An internal investigation by Apex Silver (SIL-X) has revealed that one of the company’s Latin American subsidiaries may have made improper payments to government officials in an undisclosed country.
Apex has made a filing with the Securities and Exchange Commission (SEC) over the matter, as the payments could be in violation of the Foreign Corrupt Practice Act.
The Department of Justice and the SEC may begin an investigation into the matter.
According to the filing, the payments were made several years ago in connection with an inactive, early stage exploration property; the property is not related to any of the company’s active exploration or development properties.
While the gravity of the situation remains unknown, the market has not yet taken a harsh view of the news.
In New York on March 13, Apex shares closed at US$23.24, down just 0.68%, or 16 from their closing price on March 10 — the date the company filed with the SEC.
Les Childress, an analyst with Seattle, Wash.-based JM Dutton & Associates, says while any SEC investigation would be serious, Apex’s share price has likely been protected by the lack of alternatives in the market when it comes to investing in silver.
“Any time the SEC is looking at you, it’s a problem,” Childress says. “But there are very few large-cap companies (in the sector).”
Pan American Silver (PAA-T, PAAS-Q) is widely regarded as Apex’s closest competitor. In New York on March 13, Pan American shares closed at US$22.91.
News of the payments comes on the heels of Apex’s recent run up the market.
Shares in the company climbed steeply in mid-February, moving from the US$15-US$16 range into the US$22-US$24 range.
Childress says a rise in commodity prices coupled with a West Coast road show held by Apex brought new institutional and hedge fund investment into the fold.
Such larger investors, Childress says, may be taking the view that the infraction is minor and doesn’t merit abandoning the stock.
Apex’s massive San Cristobal silver, zinc and lead project in Bolivia is expected to go into production in late 2007. It is slated to become the world’s second largest silver mine. The company also has exploration projects in Mexico, Peru and Argentina.
Its joint-venture gold-silver property in Argentina, La Frontera, recently returned high-grade gold and silver values.
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