. Hedging contracts also are subject to the risk that the other party may
be unable or unwilling to perform its obligations under these contracts. Any
significant nonperformance could have a material adverse effect on our financial
condition, results of operations and cash flows.
The
exploration of mineral properties is highly speculative in nature, involves
substantial expenditures and is frequently
non-productive.
Our
future growth and profitability will depend, in part, on our ability to identify
and acquire additional mineral rights, and on the costs and results of our
continued exploration and development programs. Competition for attractive
mineral exploration properties is intense. Our strategy is to expand our
reserves through a broad program of exploration. Mineral exploration is highly
speculative in nature and is frequently non- productive. Substantial
expenditures are required to:
· |
establish
ore reserves through drilling and metallurgical and other testing
techniques; |
· |
determine
metal content and metallurgical recovery processes to extract metal from
the ore; and |
· |
construct,
renovate or expand mining and processing
facilities. |
If we
discover ore, it usually takes several years from the initial phases of
exploration until production is possible. During this time, the economic
feasibility of production may change. As a result of these uncertainties, there
can be no assurance that we will successfully acquire additional mineral rights,
or that our exploration programs will result in new proven and probable reserves
in sufficient quantities to justify commercial operations in any of our
properties, other than the San Cristobal project.
We
consider from time to time the acquisition of operating or formerly operating
mines. Our decisions to acquire these properties are based on a variety of
factors including historical operating results, estimates of and assumptions
about future reserves, cash and other operating costs, metals prices and
projected economic returns, and evaluations of existing or potential liabilities
associated with the property and its operation. Other than historical operating
results, all of these may differ significantly from our estimates and
assumptions. In addition, there is intense competition for attractive
properties. Accordingly, there is no assurance that our acquisition efforts will
result in profitable mining operations.
Our
profitability depends, in part, on actual economic returns and actual costs of
developing mines, which may differ significantly from our estimates and involve
unexpected problems and delays.
None of
our mineral properties, including the San Cristobal project, has an operating
history upon which we can base estimates of future cash operating costs. Our
decision to develop the San Cristobal project is based on feasibility studies.
Decisions about the development of other projects in the future may also be
based on feasibility studies. Feasibility studies derive estimates of reserves
and operating costs and project economic returns. Estimates of economic returns
are based, in part, on assumptions about future metals prices. Our profitability
will be affected by changes in the price of metals. Feasibility studies derive
estimates of average cash operating costs based upon, among other
things:
· |
anticipated
tonnage, grades and metallurgical characteristics of ore to be mined and
processed; |
· |
anticipated
recovery rates of silver and other metals from the
ore; |
· |
cash
operating costs of comparable facilities and equipment;
and |
· |
anticipated
climatic conditions. |
Actual
cash operating costs, production and economic returns may differ significantly
from those anticipated by our studies and estimates.
There are
a number of uncertainties inherent in the development and construction of any
new mine, including the San Cristobal project. These uncertainties
include:
· |
the
timing and cost, which can be considerable, of the construction of mining
and processing facilities; |
· |
the
availability and cost of skilled labor, power, water and
transportation; |
· |
the
availability and cost of appropriate smelting and refining
arrangements; |
· |
the
need to obtain necessary environmental and other governmental permits, and
the timing of those permits; and |
· |
the
availability of funds to finance construction and development
activities. |
The
costs, timing and complexities of mine construction and development are
increased by the remote location of many mining properties, like the San
Cristobal project. It is common in new mining operations to experience
unexpected problems and delays during development, construction and mine
start-up. In addition, delays in the commencement of mineral production often
occur. Accordingly, there is no assurance that our future development activities
will result in profitable mining operations.
Title
to our mineral properties may be challenged.
Our
policy is to seek to confirm the validity of our rights to title to, or contract
rights with respect to, each mineral property in which we have a material
interest. However, we cannot guarantee that title to our properties will not be
challenged. Title insurance generally is not available, and our ability to
ensure that we have obtained secure claim to individual mineral properties or
mining concessions may be severely constrained. We have not conducted surveys of
all of the claims in which we hold direct or indirect interests and, therefore,
the precise area and location of these claims may be in doubt. Accordingly, our
mineral properties may be subject to prior unregistered agreements, transfers or
claims, and title may be affected by, among other things, undetected defects. In
addition, we may be unable to operate our properties as permitted or to enforce
our rights with respect to our properties.
We
may lose rights to properties if we fail to meet payment requirements or
development or production schedules.
We derive
the rights to some of our mineral properties, including some of our principal
properties at the San Cristobal project, from leaseholds or purchase option
agreements which require the payment of rent or other installment fees. In
addition, we must make annual mining patent payments to the Bolivian government
totaling approximately $360,000 to maintain our concessions at San Cristobal. If
we fail to make these payments when they are due, our rights to the property may
lapse. There can be no assurance that we will always make payments by the
requisite payment dates. Some contracts with respect to our mineral properties
require development or production schedules. There can be no assurance that we
will be able to meet any or all of the development or production schedules. In
addition, our ability to transfer or sell our rights to some of our mineral
properties requires governmental approvals or third party consents, which may
not be granted.
We
cannot insure against all of the risks associated with
mining.
The
business of mining is subject to a number of risks and hazards,
including:
· |
adverse
environmental effects; |
· |
technical
difficulties due to unusual or unexpected geologic
formations; |
· |
failures
of pit walls; and |
· |
flooding
and periodic interruptions due to inclement or hazardous weather
conditions. |
These
risks can result in, among other things:
· |
damage
to, and destruction of, mineral properties or production
facilities; |
Although
we maintain, and intend to continue to maintain, insurance with respect to our
operations and mineral properties within ranges of coverage consistent with
industry practice, there can be no assurance that insurance will be available at
economically feasible premiums. Insurance against environmental risks is not
generally available. These environmental risks include potential liability for
pollution or other disturbances resulting from mining exploration and
production. In addition, not all risks associated with developing and producing
silver, zinc, lead and other metals are included in coverage and some covered
risks may result in liabilities which exceed policy limits. Further, we may
elect to not seek coverage for all risks. The occurrence of an event that is not
fully covered, or covered at all, by insurance, could have a material adverse
effect on our financial condition, results of operations and cash
flows.
Our
San Cristobal project and our exploration activities are in countries with
developing economies and are subject to the risks of political and economic
instability associated with these countries.
We
currently conduct exploration activities in countries with developing economies
including Bolivia, Mexico and Peru in Latin America. These countries and other
emerging markets in which we may conduct operations have from time to time
experienced economic or political instability. We may be materially adversely
affected by risks associated with conducting operations in countries with
developing economies, including:
· |
political
instability and violence; |
· |
war
and civil disturbance; |
· |
expropriation
or nationalization; |
· |
changing
fiscal regimes; |
· |
fluctuations
in currency exchange rates; |
· |
high
rates of inflation; |
· |
underdeveloped
industrial and economic infrastructure; and |
· |
unenforceability
of contractual rights. |
Bolivia
has experienced slow economic growth and political instability in the last three
years. In late 2003, there were violent demonstrations in La Paz and elsewhere
in Bolivia, protesting, among other things, the proposed export of natural gas
to the U.S. through Chile. These demonstrations resulted in the resignation of
President Sanchez de Lozada in October 2003, and his constitutional replacement
by President Mesa. Demonstrations have continued in 2004 and early 2005, focused
on, among other things, the opposition of certain political parties to a
proposed statute regulating oil and gas development in Bolivia. As proposed, the
new law would provide incentives for foreign investment
and increase taxes and royalties on oil and gas
production. Following a period of demonstrations, President Mesa resigned in
early March 2005. The Bolivian Congress rejected his resignation, and President
Mesa has agreed to continue to serve as President based on agreements regarding
passage of a new oil and gas statute and progress on certain other initiatives.
The remaining opposing political party continues its active opposition. There
have been no formal proposals to impose royalties or increase taxes on the
mining industry. Although these conditions and events have not caused any
adverse impact on our San Cristobal project, political and economic
uncertainties and instability continue and may not be resolved successfully. The
political and economic climate may become more unstable, and political and
economic uncertainties may in the future have an adverse impact on the
development or operations of San Cristobal.
Changes
in mining or investment policies or shifts in the prevailing political climate
in any of the countries in which we conduct exploration and development
activities could adversely affect our business. Our operations may be affected
in varying degrees by government regulations with respect to, among other
things:
· |
production
restrictions; |
· |
export
and import controls; |
· |
income
and other taxes; |
· |
environmental
legislation; |
· |
foreign
ownership restrictions; |
· |
foreign
exchange and currency controls; |
· |
welfare
benefit policies; |
· |
land
claims of local residents; |
We cannot
accurately predict the effect of these factors. In addition, legislation in the
United States regulating foreign trade, investment and taxation could have a
material adverse effect on our financial condition, results of operations and
cash flows.
Our
activities are subject to foreign environmental laws and regulations which may
materially adversely affect our future operations.
We
conduct mineral exploration and development activities primarily in Central
America and South America, and are most active in Bolivia, where the San
Cristobal project is located, and Mexico. With the development of San Cristobal,
we also expect to conduct mining operations in Bolivia. These countries have
laws and regulations which control the exploration and mining of mineral
properties and their effects on the environment, including air and water
quality, mine reclamation, waste handling and disposal, the protection of
different species of flora and fauna and the preservation of lands. These laws
and regulations will require us to acquire permits and other authorizations for
certain activities. In many countries, including Bolivia, there is relatively
new comprehensive environmental legislation, and the permitting and
authorization processes may be less established and less predictable than they
are in the United States. There can be no assurance that we will be able to
acquire necessary permits or authorizations on a timely basis, if at all. Delays
in acquiring any permit or authorization could increase the development cost of
San Cristobal or other projects and could delay the commencement of
production.
Environmental
legislation in many countries is evolving in a manner which will likely require
stricter standards and enforcement, increased fines and penalties for
non-compliance, more stringent environmental assessments of proposed projects
and a heightened degree of responsibility for companies and their officers,
directors and employees. In Bolivia, where there is relatively new environmental
legislation, enforcement activities and strategies may be under development, and
thus may be less predictable than in the United States. We cannot predict what
environmental legislation or regulations will be enacted or adopted in the
future or how future laws and regulations will be administered or interpreted.
Compliance with more stringent laws and regulations, as well as potentially more
vigorous enforcement policies or regulatory agencies or stricter interpretation
of existing laws, may (1) necessitate significant capital outlays,
(2) cause us to delay, terminate or otherwise change our intended
activities with respect to one or more projects and (3) materially
adversely affect our future operations.
Many of
our exploration and development properties are located in historic mining
districts where prior owners may have caused environmental damage which may not
be known to us or to the regulators. In most cases, we have not sought complete
environmental analyses of our mineral properties and have not conducted
comprehensive reviews of the environmental laws and regulations in every
jurisdiction in which we own or control mineral properties. To the extent we are
subject to environmental requirements or liabilities, the cost of compliance
with these requirements and satisfaction of these liabilities would reduce our
net cash flow and could have a material adverse effect on our financial
condition and results of operations. If we are unable to fund fully the cost of
remediation of any environmental condition, we may be required to suspend
operations or enter into interim compliance measures pending completion of the
required remediation.
We
compete against larger and more experienced
companies.
The
mining industry is intensely competitive. Many of the largest mining companies
are primarily producers of base metals, and may become interested in the types
of silver deposits on which we are focused because these deposits typically are
polymetallic, containing significant quantities of base metals including zinc,
lead and copper. Many of these companies have greater financial resources,
operational experience and technical capabilities than we have. We may encounter
increasing competition from other mining companies in our efforts to acquire
mineral properties and hire experienced mining professionals. Increased
competition in our business could adversely affect our ability to attract
necessary capital funding or acquire suitable producing properties or prospects
for mineral exploration in the future.
Our
ability to obtain dividends or other distributions from our subsidiaries may be
subject to restrictions imposed by law, foreign currency exchange regulations
and our financing arrangements.
We
conduct, and will continue to conduct, all of our operations through
subsidiaries. Our ability to obtain dividends or other distributions from our
subsidiaries may be subject to restrictions on dividends or repatriation of
earnings under applicable local law, monetary transfer restrictions and foreign
currency exchange regulations in the jurisdictions in which the subsidiaries
operate. Further, our anticipated financing for the San Cristobal project is
expected to include requirements that we satisfy certain debt service reserve or
operating reserve requirements or meet debt payment obligations prior to payment
to us of any dividends by our subsidiaries. Our subsidiaries’ ability to pay
dividends or make other distributions to us is also subject to their having
sufficient funds to do so. If our subsidiaries are unable to pay dividends or
make other distributions, our growth may be inhibited unless we are able to
obtain additional debt or equity financing on acceptable terms. In the event of
a subsidiary’s liquidation, we may lose all or a portion of our investment in
that subsidiary.
We
may not be able to raise the funds necessary to explore and develop our mineral
properties.
Although
we raised approximately $536.7 million through equity sales and proceeds from
the sale of notes in 2004, we will need additional external financing to develop
and construct the San Cristobal project and to fund the exploration and
development of our other mineral properties. Sources of external financing may
include bank borrowings and future debt and equity offerings. There can be no
assurance that financing will be available on acceptable terms, or at all. The
failure to obtain financing would have a material adverse effect on our growth
strategy and our results of operations and financial condition. The mineral
properties that we are likely to develop are expected to require significant
capital expenditures. There can be no assurance that we will be able to secure
the financing necessary to retain our rights to, or to begin or sustain
production at, our mineral properties.
We
depend on the services of key executives.
We are
dependent on the services of key executives including our executive chairman and
chief executive officer and a small number of highly skilled and experienced
executives and personnel focused on the development of the San Cristobal
project. Due to the relatively small size of Apex Silver, the loss of these
persons or our inability to attract and retain additional highly skilled
employees required for the development of the San Cristobal project may delay or
otherwise adversely affect the development of the San Cristobal project, which
could have a material adverse effect on our business or future
operations.
The
substantial control of Apex Silver by our directors, officers and 5%
shareholders may have a significant effect in delaying, deferring or preventing
a change in control of Apex Silver or other events which could be of benefit to
our other shareholders.
As of
April 30, 2005, the directors of Apex Silver and officers of Apex Silver Mines
Corporation, together with members of their families and entities that may be
deemed to be affiliates of or related to these persons or entities, and 5%
shareholders beneficially owned approximately 28.4 million, or 60%, of our
outstanding shares, assuming the conversion of currently exercisable options and
warrants. This level of ownership by these persons may have a significant effect
in delaying, deferring or preventing a change in control of Apex Silver or other
events which could be of benefit to our other shareholders.
Apex
Silver and certain lower tier subsidiaries may be treated as passive foreign
investment companies for U.S. federal income tax
purposes.
We
believe that we likely were a passive foreign investment company (“PFIC”) with
respect to 2004, and likely will be a PFIC in 2005 as well as potentially with
respect to future years. If we are a PFIC, U.S. holders of Ordinary
Shares and warrants to acquire Ordinary Shares will be subject to
certain adverse U.S. federal income tax rules. Under the PFIC rules, a U.S.
holder who disposes or is deemed to dispose of Ordinary Shares or
warrants at a gain, or who receives or is deemed to receive certain
distributions with respect to Ordinary Shares, generally will be required to
treat such gain or distributions as ordinary income and pay an interest charge
on the tax imposed with respect thereto. Certain elections may sometimes be used
to reduce the adverse impact of the PFIC Rules for holders of Ordinary Shares
(so-called “QEF elections” and “mark-to-market” elections), but these elections
may accelerate the recognition of taxable income and may result in the
recognition of ordinary income. In addition, elections that may
be used to reduce the adverse impact of the PFIC rules will not be available
with respect to warrants to acquire Ordinary
Shares. The PFIC rules are extremely complex, and prospective
investors are urged to consult their own tax advisers regarding the potential
consequences to them of Apex Silver being classified as a PFIC.
We have
in certain prior filings stated that we believed that (i) Apex Silver may
be considered a PFIC but (ii) none of our non-U.S. lower tier subsidiaries
was a corporation for U.S. tax purposes that would itself be considered to be a
PFIC. We now believe that certain of our non-U.S. lower tier subsidiaries,
including the subsidiary that contains the principal assets associated with the
San Cristobal project, were corporations for U.S. tax purposes that constituted
PFICs in certain prior years. As a result, there is a possibility that some
shareholders may suffer adverse U.S. federal income tax consequences that
arguably might not have been suffered had they been aware of the PFIC status of
these lower tier subsidiaries. Such shareholders may, however, be able to make
retroactive elections in some cases that would mitigate any such adverse
consequences. Moreover, under applicable proposed regulations, the fact that our
lower tier subsidiaries of any consequence may not have had earnings and profits
for any taxable year since formation may arguably eliminate any such tax
consequences in respect of prior taxable years. For the current and all
subsequent taxable years, we believe that the potential for our lower tier
subsidiaries to be classified as PFICs with respect to new investors can be
substantially eliminated without adverse tax consequences.
In the
future, holders of our shares may claim that they have suffered adverse tax
consequences for which they could have taken remedial action if they had been
aware that such subsidiaries constituted PFICs. It is not possible for us to
determine the number of shareholders, if any, that might make such a claim or to
determine the merits or impact of such claims on us and whether such claims may
be material to us.
SELLING
SHAREHOLDERS
The
following table sets forth certain information regarding the beneficial
ownership, as of April 29, 2005, by each of the Selling Shareholders. Apex
Silver does not anticipate adding additional Selling Shareholders at a later
time and as of the date of this prospectus, Apex Silver is not aware of any
unidentified selling shareholders. The information in the table below is based
upon information provided to us by the Selling Shareholders. Except as otherwise
disclosed below, none of the Selling Shareholders has or within the past three
years has had, any position, office or other material relationship with
us.
Beneficial
ownership is determined in accordance with Rule 13d-3(d) promulgated by the SEC
under the Securities Exchange Act of 1934. Unless otherwise noted, each person
or group identified possesses sole voting and investment power with respect to
the Offered Shares.
Name |
|
Number
of Shares Beneficially Owned Prior to this
Offering |
|
Shares
Offered in this Offering |
|
Number
of Shares Beneficially Owned after this
Offering(1) |
|
|
|
|
|
|
|
|
|
|
|
|
Basel
Holdings Ltd. (2) |
|
|
862,863 |
|
|
862,863 |
|
|
0 |
|
Consolidated
Commodities, Ltd. (3) |
|
|
1,659,121 |
|
|
1,659,121 |
|
|
0 |
|
EMOF
LLC (4) |
|
|
392,136 |
|
|
392,136 |
|
|
0 |
|
Geosor
Corporation (4) |
|
|
707,466 |
|
|
707,466 |
|
|
0 |
|
LEA
Holdings Ltd. (5) |
|
|
119,568 |
|
|
119,568 |
|
|
0 |
|
ORA
Holdings Ltd. (5) |
|
|
119,568 |
|
|
119,568 |
|
|
0 |
|
Quantum
Industrial Partners LDC (4) |
|
|
2,358,221 |
|
|
2,358,221 |
|
|
0 |
|
VDM,
Inc.(6) |
|
|
194,770 |
|
|
194,770 |
|
|
0 |
|
Total |
|
|
6,413,713 |
|
|
6,413,713 |
|
|
|
|
__________
(1) |
For
purposes of calculating shares beneficially owned after this offering, it
is assumed that all the Offered Shares have been sold pursuant to this
offering. The Selling Shareholders may have sold, transferred or otherwise
disposed of all or a portion of their Offered Shares since the date on
which they provided information regarding their securities in transactions
exempt from the registration requirements of the Securities Act. The
selling shareholders have informed us that they do not hold any of our
ordinary shares other than the shares listed in the table
above. |
(2) |
The
selling shareholder has identified Butterfield Trust (Bermuda) Limited as
an entity with sole voting and dispositive power over the
shares. |
(3) |
The
selling shareholder has identified William Natbony as a natural person
with sole voting and dispositive power over the
shares. |
(4) |
The
business address of Mr. George Soros is 888 7th Avenue, 33rd Floor,
New York, New York 10106. Mr. George Soros may be deemed the
beneficial owner of 3,457,823 ordinary shares. This number includes
(i) 2,358,221 ordinary shares held for the account of Quantum
Industrial Partners LDC (“QIP”), an exempted limited duration company
formed under the laws of the Cayman Islands, (ii) 707,466 ordinary
shares held for the account of Geosor Corporation, a corporation formed
under the laws of the State of New York (“Geosor”) and (iii) 392,136
ordinary shares held for the account of EMOF LLC, a limited liability
company formed under the laws of the State of Delaware (“EMOF”). QIH
Management Investor, L.P. (“QIHMI”), an investment advisory firm organized
as a Delaware limited partnership, is a minority shareholder of, and is
vested with investment discretion with respect to, portfolio assets held
for the account of QIP. The sole general partner of QIHMI is QIH
Management LLC (“QIH Management”), a limited liability company formed
under the laws of the State of Delaware. Soros Fund Management LLC (“SFM
LLC”), a limited liability company formed under the laws of the State of
Delaware, is the sole managing member of QIH Management. Mr. George
Soros is the chairman of SFM LLC, and in this capacity may be deemed the
beneficial owner of shares held for the account of QIP. Geosor is wholly
owned by Mr. George Soros. EMOF Manager LLC (“EMOF Manager”), a
Delaware limited liability company, is the manager of EMOF and is vested
with investment discretion with respect to portfolio assets held for the
account of EMOF. Mr. George Soros is the Principal Executive Officer
of EMOF Manager, and in this capacity may be deemed the beneficial owner
of shares held for the account of EMOF. |
(5) |
The
selling shareholder has identified Caledonia Bank and Trust Limited as an
entity with sole voting and dispositive power over the
shares. |
(6) |
Mr. Paul
Soros, a director of Apex Silver, owns 100 percent of VDM, Inc.
Mr. Paul Soros is also the beneficial owner of 239,119 ordinary shares and
options to purchase 57,190 ordinary shares that are exercisable within 60
days. |
USE
OF PROCEEDS
We will
not receive any of the proceeds from the sale of Apex Silver ordinary shares by
the Selling Shareholders.
PLAN
OF DISTRIBUTION
The
Selling Shareholders and their successors, which includes their pledgees,
donees, partnership distributees and other transferees receiving the Offered
Shares in non-sale transfers, may sell the Offered Shares directly to purchasers
or through underwriters, broker-dealers or agents. Underwriters, broker-dealers
or agents may receive compensation in the form of discounts, concessions or
commissions from the Selling Shareholders or the purchasers. These discounts,
concessions or commissions may be in excess of those customary in the types of
transactions involved.
The
Offered Shares may be sold in one or more transactions:
· at fixed
prices;
· at
prevailing market prices at the time of sale;
· at
varying prices determined at the time of sale; or
· at
negotiated prices
These
sales may be effected in transactions, which may involve block transactions, in
the following manner:
· |
on
any national securities exchange or quotation service on which Apex
Silver’s ordinary shares may be listed or quoted at the time of
sale; |
· |
in
the over-the-counter market; |
· |
in
transactions other than these exchanges or services or in the
over-the-counter market; or |
· |
through
the writing and exercise of options and warrants, whether these options
and warrants are listed on an option or warrant exchange or
otherwise. |
The
Selling Shareholders may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of Offered
Shares and deliver these shares to close out short positions, or loan or pledge
the underlying shares to broker-dealers that in turn may sell these
shares.
The
aggregate proceeds to the Selling Shareholders from the sale of the Offered
Shares will be the purchase price of the shares less any discounts and
commissions. Apex Silver will not receive any of the proceeds from the resale of
the Offered Shares by the Selling Shareholders.
In order
to comply with the securities laws of some jurisdictions, if applicable, the
Selling Shareholders may sell the Offered Shares in some jurisdictions through
registered or licensed broker-dealers.
The
Selling Shareholders and any underwriters, broker-dealers or agents that
participate in the sale of the Offered Shares may be “underwriters” within the
meaning of Section 2(11) of the Securities Act. Any discounts, commissions,
concessions or profit they earn on any resale of the Offered Shares must be
underwriting discounts and commissions permitted under the Securities Act. The
Selling Shareholders will be subject to the prospectus delivery requirements of
the Securities Act.
In
addition, any securities covered by this prospectus that qualify for sale
pursuant to Rule 144 or Rule 144A under the Securities Act may be sold under
Rule 144 or Rule 144A rather than pursuant to this prospectus.
We will
bear the expenses incurred in association with the filing of this registration
statement.
DESCRIPTION
OF ORDINARY SHARES
As of the
date of this prospectus, our authorized share capital consists of one class of
75,000,000 ordinary shares, par value $.01 per share, of which 47,707,556
ordinary shares were outstanding as of April 21, 2005.
The
ordinary shares offered by this prospectus are validly issued, fully paid and
nonassessable. There are no provisions of Cayman Islands law, our Memorandum of
Association (the “Memorandum”) or our Articles of Association (the “Articles”)
which impose any limitation on the rights of shareholders to hold or vote
ordinary shares by reason of their not being resident in the Cayman Islands.
Dividends
Holders
of ordinary shares are entitled to receive dividends ratably when and as
declared by the Board of Directors. The right to receive dividends is also
subject to the rights of holders of preference shares, if any.
Liquidation
In the
event of any dissolution, liquidation or winding up of Apex Silver, whether
voluntary or involuntary, after there shall have been paid or set aside for
payment to the holders of any outstanding shares ranking senior to the shares as
to distribution on liquidation, distribution or winding up, the full amount to
which they shall be entitled, the holders of the then outstanding ordinary
shares shall be entitled to receive, pro
rata
according to the number of ordinary shares registered in the names of such
shareholders, any of our remaining assets available for distribution to our
shareholders; provided, if, at such time, the holder of ordinary shares has any
outstanding debts, liabilities or engagements to or with us (whether presently
payable or not, either alone or jointly with any other person, whether a
shareholder or not (including, without limitation, any liability associated with
the unpaid purchase price of such ordinary shares)), the liquidator appointed to
oversee our liquidation shall deduct from the amount payable in respect of such
ordinary shares the aggregate amount of such debts, liabilities and engagements
and apply such amount to any of such holder’s debts, liabilities or engagements
to or with us (whether presently payable or not). The liquidator may distribute,
in kind, to the holders of the ordinary shares remaining assets or may sell,
transfer or otherwise dispose of all or any part of such remaining assets to any
other corporation, trust or entity and receive payment therefor in cash, shares
or obligations of such other corporation, trust or entity or any combination
thereof, and may sell all or any part of the consideration so received, and may
distribute the consideration received or any balance or proceeds thereof to
holders of the ordinary shares.
Voting
Rights
The
Articles provide that the quorum required for a general meeting of the
shareholders is not less than one shareholder present in person or by proxy
holding at least 50 percent of the issued and outstanding shares entitled to
vote at such meeting. Subject to applicable law and any provision of the
Articles requiring a greater majority, we may from time to time by special
resolution alter or amend the Memorandum or Articles; voluntarily liquidate,
dissolve or wind- up our affairs; reduce our share capital
or any capital, redemption or reserve funds, or any share premium account; or
change our name or alter our objects.
Each
shareholder is entitled to one vote per share on all matters submitted to a vote
of shareholders at any such meeting. All matters, including the election of
directors, voted upon at any duly held shareholders’ meeting shall be carried by
ordinary resolution, except (i) approval of a merger, consolidation or
amalgamation which requires (in addition to any regulatory or court approvals)
the approval of at least seventy-five percent of the outstanding voting shares,
voting together as a single class; (ii) any matter that must be approved by
special resolution, including any amendment of the Memorandum and Articles; and
(iii) as otherwise provided in the Articles. A special resolution requires
the approval of at least two-thirds of the votes cast by holders of the
outstanding voting shares voting together as a s ingle class represented in
person or by proxy at a duly convened meeting. An ordinary resolution requires
the approval of a simple majority of votes cast at a meeting of shareholders
represented in person or by proxy.
The
Articles provide that, except as otherwise required by law and subject to the
rights of the holders of any class or series of shares we have issued having a
preference over the ordinary shares as to dividends or upon liquidation to elect
directors in specified circumstances, extraordinary general meetings of the
shareholders may be called only by (i) the directors or (ii) at the
request in
writing of
shareholders owning at least 25 percent of the outstanding shares generally
entitled to vote.
The
ordinary shares have noncumulative voting rights, which means that the holders
of a majority of the ordinary shares may elect all of our directors and, in such
event, the holders of the remaining ordinary shares will not be able to elect
any directors. Our board of directors is presently divided into three classes,
of three directors each. At present, each class is elected for a term of three
years, with the result that shareholders will not vote for the election of a
majority of directors in any single year. Pursuant to the Articles, directors
may be removed by the shareholders only with the vote of 80 percent of the
outstanding shares generally entitled to vote. The classified board provision
and the removal of directors by shareholder provision can only be amended with
the vote of 80 percent of the outstanding shares generally entitled to vote.
This
classified board provision could prevent a party who acquires control of a
majority of the outstanding voting power from obtaining control of the board of
directors until the second annual shareholders meeting following the date the
acquirer obtains the controlling share interest. The classified board provision
could have the effect of discouraging a potential acquirer from making a tender
offer or otherwise attempting to obtain control of us and could thus increase
the likelihood that incumbent directors will retain their positions.
Preemptive
Rights
No holder
of our outstanding shares shall, by reason of such holding, have any preemptive
rights to subscribe to any additional issue of shares of any class or series nor
to any security convertible into such shares.
Transfer
of Shares
The
Articles also provide that the board of directors may suspend the registration
of transfers of ordinary shares for such periods as the board of directors may
determine, but shall not suspend the registration of transfers for more than 40
days.
Other
Class or Series of Shares
The
Articles authorize the directors to create and issue one or more classes or
series of shares and determine the rights and preferences of each such class or
series, to the extent permitted by the Articles and applicable law. There are no
other classes or series of shares outstanding.
Transfer
Agent
Our
registrar and transfer agent for all ordinary shares is American Stock
Transfer & Trust Company.
Differences
in Corporate Law
The
Companies Law (2004 Revision) (the “Companies Law”) of the Cayman Islands is
modeled after that of England, and differs in certain respects from such laws
generally applicable to United States corporations and their shareholders. Set
forth below is a summary of certain significant provisions of the Companies Law
(including such modifications thereto adopted pursuant to the Articles)
applicable to us which differ from provisions generally applicable to United
States corporations and their shareholders. These statements are a brief summary
of certain significant provisions of the Companies Law and, as such, do not deal
with all aspects of every law that may be relevant to corporations and their
shareholders.
Interested
Directors
Our
Articles provide that any transaction we enter into in which a director has an
interest is not voidable by us nor can such director be liable to us for any
profit realized pursuant to such transaction. A director having an interest in a
transaction is entitled to vote in respect of such transaction provided the
nature of the interest is disclosed at or prior to the vote on such transaction.
Mergers
and Similar Arrangements
We may
acquire the business of another company and carry on such business when it is
within the objects of the Memorandum. The approval of the holders of at least 75
percent of the outstanding shares entitled to vote, voting together as a single
class, at a meeting called for such purpose is required for us to
(i) merge, consolidate or amalgamate with another company,
(ii) reorganize or reconstruct us pursuant to a plan sanctioned by the
Cayman Islands courts or (iii) sell, lease or exchange all or substantially
all of our assets, except in the case of a transaction between us and any entity
which we, directly or indirectly, control. In order to merge or amalgamate with
another company or to reorganize and reconstruct itself, as a general rule, the
relevant plan would need to be approved in accordance with the provisions of the
Companies Law by the holders of not less than 75 percent of the votes cast at a
general meeting called for such purpose and thereafter sanctioned by the Cayman
Islands court. In respect of such a court sanctioned reorganization, while a
dissenting shareholder may have the right to express to a Cayman Islands court
his view that the transaction sought to be approved would not provide the
shareholders with the fair value of their shares, (i) the court ordinarily
would not disapprove the transaction on that ground absent other evidence of
fraud or bad faith, and (ii) if the transaction were approved and
consummated, the dissenting shareholder would have no rights comparable to the
appraisal rights (as here defined, rights to receive payment in cash for the
judicially determined value of their shares) ordinarily available to dissenting
shareholders of Untied States corporations.
Shareholders’
Suits
There
does not appear to be any history of either a class action or a derivative
action ever having been brought by shareholders in the Cayman Islands courts.
There has, however, until recently been no official law reporting in the Cayman
Islands and actions subject to the Confidential Relationships (Preservation) Law
of 1976, as amended, are held in closed court. However, in this regard, the
Cayman Islands courts ordinarily would be expected to follow English precedent,
which would permit a minority shareholder to commence an action against or a
derivative action in the name of the corporation only (i) where the act
complained of is alleged to be beyond the corporate power of the corporation or
illegal, (ii) where the act complained of is alleged to constitute a fraud
against the minority perpetrated by those in control of the corporation,
(iii) where the act requires approval by a greater percentage of the
corporation’s shareholders than actually approved it, or (iv) where there
is an absolute necessity to waive the general rule that a shareholder may not
bring such an action in order that there not be a denial of justice or a
violation of the corporation’s memorandum of association.
Indemnification;
Exculpation
Cayman
Islands law does not limit the extent to which a company’s Articles of
Association may provide for the indemnification of officers and directors,
except to the extent that such provision may be held by the Cayman Islands
courts to be contrary to public policy (for instance, for purporting to provide
indemnification against the consequences of committing a crime). In addition, an
officer or director may not be indemnified for fraud or willful default.
Our
Articles contain provisions providing for the indemnity by us of an officer,
director, consultant, employee or agent of ours for threatened, pending or
contemplated actions, suits or proceedings, whether civil, criminal,
administrative or investigative (including, without limitation, an action by or
the right of the company), brought against such indemnified person by reason of
the fact that such person was an officer, director, consultant, employee or
agent of ours. In addition, the board of directors may authorize us to purchase
and maintain insurance on behalf of any such person against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not we would have the power to indemnify him
against such liability under the provisions of the Articles.
We also
purchase directors and officers liability insurance from third parties for our
directors and officers. Our Articles provide that our directors and officers
shall have no liability (i) for the acts, receipts, neglects, defaults or
omissions of any other such director or officer or agent of ours or (ii) by
reason of his having joined in any receipt for money not received by him
personally or (iii) for any loss on account of defect of title to any of
our property or (iv) on account of the insufficiency of any security in or
upon which any money of ours shall be invested or (v) for any loss incurred
through any bank, broker or other agent or (vi) for any loss occasioned by
any negligence, default, breach of duty, breach of trust, error of judgment or
oversight on his part or (vii) for any loss, damage or misfortune
whatsoever which may happen in or arise from the execution or discharge of the
duties, powers, authorities, or discretions of his office or in relation
thereto, unless the same shall happen through his own dishonesty.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling the registrant pursuant
to the foregoing provisions, the registrant has been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
Inspection
of Books and Records
Shareholders
of a Cayman Islands company have no general rights to inspect or obtain copies
of the list of shareholders or corporate records of a corporation.
Anti-Takeover
Effects of Articles of Association
The
Articles contain certain provisions that make more difficult the acquisition of
control of us by means of a tender offer, open market purchase, a proxy fight or
otherwise. These provisions are designed to encourage persons seeking to acquire
control of us to negotiate with the directors. The directors believe that, as a
general rule, the interests of our shareholders would be best served if any
change in control results from negotiations with the directors. The directors
would negotiate based upon careful consideration of the proposed terms, such as
the price to be paid to shareholders, the form of consideration to be paid and
the anticipated tax effects of the transaction. However, these provisions could
have the effect of discouraging a prospective acquirer from making a tender
offer or otherwise attempting to obtain control of us. To the extent these
provisions discourage takeover attempts, they could deprive shareholders of
opportunities to realize takeover premiums for their shares or could depress the
market price of the shares.
In
addition to those provisions of the Articles discussed above, set forth below is
a description of other relevant provisions of the Articles. The descriptions are
intended as a summary only and are qualified in their entirety by reference to
the Articles.
Shareholder
Action by Written Consent
Cayman
law permits shareholders to act by unanimous written consent.
Availability
of Our Ordinary Shares for Future Issuances
The
availability for issue of shares by our directors without further action by
shareholders (except as may be required by applicable stock exchange
requirements) could be viewed as enabling the directors to make more difficult a
change in control of us, including by issuing warrants or rights to acquire
shares to discourage or defeat unsolicited share accumulation programs and
acquisition proposals and by issuing shares in a private placement or public
offering to dilute or deter share ownership of persons seeking to obtain control
of us.
Shareholder
Proposals
The
Articles provide that if a shareholder desires to submit a proposal for
consideration at an annual general meeting or extraordinary general meeting, or
to nominate persons for election as directors, written notice of such
shareholder’s intent to make such a proposal or nomination must be given and
received by our secretary at our principal executive offices not later than
(i) with respect to an annual general meeting, 60 days prior to the
anniversary date of the immediately preceding annual general meeting and
(ii) with respect to an extraordinary general meeting, the close of
business on the tenth day following the date on which notice of such meeting is
first sent or given to shareholders. The notice must describe the proposal or
nomination in sufficient detail for a proposal or nomination to be summarized on
the agenda for the meeting and must set forth (i) the name and address of
the shareholder, (ii) a representation that the shareholder is a holder of
record of our shares entitled to vote at such meeting and intends to appear in
person or by proxy at the meeting to present such proposal or nomination, and
(iii) the class and number of our shares which are beneficially owned by
the shareholder. In addition, the notice must set forth the reasons for
conducting such proposed business at the meeting and any material interest of
the shareholder in such business. In the case of a nomination of any person for
election as a director, the notice shall set forth: (i) the name and
address of any person to be nominated; (ii) a description of all
arrangements or understandings between the shareholder and each nominee and any
other person or persons, (iii) such other information regarding such
nominee proposed by such shareholder as would be required to be included in a
proxy statement filed pursuant to Regulation 14A under the Exchange Act,
whether or not we are then subject to such Regulation; and (iv) the consent
of each nominee to serve as a director, if so elected. The presiding officer of
the annual general meeting or extraordinary general meeting shall, if the facts
warrant, refuse to acknowledge a proposal or nomination not made in compliance
with the foregoing procedure.
The
advance notice requirements regulating shareholder nominations and proposals may
have the effect of precluding a contest for the election of directors or the
introduction of a shareholder proposal if the procedures summarized above are
not followed and may discourage or deter a third party from conducting a
solicitation of proxies to elect its own slate of directors or to introduce a
proposal.
CERTAIN
TAX CONSIDERATIONS
United
States Federal Income Taxation
The
following discussion is a summary of the material U.S. federal income tax
consequences relating to the ownership and disposition of ordinary shares. This
discussion does not address special situations that may apply to particular
holders including, but not limited to, holders subject to the U.S. federal
alternative minimum tax, U.S. expatriates, dealers in securities, traders in
securities who elect to apply a mark-to-market method of accounting, financial
institutions, banks, insurance companies, regulated investment companies,
partnerships or other pass-through entities, U.S. Holders who own (directly,
indirectly or by attribution) 10 per cent or more of our ordinary shares, U.S.
Holders whose “functional currency” is not the U.S. dollar and persons who hold
ordinary shares in connection with a “straddle,” “hedging,” “conversion” or
other risk reduction transaction. The following discussion also does not apply
to tax-exempt entities except to the extent that certain matters are
specifically addressed. This discussion does not address the tax consequences to
U.S. Holders of ordinary shares under any state, local, foreign and other tax
laws.
The U.S.
federal income tax consequences set forth below are based upon the Internal
Revenue Code of 1986, as amended, Treasury regulations promulgated thereunder,
court decisions, revenue rulings and administrative pronouncements of the
Internal Revenue Service (the “IRS”), all of which are subject to change or
changes in interpretation. Prospective investors should particularly note that
any such change or changes in interpretation could have retroactive effect so as
to result in U.S. federal income tax consequences different from those discussed
below.
As
discussed in more detail below, we believe that we likely were a passive foreign
investment company (“PFIC”) with respect to 2004, and likely will be a PFIC in
2005 as well as potentially with respect to future years. If we are a PFIC, U.S.
Holders of ordinary shares will be subject to certain adverse tax rules (the
“PFIC rules”), which are described below. The PFIC rules are extremely complex,
and prospective investors are urged to consult their own tax advisers regarding
the potential consequences to them of us being classified as a
PFIC.
As used
herein, the term “U.S. Holder” means a beneficial owner of ordinary shares that
is for U.S. federal income tax purposes:
· |
an
individual who is a citizen or resident of the United
States; |
· |
a
corporation (or other entity taxable as a corporation for U.S. federal
income tax purposes) created or organized in or under the laws of the
United States or any state thereof (including the District of
Columbia); |
· |
an
estate the income of which is subject to U.S. federal income taxation
regardless of its source; or |
· |
a
trust, if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more U.S.
persons control all of the substantial decisions of the
trust. |
If a
partnership (including for this purpose any entity treated as a partnership for
U.S. federal income tax purposes) is a beneficial owner of ordinary shares, the
U.S. federal income tax treatment of a partner in the partnership generally will
depend on the status of the partner and the activities of the partnership. A
holder of ordinary shares that is a partnership and partners in such partnership
should consult their own tax advisers regarding the U.S. federal income tax
consequences of holding and disposing of ordinary shares.
This
discussion is limited to holders of ordinary shares who will hold the ordinary
shares as capital assets.
Prospective
investors are urged to consult their own tax advisers with respect to the
particular tax consequences to them of the purchase, ownership and disposition
of ordinary shares, including the tax consequences under any state, local,
foreign and other tax laws.
The
Passive Foreign Investment Company Rules
Classification
as a PFIC
We
believe that we likely were a PFIC with respect to 2004, and likely will be a
PFIC with respect to 2005 as well as potentially with respect to future years.
We will be a PFIC for any taxable year if either 75 percent or more of our gross
income for the taxable year is “passive” income or the average portion of our
assets during the taxable year that produce “passive” income or are held for the
production of “passive” income is at least 50 percent.
We will
likely be a PFIC with respect to 2005 and potentially with respect to future
years because we expect to earn significant passive income from investments
prior to our commencement of substantial mining operations. In addition, we may
constitute a PFIC even after we begin to generate significant income from mining
and processing operations.
If we are
classified as a PFIC for any taxable year during any part of which a U.S. Holder
owns ordinary shares, the U.S. Holder generally will be required to continue to
treat us as a PFIC even if we cease to be a PFIC in a future year. We do not
intend to make or issue to U.S. Holders of ordinary shares determinations as to
our PFIC status, or the PFIC status of any lower-tier subsidiary, for any
taxable year.
Consequences
of PFIC Status
If we are
treated as a PFIC for any taxable year during any part of which a U.S. Holder
owns ordinary shares, the U.S. Holder generally will be subject to a special tax
regime in respect of “excess distributions.” Excess distributions generally will
include dividends or other distributions on the ordinary shares in any taxable
year to the extent the amount of such distributions exceeds 125 percent of
the average distributions for the three preceding years or, if shorter, the
investor’s holding period. In addition, gain on a sale or other disposition of
ordinary shares generally will be treated as an excess distribution. For this
purpose, certain transfers of ordinary shares that otherwise would qualify as
tax free will be treated as taxable dispositions.
As
discussed in more detail below under “Taxation of U.S. Holders of Ordinary
Shares—Qualified Electing Fund Election” and “—Mark-to-Market Election”, there
are two alternative taxation regimes for PFICs that may be elected by U.S.
Holders in respect of ordinary shares, subject to certain
conditions.
Tax
Treatment of Excess Distributions
Under the
PFIC rules, a U.S. Holder will be required to allocate any excess distributions
with respect to ordinary shares to each day during the U.S. Holder’s holding
period for the ordinary shares on a straight line basis. Any portion of the
excess distribution that is allocable to the current year or to periods in the
U.S. Holder’s holding period before we became a PFIC will be included in the
U.S. Holder’s gross income for the current year as ordinary income. Any portion
of the excess distribution that is allocable to any other year will be taxable
at the highest rate of taxation applicable to ordinary income for that year,
without regard to the U.S. Holder’s other items of income and loss for such
year; and this tax will be increased by an interest charge computed by reference
to the periods to which the tax is allocable and based on the rates generally
applicable to underpayments of tax. Any such interest charge generally will be
non-deductible interest expense for individual taxpayers.
Tax
Exempt Holders
Distributions
with respect to ordinary shares held by, and gain from a sale of ordinary shares
by, a U.S. Holder that is exempt from U.S. federal income taxation, such as a
tax exempt charitable organization, pension fund or an individual retirement
account, will not be taxed as an “excess distribution” unless a dividend with
respect to our ordinary shares would be taxable to the tax exempt U.S.
Holder.
Lower-Tier
PFICs
If we are
a PFIC and if one or more of our non-U.S. corporate subsidiaries were treated as
a PFIC (“lower-tier PFICs”), U.S. Holders of ordinary shares would be considered
to own, and also would be subject to the PFIC rules with respect to, their
proportionate share of the lower-tier PFIC stock that we own, regardless of the
percentage of their ownership in us. In such circumstances a U.S. Holder of
ordinary shares could elect an alternative taxation regime in respect of its
indirect ownership interest in a lower-tier PFIC, subject to certain conditions.
See “Taxation of U.S. Holders of Ordinary Shares—Lower-Tier PFICs.”
Taxation
of U.S. Holders of Ordinary Shares
Taxation
of Dividends
We do not
expect to make distributions on the ordinary shares in the foreseeable future.
However, if we were to make a distribution on the ordinary shares, and if a U.S.
Holder’s holding period for its ordinary shares includes any portion of a
taxable year for which we were a PFIC, the portion of the distribution payable
to the U.S. Holder may be taxed as an “excess distribution” under the PFIC
rules, unless the U.S. Holder makes a QEF election or mark-to-market election
(described below) in respect of its ordinary shares.
Apart
from any portion of a distribution that constitutes an “excess distribution,”
distributions paid by us will be taxable as ordinary foreign source dividend
income upon receipt to the extent of our current or accumulated earnings and
profits, as determined for U.S. federal income tax purposes. If we are a PFIC,
such distributions will not be eligible for the reduced rates of tax applicable
to qualified dividend income. Distributions paid by us will not be eligible for
the dividends-received deduction generally allowed to U.S. corporations.
Dividends paid by us generally will be treated as “passive income” or, in the
case of certain holders for taxable years beginning before January 1, 2007,
“financial services income” for U.S. foreign tax credit purposes.
Taxation
of Gains on Sale or Other Disposition
If a U.S.
Holder’s holding period for its ordinary shares includes any portion of a
taxable year for which we were a PFIC, any gain realized by the U.S. Holder on a
sale or other disposition of the ordinary shares will be taxed as an “excess
distribution” under the PFIC rules, unless the U.S. Holder makes a QEF election
or a mark-to-market election (described below) with respect to the ordinary
shares.
If we are
not treated as a PFIC at any time during which a U.S. Holder owns ordinary
shares, the U.S. Holder will recognize capital gain or loss on a sale or other
disposition of the ordinary shares, which will constitute long-term capital gain
or loss if the holding period for the ordinary shares exceeds one year at the
time of disposition. Such gain or loss will generally be U.S. source gain or
loss.
Qualified
Electing Fund Election
The
special PFIC rules described above for “excess distributions” will not apply to
a U.S. Holder if the U.S. Holder makes a qualified electing fund or “QEF”
election for the first taxable year of the U.S. Holder’s holding period for the
ordinary shares during which we are a PFIC and we comply with specified
reporting requirements.
A U.S.
Holder that makes a QEF election with respect to us will be currently taxable on
its pro rata share of our ordinary earnings and net capital gain for each of our
taxable years in which we qualify as a PFIC and as to which the QEF election is
effective, regardless of whether the U.S. Holder receives any distributions from
us. The U.S. Holder’s basis in its ordinary shares will be increased to reflect
the U.S. Holder’s taxed but undistributed income. Distributions of income that
previously have been taxed will result in a corresponding reduction of basis in
the ordinary shares and will not be taxed again as a distribution to the U.S.
Holder.
Upon
request, we will endeavor to provide to a U.S. Holder no later than ninety days
after the request the information that is required to make a QEF election. A
U.S. Holder who makes a QEF election must provide to the IRS an annual
information statement which, upon request from a U.S. Holder, we will furnish
within ninety days after the request. A QEF election applies to all future years
of an electing U.S. Holder, unless revoked with the IRS’s consent.
Mark-to-Market
Election
If we are
a PFIC, a U.S. Holder of ordinary shares may elect under the PFIC rules to
recognize any gain or loss on its ordinary shares on a mark-to-market basis at
the end of each taxable year, so long as the ordinary shares are regularly
traded on a qualifying exchange. The mark-to-market election under the PFIC
rules is an alternative to the QEF election.
If a
mark-to-market election under the PFIC rules is made, the “excess distribution”
rules will not apply to amounts received with respect to the ordinary shares
from and after the effective time of the election, and any mark-to-market gains
or gains on disposition will be treated as ordinary income for any year in which
we are a PFIC. Mark-to-market losses and losses on disposition will be treated
as ordinary losses to the extent of the U.S. Holder’s prior net mark-to-market
gains. Losses in excess of prior net mark-to-market gains will generally not be
recognized.
A
mark-to-market election under the PFIC rules applies to all future years of an
electing U.S. Holder during which the stock is regularly traded on a qualifying
exchange, unless revoked with the IRS’s consent.
Lower-Tier
PFICs
If we are
a PFIC and, at any time, have a non-U.S. subsidiary that is classified as a
PFIC, U.S. Holders of ordinary shares generally would be deemed to own, and also
would be subject to the PFIC rules with respect to, their indirect ownership
interests in that lower-tier PFIC. If we are a PFIC and a U.S. Holder of
ordinary shares does not make a QEF election in respect of a lower-tier PFIC,
the U.S. Holder could incur liability for the deferred tax and interest charge
described above if either (1) we receive a distribution from, or dispose of
all or part of our interest in, the lower-tier PFIC or (2) the U.S. Holder
disposes of all or part of its ordinary shares. Upon request, we will endeavor
to cause any lower-tier PFIC to provide to a U.S. Holder no later than ninety
days after the request the information that may be required to make a QEF
election with respect to the lower-tier PFIC. A mark-to-market election under
the PFIC rules with respect to ordinary shares would not apply to a lower-tier
PFIC, and a U.S. Holder would not be able to make such a mark-to-market election
in respect of its indirect ownership interest in that lower-tier PFIC.
Consequently, U.S. Holders of ordinary shares could be subject to the PFIC rules
with respect to income of the lower-tier PFIC the value of which already had
been taken into account indirectly via mark-to-market adjustments. Similarly, if
a U.S. Holder made a mark-to-market election under the PFIC rules in respect of
the ordinary shares and made a QEF election in respect of a lower-tier PFIC,
that U.S. Holder could be subject to current taxation in respect of income from
the lower-tier PFIC the value of which already had been taken into account
indirectly via mark-to-market adjustments. U.S. Holders are urged to consult
their own tax advisers regarding the issues raised by lower-tier
PFICs.
We
believe that certain of our non-U.S. lower-tier subsidiaries, including the
subsidiary that contains the principal assets associated with the San Cristobal
project, were corporations for U.S. tax purposes that constituted PFICs in
certain prior years. For the current and all subsequent taxable years, we
believe that the potential for our lower-tier subsidiaries to be classified as
PFICs with respect to new investors can be substantially eliminated without
adverse tax consequences, and we will endeavor to cause our lower-tier
subsidiaries not to be classified as PFICs with respect to such years.
Nonetheless, we can provide no assurance that one or more of our lower-tier
subsidiaries will not be classified as a PFIC in respect of any
year.
Reporting
A U.S.
Holder who owns ordinary shares during any year that we are a PFIC must file an
IRS Form 8621 in respect of such ordinary shares.
Non-U.S.
Holders
An
investor who is not a U.S. Holder will not be subject to U.S. federal income tax
on any dividends received on ordinary shares unless (1) the investor has an
office or other fixed place of business in the United States to which the
dividends are attributable and the dividends are either derived in the active
conduct of a banking, finance or similar business in the United States or the
investor is a non-U.S. corporation the principal business of which consists of
trading in stocks or securities for its own account, or (2) the investor is
a foreign insurance company that conducts business in the United States and the
dividends are attributable to that business.
An
investor who is not a U.S. Holder will not be subject to U.S. federal income tax
on any gain realized on a sale or other disposition of ordinary shares unless
(1) the investor is engaged in the conduct of a trade or business in the
United States and the gain is effectively connected with that trade or business,
or (2) the investor is an individual who is present in the U.S. for
183 days or more during the taxable year in which the gain is realized and
other specified conditions are met.
United
States Information Reporting and Backup Withholding
Dividend
payments made to a U.S. Holder of ordinary shares and proceeds of a sale or
other disposition of ordinary shares may be subject to information reporting to
the IRS and possible U.S. federal backup withholding. Backup withholding will
not apply to a holder who furnishes a correct taxpayer identification number or
certificate of foreign status and makes any other required certification, or who
is otherwise exempt from backup withholding. U.S. Holders who are required to
establish their exempt status generally must provide IRS Form W-9 (Request
for Taxpayer Identification Number and Certification).
Non-U.S.
Holders generally will not be subject to U.S. information reporting or backup
withholding. However, such holders may be required to provide certification of
non-U.S. status (generally, on IRS Form W-8BEN) in connection with payments
received in the United States or through certain U.S.-related financial
intermediaries.
Backup
withholding is not an additional tax. Any amounts withheld from a payment to a
holder under the backup withholding rules may be credited against the holder’s
U.S. federal income tax liability, and a holder may obtain a refund of any
excess amounts withheld by filing the appropriate claim for refund with the IRS
in a timely manner and furnishing any required information.
LEGAL
MATTERS
Certain
Cayman Islands legal matters, including the validity of the securities offered
by this prospectus, will be passed upon for us by Walkers, Grand Cayman, Cayman
Islands.
EXPERTS
The
financial statements incorporated in this prospectus by reference to the Annual
Report on Form 10-K for the fiscal year ended December 31, 2004, have been
so incorporated in reliance on the report of PricewaterhouseCoopers LLP, an
Independent Registered Public Accounting Firm, given on the authority of said
firm as experts in accounting and auditing.
Reserves
for the San Cristobal project were calculated by Mine Reserves Associates, Inc.
All such figures are included herein in reliance upon the authority of that firm
as experts in such matters.
You
should rely only on the information incorporated by reference or provided in
this prospectus or any supplement to this prospectus. We have authorized no one
to provide you with different information. We are not making an offer of these
securities in any state where the offer is not permitted. You should not assume
that the information in this prospectus is accurate as of any date other than
the date on the front of this prospectus.
ORDINARY
SHARES
____________________
PROSPECTUS
____________________
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
ITEM 14.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The
following table sets forth various expenses in connection with the sale and
distribution of the securities being registered, other than the underwriting
discounts and commissions. We will pay all expenses in connection with the
issuance and distribution of the securities being registered.
|
|
|
|
Registration
Fee--Securities and Exchange Commission |
|
$
|
|
|
Legal
Fees and Expenses |
|
|
10,000 |
* |
Accounting
Fees and Expenses |
|
|
5,000 |
* |
|
|
|
|
|
Total |
|
$ |
27,569 |
* |
_________________
* Estimated.
ITEM 15.
INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our
Articles of Association provide that that we must indemnify our directors,
officers, employees and agents in connection with the defense of any civil legal
proceedings concerning our company or its affairs, except in the case of willful
default or fraud by such person. To the extent that we are permitted to do so,
we intend to give an indemnity to each of our directors and to arrange for the
liabilities under these indemnities to be covered. We have directors’ and
officers’ insurance for our directors, officers and some employees for specified
liabilities. We have entered into indemnification agreements with each of our
directors which require us to indemnify the director to the full extent of the
law.
The
limitation of liability and indemnification provisions in our Memorandum of
Association and Articles of Association may discourage shareholders from
bringing a lawsuit against directors for breach of their fiduciary duty. They
may also have the effect of reducing the likelihood of derivative litigation
against directors and officers, even though an action of this kind, if
successful, might otherwise benefit us and our shareholders. Furthermore, a
shareholders’ investment may be adversely affected to the extent we pay the
costs of settlement and damage awards against directors and officers pursuant to
these indemnification provisions. However, we believe that these indemnification
provisions are necessary to attract and retain qualified directors and
officers.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the provisions described in Item 14 of this registration statement
or otherwise may be permitted, the registrant has been advised that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
ITEM 16.
EXHIBITS.
Exhibit
No. |
|
Description of Exhibit |
|
|
|
4.1 |
|
Amended
and Restated Memorandum of Association (1) |
|
|
|
4.2 |
|
Amended
and Restated Articles of Association (1) |
|
|
|
4.3 |
|
Specimen
of Certificate Representing the Company’s Ordinary Shares, par value
U.S. $0.01 (1) |
|
|
|
4.4 |
|
Registration
Rights and Voting Agreement, dated October 29, 1997, by and among
Apex Silver, Silver Holdings LDC, Argentum LLC, Consolidated Commodities
Ltd, Thomas S. Kaplan, Litani Capital Management LDC and Aurum LLC
(1) |
|
|
|
5.1 |
|
Opinion
of Walkers (2) |
|
|
|
23.1 |
|
Consent
of Walkers (included in Exhibit 5.1) (2) |
|
|
|
23.2 |
|
Consent
of PricewaterhouseCoopers LLP (2) |
|
|
|
23.3 |
|
Consent
of Mine Reserves Associates, Inc. (2) |
|
|
|
24.1 |
|
Power
of Attorney (included on signature page of this registration statement)
(2) |
__________
(1) |
Incorporated
by reference to our Registration Statement on Form S-1, as amended,
filed with the SEC on August 29, 1997 (File
No. 333-34685). |
ITEM 17.
UNDERTAKINGS.
(a) We hereby
undertake:
(1) To file,
during any period in which offers or sales are being made, a post-effective
amendment to this Registration Statement:
(i) To
include any prospectus required by Section 10(a)(3) of the Securities Act of
1933 (Securities Act);
(ii) To
reflect in the prospectus any facts or events arising after the effective date
of this Registration Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the maximum aggregate offering
price set forth in the “Calculation of Registration Fee” table in the effective
registration statement; and
(iii) To
include any material information with respect to the plan of distribution not
previously disclosed in this Registration Statement or any material change to
such information in this Registration Statement;
provided,
however, that
paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the information required to
be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by the Registrant
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (Exchange
Act) that are incorporated by reference in this Registration
Statement.
(2) That, for
the purpose of determining any liability under the Securities Act, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove
from registration by means of a post-effective amendment any of the securities
being registered that remain unsold at the termination of the
offering.
(b) The
undersigned registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the registrant’s annual
report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan’s annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant certifies that
it has reasonable grounds to believe that it meets all of the requirements for
filing a registration statement on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City and County of Denver, State of Colorado, on May
16,
2005.
|
|
|
|
APEX SILVER
MINES LIMITED |
|
|
|
|
By: |
/s/
Mark A. Lettes |
|
Mark A. Lettes |
|
Senior Vice President and
Chief Financial Officer |
Pursuant
to the requirements of the Securities Act of 1933, this registration statement
has been signed by the following persons in the capacities and on the dates
indicated.
Signature |
|
Title |
|
Date |
|
|
|
|
|
* |
|
President
and Chief Executive |
|
May
16, 2005 |
Jeffrey
G. Clevenger |
|
Officer
(Principal Executive Officer) and Director |
|
|
* |
|
Director |
|
|
Harry M.
Conger |
|
|
|
|
* |
|
Director |
|
May
16, 2005 |
Charles L.
Hansard |
|
|
|
|
* |
|
Executive
Chairman of the Board |
|
May
16, 2005 |
Keith R.
Hulley |
|
|
|
|
|
|
Director |
|
|
Kevin R.
Morano |
|
|
|
|
|
|
|
|
|
* |
|
Director |
|
May
16, 2005 |
Terry M.
Palmer |
|
|
|
|
* |
|
Director |
|
May
16, 2005 |
Charles B.
Smith |
|
|
|
|
* |
|
Director |
|
May
16, 2005 |
Paul
Soros |
|
|
|
|
|
|
|
|
|
/s/
Mark A. Lettes |
|
Senior Vice President and Chief Financial Officer |
|
May
16, 2005 |
Mark A.
Lettes |
|
(Principal Financial and Accounting
Officer) |
|
|
|
|
|
|
|
By:
/s/ Mark A. Lettes |
|
|
|
|
Mark A.
Lettes |
|
|
|
|
Attorney-in-fact |
|
|
|
|