Apex sees silver lining

An initial public offering of US$55 million will be used by Denver-based Apex Silver Mines (SIL-X) for the development of its silver projects.

The company recently completed the offering, based on five million shares priced at US$11 each, on the American Stock Exchange. The original offer was set at 9 million shares at US$13 each, though that plan was altered as a result of sluggish precious metals prices and the poor market performance of companies working in Latin America.

Of the 5 million shares offered, 3.7 million were available in the United States and Canada. Another 450,000 shares were earmarked for international underwriters, whereas 830,000 shares were offered to an existing shareholder. The company currently has 25.7 million shares outstanding.

Proceeds from the offering will be used for the acquisition, exploration and development of silver properties. Apex Silver has 27 silver properties covering more than 2 million acres in Bolivia, Peru, Chile, Honduras, Mexico, Kyrgyzstan, Tajikistan and Mongolia. Its most advanced project is the San Cristobal property, in southern Bolivia.

Apex Silver completed in August an initial feasibility study at the project, situated 500 km south of La Paz and 90 km south of Uyuni. Consultant Mine Reserve Associates calculated a proven and probable reserve of 123 million tonnes grading 1.5% zinc, 0.5% lead and 56 grams silver per tonne, equivalent to 219 million contained ounces silver, 1.8 million tonnes of zinc and 629,000 tonnes of lead.

The company has also located an additional resource of 43.3 million tonnes grading 1.28 oz. silver, 1.1% zinc and 0.34% lead, plus 13.8 million tonnes of 4.2 oz. silver.

Plans call for the construction of two open pits, production from which will be processed at a rate of 30,000 tonnes per day. The mine is expected to produce 14 million oz. silver, 132,700 tonnes of zinc, and 39,500 tonnes of lead per year over a mine life of 11.5 years.

Cash costs, after zinc and lead credits, are estimated at US$2.66 per oz.

silver.

Cash costs at the project were calculated on the basis of silver production, even though the zinc content of the ore is more valuable than its silver content.

Recoveries are anticipated to be 75% for silver, 78% for zinc and 73% for lead. The stripping ratio is estimated at 1.66-to-1.

The study was based on the drilling of 278 reverse circulation holes over 64,554 metres and 17 core holes over 4,752 metres since October 1996.

A second-phase feasibility study is expected to be complete by the third quarter of 1998. Subject to financing arrangements, construction at the project, which has an estimated capital cost of US$327 million, could begin in early 1999. Production there could begin in 2001.