-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ilbo+5p4GBOkHs6mnXE4ZFM7wWLQFZ8kdZtvguTfe5NluKxT76YSEhtLr5m0i9jp qPHjySE1w4/Cz8YHudP5AA== /in/edgar/work/20000811/0000927356-00-001634/0000927356-00-001634.txt : 20000921 0000927356-00-001634.hdr.sgml : 20000921 ACCESSION NUMBER: 0000927356-00-001634 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: APEX SILVER MINES LTD CENTRAL INDEX KEY: 0001011509 STANDARD INDUSTRIAL CLASSIFICATION: [1040 ] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13627 FILM NUMBER: 693503 BUSINESS ADDRESS: STREET 1: CALEDONIAN HOUSE GROUND FL GEORGETOWN CITY: GRAND CAYMAN CAYMAN STATE: E9 BUSINESS PHONE: 3499490050 MAIL ADDRESS: STREET 1: CALEDONIAN HOUSE MARY STREET STREET 2: GEORGE TOWN GRAND CAYMAN ISLAND BWI 10-Q 1 0001.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000. OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM________TO________. COMMISSION FILE NUMBER 1-13627 APEX SILVER MINES LIMITED ------------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) CAYMAN ISLANDS, BRITISH WEST INDIES NOT APPLICABLE - -------------------------------------------------------------------------------- (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) CALEDONIAN HOUSE 69 JENNETTE STREET GEORGETOWN, GRAND CAYMAN CAYMAN ISLANDS, BRITISH WEST INDIES NOT APPLICABLE - -------------------------------------------------------------------------------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (345) 949-0050 - -------------------------------------------------------------------------------- (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS: YES X NO --------- --------- AT AUGUST 11, 2000, 34,471,268 ORDINARY SHARES, $0.01 PAR VALUE PER SHARE, WERE ISSUED AND OUTSTANDING. -1- APEX SILVER MINES LIMITED FORM 10-Q QUARTER ENDED JUNE 30, 2000 INDEX PART I - FINANCIAL INFORMATION PAGE ------ ITEM 1. FINANCIAL STATEMENTS...................................... 3 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS....................... 7 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK AND HEDGING ACTIVITIES........................ 9 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS......................................... 10 ITEM 2. CHANGES IN SECURITIES..................................... 10 ITEM 3. DEFAULTS UPON SENIOR SECURITIES........................... 10 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS....... 10 ITEM 5. OTHER INFORMATION......................................... 10 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.......................... 10 SIGNATURES.............................................................. 11 -2- PART I. FINANCIAL INFORMATION Item 1. Financial Statements APEX SILVER MINES LIMITED An Exploration and Development Stage Company CONSOLIDATED BALANCE SHEET (Expressed in United States dollars) (Unaudited)
June 30, December 31, 2000 1999 ------------------ ------------------ Assets Current assets Cash and cash equivalents $ 79,795,571 $ 96,296,577 Prepaid expenses and other assets 947,520 362,604 ------------------ ------------------ Total current assets 80,743,091 96,659,181 Property, plant and equipment (net) 62,211,329 50,561,766 Value added tax recoverable 4,294,686 3,810,460 Other non-current assets 357,989 45,997 ------------------ ------------------ Total assets $ 147,607,095 $ 151,077,404 ================== ================== Liabilities and Shareholders' Equity Current liabilities Accounts payable and other accrued liabilities $ 1,222,439 $ 2,210,585 Current portion of notes payable 966,025 901,459 ------------------ ------------------ Total current liabilities 2,188,464 3,112,044 Notes payable 3,024,908 3,137,368 Shareholders' equity Ordinary shares, $.01 par value, 75,000,000 shares authorized; 34,471,268 and 34,466,168, shares issued and outstanding for respective periods 344,713 344,662 Contributed surplus 192,451,580 192,274,553 Accumulated deficit (50,402,570) (47,791,223) ------------------ ------------------ Total shareholders' equity 142,393,723 144,827,992 ------------------ ------------------ Total liabilities and shareholders' equity $ 147,607,095 $ 151,077,404 ================== ==================
The accompanying notes form an integral part of these consolidated financial statements. -3- APEX SILVER MINES LIMITED An Exploration and Development Stage Company CONSOLIDATED STATEMENT OF OPERATIONS (Expressed in United States dollars) (Unaudited)
For the Period Three Months Ended Six Months Ended December 22, June 30, June 30, 1994 (inception) --------------------------------- -------------------------------- through 2000 1999 2000 1999 June 30, 2000 --------------------------------- -------------------------------- ------------------- Income Interest and other income $ 1,421,052 $ 233,348 $ 3,155,914 $ 488,587 $ 8,727,601 --------------------------------- -------------------------------- ------------------- Total income 1,421,052 233,348 3,155,914 488,587 8,727,601 --------------------------------- -------------------------------- ------------------- Expenses Exploration 1,245,841 1,830,057 2,288,179 3,523,569 50,454,888 Administrative 2,005,371 448,982 3,367,968 1,397,794 12,457,540 Amortization and depreciation 57,911 41,753 111,136 94,220 776,649 --------------------------------- -------------------------------- ------------------- Total expenses 3,309,123 2,320,792 5,767,283 5,015,583 63,689,077 --------------------------------- -------------------------------- ------------------- Net loss before minority interest (1,888,071) (2,087,444) (2,611,369) (4,526,996) (54,961,476) Minority interest in loss of consolidated subsidiary - - - - 4,558,886 ------------------------------------------------------------------- ------------------- Net loss for the period $ (1,888,071) $ (2,087,444) $ (2,611,369) $ (4,526,996) $ (50,402,590) --------------------------------- -------------------------------- ------------------- Net loss per Ordinary Share - basic and diluted(1) $ (0.05) $ (0.08) $ (0.08) $ (0.17) $ (2.20) ================================= ================================ =================== Weighted average Ordinary Shares outstanding 34,471,268 26,251,969 34,471,268 26,250,365 22,938,008 ================================= ================================ ===================
(1) Diluted earnings per share were antidilutive for all periods presented. The accompanying notes form an integral part of these consolidated financial statements. -4- APEX SILVER MINES LIMITED An Exploration and Development Stage Company CONSOLIDATED STATEMENT OF CASH FLOWS (Expressed in United States dollars) (Unaudited)
For the Period Six Months Ended December 22, June 30, 1994 (inception) ------------------------------------- through 2000 1999 June 30, 2000 ------------------------------------- ------------------- Cash flows from operating activities: Net cash used in operating activities $ (4,485,040) $ (4,928,076) $ (58,108,472) ------------------ ----------------- ------------------- Cash flows from investing activities: Purchases of property, plant and equipment (11,779,020) (10,060,786) (53,057,831) ------------------ ----------------- ------------------- Net cash used in investing activities (11,779,020) (10,060,786) (53,057,831) Cash flows from financing activities: Payments of notes payable (net) (236,946) 23,992 (938,119) Net proceeds from issuance of Ordinary Shares - - 191,761,070 Proceeds from exercise of stock options - - 421,879 Deferred organization costs - - (282,956) ------------------ ----------------- ------------------- Net cash from (used in) financing activities (236,946) 23,992 190,961,874 ------------------ ----------------- ------------------- Net decrease in cash and cash equivalents (16,501,006) (14,964,870) 79,795,571 Cash and cash equivalents - beginning of period 96,296,577 26,217,241 - ------------------ ----------------- ------------------- Cash and cash equivalents - end of period $ 79,795,571 $ 11,252,371 $ 79,795,571 ================== ================= =================== Supplemental disclosure of non-cash transactions: Capitalization of depreciation expense related to San Cristobal Project $ 80,277 $ 52,465 Stock issued as compensation $ 55,463 $ -
The accompanying notes form an integral part of these consolidated financial statements. -5- APEX SILVER MINES LIMITED An Exploration and Development Stage Company NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in United States dollars) 1. Basis of Preparation of Financial Statements These unaudited interim consolidated financial statements of Apex Silver Mines Limited (the "Company") and its subsidiaries have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC"). Such rules and regulations allow the omission of certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles, so long as such omissions do not render the financial statements misleading. Certain prior year balances have been reclassified to conform to the classifications being presented at June 30, 2000. In the opinion of management, these financial statements reflect all adjustments that are necessary for a fair statement of the results for the periods presented. All adjustments were of a normal recurring nature. Certain amounts in the accompanying financial statements have been reclassified. These interim financial statements should be read in conjunction with the annual financial statements of the Company included in its 1999 Annual Report on Form 10-K. 2. New Accounting Standards In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133, Accounting for Derivatives and Hedging Activities ("SFAS 133"). FAS 133, as amended by FAS 137 and FAS 138, is effective for all fiscal quarters of all fiscal years beginning after June 15, 2000 (January 1, 2001 for the Company), and establishes accounting and reporting standards for derivative instruments and hedging activities. The Company is in the process of determining the future impact that the adoption of FAS 133 will have on its earnings or financial position. In December 1999, the SEC released Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements. The objective of this SAB is to provide further guidance on revenue recognition issues in the absence of authoritative literature addressing a specific arrangement or a specific industry. The Company does not believe adoption of SAB 101 will have a material effect on its financial position or results of operations. 3. Value Added Tax Recoverable The Company has recorded value added tax ("VAT") paid by its wholly owned subsidiaries, ASC Bolivia and Cordilleras Mexico, as recoverable assets. The VAT paid by ASC Bolivia is expected to be recovered through the sales of its production from the proven and probable reserves at the San Cristobal Project that the Company has begun to develop. Bolivian law states that VAT paid prior to production may be recovered as a credit against Bolivian taxes arising from production, including income tax. The VAT paid by Cordilleras Mexico is related to exploration activities and is recoverable upon application to the tax authorities. Cordilleras Mexico has received VAT refunds relating to VAT paid through 1996 and in April 2000 received refunds for the remaining VAT paid through 1998. Applications for refund of the remaining VAT paid through the first quarter of 2000 have been filed and the remaining refund is expected in due course. At June 30, 2000, the recoverable VAT recorded by ASC Bolivia and Cordilleras Mexico is $4,011,799 and $282,887 respectively. -6- 4. Property, Plant and Equipment The components of property, plant and equipment were as follows: June 30, December 31, 2000 1999 ----------- ----------- Mineral properties................. $59,467,860 $48,056,283 Buildings.......................... 1,166,437 1,137,173 Mining equipment................... 1,451,371 1,267,679 Other furniture and equipment...... 797,202 765,241 ----------- ----------- 62,882,870 51,226,376 Less: Accumulated depreciation..... (671,541) (664,610) ----------- ----------- $62,211,329 $50,561,766 =========== =========== Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The following discussion and analysis summarizes the results of operations of Apex Silver Mines Limited (the "Company") for the three months ended June 30, 2000 and 1999 and for the six months ended June 30, 2000 and 1999 and changes in its financial condition from December 31, 1999. This discussion should be read in conjunction with the Management's Discussion and Analysis included in the Company's 1999 Annual Report on Form 10-K. The Company is a mining exploration and development company that holds a portfolio of silver and base metal exploration and development properties in South America, Mexico and Central America. None of these properties are in production and, consequently, the Company has no current operating income or cash flow. The sole source of income for the Company since inception has been interest income. The Company's policy is to invest all excess cash in liquid, high credit quality, short-term financial instruments. The Company is incorporated in the Cayman Islands and does not conduct any business that currently generates U.S. taxable income. There is currently no corporate taxation imposed by the Cayman Islands. If any form of taxation were to be enacted in the Cayman Islands, the Company has been granted exemption until January 16, 2015. Apex Silver Mines Corporation ("Apex Corporation"), the Company's U.S. management services company, is subject to U.S. federal, state and local income taxes. Other than the management services company, the Company does not pay income tax in the U.S. Results of Operations - Three Months Ended June 30, 2000 Interest and other income. Interest and other income for the second quarter of 2000 was $1,421,052 as compared to $233,348 for the second quarter of 1999. The increase in interest and other income for the second quarter of 2000 is primarily the result of higher cash balances during 2000, resulting from proceeds of the November 1999 offering of Ordinary Shares and warrants, compared to cash balances during the same period of 1999. Exploration. Exploration expense was $1,245,841 for the second quarter of 2000, compared to $1,830,057 for the second quarter of 1999. The decreased exploration expense for 2000 is due to reduced exploration activity worldwide, as the Company has shifted its attention to the development of its San Cristobal Project in Bolivia. Administrative. Administrative expenses were $2,005,371 for the second quarter of 2000, compared to $448,982 for the second quarter of 1999. The 2000 administrative expenses are higher as the result of increased corporate activities primarily outside consulting. -7- Results of Operations - Six Months Ended June 30, 2000 Interest and other income. Interest and other income for the first six months of 2000 was $3,155,914 as compared to $488,587 for the first six months of 1999. The increase in interest and other income for the first six months of 2000 is primarily the result of higher cash balances during 2000, resulting from proceeds of the November 1999 offering of Ordinary Shares and warrants, compared to cash balances during the same period of 1999. Exploration. Exploration expense was $2,288,179 for the first six months of 2000, compared to $3,523,569 for the first six months of 1999. The decreased exploration expense for 2000 is due to reduced exploration activity worldwide, as the Company has shifted its attention to the development of its San Cristobal Project in Bolivia. Administrative. Administrative expenses were $3,367,968 for the first six months of 2000, compared to $1,397,794 for the same period of 1999. The 2000 administrative expenses are higher as the result of increased corporate activities primarily outside consulting. Liquidity and Capital Resources As of June 30, 2000, the Company had cash and cash equivalents of $79,795,571 compared to $96,296,577 at December 31, 1999. The decrease is the result of $4,485,040 used in operations, including $2,288,179 spent on exploration, $11,779,020 invested in property, plant and equipment primarily related to the development of the San Cristobal Project, and a $236,946 reduction of debt. Based on the September 1999 feasibility study for the San Cristobal Project which assumes contract mining, the Company expects capital costs for construction to total approximately $413 million, excluding approximately $60 million in expected tax credits. Approximately $40 million of the tax credits are expected to be recovered during the construction phase of the Project while the remaining $20 million in tax credits are expected to be recovered against the Company's future Bolivian income taxes. In addition, the Company expects that the Project will require approximately $15 million of working capital. The continuing engineering and commercial discussion with government officials has provided additional information for scheduling and planning. Finalization of infrastructure arrangements, primarily for power and port facilities, is continuing and has resulted in a reduction of the 2000 expenditures, which are now estimated to be approximately $40 million. The remaining capital costs will be incurred in the following two years. We expect to fund these expenditures from a combination of our existing cash balances and financing raised from outside sources. The Company expects to raise significant additional financing from outside sources to complete development of the San Cristobal project. These outside sources of financing for the San Cristobal project will include both debt and equity. There can be no assurance that the Company will be able to obtain the required financing on terms that it finds attractive, or at all. Recent Developments In August 2000, the Company intends to file a universal shelf registration statement with the Securities and Exchange Commission. The filing amends and replaces the Company's current registration statement and, when effective, will allow the Company to raise money by selling any combination of equity or debt securities listed in the shelf filing. It is anticipated that project financing will constitute the substantial majority of the overall financing for the San Cristobal project. The Company continues to work with Barclays Bank PLC, Deutsche Bank Securities Inc., International Finance Corporation and the Corporacion Andina de Fomento to develop multilateral financing options as part of a total financing package that may incorporate support from other official agencies as well as debt financing from banks and capital markets. Proceeds from offering(s) under the shelf registration, if any, may be used to construct and develop San Cristobal, continue exploring the Company's other properties, maintain control or ownership of our properties, acquire additional mining related properties or businesses and for general corporate purposes. -8- Forward-Looking Statements Some information contained in or incorporated by reference into this report may contain forward-looking statements. These statements include comments regarding mine development and construction plans, costs, grade, production and recovery rates, permitting, financing needs, the availability of financing on acceptable terms, the timing of engineering studies and environmental permitting, 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. The Company believes the expectations reflected in those forward-looking statements are reasonable. However, the Company cannot assure that these expectations will prove to be correct. 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, or incorporated by reference into, this report: . worldwide economic and political events affecting the supply of and demand for silver, zinc and lead; . volatility in market prices for silver, zinc and lead; . financial market conditions, and the availability of financing on terms acceptable to our company; . 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; . uncertainties regarding future changes in tax legislation or implementation of existing tax legislation; . variations in smelting operations and capacity; . the availability of experienced employees; and . the factors discussed under "Risk Factors" in the Company's Form 10-K dated December 31, 1999. Many of those 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 report on Form 10-Q. 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. Item 3. Quantitative and Qualitative Disclosures About Market Risk and Hedging Activities Currently, the Company's major principal cash balances are held in U.S. dollars. The Company maintains minimum cash balances in foreign currencies and therefore has a relative low exposure to currency fluctuations. Because the Company conducts its activities largely in several foreign countries, the Company may in the future engage in hedging activities to minimize the risk of exposure to currency and interest rate fluctuations. The Company expects that it will be required to hedge some portion of its planned production in advance in order to complete the financing necessary to develop San Cristobal. In addition, as the Company brings San Cristobal into production and begins to derive revenue from the production, sale and exchange of metals, it may utilize various price-hedging techniques to lock in forward delivery prices on a portion of its production. The Company would expect to balance the use of price-hedging techniques to mitigate some of the risks associated with fluctuations in the prices of the metals it produces while allowing it to take advantage of rising metal prices should they occur. The Company is currently developing policies, procedures and guidelines for the hedging of metal prices, interest rates and foreign currency exposure. The Company has engaged in limited metals trading activities utilizing puts and calls in a manner similar to anticipated lender requirements, for the purpose of testing procedures and controls surrounding the trading function. At June 30, 2000, the Company recorded a modest profit from these activities, which did not have a material effect on its results of operations or -9- financial position. There can be no assurance that the Company will always benefit from the use of these techniques. PART II: OTHER INFORMATION Item 1. Legal Proceedings None. Item 2. Changes in Securities and Use of Proceeds None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders The Annual Meeting of Shareholders was held on May 16, 2000. At the meeting the following directors were elected until 2003: Director Number of Common Shares Voted -------- ----------------------------- Affirmative Negative ----------------------------- Eduardo S. Elsztain 27,913,469 6,650 David Sean Hanna 27,913,469 6,650 Thomas S. Kaplan 27,913,469 6,650 Kevin R. Morano 27,913,469 6,650 The directors continuing in office until 2001 or 2002 are Michael Comninos, Harry M. Conger, Ove Hoegh, Keith R. Hulley, Charles B. Smith and Paul Soros. The shareholders also ratified the Company's selection of PricewaterhouseCoopers LLP as the independent accountants for 2000 fiscal year with an affirmative vote of 27,911,389 Common Shares, with 5,930 Common Shares voting against and 2,800 Common Shares abstaining. Item 5. Other Information None. Item 6. (a) Reports on Form 8-K None. (b) Exhibits 27 Financial Data Schedule. -10- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf of the undersigned thereunto duly authorized. APEX SILVER MINES LIMITED (Registrant) Date: August 11, 2000 By: /s/ Thomas S. Kaplan ------------------------- Thomas S. Kaplan Chairman, Board of Directors -11- EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 79,796 0 0 0 0 80,743 62,883 672 147,607 2,188 0 345 0 0 142,049 147,607 0 3,156 0 0 5,767 0 0 0 0 0 0 0 0 (2,611) (.08) (.08)
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