<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 29, 1997
REGISTRATION NO.: 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
APEX SILVER MINES LIMITED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CAYMAN ISLANDS 1044 NOT APPLICABLE
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION INDUSTRIAL IDENTIFICATION NO.)
OF INCORPORATION) CLASSIFICATION CODE
NUMBER)
CALEDONIAN HOUSES, GROUND FLOOR
MARY STREET
GEORGE TOWN, GRAND CAYMAN
CAYMAN ISLANDS, BRITISH WEST INDIES
(345) 949-0050
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
THOMAS S. KAPLAN
PRESIDENT & CHIEF EXECUTIVE OFFICER
APEX SILVER MINES CORPORATION
1700 LINCOLN STREET, SUITE 3050
DENVER, COLORADO 80203
(303) 839-5060
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
----------------
COPIES TO:
PATRICK J. DOOLEY, ESQ. ROBERT F. WALL, ESQ.
AKIN, GUMP, STRAUSS, HAUER & FELD, WINSTON & STRAWN
L.L.P. 35 WEST WACKER DRIVE, SUITE 4200
590 MADISON AVENUE CHICAGO, ILLINOIS 60601
NEW YORK, NEW YORK 10022 (312) 558-5600
(212) 872-1000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ordinary Shares, par
value $0.01
per share............. -- -- $100,000,000 $30,304
</TABLE>
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(1) Includes up to [ ] Ordinary Shares which the U.S. Underwriters and
Managers have the option to purchase solely to cover over-allotments, if
any. The number of Ordinary Shares to be registered also includes any
Ordinary Shares initially offered or sold outside the United States that
are thereafter reoffered or resold in the United States. See
"Underwriting".
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
----------------
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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(a), MAY DETERMINE.
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<PAGE>
EXPLANATORY NOTE
This registration statement contains two forms of prospectus; one to be used
in connection with an offering in the United States and Canada (the "U.S.
Prospectus") and one to be used in connection with a concurrent international
offering outside the United States and Canada (the "International
Prospectus"). The two prospectuses are identical except for the front and back
cover pages. The form of U.S. Prospectus is included herein and is followed by
the front and back cover pages for the International Prospectus. The alternate
front cover page and alternate back cover page for the International
Prospectus included herein are labeled "Alternate Front Cover Page for
International Prospectus" and "Alternate Back Cover Page for International
Prospectus", respectively.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION AND AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THIS REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
AUGUST 29, 1997
PROSPECTUS
[ ] SHARES
[LOGO OF APEX SILVER MINES LIMITED]
APEX SILVER MINES LIMITED
ORDINARY SHARES
(PAR VALUE $0.01 PER SHARE)
Of the [ ] shares (the "Shares") of ordinary shares, par value $0.01 per
share, (the "Ordinary Shares") of Apex Silver Mines Limited (the "Company")
offered hereby (the "Offering"), [ ] Shares are being offered initially in
the United States and Canada by the U.S. Underwriters and [ ] Shares are
being offered initially outside the United States by the Managers. See
"Underwriting". Upon completion of the Offering (assuming the over-allotment
options granted to the U.S. Underwriters and the Managers are not exercised),
the Company will own [ ] percent of the outstanding share capital of Apex
Silver Mines LDC ("Apex LDC"), the Company's principal operating subsidiary.
See "Corporate Structure". The minority shareholders of Apex LDC (the "Minority
Shareholders") are entitled to sell their shares of Apex LDC to the Company
for, at the Company's sole option, Ordinary Shares on a one-for-one basis,
cash, or a combination of cash and Ordinary Shares. The Company currently
expects that any future purchases by the Company of shares of Apex LDC from the
Minority Shareholders will involve only Ordinary Shares of Apex Silver Mines
Limited. Any such transactions will not affect the beneficial or economic
interest in Apex LDC attributable to shareholders of Apex Silver Mines Limited.
Currently, the Company has approximately 13,601,544 Ordinary Shares outstanding
and approximately 7,077,007 Ordinary Shares reserved for issuance for
approximately 7,077,007 shares of Apex LDC owned by the Minority Shareholders.
If all such shares of Apex LDC were issued, the Company would have 20,678,551
Ordinary Shares outstanding. See "Certain Transactions". [AN APPLICATION WILL
BE MADE TO LIST THE SHARES FOR QUOTATION ON THE AMERICAN STOCK EXCHANGE UNDER
THE TRADING SYMBOL [" "], SUBJECT TO NOTICE OF ISSUANCE.]
Prior to the Offering, there has been no public market for the Shares. It is
anticipated that the initial offering price will be between [$ ] and [$ ]
per share. See "Underwriting" for information relating to the factors
considered in determining the initial public offering price.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
INVESTORS IN PURCHASING THE SHARES OFFERED HEREBY, SEE "RISK FACTORS" ON PAGE
8.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
<S> <C> <C> <C>
Per Ordinary Share.................. $ . $ . $ .
Total(3)................................. $ . $ . $ .
</TABLE>
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(1) The Company has agreed to indemnify the U.S. Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting".
(2) Before deducting certain expenses of the Offering, payable by the Company,
estimated to be [$ ].
(3) The Company has granted the U.S. Underwriters a 30-day option to purchase
up to [ ] additional Ordinary Shares, at the Price to Public, less
Underwriting Discount, solely to cover over-allotments, if any. If the U.S.
Underwriters exercise such option in full, the total Price to Public,
Underwriting Discount, Proceeds to Company [ ]. See "Underwriting".
These Shares are offered subject to receipt and acceptance by the U.S.
Underwriters, to prior sale, and to the U.S. Underwriters' right to reject any
order in whole or in part and to withdraw, cancel or modify the offer without
notice. It is expected that delivery of the Shares will be made at the office
of Salomon Brothers Inc, Seven World Trade Center, New York, New York, or
through the facilities of the Depository Trust Company, on or about [ ],
1997.
SALOMON BROTHERS INC
PAINEWEBBER INCORPORATED
SCOTIA CAPITAL MARKETS
The date of this Prospectus is [ ], 1997.
<PAGE>
[WORLD MAP TO FOLLOW]
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SHARES,
INCLUDING STABILIZING BIDS, SYNDICATE COVERING TRANSACTIONS AND THE IMPOSITION
OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
(i)
<PAGE>
ENFORCEABILITY OF CIVIL LIABILITIES UNDER UNITED STATES LAWS
Apex Silver Mines Limited is a Cayman Islands corporation, and certain of
its officers and directors are residents of various jurisdictions outside the
U.S. All or a substantial portion of the assets of the Company and of such
officers and directors, at any one time, are or may be located in
jurisdictions outside the U.S. In particular, Apex Silver Mines LDC, the
Company's majority-owned subsidiary, through which the Company conducts all of
its operations, is a Cayman Islands exempted limited duration company.
Therefore, it ordinarily could be difficult for investors to effect within the
U.S. service of process on the Company or any of those officers and directors
who reside outside the U.S. or to recover against the Company or such
individuals on judgments of courts in the U.S., including judgments predicated
upon civil liability under the U.S. federal securities laws and similar state
laws. Notwithstanding the foregoing, the Company has irrevocably agreed that
it may be served with process with respect to actions based on offers of
Shares made hereby in the U.S. by serving Apex Silver Mines Corporation, 1700
Lincoln Street, Suite 3050, Denver, Colorado 80203, its United States agent
appointed for that purpose.
The Company has been advised by its Cayman Islands counsel, W. S. Walker &
Company, that there may be circumstances where the courts of the Cayman
Islands would not enforce (i) judgments of U.S. courts obtained in actions
against the Company or officers or directors of the Company not resident
within the U.S. predicated upon the civil liability provisions of the U.S.
federal securities laws and similar state laws or (ii) original actions
brought in the Cayman Islands against the Company or such persons predicated
solely upon U.S. federal securities laws. There is no treaty in effect between
the U.S. and the Cayman Islands providing for such enforcement, and there are
grounds upon which Cayman Islands courts may not enforce judgments of U.S.
courts. Certain remedies 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 contrary to public policy.
* * * * *
Except as expressly provided in the Underwriting Agreement, no Shares may be
offered or sold in the Cayman Islands.
(ii)
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. Unless
otherwise indicated, (i) all references to the "Company" include Apex Silver
Mines Limited, its predecessor entities, and each of its direct and indirect
subsidiaries or other entities in which Apex Silver Mines Limited has a direct
or indirect equity or voting interest, (ii) all references to "Apex Limited"
refer exclusively to Apex Silver Mines Limited and (iii) all references to
"dollars" or "$" refer to dollars of the United States of America. Except where
otherwise specified, all information in this Prospectus assumes that the over-
allotment options granted to the U.S. Underwriters and the Managers are not
exercised. Capitalized terms used herein without definition are defined
elsewhere in this Prospectus. See "Glossary" for definitions of certain
technical terms.
THE COMPANY
Apex Silver Mines Limited is engaged in the exploration and development of
silver properties in South America, Central America and Central Asia. The
Company believes it has accumulated one of the largest, privately controlled
portfolios of silver exploration properties in the world. Since 1993, the
Company has acquired the rights to or gained control of 27 non-producing silver
properties located in or near the traditional silver producing regions of
Bolivia, Peru, Chile, Honduras, Mexico, Kyrghyzstan, Mongolia and Tajikistan.
Exploration efforts since 1993 have successfully produced the Company's first
development project, the San Cristobal project (the "San Cristobal Project")
located in southern Bolivia, where regular and close spaced drilling and
analysis have delineated substantial proven and probable reserves of silver,
zinc and lead. In addition, exploration activities at the Company's other
properties in Bolivia, Peru and Honduras indicate the presence of significant
quantities of mineralized material containing silver and other metals.
A first phase feasibility study (the "San Cristobal Study") was completed in
August of 1997 with respect to the San Cristobal Project, which is located in
the San Cristobal district of the Potosi department in southern Bolivia, a
region that has historically produced a significant portion of the world's
silver supply. The San Cristobal Study indicates that the San Cristobal Project
contains in excess of 219 million ounces of silver in the proven and probable
reserves of 122.9 million tonnes of ore based on an average grade of
approximately 1.8 ounces of silver per tonne and contains in excess of 1.8
million tons of zinc and 0.6 million tonnes of lead in these proven and
probable reserves, based on average grades of 1.49 and 0.51 percent,
respectively. At and near the San Cristobal Project, several deposits contain
an additional 57.1 million tonnes of mineralized material, comprised of 43.3
million tonnes of mineralized material with average grades of 1.28 ounces of
silver per tonne and 1.1 percent of zinc and 0.34 percent of lead and 13.8
million tonnes of mineralized material at an average grade of 4.21 ounces of
silver per tonne. The full dimensions of the mineral deposits at the San
Cristobal Project have not yet been determined; mineralized material extends
outward from the identified ore body in most directions as well as to depths
below 200 meters. The reserve estimates are limited by the current extent of
the Company's program of closely spaced drilling analysis. The Company will be
conducting an ongoing exploration program in order to fully delineate the
mineralized zones.
The San Cristobal Study was prepared for the Company by Kvaerner Metals, Davy
Nonferrous Division ("Davy"), an international engineering procurement,
construction and management firm. Davy was also retained by the Company to
confirm independently the reliability of the Company's drilling and sampling
procedures at the San Cristobal Project.
1
<PAGE>
All aspects of this confirmatory process were controlled by Davy, including
(i) the number of test holes required (four), site selection and drilling of
the four reverse circulation drill holes parallel to holes previously drilled
by the Company; (ii) sample collection, preparation and transportation; and
(iii) assay analysis. Davy's work confirmed results reported by the Company.
Behre Dolbear & Company Inc. ("Behre Dolbear"), a geological and mining
consulting firm, conducted a technical audit of and confirmed, within the
accuracy of plus or minus 25 to 30 percent, the work undertaken by Davy and the
other independent technical specialists who contributed to the San Cristobal
Study. The San Cristobal Study concluded with an economic assessment of the
identified mineral deposits.
Based on the San Cristobal Study, the San Cristobal Project, as currently
delineated, is forecast to produce an average of 14 million ounces of silver,
132,700 tonnes of zinc and 39,500 tonnes of lead per year over the anticipated
11.5 year life of the project. The San Cristobal Project is expected to consist
of two large scale, open pit mining operations using conventional mining and
processing technologies capable of producing and processing an aggregate 30,000
tonnes per day ("tpd") of ore. The stripping ratio for open pit operations is
1.66 tonnes of waste for each tonne of ore. The average cash production cost
over the life of the San Cristobal Project is forecast to be $2.69 per silver
equivalent ounce. Capital expenditures are estimated to total $354 million for
pre-production development and construction to complete the San Cristobal
Project. Based on the favorable results of the San Cristobal Study, the Company
is targeting the completion of a second phase feasibility study of the San
Cristobal Project by the third quarter of 1998 with a goal of securing
committed financing by late 1998. Subject to the completion of a second phase
feasibility study and securing committed financing, the Company anticipates
beginning construction at the San Cristobal Project in early 1999, with silver,
zinc and lead production commencing in early 2001.
In addition, the Company's recent drilling at its Cobrizos property, located
approximately 12 kilometers north of the San Cristobal Project within the San
Cristobal district, has identified approximately 10.8 million tonnes of
mineralized material with an average grade of 4.3 ounces of silver per tonne.
The Company plans to conduct further drilling and engineering studies to
establish proven and probable reserves.
The Company believes that its San Cristobal district properties may contain
some of the largest known open pit silver, zinc and lead deposits in the world.
Based on the general geology of the San Cristobal district, the drilling and
analysis performed for the San Cristobal Study, and the amount of mineralized
material identified to date, the Company believes that the San Cristobal
Project could be extended in life and/or increased in scale.
The Company is currently evaluating three other advanced-stage exploration
properties: the El Ocote silver property in southwestern Honduras; the San Juan
de Lucanas silver and gold property in southern Peru; and the Choroma silver
prospect in southern Bolivia. At the El Ocote property, the Company has
completed a conceptual engineering study in order to determine the feasibility
of bringing the property into production. Based on the results of this study,
the Company is planning a comprehensive metallurgical sampling and test
program. Upon completion of the registration of its ownership of the San Juan
de Lucanas property, the Company will conduct a focused exploration and
evaluation program to establish and develop reserves by, among other things,
drilling targets identified by previous exploration activities. Sampling of
outcrops at the Choroma silver prospect has defined several anomalies which the
Company plans to drill to test for bulk mineable mineralization and access
existing underground workings for further sampling.
The Company controls a portfolio of silver properties covering more than two
million acres of mineral rights in eight countries. The Company has conducted
limited drilling and sampling at some of these other exploration properties and
believes that certain of these properties may contain significant silver
mineralization.
2
<PAGE>
BUSINESS STRATEGY
The Company is one of a limited number of mining companies with a primary
focus on silver exploration, development and production. The Company's business
strategy is to capitalize on its sizeable reserve and mineralized material base
in order to achieve long-term profitable growth and enhance shareholder value.
The principal elements of the Company's business strategy are as follows: (i)
to complete a second phase feasibility study of a large scale open pit mining
operation at the San Cristobal Project; (ii) to secure the financing required
to develop the San Cristobal Project; (iii) to proceed to develop the San
Cristobal Project into a large scale open pit mining operation; (iv) to
continue exploration and evaluation activities at the Cobrizos property in
southern Bolivia, the El Ocote property in southwestern Honduras, the San Juan
de Lucanas property in southern Peru, and to commence drilling and underground
sampling at the Choroma property in Southern Bolivia; (v) to evaluate other
properties in the Company's portfolio of silver exploration properties,
focusing the Company's exploration and development efforts on those properties
which are most likely to contain significant silver mineralization and
divesting itself of those properties that are not of continuing interest to the
Company; and (vi) to identify and acquire additional mining and mineral
properties that the Company believes contain significant amounts of silver or
have exploration potential.
The Company believes that its expanding international portfolio of
development and exploration properties position it to take advantage of future
increases in demand for silver and certain co-occurring minerals, such as zinc,
lead, copper and gold.
BUSINESS STRENGTHS
The Company believes that its substantial proven and probable reserves of
silver, zinc and lead, its additional significant silver, zinc, lead, copper
and gold mineralized material, its large exploration property portfolio and its
experienced management team position the Company to become a major precious and
base metals producer and to benefit from favorable developments in these
markets.
MAJOR SILVER DEVELOPMENT PROJECT
The San Cristobal Study indicates that the San Cristobal Project may
constitute one of the largest known mineable silver deposits in the world.
Based on the San Cristobal Study, two of the 15 mineralized deposits identified
at the San Cristobal Project are estimated to contain total proven and probable
reserves of 219 million ounces of contained silver as well as significant
amounts of zinc and lead. The Company believes that production at the San
Cristobal Project could commence as early as 2001 at a rate of 30,000 tpd of
ore producing on average 14 million ounces of silver, 132,700 tonnes of zinc
metal and 39,500 tonnes of lead metal, subject to the results of a second phase
feasibility study and securing the required financing. The Company believes
that the nature and extent of the deposits at the San Cristobal Project will
enable the development of a large scale, open pit mining operation with low
stripping ratios that utilizes conventional mining and processing technology,
enabling the Company to benefit from economies of scale in production.
DIVERSIFIED PORTFOLIO OF SILVER PROPERTIES
The Company's current property portfolio is diversified not only in terms of
property location, but also in terms of stages of evaluation. The Company's
development, advanced exploration and other exploration stage mineral
properties are located primarily in or near traditional silver producing
regions in South America, Central America and Central Asia. These properties
include substantial holdings throughout southern Bolivia, northern Chile,
southwestern Honduras, southern Peru, and the Zacatecas district of Mexico, as
well as significant mineral concessions in Kyrghyzstan, Mongolia and
Tajikistan. Initial analyses of several of the Company's early-stage
exploration properties indicate the
3
<PAGE>
presence of sufficient silver mineralization to warrant additional exploration
and evaluation in order to determine the potential for future development.
Notwithstanding its primary focus on silver, the Company intends to exploit,
where economically feasible, co-occurring minerals, such as zinc, lead, copper
and gold, at its mineral properties.
EXPERIENCED MANAGEMENT TEAM
The management of the Company is comprised of an experienced team of mining
experts, whose experience in managing, identifying, developing, building and
bringing into production major mining enterprises averages approximately 30
years. In addition, many of the members of the Company's management team have
extensive experience in operating large scale mining projects for major
international mining companies throughout the world. Certain of the Company's
senior executives and the members of its Development Committee have had overall
responsibility for the development and operation of major mining operations,
including, among others, one major expansion of an existing iron ore mine
costing $170 million, two new mine developments each costing $165 million, the
operation and administration of major open pit iron and zinc/silver mines
located in Peru, the development, construction and start up of the $230 million
Muruntau gold project in Zarafshan, Uzbekistan, the $450 million (Australian)
Mount Keith open pit nickel mine, and participation in the identification of
several multi-million ounce gold deposits.
RESERVES AND MINERALIZED MATERIAL DATA
The following table sets forth the Company's proven and probable reserves of
silver, zinc and lead as of August 29, 1997 at the San Cristobal Project. The
reserves reflected below are based on an equivalent cut-off grade of 1.0 ounce
of silver per tonne and prices of $5.00 per ounce for silver and $0.55 and
$0.30 per pound for zinc and lead, respectively. Proven and probable reserves
include an average recovery of 75.5 percent for silver, 78.0 percent for zinc
and 73.3 percent for lead. The proven and probable reserves and mineralized
material have been determined by Mine Reserves Associates Inc. ("MRA"),
independent consultants working as members of the first phase feasibility
consultants' team. Confirmation of the reserves and mineralized material was
also conducted by another independent consulting firm, Pincock, Allen & Holt
("PAH") which developed an independent resource grade model using a common data
set that checked closely with the reserve estimates. Davy and, separately,
Behre Dolbear acting as technical auditor, reviewed the reserve estimates and
confirmed the results reported below within the accuracy of the study. See
"Properties--Development Project--San Cristobal Project--Reserves and
Mineralized Material."
PROVEN AND PROBABLE RESERVES--SAN CRISTOBAL PROJECT
<TABLE>
<CAPTION>
CONTAINED METALS
AVERAGE GRADE (000'S)
-------------------------------- ---------------------
TONNES SILVER SILVER ZINC LEAD
(000'S) (OUNCES/TONNE) ZINC (%) LEAD (%) OUNCES TONNES TONNES
-------- -------------- -------- -------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
122,891 1.79 1.49 0.51 219,472 1,836 629
</TABLE>
Stripping ratio for the open pit operations is 1.66 tonnes of waste for each
tonne of ore.
The following table sets forth the Company's estimates of the silver, zinc
and lead mineralized material contained in its property portfolio. Mineralized
material is that part of mineral deposits for which (i) tonnage and grade are
computed (a) partly from specific measurements, samples or production data
compiled from assays of outcrops, trenches, underground workings or drill holes
and
4
<PAGE>
(b) partly from projections based on geological evidence, and (ii) have not
been measured and sampled with sufficient confidence to determine that the
identified deposit can be economically and legally extracted at the time of
such determination. The mineralized material estimates were determined by MRA
for the Tesorera and Jayula deposits, and by the Company with respect to the
other deposits. In the case of the Cobrizos deposit, the mineralized material
estimates were verified by MRA. In the case of the El Ocote deposit, the
mineralized material estimates were developed by the Company and reviewed by
Behre Dolbear.
MINERALIZED MATERIAL
<TABLE>
<CAPTION>
AVERAGE GRADE
--------------------------------
SILVER
TONNES (000'S) (OUNCES/TONNE) ZINC (%) LEAD (%)
-------------- -------------- -------- --------
<S> <C> <C> <C> <C>
San Cristobal District
Tesorera deposit.............. 2,611 0.77 1.37 0.37
Jayula deposit................ 32,122 1.22 0.91 0.22
Animas deposit................ 8,600 1.67 1.71 0.76
Toldos deposit................ 3,000 3.86 -- --
Cobrizos deposit.............. 10,800 4.31 -- --
El Ocote deposit................ 2,100 9.90 -- --
</TABLE>
COMPANY HISTORY
The Company was founded in 1993 to acquire and develop attractive silver
properties throughout the world. Since 1993, the Company has accumulated a
portfolio of silver exploration properties covering more than two million acres
in eight countries. These acquisitions were premised on several factors,
including (i) the low price of silver relative to the price of other precious
metals, (ii) a perception that silver supply and demand fundamentals were
stronger than the then-prevailing price of silver suggested, (iii) the general
scarcity of attractive publicly-traded silver companies and (iv) the perception
of negative sentiment within the traditional silver mining community.
In December of 1994, in connection with an investment by Silver Holdings LDC
("Silver Holdings"), the Company reorganized as a Cayman Islands holding
company with regionally targeted subsidiaries. See "Corporate Structure",
"Certain Transactions" and "Principal Shareholders". Following this
reorganization and new investment, Apex Silver Mines LDC, an exempted limited
duration company organized under the laws of the Cayman Islands ("Apex LDC"),
accelerated its program of acquiring silver exploration properties. In March of
1996, in connection with a private placement of common stock (the "1996 Private
Placement"), Apex Limited was organized. The 1996 Private Placement, which was
completed as of August 6, 1996, raised gross proceeds of $34.1 million. See
"Certain Transactions".
Apex Limited conducts all of its operations through Apex LDC and the
subsidiaries of Apex LDC; Apex Limited's assets consist exclusively of its
shares in Apex LDC. Prior to the Offering, Apex Limited owned approximately 66
percent of the issued and outstanding shares of Apex LDC; upon completion of
the Offering (assuming the over-allotment options granted to the U.S.
Underwriters and Managers are not exercised), Apex Limited will own
approximately [ ] percent of the issued and outstanding share capital of Apex
LDC. Currently, Apex Limited has approximately 13,601,544 Ordinary Shares
outstanding and approximately 7,077,007 Ordinary Shares reserved for issuance
for approximately 7,077,007 shares of Apex LDC owned by the Minority
Shareholders. If all such shares of Apex LDC were issued, Apex Limited would
have 20,678,551 Ordinary Shares outstanding. See "Corporate Structure" and
"Certain Transactions".
5
<PAGE>
ADDRESS, PRINCIPAL OFFICE
The Company was formed under the laws of the Cayman Islands and maintains its
registered office at Caledonian House, Ground Floor, Mary Street, George Town,
Grand Cayman, Cayman Islands, British West Indies.
The Company has contracted with Apex Silver Mines Corporation ("Apex
Corporation"), a wholly-owned subsidiary of Apex LDC, for certain management
services. Apex Corporation maintains its principal office at 1700 Lincoln
Street, Suite 3050, Denver, Colorado 80203.
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THE OFFERING
<TABLE>
<S> <C> <C>
Ordinary Shares offered by the Company:
U.S. Offering................................. [ ] shares
International Offering........................ [ ] shares
-----
Total(1).................................... [ ] shares
Ordinary Shares to be outstanding after the
Offerings(1)(2)................................ [$ ]
Net Proceeds.................................... [$ ] million ($ million
if the U.S. Underwriters' and
Managers' over-allotment
options are exercised in
full).
</TABLE>
- --------
(1) Does not include up to an aggregate of [ ] shares of the Company's share
capital subject to over-allotment options granted to the U.S Underwriters
and the Managers. See "Underwriting".
(2) Excludes (i) Ordinary Shares reserved for issuance pursuant to options that
were or may be granted pursuant to the Company's Employee Share Option Plan
and Non-employee Director Share Option Plan, and (ii) approximately
7,077,007 Ordinary Shares reserved for issuance to the Minority
Shareholders. See "Executive Compensation--Share Option Plans" and "Certain
Transactions".
USE OF PROCEEDS: The Company intends to use the net proceeds for
one or more of the following purposes: (i)
feasibility studies, financing and construction
and development of its San Cristobal district
properties in Bolivia, (ii) exploration and
development activities at any of the other
properties within the Company's existing
portfolio, (iii) maintenance of control or
ownership of the Company's existing mineral
properties including ongoing lease payments, and
paying royalties and other maintenance and
registration fees, and (iv) acquisition of
additional properties or businesses that are
complementary to those of the Company. In
addition, the Company may use the net proceeds as
working capital and to finance other general
corporate purposes. Apex Limited will contribute
the gross proceeds from the Offering, and all
associated expenses, to Apex LDC.
AMERICAN STOCK EXCHANGE [ ]
SYMBOL:
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY CERTAIN RISK FACTORS RELATING
TO AN INVESTMENT IN THE SHARES. SEE "RISK FACTORS".
7
<PAGE>
RISK FACTORS
Prospective purchasers of the Shares offered hereby should consider
carefully, in addition to the other information contained in this Prospectus,
the following risk factors:
RESERVE AND OTHER MINERALIZATION ESTIMATES
The reserves and other mineralization figures presented herein, unless
otherwise indicated, are based on estimates of contained silver and other
metals made by independent geologists and/or the Company's personnel. These
estimates are imprecise and depend on geological interpretation and
statistical inferences drawn from drilling and sampling which may prove
unreliable. There can be no assurance that such estimates will be accurate, or
that indicated reserves or mineralization can be profitably exploited. Since
production has not yet commenced on any of the Company's properties, reserves
and other mineralization estimates for these properties may require
adjustments or downward revisions based on actual production experience. Any
material reductions in estimates of the Company's reserves and other
mineralization, or of the Company's ability to extract such reserves or
mineralization, could have a material adverse effect on the results of
operations and financial condition of the Company.
The Company has completed a first phase feasibility study with respect to a
portion of only one of its properties, the San Cristobal Project. Accordingly,
the Company has not established the presence of any proven or probable
reserves at any of its other mineral properties. Although conceptual studies
have been prepared with respect to the Company's El Ocote and San Juan de
Lucanas exploration properties by independent parties using data and
assumptions provided by the Company, these studies involve assumptions and
projections based on a level of data insufficient to establish the presence of
proven or probable reserves. There can be no assurance that subsequent testing
or future feasibility studies will establish additional reserves at the
Company's properties. The failure to so establish additional reserves could
restrict the Company's ability to successfully implement its strategies for
long term growth.
In addition, there can be no assurance that the proven or probable reserves
set forth in the San Cristobal Study will actually be able to be mined and
processed profitably, if at all. The San Cristobal Study is based on many
assumptions, any, some, or all of which may prove to be inaccurate. The
failure of any such assumptions to prove accurate may alter the conclusions of
the San Cristobal Study and may have a material adverse effect on the Company.
In addition, the economics of mining at San Cristobal are based on (i) bench
scale metallurgical testing of drill samples from the property to estimate
extraction yields of silver and other metals, (ii) estimates of the cost of
creating and operating the necessary mine process infrastructure and transport
facilities to profitably extract the minerals at the property and (iii)
estimates of the market price of silver, zinc and lead. Such estimates can be
highly inaccurate. There can be no assurance that the Company will achieve the
anticipated extraction rates or operating costs, or create the necessary
facilities within the budgets, proposed by the San Cristobal Study.
SAN CRISTOBAL PROJECT RISKS
In addition to the other risk factors, the San Cristobal Project involves
the following risks:
The proximity of the town of San Cristobal may adversely affect the
Company's ability to efficiently mine the San Cristobal Project. The Company
expects to seek to relocate the local population of approximately 350. There
can be no assurance that the Company will be able to develop an amicable and
economically feasible relocation program within the time period anticipated by
the Company's development plans. See "Properties--Development Project--San
Cristobal Project".
Although the Company anticipates that the development of the San Cristobal
Project will be successfully completed and that the resulting operations will
be in full production by early 2001, no
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<PAGE>
assurance can be given that the development of the San Cristobal Project will
be completed on a timely basis, that the operations will achieve the
anticipated production capacity or that the construction costs or ongoing
operating costs associated with the development of the San Cristobal Project
will not be higher than anticipated. The construction of expanded mining
operations involves a number of uncertainties, including factors beyond the
Company's control. Failure to complete the development of the San Cristobal
Project on a timely basis or unexpected cost increases could have a material
adverse effect on future results of operations and financial condition of the
Company. If the capital expenditures required to complete the development of
the San Cristobal Project are significantly higher than expected, there is no
assurance that the Company's capital resources would be sufficient to cover
such costs or that the Company would be able to obtain alternative sources of
financing to cover such costs. See "Use of Proceeds" and "Properties--
Development Project--San Cristobal Project".
NO PRODUCTION HISTORY
The Company has no history of silver production. The Company's strategy to
develop its economically feasible properties will require the construction or
rehabilitation and operation of mines, processing plants and related
infrastructure. As a result, the Company is subject to all of the risks
inherent in the establishment of new mining operations and business
enterprises. There can be no assurance that the Company will successfully
establish mining operations or profitably produce silver or other metals at
any of its properties.
MANAGEMENT OF GROWTH
The Company anticipates that as its mineral properties are brought into
production and as it acquires additional mineral rights, it will experience
significant growth in its operations. This growth is expected to create new
responsibilities for management personnel, as well as added demands on the
Company's operating and financial systems. There can be no assurance that the
Company will be successful in meeting such demands and managing its
anticipated growth. The Company's growth is dependent, in part, on the
continued identification and acquisition of additional mineral rights. There
can be no assurance that the Company will be successful in acquiring
additional mineral rights.
VOLATILITY OF METALS PRICES
The profitability of the Company and its long-term viability are dependent
in large part on the market price of silver and other metals, including zinc
and lead. The market prices for such metals are volatile and are affected by
numerous factors beyond the Company's control, including expectations for
inflation, speculative activities, currency exchange fluctuations, global or
regional consumption patterns, supply of and demand for silver and the other
metals, political and economic conditions and production and transportation
costs. The aggregate effect of these factors is impossible for the Company to
predict and could have a material adverse effect on the Company and the
results of its operations.
Certain mining operations, including the San Cristobal Project, may be
dependent upon anticipated proceeds from the production of secondary metals
and a decline in the price of any metals extracted by the Company could
materially adversely affect the profitability of the Company. If the market
price for these metals falls below the Company's production costs and remains
at such level for any sustained period, the Company will experience additional
losses and may determine to discontinue the development of a project or mining
at one or more of its properties. See "Metals Market Overview".
EXPLORATION AND DEVELOPMENT RISKS
The degree of profitability of the Company's operations will be affected by
the costs and results of its continued exploration and development programs.
The Company is seeking to expand its reserves
9
<PAGE>
through a broad program of exploration and development, including ongoing
development activities at the San Cristobal Project. Mineral exploration is
highly speculative in nature, involves many risks, and frequently is
nonproductive. There can be no assurance that the Company's mineral
exploration efforts will be successful. Once mineralization is discovered, it
usually takes a number of years from the initial phases of exploration until
production is possible, during which time the economic feasibility of
production may change. Substantial expenditures are required to establish ore
reserves through drilling, to determine metal content and metallurgical
processes to extract such metal from the ore and, in the case of new
properties, to construct mining and processing facilities. As a result of
these uncertainties, no assurance can be given that the Company's exploration
programs will result in the establishment of new ore reserves.
None of the Company's mineral properties have an operating history upon
which estimates of future cash operating costs may be based. Estimates of
reserves and cash operating costs, particularly for development projects, to a
large extent, are based upon the interpretation of geologic data obtained from
drill holes and other sampling techniques, and feasibility studies which
derive estimates of cash operating costs based upon anticipated tonnage and
grades of ore to be mined and processed, the configuration of the ore body,
expected recovery rates of silver and other metals from the ore, comparable
facility and equipment operating costs, anticipated climatic conditions, and
other factors. As a result, it is possible that actual cash operating costs
and economic returns may differ significantly from those currently estimated
by the Company. It is not unusual in new mining operations to experience
unexpected problems during the start-up phase.
There are a number of uncertainties inherent in any development program,
including the location and dimensions of a deposit, metal content, development
of appropriate metallurgical processes, receipt of necessary governmental
permits and the construction of mining and processing facilities.
The costs involved in building or upgrading all necessary power, water or
transportation facilities at any given property may be considerable,
particularly in light of the frequently remote locations of the Company's
properties. The development of many of the Company's properties will require
the creation of extensive infrastructure in order to commence production at
such sites. No assurance can be given that minerals will be discovered in
sufficient quantities to justify commercial operations or that the funds
required for development can be obtained at all, or on a timely basis.
Accordingly, there can be no assurance that the Company's future development
activities or exploration efforts will result in profitable mineral
production.
TITLE TO MINERAL PROPERTIES
Although it is the Company's policy to seek to confirm the validity of its
rights to title to, or contract rights with respect to, each mineral property
in which it has a material interest, there is no guarantee that title to its
properties will not be challenged or impugned. Title insurance generally is
not available, and the Company's ability to ensure that it has obtained secure
claim to individual mineral properties or mining concessions may be severely
constrained. The Company has not conducted surveys of all of the claims in
which it holds direct or indirect interests and, therefore, the precise area
and location of such claims may be in doubt. Accordingly, the Company's
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, the Company may not be able to operate its properties as
permitted, or to enforce its rights with respect to such properties.
The Company's rights to certain of its mineral properties, including certain
of its principal properties at the San Cristobal Project, derive from
leaseholds or purchase option agreements which require the payment of rent or
other installment fees. In the event the Company fails to make such payments
with respect to any of its mineral properties on the relevant due date, the
Company's rights to any such property may lapse. There can be no assurance
that the Company will, or will be able to,
10
<PAGE>
effect all such payments by the requisite payment dates. In addition, certain
of the Company's contracts with respect to its mineral properties mandate
development or production schedules. There can be no assurance that the
Company will be able to meet any or all of such development or production
schedules. In addition, the Company's ability to transfer or sell its rights
to certain mineral properties may require governmental approvals or third
party consents, which may not be granted.
The Company's title to, and control over its San Juan de Lucanas property in
Peru has been contested by certain employee creditors of the prior operator of
the property. During the last three years, parts of the property have been
physically controlled by individuals challenging the Company's ownership.
There can be no assurance that the Company will prevail in its attempt to
register title to the property. See "Properties--Advanced Exploration
Properties--San Juan de Lucanas".
MINING RISKS AND INSURANCE
The business of mining is generally subject to a number of risks and
hazards, including adverse environmental effects, industrial accidents, labor
disputes, technical difficulties posed by unusual or unexpected geologic
formations, cave-ins, flooding and periodic interruptions due to inclement or
hazardous weather conditions. Such risks can result in damage to and
destruction of, mineral properties or producing facilities, as well as
personal injury, environmental damage, delays in mining, monetary losses and
possible legal liability. Although the Company maintains, and intends to
continue to maintain, insurance with respect to its operations and mineral
properties within ranges of coverage consistent with industry practice, no
assurance can be given that such insurance will be available at economically
feasible premiums. Insurance against environmental risks (including potential
liability for pollution or other disturbances resulting from mining
exploration and production) is not generally available to the Company.
FOREIGN OPERATIONS
The Company currently conducts exploration activities in countries with
developing economies, including Bolivia, Chile, Honduras, Mexico and Peru in
Latin America, and Kyrghyzstan, Mongolia and Tajikistan in Central Asia. Each
of these countries has experienced recently, or is experiencing currently,
economic or political instability. Hyperinflation, volatile exchange rates and
rapid political and legal change, often accompanied by military insurrection,
have been common in these and certain other emerging markets in which the
Company may conduct operations. The Company may be materially adversely
affected by possible political or economic instability in any one or more of
those countries. The risks include, but are not limited to, terrorism,
military repression, expropriation, changing fiscal regimes, extreme
fluctuations in currency exchange rates, high rates of inflation and the
absence of industrial and economic infrastructure. Changes in mining or
investment policies or shifts in the prevailing political climate in any of
the countries in which the Company conducts exploration and development
activities could adversely affect the Company's business. Operations may be
affected in varying degrees by government regulations with respect to
production restrictions, price controls, export controls, income and other
taxes, expropriation of property, maintenance of claims, environmental
legislation, labor, welfare benefit policies, land use, land claims of local
residents, water use and mine safety. The effect of these factors cannot be
accurately predicted.
GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS
All commercial production and mineral exploration and development by the
Company will be subject to foreign laws and regulations controlling not only
the mining of and exploration for mineral properties, but also the possible
effects of such activities upon the environment. These laws and regulations
are comprehensive and deal with matters such as air and water quality, mine
reclamation, waste handling and disposal, the protection of certain species
and the preservation of certain lands. These environmental laws and
regulations may require the acquisition of permits or other
11
<PAGE>
authorizations for certain activities. Environmental legislation is evolving
in a manner which will 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. Permits from a variety
of regulatory authorities are required for many aspects of mine operation and
reclamation. The Company 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 necessitate significant capital outlays, may materially
adversely affect the Company's future operations or may cause material changes
or delays in the Company's intended activities.
The Company's preliminary analysis of the existing mining activities
conducted by the current owner and operator of the Toldos mine at the San
Cristobal Project indicates that low-level effluents from the site may be
draining into a seasonal stream which flows into the Rio Grande and,
ultimately, into the Salar de Uyuni, a salt lake to the north of the San
Cristobal Project. See "Properties--Development Project--San Cristobal
Project". Pursuant to the recently enacted Bolivian mining code, mining
companies are not liable for identified pre-existing conditions. Nonetheless,
if the Company acquires the Toldos property from its current owner, the
Company expects to improve the environmental situation which may currently
exist at the site. The Company does not expect any such remediation program to
have a material adverse effect on the Company's proposed operations at the San
Cristobal Project.
Environmental conditions may exist on other mineral properties currently
owned or controlled by the Company which are unknown to the Company at present
and which have been caused by previous or existing owners or operators of the
properties. The Company has not sought an environmental analysis at any of its
mineral properties, nor has it conducted a comprehensive review of the
environmental laws and regulations applicable to it in each of the various
jurisdictions in which it owns or controls mineral properties. To the extent
the Company is subject to environmental liabilities, the satisfaction of such
liabilities would reduce the Company's net cash flow and could have a material
adverse effect on the Company's financial position and results of operations.
Should the Company be unable to fund fully the cost of remediation of any
environmental condition, the Company might be required to suspend operations
or enter into interim compliance measures pending completion of the required
remediation.
COMPETITION
The mining industry is intensely competitive. The Company competes with many
companies possessing greater financial resources, operational experience and
technical facilities than itself. Competition in the mining business could
adversely affect the Company's ability to attract requisite capital funding or
acquire suitable producing properties or prospects for mineral exploration in
the future. The Company recently has encountered increasing competition from
other mining groups in its efforts to acquire mineral properties.
HOLDING COMPANY STRUCTURE RISKS
The Company currently conducts, and will continue to conduct, all of its
operations through subsidiaries. The Company's ability to obtain dividends or
other distributions from its subsidiaries may be subject to, among other
things, restrictions on dividends under applicable local law and foreign
currency exchange regulations in the jurisdictions in which the subsidiaries
operate. The subsidiaries' ability to pay dividends or make other
distributions to the Company may also be subject to their having sufficient
funds from their operations legally available for the payment thereof which
are not needed to fund their operations, obligations or other business plans.
If the Company's subsidiaries are unable to
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<PAGE>
pay dividends or make other distributions to the Company, the Company's growth
may be inhibited after the proceeds of the Offering are exhausted, unless the
Company is able to obtain additional debt or equity financing on terms which
are acceptable to the Company. In the event of a subsidiary's liquidation,
there may not be assets sufficient for the Company to recoup its investment
therein.
LIMITED OPERATING HISTORY; HISTORY OF LOSSES
The Company, incorporated in the Cayman Islands in March of 1996, is the
successor to the mineral property acquisition, exploration and development
activities conducted by its affiliates since 1993. The Company has incurred
losses since its inception, and expects to incur additional losses for at
least the next four years. As of June 30, 1997, the Company had an accumulated
deficit of $24,975,158. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
DISCRETION AS TO USE OF PROCEEDS
Apex Limited will contribute the gross proceeds of the Offering, and all
associated expenses, to Apex LDC. While the Company has identified certain
anticipated uses for the net proceeds, it will have broad discretion as to the
expenditure of such proceeds.
REQUIREMENT OF ADDITIONAL FINANCING
The net proceeds of the Offering will not be sufficient to complete the
Company's planned development of the San Cristobal Project. The Company
intends to seek additional financing to complete development of the San
Cristobal Project and to fund the development of other of its mineral
properties, including the Cobrizos, El Ocote, San Juan de Lucanas, and Choroma
properties. Sources of such external financing include bank borrowings and
future debt and equity offerings. There can be no assurance that additional
financing will be available on terms acceptable to the Company and its
shareholders, or at all. The failure to obtain such additional financing could
have a material adverse effect on the results of operations and the financial
condition of the Company.
The operations contemplated by the Company are expected to be highly capital
intensive. There can be no assurance that the Company will be able to secure
the financing necessary to retain its rights to, or to begin, or, if begun, to
sustain production at the Company's mineral properties.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent on the services of certain key executives including
its Chairman and the Chief Operating Officer. The loss of these persons, other
key executives or personnel, or the inability to attract and retain the
additional highly skilled employees required for the expansion of the
Company's activities, may have a material adverse effect on the Company's
business or future operations. The Chairman does not have a written contract.
See "Executive Compensation--Employment Agreements". The Company does not
intend to maintain "key-man" life insurance on any of its executive officers
or other personnel.
SUBSTANTIAL CONTROL BY DIRECTORS AND SIGNIFICANT SHAREHOLDERS
Upon the completion of this Offering, Thomas S. Kaplan and the Company's
directors and principal shareholders, together with members of their families
and entities that may be deemed affiliates of or related to such persons or
entities, will beneficially own approximately [ ] percent of the Ordinary
Shares outstanding after the Offering, including approximately 7,077,007
Ordinary Shares which would be issued in the event the Company elected to
satisfy all of its obligations to the Minority Shareholders of Apex LDC
arising under the Buy-Sell Agreement through the issuance of Ordinary Shares.
See "Certain Transactions". Mr. Kaplan and others, together with certain of
the shareholders of Apex LDC, have entered into an agreement with respect to
the appointment of two members of the Company's board of directors. See
"Certain Transactions". Such a high level of
13
<PAGE>
ownership by such persons may have a significant effect in delaying, deferring
or preventing a change in control of the Company or other events which could
be of benefit to the Company's other shareholders. See "Principal
Shareholders".
CONFLICTS OF INTEREST
Certain officers and directors of the Company are officers and/or directors
of, or are associated with, other natural resource companies that acquire
interests in mineral properties. Such associations may give rise to conflicts
of interest from time to time. See "Certain Transactions."
SUBSTANTIAL DILUTION
As a result of the Offering, persons purchasing Shares in the Offering will
experience immediate and substantial dilution in the net tangible book value
per share of $[ ]. See "Dilution".
ABSENCE OF DIVIDENDS
The Company does not anticipate paying dividends to existing or future
shareholders for the foreseeable future. It is the present intention of the
Company to retain all earnings, if any, in order to support the future growth
of its business. Any determination in the future to pay dividends will be
dependent upon the Company's consolidated results of operations, financial
condition, cash requirements, future prospects and such other factors as the
Company deems appropriate at the time.
NO PRIOR PUBLIC MARKET
Prior to the Offering, there has been no public market for the Shares. An
application will be made to have the Shares listed for quotation on the
American Stock Exchange. There can be no assurance that an active public
market for the Shares will develop, or if such market does develop, be
sustained. The initial public offering price for the Shares will be determined
by negotiations among the Company and the underwriters. There can be no
assurance that the market price of the Shares after the Offering will equal or
exceed the initial public offering price. The market price of the Shares could
be subject to significant fluctuations in response to variations in quarterly
operating results, developments relating to the Company and general trends
affecting the metals industry. In addition, broad market fluctuations and
general economic and political conditions may adversely affect the market
price of the Shares regardless of the Company's performance. See
"Underwriting" for a description of the factors to be considered in
determining the initial public offering price.
ORDINARY SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Ordinary Shares in the public market
following the Offering could adversely affect the market price of the Shares.
The Company and certain of its directors and executive officers, and all
current shareholders (including the shareholders of Apex LDC) have agreed,
during the 180 days following the date of the Prospectus, not to sell any
Ordinary Shares without the prior written consent of Salomon Brothers Inc
("Salomon"). See "Certain Transactions", "Ordinary Shares Eligible for Future
Sale" and "Underwriting".
TAX RISKS
Potential investors should inform themselves as to the tax consequences of
acquiring, holding and disposing of Shares in their particular circumstances.
In particular, potential investors that are U.S. taxpayers should consider
that the Shares may be considered interests in a "passive foreign investment
company" ("PFIC") for U.S. tax purposes, and should consult their own tax
advisers as to the taxation of U.S. shareholders of PFICs in light of their
particular circumstances. If the Company
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<PAGE>
were deemed to be a PFIC, then a U.S. taxpayer who disposes or is deemed to
dispose of Shares at a gain generally would be required to treat such gain as
ordinary income and pay an interest charge on a portion of the gain unless the
U.S. taxpayer makes a timely election (a "QEF election") to have the Company
treated as a "qualified electing fund".
A U.S. taxpayer who makes a QEF election generally must report on a current
basis his share of any ordinary earnings and net capital gain of the Company
for any taxable year in which the Company is a PFIC. A QEF election generally
must be made for the first taxable year of the U.S. taxpayer's ownership of
Shares during which the Company is a PFIC, provided that the Company complies
with certain reporting requirements. The Company intends to comply with all
reporting requirements necessary for U.S. investors to make QEF elections with
respect to the Company and will upon request provide to U.S. investors such
information as may be required to make such QEF elections effective. For
taxable years beginning after December 31, 1997, a U.S. investor who owns
marketable stock in a PFIC may elect to recognize gain or loss on a mark-to-
market basis in lieu of making a QEF election. For a further discussion, see
"Taxation--United States Federal Income Taxation--Passive Foreign Investment
Company Considerations".
FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). All statements, other than statements of historical facts,
included in this Prospectus that address activities, events or developments
that the Company expects, believes, intends or anticipates will or may occur
in the future, including such matters as future investments in existing
development projects and the acquisition of new mineral properties (including
the amount and nature thereof), the use of proceeds of this Offering, business
strategies and the future need for additional funds from outside sources, are
forward-looking statements. Forward-looking statements are inherently subject
to risks and uncertainties, many of which cannot be predicted with accuracy
and some of which might not even be anticipated. Future events and actual
results, financial and otherwise, could differ materially from those set forth
in or contemplated by the forward-looking statements herein.
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USE OF PROCEEDS
The aggregate net proceeds to the Company from the sale of Shares offered
hereby are estimated to be approximately [$ . ] (or approximately [$ . ] if
the U.S. Underwriters' and the Managers' over-allotment options are exercised
in full) after deducting the underwriting discount and estimated fees and
expenses payable by the Company in connection with the Offering. The Company
intends to use the net proceeds for one or more of the following purposes: (i)
feasibility studies, financing, and construction and development of the San
Cristobal Project, (ii) exploration and development activities at any of the
other properties within the Company's existing portfolio, (iii) maintenance of
control or ownership of the Company's existing mineral properties by making
ongoing lease payments, and paying royalties and other maintenance and
registration fees, and (iv) acquisition of additional properties or businesses
that are complementary to those of the Company. In addition, the Company may
use the net proceeds for working capital and other general corporate purposes.
Apex Limited will contribute the gross proceeds from the Offering, and all
associated expenses, to Apex LDC in exchange for an equal number of Apex LDC
shares.
The Company has not determined a specific allocation of proceeds among the
various uses described above. Accordingly, the Company anticipates that the
proceeds from the sale of the Shares offered hereby will not be sufficient to
fund the development of its mineral properties. Additional financing will be
required to fund future development activities and there can be no assurance
that such financing will be available at all, or on terms acceptable or
favorable to the Company and its shareholders. See "Risk Factors--Discretion
as to Use of Proceeds" and "--Requirement of Additional Financing".
DIVIDEND POLICY
The Company has never paid any dividends on its Ordinary Shares and expects
for the foreseeable future to retain all of its earnings from operations for
use in expanding and developing its business. Any future decision as to the
payment of dividends will be at the discretion of the Company's board of
directors and will depend upon the Company's earnings, receipt of dividends
from its subsidiaries, financial position, capital requirements, plans for
expansion and such other factors as the board of directors deems relevant. See
"Risk Factors--Absence of Dividends".
16
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1997, and such capitalization as adjusted to reflect (i) the sale of [ ]
Shares offered hereby, after deduction of the underwriting discount and
estimated expenses of the Offering payable by the Company and (ii) the
application of the estimated net proceeds. See "Certain Transactions" and
"Underwriting". This table should be read in conjunction with the Consolidated
Financial Statements of the Company and the notes thereto included elsewhere
in the Prospectus. See "Use of Proceeds".
<TABLE>
<CAPTION>
JUNE 30, 1997
---------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
SHAREHOLDERS' EQUITY:
Ordinary Shares, $0.01 par value, 50,000,000 Ordinary
Shares authorized, 13,194,453 Ordinary Shares issued
and outstanding prior to the Offering, [ ] Ordinary
Shares issued and outstanding upon consummation of
the Offering.......................................... $ 132 $
Contributed Surplus.................................... 38,149
Accumulated Deficit.................................... (24,975)
-------- ----
Total Shareholders' Equity............................. 13,306
-------- ----
Total capitalization................................. $ 13,306 $
======== ====
</TABLE>
17
<PAGE>
DILUTION
As of June 30, 1997, the net tangible book value of the Company was
$13,163,995 or $1.00 per share outstanding. After giving effect to the sale of
the [ ] Shares offered hereby, deduction of the underwriting discount and
estimated expenses of the Offering payable by the Company and the application
of the net proceeds therefrom as set forth under "Use of Proceeds", the pro
forma net tangible book value of the Company as of June 30, 1997 would have
been [ ] or [ ] per share. This change represents an immediate increase in
net tangible book value of [ ] per share to existing shareholders and an
immediate dilution of [ ] per share to purchasers of the shares of the
Company's share capital at the initial public offering price. The following
table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Initial public offering price............................... [$ ]
Net tangible book value per share at June 30, 1997(1)...... $1.00
Increase attributable to the sale by the Company of [ ]
Ordinary Shares(2)........................................ [ ]
-----
Pro forma net tangible book value per share after the
Offering(2)(3)......................................... [ ]
------
Dilution to new investors................................... [$ ]
======
</TABLE>
The following table sets forth as of June 30, 1997, the difference between
the number of Shares purchased, the total consideration paid and the average
price per share paid by the existing shareholders and to be paid by new
investors in the Offering:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------ ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders...... 13,194,453 [ ]% $38,280,632 [ ]% $2.90
New investors.............. [ ] [ ] [ ] [ ] [ ]
---------- ----- ----------- -----
Total.................... [ ] 100.0% [ ] 100.0%
========== ===== =========== =====
</TABLE>
- --------
(1) Net tangible book value per share is determined by dividing total net
tangible assets (assets less deferred organizational costs less
liabilites) by the number of Ordinary Shares outstanding prior to the
Offering.
(2) Excludes the exercise of options to purchase 427,499 Ordinary Shares and
includes the issuance of approximately 7,077,007 Ordinary Shares in
exchange for approximately 7,077,007 shares of Apex LDC, pursuant to the
Buy-Sell Agreement. See "Incentive Compensation" and "Certain
Transactions".
(3) Pro forma net tangible book value per share is determined by dividing the
number of Ordinary Shares outstanding after giving effect to the Offering
into the net tangible book value of the Company after application of the
net proceeds of the Offering. Dilution is determined by substituting pro
forma net tangible value per share after the Offering from the initial
public offering price per Share to be paid by new investors for each
Share.
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data for the Company for the years ended
December 31, 1996 and 1995, and the period from December 22, 1994 (inception)
through December 31, 1994 are derived from the audited consolidated financial
statements of the Company. The selected consolidated financial data as of and
for the six month periods ended June 30, 1997 and 1996 have been derived from
the Company's unaudited financial statements which, in the opinion of
management, include all significant normal and recurring adjustments necessary
for a fair presentation of the financial position and results of operations
for such unaudited period. The selected financial data not been presented
herein as it was immaterial. The following table should be read in conjunction
with the Consolidated Financial Statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations.
<TABLE>
<CAPTION>
FOR THE PERIOD
DECEMBER 22,
1994
SIX MONTHS ENDED (INCEPTION)
JUNE 30, YEAR ENDED DECEMBER 31, THROUGH
------------------- ------------------------- DECEMBER 31,
1997 1996 1996 1995 1994
--------- -------- ------------ ----------- -------------- ---
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Interest income......... $ 475 $ 72 $ 575 $ 462 $ 15
--------- -------- ------------ ----------- ------
Total income............ 475 72 575 462 15
--------- -------- ------------ ----------- ------
Expenses
Exploration............ 7,961 4,323 9,591 1,560 105
Administrative......... 1,814 498 1,924 982 148
Consulting............. 1,060 792 2,506 560 145
Professional fees...... 776 421 1,096 657 20
Amortization and depre-
ciation............... 41 28 57 57 --
--------- -------- ------------ ----------- ------
Total expenses.......... 11,652 6,062 15,174 3,816 418
--------- -------- ------------ ----------- ------
Loss before minority
interest............... (11,177) (5,990) (14,599) (3,354) (403)
Minority interest....... -- 2,666 2,876 1,493 190
--------- -------- ------------ ----------- ------
Net loss for the
period................. $ (11,177) $ (3,324) $ (11,723) $ (1,861) $ (213)
========= ======== ============ =========== ======
Net loss per Ordinary
Share.................. $ (0.85) $ (0.38) $ (1.11) $ (0.21) $(0.02)
========= ======== ============ =========== ======
Weighted average number
of Ordinary Shares
outstanding ........... 13,195 8,823 10,596 8,823 8,823
CASH FLOW DATA:
Net cash provided by
financing activities .. $ 172 $ 2,820 $ 35,269 $ 6,430 $ 686
Net cash used in
operating activities... (12,982) (4,939) (12,092) (3,491) (329)
Net cash used in
investing activities... (9,051) -- (524) -- --
--------- -------- ------------ ----------- ------
Net increase (decrease)
in cash................ $ (21,861) $ (2,119) $ 22,653 $ 2,939 $ 357
========= ======== ============ =========== ======
<CAPTION>
JUNE 30, DECEMBER 31,
------------------- -----------------------------------------
1997 1996 1996 1995 1994
--------- -------- ------------ ----------- --------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets............ $ 14,291 $ 1,476 $ 26,797 $ 6,820 $9,929
Total liabilities....... 985 1,005 2,486 359 114
Minority interest....... -- 210 -- 2,876 4,369
Shareholders' equity.... 13,306 261 24,311 3,585 5,446
</TABLE>
19
<PAGE>
CORPORATE STRUCTURE
HISTORY OF THE COMPANY
Beginning in 1993, the Company and its founders embarked on a program of
acquiring silver exploration properties throughout the world. In December of
1994, in connection with an investment by Silver Holdings, the Company
reorganized as a Cayman Islands holding company with subsidiaries based on
regional operations. See "Certain Transactions". Following this reorganization
and new investment, Apex LDC accelerated its program of acquiring silver
exploration properties. In March of 1996, in connection with the 1996 Private
Placement, Apex Silver Mines Limited was organized. The 1996 Private
Placement, which was completed as of August 6, 1996, raised gross proceeds of
$34.1 million for an approximately 21 percent interest (on a fully diluted
basis) in the Company. See "Certain Transactions".
As an "exempted" company under the laws of the Cayman Islands, the Company
may not carry on business in the Cayman Islands, except in furtherance of the
business of the Company carried on outside the Cayman Islands. Substantially
all of Apex Limited's assets consist of shares of Apex LDC. Currently, Apex
Limited owns approximately 66 percent of Apex LDC. Upon completion of the
Offering (assuming the over-allotment options granted to the U.S. Underwriters
and the Managers are not exercised), Apex Limited will own [ ] percent of
the outstanding share capital of Apex LDC. The Minority Shareholders are
entitled to sell their shares of Apex LDC to Apex Limited for, at Apex
Limited's sole option, Ordinary Shares on a one-for-one basis, cash, or a
combination of cash and Ordinary Shares. The Company currently expects that
any future purchases by Apex Limited of shares of Apex LDC from the Minority
Shareholders will involve only Ordinary Shares of Apex Limited. Any such
transactions will not affect the beneficial and economic interest in Apex LDC
attributable to shareholders of Apex Limited. Currently, Apex Limited has
approximately 13,601,544 Ordinary Shares outstanding and approximately
7,077,007 Ordinary Shares reserved for issuance for approximately 7,077,007
shares of Apex LDC owned by the Minority Shareholders. If all such shares of
Apex LDC were issued, Apex Limited would have 20,678,551 Ordinary Shares
outstanding. See "Principal Shareholders" and "Certain Transactions". Apex LDC
conducts its business primarily through a series of directly and indirectly
owned subsidiaries. The Company has approximately 33 full-time employees.
Apex LDC's, and hence the Company's, principal operating subsidiaries are
(i) Andean Silver Corporation LDC ("Andean"), which is indirectly engaged in
exploration and development activities in South America; (ii) Apex Asia LDC
("Apex Asia"), which is engaged, directly and indirectly, in exploration
activities in Asia; (iii) Apex Corporation, which serves as the principal
management services provider to the Company pursuant to the terms of a
Management Services Agreement executed in connection with Apex Corporation's
formation in the fall of 1996; (iv) Minera de Cordilleras (Honduras), S. de
R.L. ("Cordilleras Honduras"), which is engaged in exploration and development
activities in Honduras; (v) Cordilleras Silver Mines, Ltd. ("Cordilleras
Bahamas"), which is indirectly engaged in exploration and development
activities in Mexico and Honduras; and (vi) Compania Minerales de Zacatecas,
S. de R.L. de C.V. ("CMZ"), which is indirectly engaged in exploration
activities in Mexico. See "Certain Transactions".
Apex LDC is the sole beneficial owner of Andean, with a 99 percent interest;
the remaining one percent interest is held by Apex Partners LDC ("Apex
Partners"), which is wholly beneficially owned by Apex LDC. Andean owns 97.5
percent of ASC Bolivia LDC ("ASC Bolivia"); Apex LDC holds the remaining 2.5
percent. Apex LDC is the sole beneficial owner of ASC Peru LDC ("ASC Peru");
Andean holds a 99 percent interest in ASC Peru, and ASC Partners LDC ("ASC
Partners"), which is wholly and beneficially owned by Apex LDC, holds the
remaining one percent interest. The Company anticipates that individual
properties will be contributed to new special purpose holding companies prior
to the commencement of production at such properties. The formation of such
additional subsidiaries will not involve any dilution to the Company's
beneficial ownership of the underlying properties.
20
<PAGE>
Apex Asia, which is wholly beneficially owned by Apex LDC, has formed joint
venture entities to own or otherwise hold interests in silver resource
properties in Kyrghyzstan and Mongolia, and is in the process of doing so in
Tajikistan. In Kyrghyzstan, Apex Asia holds a 50 percent interest in " "JSC'
Kumushtak" ("Kumushtak Mining"). The remaining 50 percent interest in
Kumushtak Mining and KMC is held by the North Kyrghyz Geological Expedition, a
government mining enterprise which operates in the Kumushtak region in
northwestern Kyrghyzstan. Apex Asia owns 99 percent of " "JSC' Kumushtak
Management Company' " ("Kumushtak Management Company"); Apex Partners holds
the remaining one percent. In Mongolia, Apex Asia has organized "Asgatmongu'
Company, Ltd. ("Asgat Mining"). Apex Asia holds approximately one half of the
total interests in Asgat Mining and has appointed two individuals, including
the chairman, of Asgat Mining's four member board of managers.
Mongolrostvetmet, a joint association owned by the government of Mongolia and
Zarubeshvetmet, a recently privatized company organized under the laws of the
Russian Federation, holds the remaining interest in Asgat Mining. In
Tajikistan, Apex Asia has entered into an agreement with the Adrasman Mining
Venture ("Adrasman Mining"), an agency of the government of Tajikistan, to
form "Kanimansur Ltd." Joint Mining Venture ("Kanimansur Mining"). Kanimansur
Mining will be 49 percent owned by Apex Asia.
In Mexico, CMZ serves as the holding company for Compania Metalurgica Largo,
S. de R.L. de C.V. ("Largo") and Compania Metalurgica Barones, S. de R.L. de
C.V. ("Barones").
Apex LDC is the sole beneficial shareholder of each of Cordilleras Bahamas,
Cordilleras Cayman, and Cordilleras Honduras and Apex Corporation. Cordilleras
Cayman owns 99 percent of the shares of Cordilleras Mexico; the remaining one
percent interest is held by Apex Partners. Cordilleras Honduras is 99 percent
owned by Apex LDC; the remaining one percent interest is owned by Apex
Partners.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF
OPERATIONS
GENERAL
The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and related notes thereto which appear
elsewhere in this Prospectus.
The Company is a mining exploration and development company that holds a
portfolio of silver exploration and development properties in South America,
Central America and Central Asia. None of these properties are on production
and, consequently, the Company has no current operating income or cash flow.
BACKGROUND
In mid-1993, Apex Silver Mines Ltd. ("Apex Bermuda") was established to
acquire and develop silver exploration properties throughout the world.
On December 22, 1994, Apex Bermuda contributed substantially all of its
assets to Apex LDC, a limited duration company formed under the laws of the
Cayman Islands.
In March of 1996, Apex Limited, a limited liability company formed under the
laws of the Cayman Islands, was incorporated in order to facilitate the 1996
Private Placement. In connection with the 1996 Private Placement, Apex Limited
issued Ordinary Shares to certain of the non-U.S. investors in Apex LDC in
exchange for their interests in Apex LDC. These transactions, and the 1996
Private Placement were completed effective as of August 6, 1996. Currently,
Apex Limited owns approximately 66 percent of Apex LDC. Upon the completion of
the Offering (assuming the over-allotment options granted to U.S. Underwriters
and the Managers are not exercised) Apex Limited will own [ ] percent of the
outstanding share capital of Apex LDC. The Minority Shareholders are entitled
to sell their shares of Apex LDC to the Company for, at Apex Limited's sole
option, Ordinary Shares of Apex Limited on a one for one basis, cash, or a
combination of cash and Ordinary Shares. The Company currently expects that
any future purchases by Apex Limited of shares of Apex LDC from the Minority
Shareholders will involve only Ordinary Shares. Any such transactions will not
affect the beneficial and economic interest in Apex LDC attributable to
shareholders of Apex Limited. See "Certain Transactions". Currently, Apex
Limited has approximately 13,601,544 Ordinary Shares outstanding and
approximately 7,077,007 Ordinary Shares reserved for issuance for
approximately 7,077,007 shares of Apex LDC owned by the Minority Shareholders.
If all such shares of Apex LDC were issued, Apex Limited would have 20,678,551
Ordinary Shares outstanding.
For United States investors, ownership of the Shares may have certain tax
consequences. See "Tax Considerations".
THE SAN CRISTOBAL PROJECT
From 1994 to 1996, the properties comprising the San Cristobal Project were
acquired in a series of transactions. See "Properties--Development Project--
San Cristobal Project." In 1996, the Company began exploring these properties,
and discovered the presence of a significant silver zinc and lead deposit with
the potential to be developed as a large scale open-pit mining project. In
the, fall of 1996, an in-fill drilling program using reverse circulation
("RC") and diamond core drilling was continued in order to delineate the
deposit and the amount of reserves. In addition, an expanded exploration
effort at the San Cristobal Project resulted in the discovery of additional
silver and base metal anomalies.
Based on the San Cristobal Study, the San Cristobal Project is forecast to
produce annually an average of 14 million ounces of silver, 132,700 tonnes of
zinc and 39,500 tonnes of lead during an expected minimum life of 11.5 years.
The San Cristobal Project is expected to consist of two large
22
<PAGE>
scale, open pit mining operations using conventional mining and processing
technologies capable of producing and processing an aggregate 30,000 tonnes
per day ("tpd") of ore. The average cash production cost over the life of the
San Cristobal Project is forecast to be $2.69 per silver equivalent ounce. See
"Glossary". Capital expenditures are estimated to total $354 million for pre-
production development and construction to complete the San Cristobal Project.
Based on the favorable results of the San Cristobal Study, the Company is
targeting the completion of a second phase feasibility study of the San
Cristobal Project by the third quarter of 1998 with a goal of securing
committed financing by late 1998. Subject to the completion of a second phase
feasibility study and committed financing, the Company anticipates beginning
construction at the San Cristobal Project in early 1999, with silver, zinc and
lead production commencing in early 2001.
The Company plans to commission this second phase feasibility study in the
fall of 1997, immediately after the completion of the Offering. The Company
also intends to continue an extensive drilling program in order to (i) further
define the existing ore bodies, (ii) increase the San Cristobal Project's
proven and probable reserves and (iii) evaluate other areas of potential
mineralization. At the same time, contracts for power supply, transportation,
and smelting and refining of metal concentrates will be negotiated.
If the results of this second phase feasibility study confirm the economic
feasibility of the San Cristobal Project, and if no new properties emerge in
the interim that are considered to be more attractive development
opportunities, the Company expects to devote the majority of the proceeds from
the Offering to financing its equity portion of the construction and
development costs of the San Cristobal Project. See "Use of Proceeds".
The Company has retained N.M. Rothschild & Sons Limited and Barclays Bank
PLC as the Company's financial advisor and arranger, respectively, in
connection with the anticipated project financing of the San Cristobal
Project. The Company anticipates that project financing activities will
commence on a preliminary basis in late 1997 and then accelerate with the
delivery of the a second phase feasibility study in mid-1998 with financing to
be secured by late 1998. If this timetable is achieved, project construction
could commence in early 1999 and, after an approximate two-year construction
and development program, production could commence in early 2001.
The Company has engaged Salomon and Credit Suisse First Boston Corporation
("Credit Suisse First Boston") to act as the Company's financial advisors with
respect to the identification of, and negotiation with, potential joint
venture mining partners in the San Cristobal Project. The Company has paid
each of Salomon and Credit Suisse First Boston a financial advisory fee and
has agreed to pay each of them monthly advisory fees and a success-based
transaction fee, and to reimburse their respective out-of-pocket expenses. In
addition, the Company has agreed to indemnify each of Salomon and Credit
Suisse First Boston against certain liabilities.
OTHER PROJECTS
The Company is also assessing the economic viability of (i) the Cobrizos
property in Bolivia, which may be developed in conjunction with the San
Cristobal Project; (ii) the El Ocote project in Honduras; (iii) the San Juan
de Lucanas project in Peru; and (iv) the Choroma property in Bolivia.
The Cobrizos property is located approximately 12 kilometers north of the
San Cristobal Project. Recent drilling by the Company suggests the presence of
approximately 10.8 million tonnes of mineralized material containing 4.3
ounces of silver per tonne and 0.2 percent copper. This mineralized material
estimate has been reviewed and verified by MRA, an independent mine geology
consulting firm. The mineralized body is amenable to open pit mining and is
being considered as a satellite mining operation that could provide additional
feed to the proposed mill to be constructed at the San Cristobal Project,
thereby enhancing the silver grade of the ore processed by the mill after the
early years of operation at the San Cristobal Project.
23
<PAGE>
The El Ocote property is located in southeast Honduras. Behre Dolbear
reviewed the Company's estimate that the property contains approximately 2.1
million tonnes of mineralized material averaging 9.9 ounces of silver per
tonne and prepared a conceptual study of this property for the Company in
1996. On the basis of this initial study, the Company conducted further field
work and a second conceptual study. This latest study, which was performed by
Davy, utilized the earlier resource estimates, and estimated new capital and
operating costs and production schedules based on underground mining and heap
leach processing. The Company expects to conduct an additional round of field
work and to undertake metallurgical sampling and heap leach tests. If
warranted, these analyses will be followed by additional drilling to establish
proven and probable reserves.
In June of 1995, PAH prepared a conceptual study for the rehabilitation of
an idled mine at the San Juan de Lucanas property. The results indicated that
approximately $10 million in capital expenditures would be required to
rehabilitate the mine to a 500 tpd capacity operation. The Company believes
that the identification of additional reserves at the site would be required
to justify such an investment. In addition, the Company has experienced
lengthy delays in its effort to register its title to the properties
comprising the San Juan de Lucanas property. While the Company believes its
legal position is secure, it is not currently possible to estimate when this
registration process will be completed. The Company expects to begin
exploration and commission a first phase feasibility study of the property
after its title thereto has been perfected.
The Choroma property is located in the Bolivian silver-lead belt, 600
kilometers south of La Paz and 80 kilometers north of the Argentine border
near the town of Tupiza at an elevation of approximately 3,300 meters. During
early 1996, the Company channel-sampled many of the rock outcrops and
identified several anomalies 44 to 86 meters long with average grades between
1.8 and 4.0 ounces of silver per tonne. These anomalies will be drilled and
sampled to test for bulk mineable mineralization. In addition, the Company
will gain access to existing underground workings to sample these structures,
and to test further for bulk mineralization.
RESULTS OF OPERATIONS
Loss Before Minority Interest. The Company does not produce silver or any
other mineral products and has no revenues from product sales. The only source
of revenue is interest income. The loss before minority interest for the six
month period ended June 30, 1997 was $11,177,495 compared to a loss before
minority interest of $5,990,521 for the six month period ended June 30, 1996,
and the loss before minority interest for the year ended December 31, 1996 was
$14,599,240 compared to a loss before minority interest of $3,354,160 in 1995
and a net loss before minority interest of $403,149 in 1994. The Company's
expenses for the year ended December 31, 1996 were substantially higher than
1995 and 1994 due to increased exploration activity and higher general and
administrative expenses.
Exploration. Mineral exploration expenditures are expensed as incurred prior
to the determination of the feasibility of mining operations. Once it has been
determined that a mineral property has proven and probable ore reserves,
subsequent development and exploration expenses are capitalized. Through June
30, 1997, all acquisition and exploration costs have been expensed as
incurred. The Company will capitalize future exploration and development costs
associated with the San Cristobal Project commencing with the start-up of the
second phase feasibility study.
Exploration expenses were $7,961,583 for the six month period ended June 30,
1997 compared to $4,322,867 for the six month period ended June 30, 1996, and
were $9,590,632 for the year ended December 31, 1996, compared to $1,559,874
in 1995 and $105,185 in 1994. The increased exploration expenses from 1995 to
1996 were due to an increase in exploration activity at the San
24
<PAGE>
Cristobal Project. Total cumulative exploration expense at the San Cristobal
Project was [$ ] through June 30, 1997.
Administrative. Administrative expenses were $1,814,480 for the six month
period ended June 30, 1997, compared to $497,874 for the six month period
ended June 30, 1996, and totaled $1,923,165 for the year ended December 31,
1996, compared to $982,261 in 1995 and $147,780 in 1994. The increased
expenditures in 1996 relative to 1995 were primarily due to the hiring of key
management personnel during the second half of 1996 and the opening of Apex
Corporation's Denver office.
Consulting. Consulting fees were $1,059,669 for the six month period ended
June 30, 1997 compared to $792,417 for the six month period ended June 30,
1996, and were $2,506,250 for the year ended December 31, 1996, compared to
$560,060 in 1995 and $144,840 in 1994. The increase in 1996 over 1995 is
primarily due to expenses associated with retaining third party consultants to
prepare technical studies on various properties and executive recruiters to
identify and hire key personnel.
Professional Fees. Professional fees were $775,863 for the six month period
ended June 30, 1997, compared to $421,055 for the six month period ended June
30, 1996, and totaled $1,096,271 for the year ended December 31, 1996,
compared to $657,621 in 1995 and $20,600 in 1994. The increase in 1996 over
1995 was primarily due to higher legal and accounting fees.
Amortization and Depreciation. Amortization and depreciation expense was
$41,198 for the six month period ended June 30, 1997, compared to $28,295 for
the six month period ended June 30, 1996, and totaled $57,392 for the year
ended December 31, 1996, compared to $56,591 in 1995 and $-0- in 1994. Costs
incurred in the organization of the Company and its subsidiaries were
capitalized and are being amortized on a straight-line basis over five years.
Interest Income. The primary source of income for the Company since
inception is interest income. Interest income for the six month period ended
June 30, 1997 was $475,298 compared to $71,987 for the six month period ended
June 30, 1996, and totaled $574,470 for the year ended December 31, 1996,
compared to $462,247 in 1995 and $15,256 in 1994. The Company's policy is to
invest all excess cash in liquid, high credit quality, short term financial
instruments. The increase in interest income for the comparative periods was
due to the additional cash raised in the 1996 Private Placement.
Income Taxes. Apex Corporation, the Company's U.S. management services
company, is subject to U.S. income taxes. Otherwise the Company pays no income
tax in the U.S. since the Company is incorporated in the Cayman Islands and
conducts no 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. See "Tax Considerations".
EMPLOYEE BENEFITS
The Company does not provide any post-retirement or post-employment benefits
to its employees and therefore does not accrue for such expenses. In 1997,
Apex Corporation instituted a 401(k) Plan for its U.S. employees. Apex
Corporation makes monthly contributions to this 401(k) Plan, and currently
matches 50 percent of each employee's contribution up to an employee
contribution of six percent of base salary. Employees vest in the Company's
contribution at 50 percent after one year of service and 100 percent after two
years of service. Although the Company does not currently have a formal bonus
or incentive plan for any of its employees, it anticipates instituting a bonus
plan in the future. See "Executive Compensation--Other Plans".
25
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1997, the Company had cash and short-term investments of
$13,088,342 compared to $25,949,771 at December 31, 1996 compared with
$3,296,618 at December 31, 1995 and $356,942 at December 31, 1994. The
increase in 1996 relative to 1995 was due primarily to the receipt of net
proceeds from the 1996 Private Placement and the payment of the Silver
Holdings demand note discussed below.
On December 22, 1994, the Company received, in consideration for the
issuance of shares of Apex LDC to Silver Holdings, a $10,000,000 non-
negotiable demand note, with interest accrued thereon at an interest rate
equal to the one month London Interbank Offered Rate for U.S. dollar deposits.
The principal outstanding under this demand note was $2,819,718 on December
31, 1995 and $9,250,000 on December 31, 1994. On February 5, 1996, the
remaining balance was fully paid. See "Certain Transactions".
In connection with the 1996 Private Placement, which closed effective August
6, 1996, the Company issued 4,256,700 Ordinary Shares at a price of $8.00 per
share and received net proceeds of $32,449,350.
The net cash used in operating activities for the six month period ended
June 30, 1997 was $12,981,766 compared with $4,938,517 for the six month
period ended June 30, 1996, and was $12,091,580 for the year ended December
31, 1996, compared with $3,490,631 in 1995 and $328,586 in 1994. The variance
in the net cash used in operating activities between the comparative periods
was due to the increased exploration activity and the San Cristobal Study. The
net cash provided by financing activities was $171,659 for the six month
period ended June 30, 1997, compared with $2,819,718 for the six month period
ended June 30, 1996, and $35,269,068 for the year ended December 31, 1996,
compared with $6,430,307 in 1995 and $685,528 in 1994.
The Company is subject to a series of obligations with respect to its
mineral properties; the failure to meet any of these commitments could result
in the loss or forfeiture of one or more of the Company's properties. These
obligations consist of government mineral patent fees and commissions, work
commitments, lease payments and advance royalties. In addition, a number of
the Company's property interests derive from contractual purchase options. In
order to acquire such properties, the Company will be obliged to make certain
payments to the registered concession holders and others who have interests in
the properties. See "Notes to the Consolidated Financial Statements".
The Company does not currently have a line of credit with any financial
institution.
The Company's future revenues and earnings will be influenced by currency
exchange rates and by world market prices for silver, zinc, lead, copper and
gold, which fluctuate and over which the Company has no control. See "Metals
Market Overview". Depending upon market conditions for currency exchange and
metal prices, the Company may from time to time hedge its metal or currency
exposure in order to decrease fluctuations in revenues and earnings. The
Company does not currently have a set of policies or guidelines for hedging
foreign currency, interest rate or metals price exposure. See "Risk Factors--
Volatility of Metals Prices".
The Company does not know of any trends, demands, commitments, events or
incidents that may result in the Company's liquidity either materially
increasing or decreasing at present or in the foreseeable future other than
the Offering.
It is anticipated that the Company will devote the majority of the net
proceeds from the Offering to financing its equity portion of the San
Cristobal Project's construction and development. In addition, it is
anticipated that significant expenditures will be made for other continuing
exploration, property acquisition, property evaluation and general corporate
expenses.
26
<PAGE>
The development program at the San Cristobal Project will require
significant additional financing. Sources of financing may include bank
borrowings and future additional debt or equity financings. There can be no
assurance that any such financing will be obtainable on terms that are
attractive to the Company, or at all. The Company has retained N.M. Rothschild
& Sons Limited and Barclays Bank PLC to act as the Company's financial advisor
and arranger, respectively, in connection with the anticipated project
financing for the San Cristobal Project.
The Company has engaged Salomon and Credit Suisse First Boston to act as the
Company's financial advisors with respect to the identification of, and
negotiation with, potential joint venture mining partners in the San Cristobal
Project. The Company has paid each such financial advisor a financial advisory
fee and has agreed to pay each of them monthly advisory fees and a success-
based transaction fee, and to reimburse their respective out-of-pocket
expenses. In addition, the Company has agreed to indemnify each financial
advisor against certain liabilities.
As of the date hereof, the Company does not plan to declare or pay a
dividend.
ENVIRONMENTAL COMPLIANCE
The Company's current and future mining and processing operations and
exploration activities will be subject to various federal, state and local
laws in the countries in which it conducts its activities, which govern the
protection of the environment, prospecting, development, production, taxes,
labor standards, occupational health, mine safety, toxic substances and other
matters. Management does not believe that compliance with such regulations
will have a material adverse effect on its competitive position. The Company
intends to obtain all licenses and permits required by all applicable
regulatory agencies in connection with its mining operations and exploration
activities. The Company's preliminary analysis of the previous and temporarily
continuing leaching operations at the Toldos mine operated by the current
owner and operator indicates that some effluents from the site may be draining
into a seasonal stream which flows into the Rio Grande and, ultimately, into
the Salar de Uyuni, a salt lake to the north of the San Cristobal Project.
Under Bolivian law the Company is not obliged to remediate known pre-existing
environmental conditions. Nonetheless, if the Company acquires the Toldos
property from its current owner, the Company expects to improve the
environmental situation which may currently exist at the Toldos property. The
Company does not expect any such program to have a material adverse effect on
the Company's proposed operations at the San Cristobal Project. The Company
intends to maintain standards of environmental compliance consistent with
World Bank environmental guidelines. See "Properties--Development Property--
San Cristobal Project".
27
<PAGE>
THE COMPANY
The Company is engaged in the exploration and development of silver
properties in South America, Central America and Central Asia. The Company
believes it has accumulated one of the largest privately controlled portfolios
of silver exploration properties in the world. Since 1993, the Company has
acquired the rights to or gained control of 27 non-producing silver properties
located in or near the traditional silver producing regions of Bolivia, Peru,
Chile, Honduras, Mexico, Kyrghyzstan, Mongolia and Tajikistan. Exploration
efforts since 1993 have successfully produced the Company's first development
project, the San Cristobal Project located in southern Bolivia, where regular
and close spaced drilling and analysis has delineated substantial proven and
probable reserves of silver, zinc and lead. In addition, exploration
activities at the Company's other properties in Bolivia, Peru and Honduras
indicate the presence of significant quantities of mineralized material
containing silver and other metals.
The San Cristobal Study was completed in August of 1997 with respect to the
San Cristobal Project, which is located in the Potosi department in southern
Bolivia, a region that has historically produced a significant portion of the
world's silver supply.
BUSINESS STRATEGY
The Company was founded in 1993 to acquire and develop attractive silver
properties throughout the world. Since 1993, the Company has acquired a
portfolio of silver properties covering approximately two million acres in
eight countries. These acquisitions were premised on several factors,
including (i) the low price of silver relative to the price of other precious
metals, (ii) a perception that silver supply and demand fundamentals were
stronger than the then-prevailing price of silver suggested, (iii) the general
scarcity of attractive publicly-traded silver companies, and (iv) the
perception of negative sentiment within the traditional silver mining
community. As a consequence of a prolonged depressed price for silver, which
culminated in a low of $3.51 per ounce in 1993, many marginal silver producers
around the world were forced to scale back, and in some cases shut down, their
silver mining operations. The resultant mine closures, bankruptcies and low
prices contributed to a generally depressed market for silver mining
properties around the world. Competition for the purchase of silver properties
was further dampened by the fact that many of the silver mining companies that
maintained operations became less aggressive in their search for new silver
properties and/or attempted to diversify into other metals in order to
mitigate their exposure to low silver prices. Negative sentiment among silver
producers was reflected in reduced exploration expenditures. The Company's
founders believed that these market conditions provided the Company with
compelling opportunities to purchase silver exploration properties at
attractive prices.
While this "bear market" psychology resulted in a soft market for silver
properties, the Company believed that the fundamental outlook for silver was
improving. The trend of large annual surpluses in silver supply relative to
demand, which had peaked in the early 1980s, began to reverse by the early
1990s, when rising industrial demand for silver, combined with declining
production profiles, caused substantial supply deficits. The Company believed
that the disequilibrium in supply and demand suggested that the "bear market"
in silver was nearing an end. Encouraged by what it considered a discrepancy
between market perceptions and improving fundamentals, the Company embarked on
a program of acquiring silver exploration properties globally and recruiting a
professional management team with a proven track record of developing and
operating mining properties worldwide.
The Company believes that it has successfully achieved the objectives of its
initial acquisition program by assembling a portfolio comprised of
approximately 27 non-producing silver properties covering more than two
million acres of land located in or near traditional silver mining regions of
South
28
<PAGE>
America, Central America and Central Asia. Moreover, the Company has recruited
an experienced management team with significant experience in the
identification, exploration and development of mineral properties, as well as
the construction and operation of large-scale mining projects. Finally, the
Company has successfully enlisted the support of major financial institutions
and investors through two private placements: a $10 million offering in
December of 1994, and a $34.1 million offering in August of 1996.
Upon completion of the Offering, the Company will focus on achieving the
following five objectives: (i) to complete a second phase feasibility study of
a large scale open pit mining operation at the San Cristobal Project; (ii) to
secure the financing required to develop the San Cristobal Project; (iii) to
proceed to develop the San Cristobal Project into a large scale open pit
mining operation; (iv) to continue exploration and evaluation activities at
the Cobrizos property in southern Bolivia, the El Ocote property in
southwestern Honduras, the San Juan de Lucanas property in southern Peru, and
to commence drilling and underground sampling of the Choroma property in
Southern Bolivia; (v) to evaluate other properties in the Company's portfolio
of silver exploration properties, focusing the Company's exploration and
development efforts on those properties which are most likely to contain
significant silver mineralization and divesting itself of those properties
that are not of continuing interest to the Company; and (vi) to identify and
acquire additional mining and mineral properties that the Company believes
contain significant amounts of silver or have exploration potential.
29
<PAGE>
PROPERTIES
The Company's portfolio of silver properties in Bolivia, Peru, Chile,
Honduras, Mexico, Kyrghyzstan, Mongolia and Tajikistan, which cover an area in
excess of two million acres, contain identified silver mineralization or offer
significant exploration potential. These mineral properties consist of (i)
mining concessions which the Company has acquired, or is in the process of
acquiring, directly; (ii) concessions which the Company has leased, generally
with an option to purchase; (iii) concessions which the Company has agreed to
explore and develop and, if feasible, bring into production, in concert with
local joint venture partners; and (iv) new claims, principally to mineral
properties which the Company believes offer significant exploration
opportunities and which the Company has staked on its own behalf.
The Company's exploration and development activities are currently focused
on five properties: the San Cristobal Project and the Cobrizos property in
southern Bolivia, the El Ocote property in southwestern Honduras, the San Juan
de Lucanas property in southern Peru, and the Choroma property in southern
Bolivia. All five of these properties remain subject to various stages of
exploration, analysis and development. The Company has completed a first phase
feasibility study with respect to the San Cristobal Project. Based on the
favorable results of the San Cristobal Study, the Company is targeting the
completion of a second phase feasibility study of the San Cristobal Project by
late 1998. The Company expects to commission a conceptual study with respect
to the Cobrizos property in the second half of 1997, and expects to commission
a drilling and underground sampling program of the Choroma property. The
Company has completed conceptual studies with respect to the El Ocote and San
Juan de Lucanas properties. Although the San Cristobal Project remains the
Company's top development priority, the initial analysis from the Cobrizos, El
Ocote, San Juan de Lucanas and Choroma properties have been promising and the
Company believes that these properties may be economic development and
production candidates.
In addition to the aforementioned properties, the Company controls a
portfolio of silver exploration properties located in eight countries in South
America, Central America and Central Asia. The Company generally seeks to
structure its acquisitions of mineral rights so that individual properties can
be explored without significant expense and acquired if significant
development opportunities are identified. Properties which the Company
determines do not warrant further exploration or development expenditures will
be sold or otherwise relinquished, typically without further financial
obligation to the Company. Although the Company believes that its exploration
properties may contain significant silver mineralization, the Company's
analysis of such properties is at a preliminary stage. The activities
performed to date at these properties often have involved the analysis of data
from previous exploration undertaken with respect to a property, as
supplemented by the Company's own field work and sampling programs. See "Risk
Factors -- Reserve and Other Mineralization Estimates".
30
<PAGE>
DEVELOPMENT PROJECT
SAN CRISTOBAL PROJECT
Location and Access
The San Cristobal Project is located in the San Cristobal district of Nor
Lipez province in the Potosi department in southern Bolivia, approximately 500
kilometers south of La Paz and 90 kilometers south of the town of Uyuni. The
San Cristobal Project is named after the town of San Cristobal which is
situated in the midst of the project area. The San Cristobal Project is
comprised of 15 separate identified mineralized anomalies, including the
Toldos deposit, which has been recently mined.
The town of San Cristobal is accessible by a gravel road which runs
approximately 50 kilometers north to the railroad at Rio Grande and a further
60 kilometers northeast to Uyuni. A small unpaved airstrip is also located
approximately six kilometers from the Toldos deposit. The Company has
constructed unpaved roads to access the individual deposits at the site. The
Company anticipates that prior to the commencement of operations at the San
Cristobal Project it will be necessary to construct an approximately 53
kilometer rail spur and road linking the site to the existing main rail line
siding located 40 kilometers north of the property. The Company also expects
(i) to construct a 110 kilometer electric line to supply power to the San
Cristobal Project, and (ii) to pump water approximately ten kilometers to the
site from wells which will be drilled near the Rio Grande river.
The property is largely undisturbed, except for the Toldos deposit, which
has been mined by underground block caving and open pit mining. At present,
there is no significant plant or equipment on site. There is an active mining
camp at the Toldos deposit. A small river, the Rio Grande, passes
approximately 11 kilometers south of the site. Due to the remote location and
small size of the town of San Cristobal, the Company expects that it will have
to recruit skilled and unskilled labor from neighboring areas.
Operating History
Silver was discovered in what is now the San Cristobal district in the early
seventeenth century, and mining has occurred intermittently in the area ever
since. Although no records from the Spanish colonial era mines have survived,
and few records exist with respect to production in the district during the
nineteenth and twentieth centuries, the Company estimates that the district
has produced in excess of 60 million ounces of silver. The Toldos mine was
operated as a block-caving underground operation between 1985 and 1988, and
was operated as an open pit mine between 1989 and 1995. Empresa Minera Yana
Mallcu, S.A. ("Yana Mallcu"), a Bolivian mining corporation, continues to
operate a remnant heap leaching operation at Toldos, reprocessing the tailings
from the former mining operation.
Title and Ownership Rights
Since commencing its acquisition program in the San Cristobal district, the
Company has secured contract rights over, outright ownership of or the first
claim of all of the mineral properties that it has identified to be of
interest within a radius of approximately 50 kilometers from the San Cristobal
Project.
In October of 1994, the Company, acting through its agent Mineria Tecnica
Consultores Asociados ("Mintec"), entered into lease and option agreements
with the owner of ten mining concessions pertaining to approximately 1,134
acres of mineral rights including the mineralized areas known as Jayula and
Tesorera. Pursuant to this agreement, which was assigned by Mintec to the
Company in July 1996, the Company is leasing the ten concessions until October
of 1998 for a monthly rent of $12,000. The contract governing the concessions
affords the Company a two-year option, which expires in November of 1998, to
purchase the properties for $2,000,000, less the sum of all prior lease
payments.
In August of 1995, the Company, again acting through its agent Mintec,
acquired a two-year purchase option for the mining concessions containing the
Animas deposit from Cooperativa Minera Litoral Ltda. ("Litoral"), a Bolivian
mining cooperative. In July of 1997, the Company exercised its option to
purchase the property. The acquisition price was $150,000, less 50 percent of
the aggregate prior monthly payments to Litoral.
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<PAGE>
In February of 1996, the Company, again acting through its agent Mintec,
acquired from Yana Mallcu an option to acquire mining concessions controlling
approximately 4,692 acres of mineral rights in the San Cristobal district,
including the entire Toldos mineralized dome. Under the terms of this option
agreement, which expires in February of 1998, the Company has agreed to pay
$6,000 per month to Yana Mallcu for the duration of the contract or until such
time as the Company exercises its option to purchase the concessions. The
Company is entitled to purchase the concessions for the sum of $500,000 and
the assumption of up to $5,750,000 of Yana Mallcu's indebtedness.
The Company has engaged Salomon and Credit Suisse First Boston to act as the
Company's financial advisors with respect to the identification of, and
negotiation with, potential joint venture mining partners in the San Cristobal
Project.
Geology and Mineralization
The San Cristobal Project occupies the central portion of a volcanic
depression probably resulting from the collapse of a Miocene age volcanic
peak. The collapse resulted in the formation of a four kilometer diameter
depression, which was subsequently filled with fine to coarse-grained
volcaniclastic sedimentary rocks (shale, conglomerate, sandstone, landslide
debris, talus, etc.).
In the late Miocene age, after sedimentation had nearly filled the
depression, a series of dacite and andesite porphyry sills and domes intruded
into the volcaniclastics, with disseminated and stockwork silver-lead-zinc
mineralization forming both within the volcaniclastics and in the intrusions
themselves. As a result, mineralization occurs in the San Cristobal district
in shallow intrusive dacite sills and domes, intrusive breccia bodies and
volcaniclastics. The disseminated mineralization has not been mined in the
past except for some areas of the Toldos mine. Previous workings were only on
mineralized veins. Company studies indicate the presence of at least 15
mineralized domes, all located in close proximity to one another. Most of the
identified mineralized domes are hydrothermally altered and all have been
found to be strongly mineralized. Nine of these domes have been drilled by the
Company. To date, drilling has been conducted in sufficient detail to allow
estimates of proven and probable reserves at the Tesorera and Jayula domes and
additional mineralized material at Tesorera, Jayula, Animas and Toldos domes.
As previously noted, the Company currently controls the mineral rights to all
of these domes.
The following paragraphs describe the geology and mineralization of the more
intensely drilled areas of the San Cristobal district. The two largest
identified areas of mineralization, the Jayula and Tesorera deposits, appear
to be portions of one single mineralized body, and even though they will be
identified separately below, recent drilling results suggest that the two
bodies may be connected with ore grade mineralization. The Company intends to
analyze these and other areas in conjunction with the overall exploration and
development plans for the San Cristobal Project.
Jayula. The Jayula deposit consists of a dacite porphyry sill intruded into
volcaniclastics that filled the depression. Both the dacite intrusion and the
adjacent sediments have been cut by numerous narrow veins and veinlets,
forming a mineralized stockwork over large areas. Mineralization in the
stockwork consists of iron oxides, clays, galena, barite, sphalerite, pyrite,
tetrahedrite, and acanthite. Veins and veinlets are most common in the dacite
sill, near its contact with the sedimentary rocks. Within the volcaniclastics
rocks themselves, and locally within the intrusive sill, is a second form of
mineralization, characterized by disseminated galena, sphalerite and
acanthite. This disseminated mineralization is predominately confined to
coarser-grained sedimentary beds, usually conglomerates and coarse sandstones.
As the extent of ore grade mineralization is confined to the limits of the
planar beds of coarse-grained units, the mineral zones within the sediments
are both stratiform and
32
<PAGE>
stratibound, forming gently-dipping planar bodies of mineralization which
parallel the bedding of the sediments.
Oxidation of the mineralized zone in the Jayula deposit has occurred to a
depth averaging 40 meters. In this oxide zone, zinc has been nearly completely
leached out; silver values, however, are greatly enhanced due to secondary
enrichment processes. In the oxide zone, the dominant minerals are iron
oxides, clays, native silver, and secondary acanthite.
Based on the assay results of samples taken from old small scale underground
workings, surface exposures, and seven diamond core and 50 RC holes drilled by
the Company, the Company believes that the dacite porphyry intrusion hosts
approximately 75 percent of the mineralization identified at Jayula, with the
volcaniclastics hosting the remainder. The mineralized zone at Jayula covers
an area no less than 500 meters by 600 meters on the surface, and ore grade
mineralization extends to at least 200 meters below the surface. Of the 57
holes drilled at Jayula, approximately one-half had ore-grade mineralization
at their lowest depth. The mineralized zone has not been fully delineated by
the drilling, with ore grade mineralization over significant widths being
found at the southeast, west and northwest perimeters of the drilled area and
at depth. The exploration program has delineated the boundaries of the deposit
only at the northeast corner of the deposit.
Tesorera. The Tesorera deposit is 1,300 meters southwest of the Jayula
deposit, and both appear to be part of the same large mineralized system. The
geology and mineralization at Tesorera are nearly identical to Jayula. At
Tesorera, the west side of the deposit consists of a dacite porphyry sill
intruded into the caldera-fill sediments, and, as at Jayula, disseminated
mineralization occurs within certain coarse-grained sedimentary beds and in
the intrusion itself. This mineralization is similarly stratabound and
stratiform, forming several subparallel, gently-dipping horizons parallel to
the bedding of the volcaniclastics. The mineralogy is identical to that at
Jayula, consisting of pyrite, iron oxides, barite, clays, galena, sphalerite,
tetrahedrite, and acanthite.
Oxidation has affected the Tesorera deposit to a greater depth than at the
nearby Jayula deposit, typically extending to a depth of 75 meters. The oxide
zone mineralogy of Tesorera, like that at Jayula, is dominated by iron oxides,
clays, native silver, and secondary acanthite.
The Tesorera deposit has been drilled by 139 RC and ten diamond core holes
have been drilled at the Tesorera deposit. The assays indicate that the
mineralization is present over an area of 950 meters by 450 meters. As at
Jayula, the deposit is open to depth and in three directions but it is closed
to the west, as the dacite intrusion appears to have received minimal
mineralization. Approximately 40 percent of the holes had ore-grade
mineralization at their lowest depth, which was usually in excess of 200
meters below the surface.
Animas. The Animas deposit, located two kilometers west of Tesorera, is
hosted by a subvertical breccia pipe adjacent to a stockwork-veined rhyolite
porphyry dike. The volcaniclastic rocks are not present at Animas, and thus
stratibound mineralization is absent.
The breccia pipe occurs along the eastern margin of a north-trending
rhyolite dike. The pipe follows the margin for a distance of 400 meters, and
varies from 20 meters to 200 meters wide. It has been drilled to a depth of
200 meters, and is found to be shaped in cross section like an inverted cone
that is narrower at depth. Mineralization is primarily sulfide and consists of
massive galena and sphalerite as a matrix around the breccia fragments. Silver
is present as acanthite and minor tetrahedrite. The Company has drilled 33
reverse circulation holes at Animas.
Toldos. The Toldos deposit consists of a series of a parallel, high-angle
veins. These veins were mined to a depth of approximately 100 meters below the
surface. These veins averaged approximately 15 ounces of silver per tonne. The
wall rock adjacent to the veins also contained disseminated
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<PAGE>
and veinlet mineralization. The Company believes that the wall rock and lower
grade ore has not been systematically mined.
Yana Mallcu converted its operations at the Toldos dome from underground
narrow vein mining to bulk mining methods, principally block caving in 1985
and open pit mining in 1989. Beginning in 1985, ore was processed through a
conventional heap leaching circuit at a rate of 3,000 tonnes per day. With the
exception of some minor leaching of the mine tailings undertaken by the former
owner of the Toldos mine, mining activities at the Toldos deposit were
discontinued in 1995.
Drilling Program
The Company has been engaged in a comprehensive delineation and in-fill
drilling program at the San Cristobal Project since October of 1996. This
program was designed to substantiate initial positive drill results at several
of the numerous intrusive dacite or breccia domes located in the district and
has concentrated on the Tesorera, Jayula, and Animas mineralized dome
complexes. The Company has drilled 278 reverse circulation drill holes and 17
diamond core drill holes for a total of 64,554 meters of reverse circulation
RC drilling and 4,752 meters of diamond core drilling at the San Cristobal
Project. These drill holes were generally spaced at intervals from 25 up to
150 meters. Although this drilling is sufficient to establish the presence of
proven and probable ore reserves at the Tesorera and Jayula deposits, drilling
has been too widely spaced to establish proven and probable reserves at the
Animas deposit. The following table summarizes the Company's drilling
activities at San Cristobal.
<TABLE>
<CAPTION>
DIAMOND DRILL HOLES RC DRILL HOLES
-------------------- -------------------
# OF AVG. # OF AVG.
HOLES DEPTH SPACING HOLES DEPTH SPACING
----- ----- -------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Dome Complex
Jayula............................... 7 250m 100-150m 50 225m 60-150m
Tesorera............................. 10 250m 50-150m 139 225m 25-70m
Animas............................... 0 -- -- 33 200m 40-120m
--- ---
Subtotal........................... 17 -- -- 222 -- --
Surrounding Anomalies.................. 0 NA NA 56 250m random
--- ---
Total Drilling..................... 17 278
=== ===
</TABLE>
First Phase Feasibility Study
In early 1997, the Company commissioned Davy to conduct the San Cristobal
Study. This first phase feasibility study was completed in August of 1997 and
has estimated accuracies ranging from plus or minus 25 to 30 percent. Davy
served as lead engineers, and reviewed the efforts and contributions of the
other independent San Cristobal Study consultants. MRA performed ore reserve
estimates using kriging estimating methods and prepared mine production
schedules, and estimated capital and operating costs. PAH developed an
independent resource grade model using the same database used by MRA which
checked closely with the MRA reserve estimates. Mineral Resource Development
Inc. ("MRDI") conducted the metallurgical test work and developed the process
flow sheet. Knight Piesold LLC was contracted to perform the preliminary
environmental assessment and geotechnical estimates, including mill tailings
pond design. The firm of Behre Dolbear was hired by the Company to conduct and
oversee a technical audit of Davy's procedures and analyses as well as the
work of the technical subcontractors. CPM Group ("CPM") was retained by the
Company to provide an independent analysis of the silver, lead and zinc
markets. The Company purchased published studies from Brook Hunt & Associates
and the International Lead Zinc Study Group regarding the lead and zinc
markets.
Proven and probable reserve estimates are based on regularly spaced drilling
at the Tesorera and Jayula mineralized domes. Proven and probable reserves
were calculated using (i) the cost
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<PAGE>
assumptions delineated in the San Cristobal Study (see below) and (ii) the
market price assumptions of $5.00 per ounce of silver, $0.55 per pound of zinc
and $0.30 per pound of lead. The cut-off grade was based on a combined value
of $4.18 per tonne of ore. The ore reserve estimation method used was kriging,
a method which automatically moderates exceptionally high grades consistent
with the geostatistical character of its mineralization. The following table
summarizes the estimated proven and probable reserves and mineralized material
at the San Cristobal Project, as indicated by the drilling completed to date.
The reserve estimates for the Tesorera and Jayula deposits were prepared by
the San Cristobal Study consultants, and check closely with an independent
resource grade model developed by PAH. The additional mineralized material
which occurs proximate to the San Cristobal Project was estimated by MRA for
the Tesorera and Jayula deposits and the others were estimated by the Company.
The Company's Mineralized Material estimates with respect to the Cobrizos
deposit were confirmed by MRA.
<TABLE>
<CAPTION>
AVERAGE GRADE CONTAINED METALS
----------------------- ---------------------
TONNAGE SILVER ZINC LEAD SILVER ZINC LEAD
(000S GRADE GRADE GRADE OUNCES TONNES TONNES
TONNES) (OZ./TONNE) (%) (%) (000S) (000S) (000S)
------- ----------- ----- ----- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
PROVEN AND PROBABLE
RESERVES
Tesorera.............. 42,113 1.88 2.00 0.67 79,384 842 282
Jayula................ 80,778 1.73 1.23 0.43 140,088 994 347
------- ---- ---- ---- ------- ----- ---
Total Proven and
Probable Reserves.. 122,891 1.79 1.49 0.51 219,472 1,836 629
======= ==== ==== ==== ======= ===== ===
Stripping ratio for the combined open pit operations is 1.66 tonnes of waste
for each tonne of ore.
ADDITIONAL MINERALIZED
MATERIAL
Tesorera.............. 2,611 0.77 1.37 0.37
Jayula................ 32,122 1.22 0.91 0.22
Animas................ 8,600 1.67 1.71 0.76
------- ---- ---- ----
Subtotal............ 43,333 1.28 1.10 0.34
------- ---- ---- ----
Toldos................ 3,000 3.86 -- --
Cobrizos.............. 10,800 4.31 -- --
------- ---- ---- ----
Total Additional
Mineralized Materi-
al................. 57,133 1.99 -- --
======= ==== ==== ====
</TABLE>
Sampling Procedures
The approximate 30 kilograms of RC drill cuttings from every two meters of
drill depth were sampled at the drill site by splitting the drill chips
ejected from the drill in a vezin type sampler. This splitting process and the
moisture content of the ejected material results in approximately one-half of
the sample being collected in plastic buckets placed in series. The pulp is
allowed to settle and the excess water decanted off the sample. The sample is
then reslurried and split in half using a Jones type riffle. Each half is then
placed in a sample bag and most of the remaining water is allowed to drain for
one to two days. One sample is sent to an assay laboratory for sample
preparation and analysis; the second sample is stored for later reference and
possible confirmatory testing. Drill core samples are prepared by first sawing
the core in half with a rock saw. Half of the core is bagged for assay and the
other half is used for geological logging and then saved. These samples are
also taken at intervals of approximately every two meters of the drill core,
depending upon rock type changes.
The six-kilogram RC drilling samples and the half core samples received at
the lab are first dried in an oven at a temperature not to exceed 85 degrees
centigrade. After drying, the
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samples are first crushed to minus ten (-10) mesh (1.68 millimeters) and split
in half. One of these samples is pulverized to minus 65 mesh and again this is
mixed and split down to 250 to 500 grams using Jones type riffles. The
remaining sample is bagged as a reserve. The sample is then pulverized in a
ring and puck pulverizer to minus 200 mesh (0.074 millimeters).
The minus 200 mesh sample is analyzed for silver using standard fire assay
procedures using a one assay tonne sample size. Samples with low silver values
are finished by atomic adsorption while samples with high silver values are
finished gravimetrically. Assay results are reported in parts per million
(grams per tonne). The sample is also analyzed for lead and zinc using
standard total wet analytical methods using a four acid digestion and atomic
adsorption. Results are reported in parts per million or percent, depending
upon the values encountered.
Davy conducted its own independent drilling sampling and assay analysis of a
representative sample of four drill holes. Davy independently determined how
many holes and their positioning and managed the drilling of these four "twin"
holes, the collection of the resultant drill samples, and maintained custody
of the samples from the drill site to their independent assay laboratory in
the United States. This independent test program confirmed the Company's
drilling results.
First Phase Feasibility Study Results
The San Cristobal Study was based on field work involving extensive drilling
with typically evenly spaced drill holes designed to establish the presence
and dimensions of measurable mineralization. The Company's field work was
conducted in accordance with generally accepted mining industry procedures. In
addition, bench scale metallurgical test work was conducted. A summary of the
key conclusions from the first phase feasibility study is provided below.
Production Rates
The first phase feasibility study utilized a base case incorporating an ore
production rate of 30,000 tonnes per day (10.8 million tonnes per year)
resulting in a minimum mine life of 11.5 years based on current reserves. An
average waste to ore strip ratio of 1:66:1 is indicated with the ratio varying
from approximately 2.0:1 in the early years to 0.5:1 in the later years of the
mine life. The ore is near the surface and outcrops in some areas and the
study estimates 30 million tonnes of pre-production waste stripping will be
required. Production will utilize conventional large scale open pit mining
methods and equipment.
Processing
The bench scale metallurgical tests and analysis indicate successful use of
conventional flotation separation of waste rock from minerals and separate
collection of silver rich zinc and lead concentrates for both oxide and
sulfide ores. Test results indicate average metallurgical recovery rates of 77
percent for silver, 85 percent for zinc and 75 percent for lead in the
sulphide ores, and 60 percent for silver and 55 percent for lead in the oxide
ores. These concentrates are expected to have metal content well within the
norms of downstream smelting and refining processes. Consequently, the process
selected by the study includes conventional primary crushing, followed by
semi-autogenous-grinding (SAG) milling, followed by differential flotation
which will produce separate zinc and lead concentrates each containing
approximately half of the silver produced.
Metal in Concentrate Production
The profile of the production of metals contained in concentrate is
estimated below.
<TABLE>
<CAPTION>
YEARS 1 TO AVERAGE
METAL 5 YEARS 6 TO 12 PER YEAR
----- ---------- ------------- ----------
<S> <C> <C> <C>
Silver (ounces)............................ 15,400,000 13,000,000 14,000,000
Zinc (tonnes).............................. 114,600 146,500 132,700
Lead (tonnes).............................. 44,209 35,890 39,507
</TABLE>
36
<PAGE>
Cost Estimates
Mine site cash production costs for mining, including stripping waste,
processing, overhead, reclamation, and general and administration costs are
estimated to be $6.44 per tonne of ore mined. These estimates assume the use
of a large scale mining contractor who will drill, blast, and transport the
ore and waste rock from the mine to the process plant and waste rock piles.
Average transport costs for concentrate produced to the market is estimated to
be $70 per tonne of concentrate from the mine gate. Treatment charges for
smelting and refining are estimated to be $175 per tonne of lead and zinc
concentrates.
Stripping ratio for the combined open pit operation is 1.66 tonnes of waste
for each tonne of ore. The cash production cost is estimated to be $2.69 per
equivalent ounce of silver.
Capital cost estimates for the completion of the second phase feasibility
study and financing, which the Company anticipates will be completed in late
1998, as well as the development and construction of mining, processing and
infrastructure and the inclusion of working capital, which the Company
anticipates will be completed in late 2000, total $354 million. This amount
includes $15 million of working capital, $24 million of pre-construction
capital, $25.5 million pre-production waste stripping, $289.6 million for the
construction of the process plant and necessary infrastructure. The process
plant and infrastructure estimates include a 20 percent contingency. These
estimates include the construction of transportation facilities and other
requisite infrastructure, but exclude the cost of mobile mining equipment
which will be provided by a mining contractor.
Proposed Development Program
In the event no new properties emerge in the interim which represent more
attractive development opportunities, it is anticipated that the Company will
devote the majority of the proceeds from the Offering to develop the San
Cristobal Project.
Part of the continuing development of the San Cristobal Project will be the
completion of a second-phase feasibility study. This study, and the field work
required in connection with it will involve:
. Additional in-fill and extension drilling intended to delineate
significant additional proven and probable reserves;
. Sterilization drilling to confirm surface plant and infrastructure
siting;
. Collection of bulk and composite samples for additional bench scale and
pilot plant scale metallurgical test work;
. Comprehensive environmental sampling and monitoring including the
preparation of an environmental impact study;
. Discussions and negotiations with national and international service
providers with respect to power supply and transportation, and
negotiations with smelters and refiners of metal concentrates;
. Collection of detailed and extensive cost information from national and
international sources;
. Preliminary engineering for mine, plant, and infrastructure to be
advanced to approximately ten percent of final engineering so as to
provide capital and operating cost estimates within an accuracy range of
plus or minus ten percent; and
. Continuing updates of metal markets dynamics and forecasts.
The Company has retained N.M. Rothschild & Sons Limited and Barclays Bank
PLC as the Company's financial advisor and arranger, respectively, in
connection with the anticipated project financing of the San Cristobal
Project. The Company anticipates that project financing activities will
commence on a preliminary basis in late 1997 and then accelerate with the
delivery of the
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second phase feasibility study in mid-1998 with financing to be secured by
late 1998. If this timetable is achieved, project construction could commence
in early 1999 and, after an approximate two-year construction and development
program, production could commence in early 2001.
Exploration and Development
Jayula. The Company plans to continue drilling the Jayula deposit in order
to determine the limits of economic mineralization. As the deposit is open in
most directions, and at depth, such drilling is required to determine the full
size of the deposit for pit design and mine planning. Preliminary drilling
west of the Jayula deposit indicates that the deposit may converge with the
Tesorera deposit, thus this probability will be tested by numerous closely
spaced drill holes.
Tesorera. The Company intends to continue drilling the Tesorera deposit in
order to determine the full extent of the mineralization. A primary goal is to
determine the extent of mineralization, particularly toward the Jayula
deposit, to test the probability that the ore-grade mineralization at the
Tesorera deposit is indeed connected to that at the Jayula deposit, 1,300
meters to the northeast. Additional deep drilling will be conducted to
determine the depth of the mineralization at Tesorera, as many of the holes
have bottomed in ore grade mineralization.
Animas. The Animas deposit is relatively small in comparison to the Tesorera
and Jayula deposits. Therefore, although much additional drilling is necessary
to put the mineralized material into a proven and probable category, drilling
at the site will likely take a lower priority than drilling at the other,
larger deposits. There is good exploration potential at the Animas deposit,
especially to the west of the rhyodocite dike, and to the north on strike of
the known breccia pipe. During routine district-wide exploration, these
potential areas will be tested.
Cobrizos. Cobrizos is a joint venture between the Company and the
Corporacion Minera Boliviano S.A. ("Comibol"), a government agency, and is
described in more detail below. Nevertheless, it is included under this
heading as its proximity to the San Cristobal Project makes it likely that it
will be developed in conjunction with the San Cristobal Project. Therefore,
future work will include drilling along strike beyond the currently defined
zone of mineralization, and diamond drilling to confirm the results of
reserve-circulation drilling as well as gather samples for metallurgical
testing. See "Advanced Exploration Properties--Cobrizos".
Toldos. The Company has started drilling reconnaissance holes in the area at
the Toldos deposit. Several of these holes show favorable results, and
additional drilling will be conducted to test the mineralized material for
proven and probable reserves.
Satellite Deposits, including Inca, Colon, and Cerillos. In addition to the
above, the Company has additional anomalous zones in this area that it will
explore during the second phase feasibility study.
Environmental and Other Issues
The Company's preliminary analysis of the existing tailings operations at
the Toldos deposit at the San Cristobal Project indicates that some effluents
from the Toldos deposit may be draining into a seasonal stream which drains
into the Rio Grande and, ultimately, flows into the Salar de Uyuni, a salt
lake to the north of the San Cristobal Project. If the Company exercises its
option to acquire the Toldos property from its current owner, the Company
expects to improve the environmental situation which may currently exist at
the mine. The Company does not expect any such program to have a material
adverse effect on the Company's proposed operations at the San Cristobal
Project. See "Risk Factors--Government Regulation and Environmental Matters".
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<PAGE>
The Company has determined that the town of San Cristobal, its church, and
its cemetery are located in close proximity to the planned Jayula and Tesorera
pits. The Company's efficiency when mining the deposits may be limited without
the resettlement of the residents of the town and the possible replacement of
its church. The Company is currently working with the residents of the town,
which it estimates has approximately 350 inhabitants, to develop an
economically feasible relocation plan sensitive to the interests of the
residents and the traditions of the town. See "Risk Factors--San Cristobal
Project Risks".
39
<PAGE>
ADVANCED EXPLORATION PROPERTIES
COBRIZOS
Location and Access
The Cobrizos property is located on level terrain 12 kilometers north of the
San Cristobal Project in southern Bolivia. The proximity to the San Cristobal
Project affords significant potential operating efficiencies. The former
railroad maintenance town of Uyuni lies 70 kilometers to the northeast and the
railroad to the Chilean port of Antofagasta, 460 kilometers distant, passes 20
kilometers to the north. The Bolivian commercial centers of Oruro and La Paz,
respectively, are located 350 kilometers and 500 kilometers to the north.
Operating History
Green and blue colored copper carbonate minerals were produced from the
deposit for use as pigment during pre-Columbian times and Spanish miners
subsequently engaged in small scale native copper and copper sulfate mining.
Between 1892 and 1906 Compania Arenal sank shafts as deep as 60 meters and
produced copper from approximately 100,000 tonnes of material extracted from
shallow underground and open cast workings. A combination of flooding and
carbon dioxide build-up in the workings ultimately forced a cessation of
operations.
Title and Ownership Rights
The Company acquired the right to enter into a joint venture with Comibol on
its approximately 4,178 acres of mining rights at the Cobrizos property
through public tender in August of 1996. An agreement defining the joint
venture was signed on September 11, 1996. Pursuant to this agreement, the
Company must complete certain payments and work commitments in order for its
rights to vest in this joint venture at the Cobrizos property, to which
Comibol contributes only the mining rights. These obligations are summarized
below.
<TABLE>
<CAPTION>
PAYMENT
PER MINIMUM WORK
PERIOD ACRE COMMITMENT
------ ------- ------------
<S> <C> <C>
0-24 months.......................................... $ 1.44 $625,000
25-48 months......................................... $ 48.28 No minimum
49-60 months......................................... $240.89 No minimum
</TABLE>
Comibol will receive five percent of the operating cash flow, as defined
below, from production at the Cobrizos property until the Company has
recovered its entire capital investment; thereafter, Comibol will receive 15
percent of operating cash flow. The Company has the right, in its discretion,
to reduce the acreage subject to the joint venture agreement prior to
commencement of the third year thereof and again prior to the commencement of
the fifth year thereof. Operating cash flow is defined in the agreement as the
gross revenues less the cost of transportation, smelting and refining,
marketing commissions, production costs and administrative expenses. Financing
costs and depreciation are not deductible from gross revenues.
Geology
The Cobrizos property hosts an oxidized copper-silver deposit of the red
bed-type composed of narrow (less than ten centimeters thick) veins in a
stockwork cutting shale and sandstone of the Jurassic Potoco Formation, which
dips steeply to the east.
Mineralized Material
In November and December of 1995, prior to entering into the aforementioned
joint venture agreement with Comibol, the Company conducted initial field
studies including geologic mapping and
40
<PAGE>
the collection of 108 samples for geochemical analysis of gold, silver, and
copper. After successfully bidding for and acquiring the Cobrizos property,
the Company conducted a mercury vapor survey over the greater mineralized area
in August of 1996. In October of 1996, the Company drilled 11 inclined (-60
degrees) reverse-circulation holes. Four of the holes drilled in a row 700
meters long and spaced no less than 150 meters apart tested a single
stratigraphic horizon and intersected silver and copper mineralization.
These drill results precipitated a follow-up drilling phase focused on this
single stratographic horizon during which eight additional holes were drilled
over a strike length of 850 meters which, together with the four earlier
holes, resulted in all the drill holes being spaced approximately 75 meters
apart. The results indicate a steeply dipping mineralized zone with an average
width of 55 meters over the 855 meters of strike length. The indicated depth
from surface or near surface is at least 100 meters. The Cobrizos property
contains mineralized material of 10.8 million tonnes at an average grade of
4.3 ounces of silver per tonne and approximately 0.22 percent of copper. These
estimates were confirmed by MRA.
Exploration and Development
The Company intends to commission a conceptual study of the property in the
fall of 1997. Further drilling will be conducted in order to increase the
reliability of current data, to determine the limits of the mineralization at
the site, and to establish proven and probable reserves. The Company believes
that the proximity of the Cobrizos property to the San Cristobal Project may
result in significant operating efficiencies. Open pit mining with processing
either at the deposit site or at the proposed milling and processing facility
at the San Cristobal Project will be evaluated, and metallurgical test work
will be conducted.
EL OCOTE
Location and Access
The El Ocote property in southwestern Honduras is located near the town of
Santa Lucia in the municipality of La Labor, department of Ocotepeque,
approximately 150 kilometers south of the major city of San Pedro Sula and
approximately 30 kilometers east of the Guatemalan border. The property is
accessible by means of the paved Pan-American Highway which passes within one
kilometer of the deposit. Power, water and labor are available within two
kilometers of the property. The site is largely unimproved with no equipment
on site; some underground development has occurred, and it is possible to
inspect the mineral body from four adits.
Operating History
A portion of the El Ocote property was first explored and put into
production in the late nineteenth century. Rosario Resources ("Rosario"), a
New York-based company, subsequently acquired the property and in 1963 drilled
four diamond drill holes. According to Rosario's geologists responsible for
the project, Rosario decided against further development due to difficult
logistics and what was perceived to be unfavorable metallurgy. Rosario's
metallurgical studies at the time indicated that the mineralized material at
the site was best processed by flotation.
Title and Ownership Rights
In 1983, a Honduran entity, Compania Minera Ocote, S. de R.L. ("Minera
Ocote") acquired the property. In June of 1994, the Company, acting through an
agent, acquired an exclusive five-year exploitation concession and purchase
option for the El Ocote property from Minera Ocote totaling 986 acres. Minera
Ocote's rights to the property derive from a 40-year mining concession granted
by the government of Honduras in March of 1983, which may be extended for an
additional 20-year term.
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<PAGE>
Pursuant to the contract with Minera Ocote, the Company has committed to
undertake a five-year, $1,000,000 exploration and development program on the
property, and to advance production royalties of $50,000 and $75,000 to Minera
Ocote on the fourth and fifth anniversaries, respectively, of the agreement.
The Company is also responsible for maintaining Minera Ocote's concession
until such time as title has been formally transferred to the Company. Minera
Ocote has agreed to transfer the title to the property on the fifth
anniversary of the aforementioned contract, assuming the property is in
production, or at such earlier time as the Company may request. Upon the
commencement of commercial production at the property, the Company will pay
Minera Ocote a five percent NSR royalty.
In addition to the aforementioned concession at the El Ocote property, the
Company has also contracted with Minera Ocote to acquire an exploration
permit, the Ocote Exploration Zone, covering approximately 17,414 acres of
adjacent territory. Minera Ocote's title to this exploration permit was
formally granted in March of 1996. This exploration permit will have a life of
four years, extendible for an additional two years before converting into an
exploitation concession. The Company expects that if it elects to acquire this
permit outright from Minera Ocote, title to the property will be assigned to
Cordilleras Honduras. The Company also holds a right of first refusal with
respect to another property contiguous to the El Ocote property.
Geology
The major geological feature of the El Ocote property is a zone of
mineralized breccia rock contained in a near vertical pipe-shaped structure.
This pipe is located at an altitude of approximately 1,600 meters on the side
of the very steep eastern slopes of Cordillera Del Merendo. The deposit is
hosted by a thin package of Tertiary andesitic volcanics, which overlie
Tertiary sediments and volcaniclastics, as well as Cretaceous Yojoa Group
limestones. Although faults are believed to be present immediately east and
northeast of the structure, it does not appear to have been subjected to any
significant post-mineral faulting.
The deposit consists of a near vertical column of brecciated diorite,
roughly oval in plan section, in which silver and copper minerals, plus
fluorite, and quartz form the cement around the breccia fragments. This
structure in plan has dimensions of 150 meters (north-south) by 90 meters
(east-west). Within the mineralized structure, the fragments comprise angular
to rounded diorite and diorite porphyry. The degree of brecciation decreases
with depth, such that at a depth of less than approximately 50 meters below
the 1,200 level, there is no longer significant brecciation and the rock is
merely weakly jointed.
The bulk of the silver mineralization is in one massive block of breccia
near the surface, with the grade diminishing rapidly below the 1,200 meter
level. Below that level, most of the higher grade material takes the form of
several arcuate bands, concave upward, which extend downward from the west
side of the structure and which terminate with depth toward the east.
Mineralized Material
In 1995, the Company began a process of evaluating the exploration and
development potential of the identified mineralized zone at the El Ocote
property. Specifically, the Company resampled four preexisting mine levels,
mapped the geology of the area, prepared topographic maps of the site, and
drilled 16 RC drill holes into the pipe-like structure and two RC holes into
the surrounding host rock. A total of 3,422 meters of drilling was completed
during this program and a total of 2,258 samples from these holes were sent
for assay. Using this drill assay data and the data from 313 samples from the
underground mine workings, the Company estimated that the deposit contains
approximately 2.1 million tonnes of mineralized material containing 9.9 ounces
of silver per tonne at a cut-off grade of 2.0 ounces of silver per tonne.
42
<PAGE>
Conceptual Study
The Company commissioned Davy to prepare a conceptual study in order to
estimate the potential and timing of undertaking rapid exploitation of the
property via rapid bulk underground mining and heap leach extraction methods.
This study utilized the Company's estimate of mineralized material mentioned
above.
This study was completed in July of 1997 and concluded as follows:
. The project's economics are sensitive to metallurgical recovery and metal
prices. Assuming a 50 percent heap leach recovery, the project's internal
rate of return is positive with silver prices of approximately $6.00 per
ounce, or at a 75 percent recovery, a positive rate of return begins at
prices above $4.00 per ounce of silver.
. Metallurgical test work should be undertaken to determine cyanide
consumption and silver recovery rates.
. Upside potential lies in lower cyanide consumption rates and the
discovery of ore reserves to improve the return on capital invested in
the mining and processing facilities.
Exploration and Development
The Company plans to commission an extensive metallurgical sampling and
testing program as the next step in its continuing evaluation of this
property. The Company believes that there is little likelihood of discovering
additional resources within the pipe structure itself. Nonetheless, as part of
the appraisal of the mineral potential of the El Ocote property, a regional
stream sediment survey was conducted over an area of 80 square kilometers. The
stream draining the mineralized area at the El Ocote property assayed 0.6
parts per million ("ppm") silver. Most other streams in the immediate area
assayed under 0.5 ppm silver. However, a large number of streams draining an
area 4.5 kilometers southwest of the mineralized structure assayed from 0.6 to
2.6 ppm silver. As numerous streams draining this area are strongly anomalous
in silver, the Company believes it is likely that additional silver
mineralization may occur in the headwaters of those sampled streams. The
Company plans to conduct further reconnaissance field work in this anomalous
area until the source of the silver is discovered.
SAN JUAN DE LUCANAS
Location and Access
The San Juan de Lucanas property is located 147 kilometers east of the town
of Nazca in the San Juan district of the Lucanas province in the department of
Ayacucho in southern Peru, approximately 500 kilometers south of Lima. The
property is accessible by means of a partly-paved, well-maintained highway
from Nazca which extends to within ten kilometers of the property and is
connected to the mine and mill site by well-established gravel roads. Water
and labor are available on site while power must be generated at the site.
Operating History
Mineralization was discovered in the San Juan district in colonial times.
Documented mining has occurred intermittently in the area since 1938. Empresa
Minera San Juan de Lucanas S.A. ("EMSJ") operated the San Juan de Lucanas mine
from 1966 until 1990, at which time operations were discontinued
43
<PAGE>
due to operating losses. Between 1990 and early 1996, a small mining
cooperative intermittently ran the San Juan de Lucanas mine at a low
production level. Since 1951, the three mined veins at San Juan de Lucanas
property have produced approximately 3,000,000 tonnes of ore grading an
average of 13.8 ounces of silver per tonne and 0.061 ounces of gold per tonne.
Mill recoveries of 84 percent silver and 91 percent gold resulted in district
production of approximately 35,830,000 ounces of silver and 170,400 ounces of
gold.
Title and Ownership Rights
Through its new claims and the acquisition of mining concessions and certain
contract rights entitling it to explore and develop mining concessions in the
district, the Company has acquired title to, or otherwise controls, mineral
rights to more than 52,000 acres of properties dispersed over an area of
approximately 150 square miles in the San Juan district of the Lucanas
province of Peru. The Company has contracted to acquire 38 existing mining
concessions relating to 42,071 acres of land, including the aforementioned
pre-existing mining complex, and has staked new claims covering more than
10,131 acres. The Company believes that it controls all known mineralized
structures in the San Juan district.
The registered holders of title to the 38 mining concessions include EMSJ
and Banco Minero del Peru, S.A. ("Banco Minero"), a Peruvian state bank which
is in liquidation. Among EMSJ's creditors were Banco Minero, which became
EMSJ's sole shareholder, and EMSJ's former employees, who where the
beneficiaries of certain statutory labor liens on EMSJ's assets. As a result,
these mining assets, although primarily registered in the name of EMSJ, also
included certain properties registered in the name of Banco Minero which are
now registered in the name of ASC Peru, a subsidiary of the Company. In June
of 1993, Banco Minero agreed to transfer ownership of the San Juan de Lucanas
mining complex to EMSJ's former workers in exchange for a release of all
claims by such workers against EMSJ and its successor in interest, Banco
Minero. The Banco Minero settlement agreement was subject to (i) a two-step
court approval process and (ii) subsequent registration with the Peruvian
Registry of Mines. The approval process has been completed and the
registration of the settlement agreement has been ordered by the Labor Court
in Lima. The registration of the settlement agreement, transfer of title to
the Company and the raising to public deed of the Company's rights to acquire
the concessions, however, remain pending.
The Company has contracted with more than 90 percent in interest of the
beneficiaries of the Banco Minero settlement agreement to acquire all of their
rights in the San Juan de Lucanas mining complex (such contracts, the "San
Juan Contracts"). The Company has obtained the opinion of local counsel
attesting to the validity and enforceability of the San Juan Contracts. In
order for the Company to perfect its title to the San Juan de Lucanas mining
complex, the Banco Minero settlement agreement must be duly registered with
the Peruvian Registry of Mines. Since Peruvian law does not provide for
fractional interests in mining properties as an administrative procedure, a
special purpose mining entity, to be named SMRL Dorita I de Ica ("SMRL"),
which will be beneficially owned by the workers party to the settlement
agreement, will become the holder of the title to the San Juan de Lucanas
property. The SMRL is broadly analogous to a Peruvian limited liability
corporation. Pursuant to the San Juan Contracts, the Company will become the
holder of at least 90 percent of the participating interests in SMRL. The
Company expects that pursuant to the San Juan Contracts, SMRL will be
compelled to sell the San Juan de Lucanas property to the Company or its
designee upon the registration of the settlement agreement.
As several of the former workers party to the Banco Minero settlement either
are not party to the San Juan Contracts, or have sought or may be expected to
seek to opt out of the San Juan Contracts, the Company's interest in
particular properties comprising the San Juan de Lucanas mining complex may be
subject to a small amount of dilution. Management does not believe that any
such dilution will have a material adverse effect on its interests or
activities in the San Juan district. The Company is
44
<PAGE>
pursuing the rapid resolution of all title disputes and is committed to an
amicable settlement with all parties involved.
Concurrent with the resolution of outstanding administrative legal issues,
the Company has taken steps to maintain an orderly physical presence in the
San Juan district. Of the 337 surviving ex-workers, approximately 60 continue
to live at the mining camp while the others no longer live in the district.
Those at the camp are living at a subsistence level. The Company provides
periodic truckloads of food and other supplies and has provided some
assistance to the local school and sports teams. The Company has two
representatives at the camp who periodically report to management, and the
Company's engineering personnel have made numerous uneventful visits to the
camp. However, the situation is unstable and is likely to remain so until such
time as the Company is able to make purchase payments on the SMRL properties.
The Company expects to make such payments as soon as the registration of the
settlement agreements have been completed and the San Juan Contracts have been
raised to public deed.
Geology
The mineral deposits at the San Juan de Lucanas property are epithermal,
with mineralization occurring in a number of steeply dipping veins, running
along two well defined orientations. The north-south veins include the veins
known as Santa Rosa, Saramarca, Yanarumi, Ventanilla and Rosaura; the
northeast-southwest vein is known as Concepcion-Raquel. The outcrops of the
Ventanilla and Concepcion-Raquel structures can be followed on the surface for
over one kilometer. The rocks hosting the veins consist of lava flows and tuff
flows with conglomerate.
There are several systems of veins on the property. The Concepcion-Raquel
vein forms the most important structure in the district and is comprised of
two sets of three parallel structures each. The width of the veins varies
between two and four meters, although in some sections of the mine, widths
over 20 meters can be found. The Santa Rosa vein and another associated vein,
Alfa Romeo, form the second most important vein system; with vein widths
varying from one to seven meters. The third most important vein system is the
Saramarca system which is comprised of a series of veins and mineralization
occurring in lenses.
All three vein systems are mineralized with gold, chalcopyrite, sphalerite,
galena, argentite and ruby silvers. Successive processes of leaching and
oxidation led to the formation of an enriched zone which constitutes the most
readily mineable portion of the deposit. The main minerals at the surface are
oxides extending to a depth of approximately 100 meters. The oxides contain
significant grades of silver and gold in some areas. Below this level, an
enriched zone with a vertical interval of 200 to 250 meters is present in most
of the known veins.
Mineralized Material
Underground mineralized material is estimated at 139,000 tonnes with an
average silver grade of 9.27 ounces per tonne and gold grade of 0.086 ounces
per tonne.
During January and February of 1995, the Company engaged independent
contractors to survey and drill, under the supervision of Company geologists,
the two tailings dumps using impact casing methods. Twenty holes were drilled,
and 149 samples obtained. Approximately 85 percent of the tailings area was
sampled, and there is no reason to believe that the remaining 15 percent would
yield significantly different results.
Based on the work described above, the Company estimates that the two
tailings dumps contain at least 1.75 million tonnes of mineralized material
with an average silver grade of 1.74 ounces per tonne and gold grade of 0.006
ounces per tonne. The Company sent a 60 pound (30 kilogram) sample to the
University of Cardiff, Wales, for metallurgical testing to estimate
recoveries, material balances
45
<PAGE>
for various throughputs for processing the tailings, reagent consumption and
preliminary equipment and capital specifications. PAH found that these test
results support the concept of reprocessing the tailings profitably, assuming
a tailings reclaim agglomerate and heap leach process for a new or refurbished
underground mine combined operation. The tailings component would contribute a
net cash margin (before tax) of $1.99 per ounce of silver at an assumed price
of $5.15 per ounce of silver.
Conceptual Study
In June of 1995, PAH performed a conceptual study evaluating the
rehabilitation of the idled San Juan de Lucanas mine complex. PAH concluded
that rehabilitation would be feasible, and require approximately $10 million
to return the mine to a 500 tpd underground mining operation. Operating cash
costs of a rehabilitated and developed mine were estimated by PAH to be
approximately $2.40 per ounce of silver when fully operational. PAH outlined a
mine and power rehabilitation program and also defined requirements for
replacement of the crushing and grinding sections, a new flotation plant,
thickening section and cyanidation section, and repairs to the Merrill-Crowe
precipitation section. All ancillary structures would have to be rebuilt. The
Company believes additional reserves, which could result from such proposed
exploration, would be required to justify such investment.
Exploration and Development
The Company has defined a two stage, 5,500 meter core drilling program with
the goal of delineating an additional two million tonnes of reserves within
the known vein system. The first stage would consist of 12 core holes drilled
into eight veins to depths averaging 250 meters, for a total of 2,875 meters.
The second stage would consist of another 10 holes in the same veins, for a
total of 2,625 meters. If successful, a third phase consisting of additional
drilling and underground drifting will be conducted, the results of which will
be used to justify the rehabilitation and development of the mine, as well as
further exploration on other parts of the property.
CHOROMA
Location and Access
The Choroma property is located in the Bolivian silver-tin belt, 600
kilometers south of La Paz and 80 kilometers north of the border with
Argentina. It is 15 kilometers northeast of the small regional commercial
center of Tupiza, which is served by the railroad connecting Salta, Argentina
with Antofagasta, Chile and La Paz. Elevations in the prospect area range from
3,100 to 3,500 meters above mean sea level.
Title and Ownership Rights
The property is covered by approximately 310 acres of mining rights owned by
Comibol. The right to joint venture with Comibol was acquired through public
tender and contracted in July of 1996. The terms of the 40-year renewable
agreement provide for an initial five-year exploration period during which the
Company must make the following payments and investments in the property in
order to maintain the joint venture:
<TABLE>
<CAPTION>
PAYMENT MINIMUM WORK
PERIOD PER ACRE COMMITMENT
------ --------- ------------
<S> <C> <C>
0-24 months.......................................... $ 1.44 $213,000
25-48 months.......................................... $ 48.18 No minimum
49-60 months.......................................... $240.89 No minimum
</TABLE>
46
<PAGE>
Comibol will receive five percent of the operating cash flow, as defined
below, from production at the Choroma property until the Company has recovered
its entire capital investment; thereafter, Comibol will receive 15 percent of
operating cash flow. The Company has the right, in its discretion, to reduce
the acreage subject to the joint venture agreement prior to commencement of
the third year thereof and again prior to the commencement of the fifth year
thereof. Operating cash flow is defined in the agreement as the gross revenues
less the cost of transportation, smelting and refining, marketing commissions,
production costs and administrative expenses. Financing costs and depreciation
are not deductible from gross revenues.
Operating History
Production records are not available for the Choroma property. Pods of high-
grade lead-silver oxide ores were mined from veins during the Spanish Colonial
era. During the first half of the twentieth century, the deposit belonged to
Simon I. Patino until it was nationalized in 1952, when the property became
part of Comibol. Comibol leased the property to Messrs. H. Berinduague and A.
Levy, and finally to a miners' cooperative. Between 1976 and 1985, Comibol
rehabilitated several mine workings, carried out 526 meters of development on
several veins, and drilled 3,336 meters of core in 15 holes. The results of
this work are not in the Company's possession and reportedly have been lost by
Comibol. The mine was inactive when the United Nations Development Program
(UNDP) issued its report in December of 1990, following a 15-day field study.
UNDP concluded that the deposit had potential for the discovery of bulk
mineable material in fractured or brecciated rock as well as for traditional
vein ore bodies.
During the first quarter of 1996, geologists for the Company channel sampled
many of the outcrops at the Choroma property. This work defined several lines
44 to 86 meters long which each averaged between 1.8 ounces of silver per
tonne and 4.0 ounces of silver per tonne. The Company acquired the property on
the basis of this work and the earlier reports.
Geology
The deposit is located near the southern end of the Bolivian silver-tin belt
in a sequence of dark colored shales of Ordovician age that have been intruded
by one or more porphyry domes of quartz dacitic to rhyolitic composition.
Veins and associated hydrothermal breccias occupy steep fractures trending
northwest. Hydrothermal alteration in rocks flanking the mineralized
structures consists of locally intense silification overprinted on more
broadly distributed propyllitic dominated by chlorite. Vein filling consists
of quartz, siderite, pyrite, chalcopyrite, arsenopyrite, galena, sphalerite,
tetrahedrite, tenantite and argentite with local concentrations of canfieldite
and agyrodite. Gold grades of up to 0.064 ounces per tonne are present in at
least one vein.
Exploration
Sampling of outcrops has defined several anomalies, which the Company
intends to drill in order to test for bulk mineable mineralization. In
addition, access will be gained to underground workings for sampling of
structures and wallrocks to further test for bulk mineable mineralization as
well as ore hosted by veins.
47
<PAGE>
OTHER MINERAL PROPERTIES
In addition to the aforementioned development project and advanced
exploration properties, the Company has a portfolio of more than two million
acres of exploration properties located in the traditional silver producing
regions of the world or otherwise identified by the Company as areas which
warrant exploration. The Company generally seeks to structure its acquisitions
of mineral properties in order to allow the Company to engage in phased
exploration of individual properties at a relatively low cost and to acquire
those properties that it regards as presenting significant development
opportunities. Properties which the Company determines do not warrant further
exploration or development will be sold or otherwise relinquished, typically
without further cost obligations to the Company. The Company currently holds,
controls or has options to acquire 22 major groups of exploration properties
located in eight countries. The distribution of these holdings is summarized
in the table below.
LOCATION AND DISTRIBUTION OF EXPLORATION PROPERTIES
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
COUNTRY PROPERTIES ACREAGE(1) TOTAL ACREAGE(1)
------- ---------- ---------- ----------------
<S> <C> <C> <C>
SOUTH AMERICA
Bolivia................................ 4 949,607 47.1%
Chile.................................. 3 53,127 2.6
Peru................................... 3 87,908 4.4
--- --------- -----
Subtotal............................. 10 1,090,642 54.1
--- --------- -----
CENTRAL AMERICA
Honduras............................... 5 344,556 17.1
Mexico................................. 3 26,275 1.3
--- --------- -----
Subtotal............................. 8 370,831 18.4
--- --------- -----
CENTRAL ASIA
Kyrghyzstan............................ 1 534,477 26.5
Mongolia............................... 1 4,201 0.2
Tajikistan............................. 2 14,332 0.7
--- --------- -----
Subtotal............................. 4 553,010 27.5
--- --------- -----
Total................................ 22 2,014,483 100.0%
=== ========= =====
</TABLE>
- --------
(/1/) Acreage and percent of total acreage figures do not include land
considered part of the San Cristobal Project, El Ocote, San Juan de
Lucanas, Cobrizos and Choroma properties. These five properties consist of
claims and concessions comprising approximately 6,518 acres, 988 acres,
52,200 acres, 4,178 acres and 309 acres, respectively.
While the Company in the near term expects to focus primarily on the
development of the San Cristobal Project, the acquisition, exploration and
evaluation of properties will be vigorously pursued in order to unlock the
potential value of the Company's existing exploration property portfolio as
well as to sustain continuing corporate growth objectives.
Drilling and geophysical engineering services are frequently subcontracted
to regional and/or international firms. Chemical analysis generally is
performed in laboratories located in the same regions as the specific
property, with metallurgical testing and analysis conducted in the U.S. When
using core drilling, the Company uses conventional split core sampling in its
testing, retaining one half of all drill cores for reference and confirmatory
testing processes. Similarly, representative portions of chip samples from
rotary percussion, reverse circulation drilling are processed leaving
substantial quantities of the chip sample material for reexamination and other
future test work.
The Company's international exploration activities are described on a
country-by-country basis below. Due to the limited nature of the available
information regarding these properties, the general exploration portfolio is
addressed below in a summary manner only.
48
<PAGE>
BOLIVIA
The Company has continued its aggressive land acquisition program throughout
Bolivia, making the Company one of this country's largest private owners of
mineral rights. The Company's holdings and joint ventures, excluding the
Cobrizos property, the Choroma property and the San Cristobal Project, now
total almost 950,000 acres, including its existing joint venture interests for
the historic Pulacayo mine and options on several properties being explored
presently. The Company expects to pursue aggressively its exploration program
in Bolivia.
CHILE
The Company has been systematically staking concessions in northern Chile.
This program, which is based on efforts to identify promising silver
exploration zones, has resulted in the staking of 22 claims over an area of
more than 53,000 acres. The Company's exploration of its Chilean property
holdings are at an early stage.
PERU
In addition to its San Juan de Lucanas property, the Company has undertaken
numerous activities in Peru, including: (i) the acquisition and preliminary
evaluation of the Otuzco property located in northern Peru which has been
leased and is subject to a purchase option held by the Company; and (ii)
technical evaluation of a number of the mining properties being sold by
Centromin, the Peruvian state-owned mining company. The Company is presently
engaged in land acquisition programs in several districts.
MEXICO
Exploratory work in Mexico has successfully secured a significant land
position in the vicinity of Zacatecas, historically Mexico's largest silver
producing district. An initial exploration program was completed in March of
1997. The Company believes that this program has indicated considerable
potential for several underground silver operations. Additional exploration
targets throughout Mexico are being analyzed by the Company's Zacatecas
office.
HONDURAS
In addition to its El Ocote property, the Company has acquired an extensive
land position in Honduras, encompassing more than 396,000 acres of exploration
and exploitation concessions. The Company's analysis of these properties
remains preliminary. Over the course of the next 12 to 18 months, the Company
expects to conduct additional field reconnaissance in order to determine
further drill targets at these properties.
KYRGHYZSTAN
On March 26, 1996, the Company established Kumushtak Mining, a 50/50 joint
venture with North-Kyrghyz Geological Expedition, a state enterprise organized
under the laws of the Kyrghyz Republic. Kumushtak Mining holds concessions
located in a belt of silver occurrences which extends for several hundred
kilometers in the Kumushtak river valley in western Kyrghyzstan. The area
encompasses several historic mining districts.
The Company recently completed its first round of drilling at one
significant silver anomaly situated in Kumushtak. The results of such drilling
indicate insufficient grades to sustain economic production at prevailing
silver prices. However, due to Kumushtak Mining's large property holdings and
exploration potential, the Company intends to preserve a strategic position in
this region and continue with its interest in Kumushtak Mining. The Company
believes that Kumushtak Mining's extraordinarily large concession offers the
possibility of numerous occurrences of silver and gold.
49
<PAGE>
MONGOLIA
On March 26, 1996, the Company established Asgat Mining, a 50/50 joint
venture with Mongolrostvetmet, a joint association owned by the Mongolian
government and Zarubeshvetmet, a privatized company formed under the laws of
the Russian Federation. Asgat Mining is involved in the evaluation of the
Asgat silver deposits in northwestern Mongolia (the "Asgat Silver Property").
Work on the Asgat Silver Property, which already contains some underground
development, has principally involved data preparation for a feasibility
study. Recently, metallurgical bench scale test work has been conducted with
mixed results. While recoveries of silver and copper were high, the results
indicated large amounts of arsenic and antimony. The Company regards the Asgat
Silver Property as a strategic property position with potential long term
development prospects. Asgat Mining is presently assessing other precious
metal prospects based on its detailed knowledge of information and conditions
in Mongolia.
TAJIKISTAN
The Company is in the process of obtaining an exclusive, irrevocable license
to exploit the Bolshoi Kanimansur and the Western Kanimansur silver deposits
in northern Tajikistan, through the formation of Kanimansur Mining, which will
be 49 percent owned by Apex Asia and 51 percent by Adrasman Mining. The
Company is considering entering into a joint venture with respect to the
property with Zarabeshtsvetmet, a Russian mining company.
50
<PAGE>
METALS MARKET OVERVIEW
SILVER MARKET
Silver has traditionally served as a medium of exchange, much like gold.
While silver continues to be used for currency, the principal uses of silver
can be divided into three main categories: (i) industrial uses, primarily
electrical and electronic components; (ii) photography; and (iii) jewelry and
silverware. According to the Silver Institute, in 1996, approximately 720
million ounces of silver were consumed for these and other industrial
purposes.
Silver's strength, malleability, ductility, thermal and electrical
conductivity, sensitivity to light and ability to endure extreme changes in
temperature combine to make silver a widely-used industrial metal.
Specifically, it is used in batteries, computer chips, electrical contacts,
and high-technology printing. Silver's anti-bacterial properties also make it
valuable for use in medicine and in water purification.
Most silver production is obtained from mining operations for which silver
is not the principal or primary product. Approximately 83 percent of mined
silver is produced as a by-product of mining of lead, zinc, gold or copper
deposits. According to the Silver Institute, approximately 400 million ounces
of silver were mined in 1996. CPM estimates that recycled or secondary
production accounts for a decreasing proportion of total silver supply,
approximately 29 percent of total silver production in 1996, compared to an
average of 36 percent of aggregate silver production between 1980 and 1990.
CPM further estimates that total silver supply (from mine production,
recycling and estimated dishoarding and government stockpile sales) has been
insufficient to meet industrial demand since 1989, and stockpiles have been
diminishing. CPM studies indicate that approximately 576 million ounces of
silver were supplied from all sources in 1996.
The following table sets forth the London Silver Market's annual average
(except for 1997), high and low spot price of silver in U.S. dollars per troy
ounce since 1977.
<TABLE>
<CAPTION>
YEAR AVERAGE HIGH LOW
---- ------- ------ -----
(DOLLARS PER TROY
OUNCE)
<S> <C> <C> <C>
1977......................................... $ 4.63 $ 4.97 $4.31
1978......................................... 5.42 6.26 4.82
1979......................................... 11.06 32.20 5.94
1981......................................... 10.49 16.30 8.03
1982......................................... 7.92 11.11 4.90
1983......................................... 11.43 14.67 8.37
1984......................................... 8.14 10.11 6.22
1985......................................... 6.13 6.75 5.45
1986......................................... 5.46 6.31 4.85
1987......................................... 7.01 10.93 5.36
1988......................................... 6.53 7.82 6.05
1989......................................... 5.50 6.21 5.04
1990......................................... 4.83 5.36 3.95
1991......................................... 4.06 4.57 3.55
1992......................................... 3.95 4.34 3.65
1993......................................... 4.31 5.42 3.56
1994......................................... 5.28 5.75 4.64
1995......................................... 5.19 6.04 4.41
1996......................................... 5.19 5.83 4.71
1997 (to June 30)............................ 4.89 5.31 4.64
</TABLE>
- --------
(Source: Silver Institute)
51
<PAGE>
ZINC AND LEAD MARKETS
The Company anticipates that the San Cristobal Project will, and that other
future projects may, involve the production of economically significant
quantities of metals other than silver. The Company expects that production
from the San Cristobal Project will include the extraction, processing and
sale of significant quantities of zinc and lead.
Zinc is utilized for its resistance to corrosion, and, in the form of steel
coating, is widely used in construction of infrastructure, housing and office
buildings. In the automotive industry, zinc is used for steel coating, and die
casting, and is an important component of tires and motor oil. Smaller
quantities of various forms of zinc are used in fertilizers, food supplements
and cosmetics, and in specialty electronic applications such as satellite
receivers. Industrial consumption of zinc in 1996 was estimated by the
International Lead Zinc Study Group (the "ILZSG") at 6.28 million tonnes.
Recycled zinc accounts for about 30 percent of the zinc consumed on an annual
basis. According to the ILZSG, 5.94 million tonnes of zinc were produced in
1996.
The primary use of lead is in motor vehicle batteries, but it is also used
in cable sheathing, shot for ammunition and alloying, and in chemical form for
use in alloys, glass and plastics. Industrial consumption of lead in 1996 is
estimated by the ILZSG at 5.08 million tonnes. Lead is widely recycled with
secondary production accounting for a steady 54 percent of total supply.
According to the ILZSG, 5 million tonnes of lead were produced in 1996.
The following table sets forth the annual average (except for 1997) spot
prices for zinc and lead on the London Metals Exchange since 1977.
<TABLE>
<CAPTION>
YEAR ZINC LEAD
---- ---- ----
(U.S.
CENTS PER
POUND)
<S> <C> <C>
1977...................................................... 34.4c 30.7c
1978...................................................... 31.0 33.7
1979...................................................... 33.5 52.6
1980...................................................... 34.4 41.4
1981...................................................... 38.3 33.5
1982...................................................... 33.7 24.7
1983...................................................... 34.6 19.3
1984...................................................... 41.7 20.1
1985...................................................... 35.5 17.7
1986...................................................... 34.1 18.4
1987...................................................... 36.2 27.0
1988...................................................... 56.3 29.7
1989...................................................... 77.6 30.5
1990...................................................... 68.9 36.7
1991...................................................... 50.7 25.3
1992...................................................... 56.2 24.6
1993...................................................... 43.6 18.4
1994...................................................... 45.3 24.9
1995...................................................... 46.8 28.6
1996...................................................... 46.5 35.1
1997 (to June 30)......................................... 58.3 30.9
</TABLE>
- --------
(Source: Flemings Global Mining Group)
52
<PAGE>
REPUBLIC OF BOLIVIA
The following information has been compiled by the Company from governmental
and private publications.
GENERAL INFORMATION
Bolivia is situated in central South America and is bordered by Peru,
Brazil, Paraguay, Argentina and Chile. It has an area of 1,098,581 square
kilometers and a population of approximately 7.7 million people. Bolivia's
official and most widely spoken language is Spanish, but over 70 percent of
the population is either native Aymara or Quechua Indian. Sucre is the capital
city of Bolivia. La Paz is the seat of government and, with a population of
over one million people, the largest city in Bolivia. La Paz is situated on
the Altiplano, the high plateau which separates the eastern and western ranges
of the Andes. The land in this part of the country is largely semi-desert
plains bordered by steep, rugged mountains. The eastern portion of the country
consists of sparsely populated low-lands bordering the Brazilian Amazon basin
where temperate and tropical forest dominate. Santa Cruz is the principal city
of the low country with a population of approximately 700,000.
The government of Bolivia consists of a directly elected president and a
bicameral congress. Since the military government stepped down in 1982,
Bolivia has maintained a stable democratic system with elections every four
years. The current president, Hugo Banzer, was elected by the Congress on
August 5, 1997, after no presidential candidate succeeded in winning a
majority of the votes in the general election held in June of 1997.
ECONOMY
The Bolivian economy has experienced continuous growth and relatively low,
stable inflation in recent years. This economic performance is generally
ascribed to the deregulation of key sectors of the economy, including oil and
gas, communications, transport and finance, and to foreign direct investment
which has occurred as part of the recent privatization of formerly government-
owned electricity, telecommunications, railways, aviation and oil and gas
companies. The country's privatization program has involved (i) the sale of
shares in government-owned entities in exchange for capital contributions to
the privatized entities, and (ii) the contribution of government-owned shares
in such privatized entities to trust funds established on behalf of all
Bolivians over the age of 21 at the end of 1995. In connection with this
program, the Company has entered into joint venture agreements with the
government mining company, Comibol, with respect to two properties. Summary
information on the Bolivian economy is set forth in the table below.
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
GDP Growth............................ 1.6% 4.7% 5.0% 3.7% 4.0%
GDP per Capita........................ $ 764 $ 791 $ 756 $ 812 $ 860
Inflation............................. 10.5% 9.3% 8.5% 12.6% 7.9%
Public Sector Deficit (non-financial)
as % of GDP.......................... 4.6% 6.5% 3.2% 2.3% 2.1%
Exports FOB (in millions)............. $ 774 $ 809 $1,124 $1,181 $1,326
Imports CIF (in millions)............. $1,131 $1,177 $1,196 $1,433 $1,635
Current Account Balance (% GDP)....... 7.8% 8.4% 3.6% 5.0% 5.2%
Total Investment (in millions)........ $ 794 $ 760 $ 794 $ 898 $1,173
Share of GDP (%)...................... 14.1% 13.3% 13.3% 13.7% 16.5%
Public Investment (in millions)....... $ 532 $ 481 $ 505 $ 524 $ 540
Share of GDP (%)...................... 9.4% 8.4% 8.5% 8.0% 7.6%
Private Investment (in millions)...... $ 262 $ 279 $ 288 $ 373 $ 632
Share of GDP (%)...................... 4.6% 4.9% 4.8% 5.7% 8.9%
</TABLE>
- --------
Source: Latin Finance
53
<PAGE>
The official monetary unit of Bolivia is the boliviano, which was introduced
in January of 1987 following the adoption in 1985 of a broad based reform
program known as the "New Economic Policy". In the mid-1980s, prior to the New
Economic Policy, Bolivia suffered from hyperinflation, declining foreign
investment, growing balance of payments deficits and a foreign exchange
shortage fueled in part by an increasing disparity between the official and
unofficial exchange rates. The New Economic Policy removed restrictions on
exports and imports, ended most price controls and subsidies, instituted a
freeze on public sector wages and subjected the public sector to rigorous cost
cutting. By 1986, inflation was under control and the International Monetary
Fund resumed stand-by assistance. During the period of the New Economic
Policy, the gap between the official exchange rate and the parallel unofficial
rate was bridged. On December 31, 1996, the exchange rate was 5.19 bolivianos
to one U.S. dollar compared to the exchange rate on December 31, 1995 of 4.94
bolivianos to one U.S. dollar. On June 30, 1997, the exchange rate was 5.23
bolivianos to one U.S. dollar; over the past year the boliviano has shown a
tendency to depreciate approximately US$0.01 every 15 days.
The boliviano is freely convertible in Bolivia at a single, public exchange
rate established by twice-weekly auctions held by the Bolivian Central Bank.
FOREIGN INVESTMENT AND TAX
Since the New Economic Policy, most restrictions on trade have been removed
or are in the process of being phased out. Currently, import levies stand at
ten percent for all items except capital goods, which are subject to a five
percent levy. In March of 1991, a new export code introduced further measures
to liberalize trade. In order to prevent transfer pricing and other tax
avoidance mechanisms, almost all foreign trade transactions require the filing
of an aviso de conformidad describing the terms of the underlying
transactions.
The 1990 Investment Law provides for unrestricted repatriation of capital,
freedom to import goods and services, equality under the law between foreign
and domestic companies, and the creation of "free trade zones".
Mining companies in Bolivia are subject to a 25 percent income tax. Taxable
income is determined in accordance with Bolivian generally accepted accounting
principles. However, earnings reinvested (for specified purposes) in Bolivia
are deductible in computing taxable profits. If the reinvested capital exceeds
retained profits, the excess may not be carried forward. Income from the
export of derivative products from precious metals which include Bolivian
added value is exempt from taxes under the Bolivian Mining Code.
Under the new Bolivian Mining Code, which came into effect on March 17,
1997, there is Complementary Mining Tax applicable to whomever carries out
mining activities, which would be payable if greater than the Bolivian income
tax. Mining activities are defined to include: prospecting and exploration;
mining or extracting minerals or metals; concentrating mine products; smelting
and refining; marketing of minerals and metals. The Complementary Mining Tax
is calculated by applying an aliquot to the taxable base. The aliquot of the
Complementary Mining Tax is a variable percentage (which fluctuates between
three percent and seven percent for precious stones and metals and between one
percent and five percent for other metallic minerals) indexed to the official
U.S. dollar market price for the relevant metal or mineral. The taxable base
is construed as the amount that results from multiplying the weight of the
fine content of the mineral or metal by its official U.S. dollar market price.
This tax is creditable against corporate income and is, in effect, a minimum
tax on mining companies. Manufacturing or processing involving minerals is not
subject to the Complementary Mining Tax.
Bolivian source income, including dividends, interest, management fees and
expenses charged to a Bolivian company by foreign affiliates is subject to a
withholding tax of 12.5 percent.
54
<PAGE>
Operating losses (as adjusted for inflation) may be carried forward and
deducted from taxable income indefinitely. However, if accrued losses exceed
50 percent of capital (including that of a branch) the capital must be
increased.
Bolivia assesses a 12.5 percent tax on profits of a branch of a foreign
corporation operating in Bolivia. The branch tax is calculated on the book
profits of the branch regardless of remittances or reinvestment of profits in
the branch. Book profits are deemed remitted 120 days after the end of the
fiscal year.
There is a 13 percent value added tax ("VAT") on all sales, including
mineral commodities, a five percent import duty on machinery and equipment and
a ten percent duty on imported raw materials and components. The VAT paid on
purchases is recoverable against VAT collected on Bolivian sales. Exports are
not subject to VAT. The exporter can offset the VAT credit arising from
purchases with domestic sales or can apply for a refund of import duties and
VAT paid on inputs and raw materials included in the cost of exported goods.
However, the refund of credits arising from imports is limited to 13 percent
of the total value of the exports and therefore is not recoverable during the
exploration phase.
MINING INDUSTRY
Bolivia produces a number of mineral commodities including tin, gold,
silver, lead, zinc, antimony, tungsten, copper and bismuth. The country has
long been a leading mineral and precious metals producer. Bolivia was
colonized in the early sixteenth century by Spaniards who arrived in search of
silver and gold. The extensive silver mining operations in Potosi which
developed under Spanish rule led to the region being described as the
"treasury of the Spanish empire". In the early Twentieth Century, tin became
the country's leading mineral export although in recent years the focus has
returned to gold, silver, lead and zinc. The country's principal mining
regions are the eastern part of Bolivia along the Brazilian border, and the
traditional mining areas of the Altiplano and Cordillera.
Recent regulatory reforms have resulted in increased exploration activities,
particularly with respect to precious metals. In the early 1990s, the
government reformed the land tenure system, reduced taxes on mining
operations, established equal treatment under the law between Comibol and
foreign companies in obtaining mineral concessions, and created a national
Mining Inventory Service which will maintain up-to-date information, including
maps, for exploration and mining exploration concessions.
MINING CONCESSIONS
Pursuant to the Bolivian constitution, all mineral deposits are the property
of the State. Mining concessions, which may be awarded by the government,
grant the holder, subject to the payment of patents, the real and exclusive
right to carry out prospecting, exploration, exploitation, concentration,
smelting, refining and marketing activities with respect to all mineral
substances located within a given concession. Individual mineral claims
consist of indivisible squares shaped like an inverted pyramid, whose lower
vertex is the center of the earth and whose surface area covers a total area
of 25 hectares. Mining concessions are comprised of no fewer than one and no
more than 2,500 adjacent squares. Mining concessions are distinct from the
surface rights which comprise traditional land ownership; holders of mining
concessions are entitled to explore and exploit a property and to use the
water found at the property. Expropriation or the establishment of easements
may not be legally carried out if the water supplies for a population are
interrupted or negatively affected.
Holders of mining concessions are obliged to pay an annual mining patent.
Co-owners are jointly and severally responsible for the patent payment. The
patent is progressive and fees are based on the number of years of existence
of the concession. Concessions established before the enactment of the new
Mining Code, which comprise an area of up to 1,000 mining claims, pay the
equivalent of $1.00
55
<PAGE>
per claim per year. Concessions established before the enactment of the new
Mining Code which comprise an area of more than 6,000 mining claims pay the
equivalent of $1.00 per claim per year for the first five years of the
existence of the concession; thereafter, the patent increases to the
equivalent of $2.00 per claim per year. Concessions established under the new
Mining Code pay the following: for the first five years of the existence of a
concession, the owner is required to pay the equivalent of $25.00 per square
per year; thereafter the patent increases to the equivalent of $50.00 per
square per year. All of the Company's Bolivian concessions were established
prior to enactment of the new Mining Code.
Mining concessions are liable to forfeiture when the corresponding annual
patent fails to be paid. Forfeiture is governed by law and does not require
any administrative or judicial declaration. When a concession has been
forfeited, the mining concession reverts to the State.
The Mining Code requires concession holders to minimize damage to surface
rights, to neighboring concessions and to the environment. Concession holders
are liable for damage or injury caused by their operations. Concession holders
are not obliged to remediate environmental damage caused prior to the
effectiveness of the Environmental Law or the date on which the mining
concession was obtained, if the concession was granted at a later date. On
becoming the owner of a concession, the concession holder must carry out an
environmental audit to determine the extent of any environmental damage. If an
environmental audit is not performed, the concession holder assumes the
responsibility to mitigate all environmental damage. Environmental liabilities
incurred under this new regime survive the existence or ownership of the
relevant concession.
In 1992, the Bolivian government passed environmental legislation that
establishes a comprehensive scheme for the initiation of a national
environmental policy to protect the environment, promote sustainable
development, promote the preservation of biological diversity and promote
environmental education. Few environmental regulations specifically applicable
to mineral exploration companies in Bolivia have been proclaimed to date. At
present, concession holders must maintain waterways running through their
concessions in their unspoiled state and concession holders must employ
exploration and development techniques that will minimize environmental
damage. Under Bolivia's environmental regulations, environmental impact
assessments are required. In practice, foreign mining companies operating in
Bolivia generally adhere to U.S. and European environmental standards for
mining and exploration.
LABOR MARKET
Bolivia has a large pool of unskilled and, in the mining sector, semi-
skilled labor, but a relative shortage of skilled labor and managerial
expertise overall. One percent of the payroll tax is used for worker training.
A large portion of the labor force that is engaged in wage employment is also
unionized, although union participation is not mandatory. Strikes, which have
decreased greatly since the early 1980s, are not forbidden. However, before a
strike may be called, all legally-mandated alternatives, such as negotiation,
mediation and conciliation, must have been exhausted. Collective agreements
are very rare, as negotiations are generally carried out between an individual
company's union and management.
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MANAGEMENT
DIRECTORS
Set forth below are the names, ages, positions with the Company, business
experience and directorships in other companies of the directors of the
Company. Apex Limited has no executive officers. Under the Companies Law (1995
Revision) of the Cayman Islands, directors are authorized to bind the
corporation that they represent.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Michael Comninos......................................... 66 Director
Harry M. Conger.......................................... 67 Director
Eduardo S. Elsztain...................................... 37 Director
David Sean Hanna......................................... 36 Director
Ove Hoegh................................................ 58 Director
Keith R. Hulley.......................................... 57 Director
Thomas S. Kaplan......................................... 34 Chairman, Director
Richard Katz............................................. 55 Director
Paul Soros............................................... 70 Director
</TABLE>
Michael Comninos. Mr. Comninos has been a director of the Company since
April of 1997. An international financier, Mr. Comninos joined N.M. Rothschild
& Sons in 1954, becoming a Partner in its corporate finance group in 1965,
and, later, upon the firm's incorporation as N.M. Rothschild & Sons Limited in
1970, a director. Prior to his retirement in 1991, Mr. Comninos served as the
head of the firm's investment management division, its credit division and for
ten years served as the chairman of N.M. Rothschild & Sons (C.I.) Ltd., the
firm's merchant banking affiliate in Guernsey. Mr. Comninos has served as a
director of numerous listed real estate and investment funds and is currently
a member of the investment committee of the East European Food Fund, a
Luxembourg investment fund managed by Jupiter Asset Management Bermuda
Limited. Mr. Comninos is a member of the Institute of Investment Management
and Research, The Institute of Bankers, The Institute of Chartered Secretaries
and Administrators and the Association of Corporate Treasurers.
Harry M. Conger. Mr. Conger has been a director of the Company since April
of 1997. A leading figure in the international mining community, Mr. Conger
has 42 years of industry experience, rising from a position as shift boss to
Chairman and Chief Executive Officer of Homestake Mining Company
("Homestake"), a New York Stock Exchange listed-company. He served as Chairman
of Homestake from 1982 and retired from the Chief Executive Officer position
in May 1986, remaining as Chairman. Over the course of his career, Mr. Conger
has been involved in gold, silver, lead, zinc, uranium, sulfur, coal, iron ore
and copper mining. He has been extensively involved in numerous major project
developments, with both on-site and broader supervisory responsibility,
including the expansion, at a cost of $170 million, of an iron ore mine to 25
million tons of material mined per year, greenfield development of a large
surface coal mine moving 20 million tonnes per year at a cost of $165 million,
and development of a new gold mine with new technology at a cost of $165
million. Mr. Conger is a former Chairman of the American Mining Congress, the
World Gold Council and is a member of the National Academy of Engineering. He
currently serves on the boards of directors of ASA Limited, a closed-end
portfolio of gold stocks listed on the New York Stock Exchange, and Pacific
Gas and Electric Company (PG&E), a San Francisco based utility company. He
recently retired from Baker Hughes Inc., an oil and mining services company
based in Houston, Texas under their ten year tenure rule; and Cal Mat Company
of Los Angeles, an integrated producer of cement, construction aggregates,
pre-mixed concrete and asphalt mixes, and real estate developer. Mr. Conger
retired as Chief Executive Officer of Homestake in February of 1997.
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Eduardo S. Elsztain. Mr. Elsztain has been a director of the Company since
its inception in March of 1996 and until the Offering was a director of Apex
LDC. He is also a director of, and an indirect shareholder in, Silver
Holdings. See "Principal Shareholders". Mr. Elsztain is the founder of
Consultores Asset Management S.A. ("Consultores"), a leading securities
portfolio management firm in Buenos Aires, Argentina formerly known as
Consultores de Inversiones Bursatiles y Financiera S.A. He has served as the
President of Consultores since 1989. Mr. Elsztain is currently the Chairman of
the board of directors of IRSA Inversiones y Representaciones S.A., an
Argentine real estate company listed on the Buenos Aires stock exchange and on
the New York Stock Exchange. He is also the Chairman of the board of directors
of Cresud S.A.C.I.F. y A. and of SAMAP Sociedad Anonima Mercado de Abasto
Proveedor, companies listed on the Buenos Aires Stock Exchange. Mr. Elsztain
studied Economics at the University of Buenos Aires.
David Sean Hanna. Mr. Hanna has been a director of the Company since its
inception in March of 1996 and until the Offering was a director of Apex LDC.
See "Principal Shareholders" and "Certain Transactions". Mr. Hanna is a
specialist in corporate law with the Bahamas law firm of Arthur D. Hanna &
Co., of which he is a Partner. Mr. Hanna is also a director of each of (i)
Andean, (ii) ASC Peru, (iii) ASC Partners, (iv) Cordilleras Bahamas, (v)
Cordilleras Cayman, (vi) Litani LDC, and (vii) Consolidated. See "Corporate
Structure". Mr. Hanna was called to the Bar of England and Wales in 1983. He
holds an LLB (Honours) from the University of Buckingham, England.
Ove Hoegh. Mr. Hoegh has been a director of the Company since April of 1997.
A member of the board of directors until July of 1997 of Leif Hoegh & Co. A/S,
a family owned shipping business with more than $1 billion in assets, Mr.
Hoegh has more than 30 years of experience in the international shipping
industry. Mr. Hoegh began his career in commercial fishing, and joined the
board of directors of Leif Hoegh & Co. in 1966. From 1970 to 1982, he served
as Chief Operating Officer and Chief Executive Officer of Leif Hoegh & Co.
Since 1982, he has served as the senior partner of Hoegh Invest, a family
investment company with a diversified portfolio of technology, oil and gas and
real estate holdings. In addition, Mr. Hoegh served for eight years as a
member of the board of directors and executive committee of Brown Boveri
(Norway), and also has served on the shareholders' councils of Esso Norway,
Den Norske Creditbank, and Det Norske Veritas. A member of the board of the
Energy Policy Foundation of Norway, Mr. Hoegh is a former member of the
steering committee of the International Maritime Industry Forum, a former Vice
Chairman of the executive committee of the Independent Tanker Owners'
Association, and served for five years as a member of the Harvard Business
School Visiting Committee. Mr. Hoegh is a graduate of the Royal Norwegian
Naval Academy and holds an M.B.A. from Harvard University.
Keith R. Hulley. Mr. Hulley has been a director of the Company since April
of 1997 and, upon consummation of the Offering, will become a director of Apex
LDC. A mining engineer with more than 30 years experience, Mr. Hulley has
served as the Executive Vice President and Chief Operating Officer of Apex
Corporation since its formation in October of 1996. From early 1991 until he
joined the Company, he served as a member of the board of directors and the
Director of Operations at Western Mining Holdings Limited Corporation
("Western Mining"), a publicly-traded international nickel, gold and copper
producer. At Western Mining, Mr. Hulley's responsibilities included
supervising on a global basis strategic planning, mine production,
concentrating, smelting, refining and sales. During this period, Western
Mining produced on an annual basis approximately 90,000 tonnes of nickel,
700,000 ounces of gold, 80,000 tonnes of refined copper and 1,500 tonnes of
uranium oxide. Mr. Hulley also supervised the development and operation of
Western Mining's Mount Keith open-pit nickel mine, a $450 million mining
project. Prior to joining Western Mining, Mr. Hulley was the President, Chief
Executive Officer and Chairman of the board of directors of USMX Inc., a
publicly-traded precious-metals exploration company. Mr. Hulley has also
served as the President of the minerals division and Senior Vice President for
Operations of Atlas Corporation, where he was in charge of mining
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exploration, development and production. Previously he was Vice President of
Mining and Development of the U.S. division of BP Minerals, Inc. Over the
course of his career, Mr. Hulley has worked as a miner and shift supervisor in
the gold mines of South Africa, Mine Operation Superintendent of Kennecott
Corporation's Bingham Canyon mine which processed 100,000 tonnes of ore per
day, and project manager of the early phase of the Ok Tedi exploration and
development projects in Papua New Guinea. A member of the American Institute
of Mining and Metallurgical Engineers and a Fellow of the Australian Institute
of Mining and Metallurgy, Mr. Hulley holds a B.S. in Mining Engineering from
the University of Witwatersrand and an M.S. in Mineral Economics from Stanford
University.
Thomas S. Kaplan. Mr. Kaplan has been the Chairman of the board of directors
of the Company since its inception in March of 1996 and is a director and was
the founder of Apex LDC and its predecessor, Apex Bermuda, which contributed
substantially all of its assets to Apex LDC in December of 1994. Mr. Kaplan is
a director of Litani LDC and a principal shareholder in Consolidated.
Consolidated is a shareholder of Apex Limited, and Litani LDC is a shareholder
of both Apex Limited and Apex LDC. See "Principal Shareholders". Mr. Kaplan
also serves as a director of each of the Company's subsidiary entities, except
for Cordilleras Bahamas, Asgat Mining, Kumushtak Mining and Kumushtak
Management Company. For the past ten years, Mr. Kaplan has served as an
advisor to private clients, trusts and fund managers in the field of strategic
forecasting, an analytical method which seeks to identify and assess global
trends in politics and economics and the way in which such trends relate to
international financial markets, particularly in the developing markets of
Asia, Latin America, the Middle East and Africa. Mr. Kaplan has managed
numerous venture capital investments and portfolio investment accounts, and is
a principal of several entities specializing in direct and portfolio
investments, including Feder Information Services Corporation, Tigris
Financial Group Ltd., FMS Partners L.P. and Bridge Capital Group L.P. Mr.
Kaplan also serves as a director of African Plantations Corporation LDC, a
Cayman Islands limited duration company which owns and operates coffee and tea
plantations in eastern and southern Africa. Mr. Kaplan was educated in
Switzerland and England and holds B.A., M.A., and D. Phil. degrees in History
from the University of Oxford.
Richard Katz. Mr. Katz has been a director of the Company since April of
1997. An investment banker specializing in international finance, Mr. Katz was
a director of N.M. Rothschild & Sons Limited, London, England from 1977 until
March 1993, having joined them in 1969; he was also a managing director of
Rothschild Italia S.p.A., Milan, Italy from its inception in 1989 until
December 1993. Mr. Katz has been a supervisory director of Quantum Fund N.V.,
a Netherlands Antilles investment fund, or one of its subsidiaries, since
1986. He is also a member of the board of supervisory directors of a number of
other investment funds affiliated with Mr. George Soros, including Quasar
International Fund N.V. and Quantum Emerging Growth Fund N.V., and is the
Chairman of the board of supervisory directors of Quota Fund N.V., and the
Chairman of the boards of advisors of Quantum Realty Fund Limited, Asian
Infrastructure Development Fund Ltd., and Quantum Industrial Holdings Ltd., an
indirect shareholder of the Company. See "Principal Shareholders".
Paul Soros. Mr. Soros has been a director of the Company since its inception
in March of 1996 and, until the Offering, was a director of Apex LDC.
Principally involved in private investment activities during the past five
years, Mr. Soros is a director of, and an indirect shareholder in, Silver
Holdings. Mr. Soros is a member of the Investment Advisory Committee of
Quantum Industrial. Quantum Industrial is the largest shareholder in Silver
Holdings. See "Principal Shareholders" and "Certain Transactions". Mr. Soros
is involved in the monitoring of the Quantum Group of Fund's shareholding in
Companhia Vale do Rio Doce S.A. ("CVRD") of Brazil, its participation in
Global Power Investments, L.P., a joint venture with the International Finance
Corporation and GE Capital Corporation to develop power projects in emerging
economies, serves on the Board of Directors of TVX Gold Inc., and is an active
advisor to the Company. Mr. Soros is the founder and former president of Soros
Associates, an international engineering firm specializing in port
development, offshore terminal and material handling
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projects for the mining industry and other basic industries. Soros Associates
was involved in projects in more than 80 countries, acting on behalf of
consortia including USX Corporation, The Broken Hill Proprietary Company
Limited, Alcan Aluminium Limited and Aluminium Company of America, and was
involved in projects in a majority of the largest mineral ports in the world.
Mr. Soros has served on the Review Panel of the President's Office of Science
and Technology and the U.S.-Japan Natural Resources Commission. He received
the Outstanding Engineering Achievement Award of the National Society of
Professional Engineers in 1989. Mr. Soros holds a Masters of Mechanical
Engineering degree from the Polytechnic Institute of Brooklyn and is a
licensed professional engineer in New York and numerous other states. In
addition, he holds several patents in material handling and offshore
technology, and is the author of over 100 technical articles.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has established an Audit Committee of its board of directors.
The Audit Committee will review the accounting and auditing principles and
procedures of the Company with a view to providing for the safeguard of the
Company's assets and the reliability of its financial records, recommending to
the board of directors the engagement of the Company's independent
accountants, reviewing with the independent accountants the plans and results
of the auditing engagement, and considering the independence of the Company's
accountants. Messrs. Comninos, Katz and Hoegh currently serve on the Audit
Committee.
A Compensation Committee has also been established to review the Company's
compensation policies and supervise the Company's Share Option Plans. See
"Executive Compensation--Share Option Plans". Messrs. Conger and Soros
currently serve on the Compensation Committee.
The Company's board of directors is divided into three classes designated
Class I, Class II and Class III. Each class of directors consists of one-third
of the total number of directors constituting the entire board and
approximately one-third of the members of the board are elected at each annual
meeting of stockholders. The Class I directors are Messrs. Conger, Katz and
Comninos; the Class II directors are Messrs. Hulley, Soros and Hoegh; and the
Class III directors are Messrs. Kaplan, Elsztain and Hanna. The term of the
Class I directors will end on the date of the 1998 annual meeting of
stockholders. The term of the Class II directors will end on the date of the
1999 annual meeting of stockholders. The term of the Class III directors will
end on the date of the 2000 annual meeting of stockholders. If the number of
directors is changed, any increase or decrease in the number of directors will
be apportioned among the classes so as to maintain the number of directors in
each class as nearly equal as possible, and any additional directors of any
class elected to fill a vacancy resulting from an increase in such class will
hold office for a term that coincides with the remaining term of that class.
Each director will hold office until the annual meeting for the year in which
his term expires and until his successor shall be elected, subject, however,
to his prior death, resignation, retirement or removal from office. Any
vacancy occurring in the board for any reason will be filled by a vote of the
majority of the directors then in office, even if less than a quorum, or by a
sole remaining director. Any director elected to fill a vacancy will hold
office for a term that coincides with the term of the class to which such
director was elected.
EXECUTIVES AND KEY PERSONNEL
Apex Corporation
As discussed above, the Company has no executive officers. The Company has
entered into a Management Services Agreement dated as of October 22, 1996,
pursuant to which the Company has
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engaged Apex Corporation to provide a broad range of corporate management and
advisory services. See "Certain Transactions".
Thomas S. Kaplan. Mr. Kaplan serves as the Chairman of the board of
directors of the Company and President and Chief Executive Officer of Apex
Corporation. See "Management--Directors".
Keith R. Hulley. Mr. Hulley serves as the Executive Vice President and Chief
Operating Officer of Apex Corporation and as a director of Andean Silver
Corporation LDC. See "Management--Directors".
Marcel F. DeGuire. Mr. DeGuire serves as Vice President of Development of
Apex Corporation and as a director of Apex Asia. Prior to joining Apex in
August of 1996, he served as Vice President of Project Development and
Regional Director for the jurisdictions formerly part of the Soviet Union of
Newmont Gold Company. During this period, Mr. DeGuire acted as Project Leader
of Newmont Gold's Muruntau large scale open pit heap leach gold project in
Uzbekistan. This facility processes 37,800 tonnes of ore per day and was built
at a cost of $225 million. Mr. DeGuire was directly involved in the joint
venture negotiations leading up to the project, the subsequent feasibility
studies, completion of construction and the commencement of mining operations.
In addition to his work in Central Asia, Mr. DeGuire has been responsible for
numerous feasibility analyses, including the Yanacocha gold project in Peru,
on behalf of Newmont Mining Corp. During his almost 20 years with Newmont
Mining, Mr. DeGuire worked as resident manager of a uranium mine and rose to
President of several of Newmont Mining's subsidiaries and became a leading
expert in environmental management and mine reclamation, serving as Newmont
Mining's Vice President of Environmental Affairs and Research and Development
as well as other senior executive positions. Mr. DeGuire is a member of the
American Institute of Mining, Metallurgical and Petroleum Engineers, the
Canadian Institute of Metallurgy, the Mining and Metallurgical Society of
America and has published numerous articles on mineral processing and
environmental matters. Mr. DeGuire holds a B.S. in Metallurgical Engineering
from Michigan Technological University and M.S. in Metallurgical Engineering
from the University of Nevada, Reno.
Gregory G. Marlier. Mr. Marlier serves as the Vice President of Finance and
Chief Financial Officer of Apex Corporation. From August of 1991 until
November of 1996, when he joined Apex Corporation, Mr. Marlier was the
Treasurer and Chief Financial Officer of Cambior USA, Inc., the mineral
resources exploration and development subsidiary of Cambior, Inc., an
international mining company based in Montreal, Canada. Mr. Marlier has almost
25 years of mining industry finance experience, serving as Chief Financial
Officer and Corporate Secretary of Westmont Mining, Inc. (a predecessor of
Cambior USA), Controller and Corporate Secretary of New Castle Energy
Corporation and director of administrative services of Dorchester Coal
Company. Mr. Marlier has also worked with Northern Coal Company and
Consolidation Coal Company (Consol). A member of the Association of Mining
Financial Professionals and National Mining Association, Mr. Marlier holds a
B.S. in Business Administration and Accounting from John Carroll University,
Cleveland, Ohio.
Dr. Larry J. Buchanan. Dr. Buchanan serves as Chief Geologist to the Company
and is a principal advisor to its international operations. Dr. Buchanan is a
noted exploration geologist with a reputation as one of the industry's leading
experts on epithermal deposits, on which he has written several definitive
texts. His analysis of such deposits has given rise to the industry paradigm
known as "The Buchanan Model". Dr. Buchanan has published eight geological
texts, played a key role in identifying several multi-million ounce gold
deposits, and developed implementation programs for numerous currently
producing mines. His consulting clients have included Cyprus Minerals Company,
FMC Corporation, Total Resources, Inc. and Fischer-Watt Gold Co. Inc.
("Fischer-Watt"). Dr. Buchanan is a shareholder and director of Begeyge Minera
Ltda. Dr. Buchanan holds a B.Sc. and an M.Sc. in Geological Engineering and
Ph.D in Economic Geology from the Colorado School of Mines.
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Douglas M. Smith, Jr. Mr. Smith serves as Vice President of Exploration for
Apex Corporation. Mr. Smith began his career with Minas de San Luis, S.A.,
where he was District Geologist at the Taylotita mine, one of the largest
epithermal silver-gold deposits in the world, and became Chief Geologist at
the Company. Prior to joining Apex, Mr. Smith was employed for almost 20 years
by ASARCO Incorporated ("ASARCO"), which he joined in 1977. During his tenure
at ASARCO, he held numerous positions including Manager of the Rocky Mountain
Exploration Division and, most recently, Chief Geologist of the Latin American
Exploration Division, where he was responsible for overseeing all aspects of
exploration and project evaluation in Spanish-speaking countries of the
Americas, including Bolivia, Peru, Chile and Mexico. Mr. Smith left ASARCO in
1997 to join Apex Corporation. Mr. Smith holds a B.S. in Geology from the
University of New Mexico.
Leni S. Berliner. Ms. Berliner serves as Commercial Development Manager for
Apex Corporation. Prior to joining the Company in the fall of 1996, Ms.
Berliner was the Chief Administrator-South America for Andean, a position she
had held since Andean's inception in 1994; prior to the formation of Andean,
she represented Andean Bahamas in a similar capacity starting in mid-1993.
Before joining the Company, Ms. Berliner was a private sector development
analyst and management consultant for ten years devising country investment
strategies for, among others, the Inter-American Investment Corporation, the
investment arm of the Inter-American Development Bank. Ms. Berliner is a
specialist in Latin American business and banking, and has worked extensively
throughout the region and in other emerging markets. She holds a B.A. with
honors from the University of Massachusetts, Amherst, and an MPIA in Economic
and Social Development from, and was a Public Service Fellow at, the
University of Pittsburgh.
Latin America
Johnny Delgado Achaval. Mr. Delgado serves as the Chief Executive Officer of
Andean. Mr. Delgado has over 30 years experience in the South American mining
industry, including 15 years as President, and principal shareholder, of
Mintec, one of Bolivia's leading mining consulting firms, and the agent for
Andean Silver Corporation LDC since the formation of its Bolivian branch in
1994. Mr. Delgado founded Mintec in 1981. Prior to the formation of Mintec,
Mr. Delgado worked with International Mining Company from 1966 to 1981, where
he served initially as Chief of Exploration and Project Manager and then as
Technical Vice President of its tungsten mining holding company, Estalsa
Boliviana S.A. Both before and during his tenure at Mintec, Mr. Delgado was
involved in all aspects of international mining, including the direction of
major exploration efforts in Bolivia, Peru, Brazil, Ecuador, Argentina and
Chile, as well as management of mining operations in Bolivia. Mr. Delgado has
taught mining engineering, mining finance and mine geology. He is a member of
the Geological Society of Bolivia, the Society of Bolivian Engineers and the
Mining Club.
Felipe de Lucio Pezet. Mr. De Lucio serves as the General Manager of ASC
Peru. Mr. de Lucio is a mining engineer with over 30 years experience in the
Peruvian mining industry. Over the course of his career, Mr. de Lucio has been
the Head of Mining Engineering for Cerro De Pasco Corporation, the Deputy
Manager of Operations for the Compania Minera Caylloma S.A., the General
Manager of Compania Minera Colquirrumi S.A., the Manager of Operations for
Sociedad Minera Austria Duvaz S.A., and the Chief Executive Officer of Hierro
Peru, S.A. In addition, he has served on the Board of Directors of Sociedad
Minera Austria Duvaz S.A., the Corporacion Financiera de Desarrollo, S.A.,
Hierro Peru S.A., Banco Minero del Peru, S.A., Compania Mercantil de
Industrial Inga and Empresa Minera del Centro del Peru. In 1990, Mr. de Lucio
served on the Advisory Committee to the Minister of Energy and Mines and acted
as the head of the council responsible for the design and implementation of
the Government of Peru's Mining Development Plan. Mr. de Lucio is a former
President of the Mining Engineers' Association. He holds mining and
engineering degrees from National University of Engineering in Lima, as well
as the University of Arizona and the Michigan Technological University.
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Jon Gelvin. Mr. Gelvin serves as Chief Geologist for Cordilleras Mexico,
Cordilleras Bahamas and Cordilleras Honduras and is the Company's chief
representative in Central America. Mr. Gelvin has 30 years experience as a
professional geologist/engineer and mining exploration consultant in South
America and Central America. From 1976 to 1989, Mr. Gelvin served as a mining
exploration consultant in all of Central America and South America, with the
exception of Uruguay and Paraguay. In 1990, Mr. Gelvin joined Fischer-Watt to
supervise a Honduran mining exploration project; he left Fischer-Watt in 1993.
He joined Cordilleras Mexico in 1994 as an explorer, and became Chief
Geologist for CMZ in January of 1997. Mr. Gelvin is a shareholder and director
of Begeyge Minera Ltda. Mr. Gelvin holds a B.Sc. in petroleum engineering from
the Colorado School of Mines.
Asia
Dekel Golan. Mr. Golan serves as the President and a director of Apex Asia.
Mr. Golan is the founder and manager of MADA Holdings and Management Ltd., a
limited liability company organized and existing under the laws of Israel,
engaged in business development operations, including the promotion of
chemicals, mining and agricultural ventures. Mr. Golan served as head of
Competitive Intelligence and Business Development for Dead Sea Bromine Group,
the world's largest bromine producer and a subsidiary of Israel Chemicals
Ltd., Israel's leading mineral exploitation company. Mr. Golan holds a B.Sc.
in General Science from the Tel Aviv University.
Alexander Becker. Mr. Becker serves as Apex Asia's principal advisor with
respect to mining exploration, development and production in Kyrghyzstan. Mr.
Becker is an experienced geologist with extensive mining experience. Prior to
emigrating from Russia to Israel in 1991, where he became a senior scientific
researcher for the Ramon Science Center at Ben Gurion University, Mr. Becker
served as Geologist in Chief of the Northern Kyrghyzstan Geological Expedition
at the Kyrghyzstan Ministry of Geology in Frunze. Mr. Becker has authored
numerous papers and reports on Kyrgyzstani geology, with particular regard to
the Northern Tien Shan region. He holds an M.Sc. in Geology from the Tomsk
State University and a Ph.D. in Geology, specializing in the Northern Tien
Shan region, from the Academy of Science in Frunze, Kyrghyzstan.
Boris Miletsky. Mr. Miletsky serves as Vice President of Apex Asia, and is
Apex Asia's principal advisor with respect to mining exploration, development
and production in Mongolia. Prior to emigrating from Russia to Israel in 1993,
Mr. Miletsky served as the Managing Director of the Russian concern
Geologodzevska, the largest geological entity active in Mongolia, and as the
Soviet Ministry of Geology's representative to Mongolia. At Geologodzevska,
Mr. Miletsky supervised more than 3,000 workers, and served as the company's
chief negotiator with the governments of Mongolia and the Russian Federation.
Mr. Miletsky played a key role in negotiating Apex Asia's joint venture with
Mongolrostvetmet. Mr. Miletsky holds an M.Sc. in Geological and Mineral
Sciences from the Academy for the Geological Sciences in Kazakhstan.
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EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Directors do not receive any cash compensation from the Company for serving
on the board of directors, although each non-employee director (other than Mr.
Conger) received, in April of 1997 options to purchase 6,250 Ordinary Shares
at a price of $8.00 per share and each non-employee director (including Mr.
Conger) is eligible to receive grants of Options under the Non-employee
Director Share Option Plan. See "Share Option Plans--Non-employee Directors
Share Option Plan". The Company has agreed to reimburse the directors for all
reasonable out-of-pocket costs incurred by them in connection with their
services to the Company. Mr. Conger received options to purchase 25,000
Ordinary Shares for certain consulting services performed for the Company and
options to purchase 3,125 Ordinary Shares for being a member of the Company's
Development Committee, all of which options are exercisable at a price of
$8.00 per share. The options for the 25,000 Ordinary Shares vest ratable over
four years with the first tranche vesting in October 1996.
COMPENSATION OF OFFICERS
The following table sets forth certain information with respect to the
annual compensation paid by the Company during the fiscal year ended December
31, 1996 to the Chief Executive Officer of Apex Corporation and the four other
most highly compensated executive officers and certain other officers of the
Company:
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
---------------- ------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS COMPENSATION
--------------------------- -------- ------- ------------ ------------
<S> <C> <C> <C> <C>
Thomas S. Kaplan................ $120,625 -- -- --
Chairman and Chief Executive
Officer, Apex Corporation (1)
Keith R. Hulley................. 56,250 -- 125,000 $93,167
Executive Vice President and
Chief Operating Officer, Apex
Corporation(2)
Marcel F. DeGuire............... 67,500 -- 62,500 --
Vice President of Development,
Apex Corporation(3)
Gregory G. Marlier.............. 20,833 -- 31,250 --
Vice President of Finance and
Chief Financial Officer, Apex
Corporation(4)
Douglas M. Smith Jr. ........... -- -- -- --
Vice President of Exploration,
Apex Corporation(5)
Johnny Delgado Achaval.......... 25,000 -- -- --
Chief Executive Officer, Andean
ASC (6)
Dekel Golan..................... 120,000 -- -- --
President, Apex Asia(7)
Larry J. Buchanan............... 70,700 $10,000 37,500 --
Chief Geologist, Apex
Corporation
Leni S. Berliner................ 80,000 5,000 -- --
Manager Commercial Development,
Apex Corporation(8)
Felipe de Lucio Pezet
Manager ASC Peru(9)............ 66,000 7,500 -- --
Kerry A. McDonald............... 76,000 -- -- --
Manager, Cordilleras Mexico(10)
</TABLE>
- --------
(1) Effective April 1, 1997, Mr. Kaplan's annual base salary is $240,000.
(2) Mr. Hulley joined the Apex group of companies on October 1, 1996. His
annual base salary is $225,000. The $93,167 of other compensation was for
taxable moving expenses and tax reimbursement.
(3) Mr. DeGuire joined the Apex group of companies on August 19, 1996. His
annual base salary is $180,000.
(4) Mr. Marlier joined Apex Corporation on November 1, 1996. His annual base
salary is $125,000.
64
<PAGE>
(5) Mr. Smith joined Apex Corporation on March 7, 1997. His annual base salary
is $120,000.
(6) Mr. Delgado Achaval joined Andean on November 1, 1996. His annual base
salary is $125,000. He also receives an additional $25,000 in annual
compensation in lieu of Company benefits.
(7) Mr. Golan has served as the President of Apex Asia since December 21,
1994. His annual base salary is $120,000. Mr. Golan is also compensated
for his services to the Company through payments to two companies that he
owns or otherwise controls (i) Mada Limited, and (ii) MADA Holdings &
Management Ltd.
(8) On January 1, 1997, Ms. Berliner became Manager of Commercial Development
for Apex Corporation. Her annual base salary is $80,000.
(9) Mr. de Lucio Pezet joined ASC Peru on March 6, 1995. His annual base
salary is $72,000.
(10) Mr. McDonald resigned from his position as Manager of Cordilleras
Honduras in April of 1997. Currently, Mr. McDonald serves as a consultant
to the Company's subsidiaries in Mexico.
The following table contains further information concerning the share
options grants made to each of the officers of Apex Corporation during the
fiscal year ended December 31, 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
SHARE PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(4)
-------------------------------------------- ---------------------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE OR
OPTIONS IN FISCAL BASE PRICE EXPIRATION
GRANTED(1) YEAR(2) ($/SH)(3) DATE 5% 10%
---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Keith R. Hulley......... 125,000 44.44 $8.00 9/2/06
Marcel F. DeGuire....... 62,500 22.22 8.00 8/5/06
Gregory G. Marlier...... 31,250 11.11 8.00 10/2/06
Larry J. Buchanan....... 37,500 13.33 8.00 9/1/06
</TABLE>
- --------
(1) All options granted in 1996, except for those granted to Dr. Buchanan,
vest ratably over four years, with the first tranche vesting on the date
of grant. The options granted to Dr. Buchanan vest ratably over three
years, with the first tranche vesting on the date of grant.
(2) Based on 281,250 options granted to employees in fiscal 1996.
(3) All share options were granted with exercise prices of $8.00 per share.
(4) These amounts are based on compounded annual rates of share price
appreciation of five and ten percent over the 10-year term of the options,
as mandated by rules of the Securities and Exchange Commission, and are
not indicative of expected share price performance. Actual gains, if any,
on share option exercises are dependent on future performance of the
overall market conditions, as well as the option holders' continued
employment throughout the vesting period. The amounts reflected in this
table may not necessarily be achieved or may be exceeded. The indicated
amounts are net of the option exercise price but before taxes that may be
payable upon exercise.
65
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
SHARES
ACQUIRED NUMBER OF VALUE OF
ON VALUE SECURITIES UNDERLYING UNEXERCISED
EXERCISE REALIZED UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
NAME (#) ($) FISCAL YEAR-END AT FISCAL YEAR-END *
- ---- -------- -------- ------------------------- -------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
Keith R. Hulley......... -- -- 31,250 93,750 -- --
Marcel F. DeGuire....... -- -- 15,625 46,875 -- --
Gregory G. Marlier...... -- -- 7,813 23,437 -- --
Larry J. Buchanan....... -- -- 12,500 25,000 -- --
</TABLE>
- --------
* Computed based upon a fair market value of $8.00 per share on December 31,
1996 as determined by the Company.
EMPLOYMENT AGREEMENTS
The Company and Keith Hulley, a director of the Company, entered into an
agreement on September 2, 1996 with respect to Mr. Hulley's employment as
Executive Vice President and Chief Operating Officer of Apex Corporation.
Pursuant to such employment agreement, the Company, through Apex Corporation,
will pay Mr. Hulley an annual salary of $225,000, plus a performance-based
bonus starting in 1998. In addition, the employment agreement provides that
Mr. Hulley is eligible to participate in the Company's and Apex Corporation's
employee benefit plans, including the Employee Share Option Plan pursuant to
which Mr. Hulley received options to purchase 125,000 Ordinary Shares. Twenty-
five percent of the options vested on appointment, the remaining 75 percent
vest over the three-year period ending September 2, 1999 at a rate of 25
percent per annum. The employment agreement, which may be terminated for cause
by the Company at any time, contains a severance arrangement that entitles Mr.
Hulley to receive his existing salary and all benefits for one year from the
date of termination if he is terminated, other than for cause, at any time
within three years from the date of the employment agreement. The employment
agreement also contains a non-compete covenant with a term of two years after
the termination of Mr. Hulley's employment.
Marcel DeGuire, Vice President of Project Development of Apex Corporation,
and the Company entered into an employment agreement on August 1, 1996.
Pursuant to such employment agreement the Company, through Apex Corporation,
will pay Mr. DeGuire an annual salary of $180,000. In addition, the employment
agreement provides that Mr. DeGuire is eligible to participate in the
Company's employee benefit plans, including the Employee Share Option Plan
pursuant to which Mr. DeGuire received options to purchase 62,500 Ordinary
Shares. Twenty-five percent of the options vested on appointment, the
remaining 75 percent vest over the three-year period ending August 1, 1999 at
a rate of 25 percent per annum. The employment agreement, which may be
terminated for cause by the Company at any time, contains a severance
arrangement that entitles Mr. DeGuire to receive his existing salary and all
benefits for one year from the date of termination if he is terminated, other
than for cause, at any time within three years from the date of the employment
agreement. The employment agreement also contains a non-compete covenant with
a term of two years after the termination of Mr. DeGuire's employment.
66
<PAGE>
Gregory Marlier, Vice President of Finance and Chief Financial Officer of
Apex Corporation, and the Company entered into an employment agreement on
October 2, 1996. Pursuant to such employment agreement the Company, through
Apex Corporation, will pay Mr. Marlier an annual salary of $125,000, plus a
performance-based bonus starting in 1998. In addition, the employment
agreement provides that Mr. Marlier is eligible to participate in the
Company's employee benefit plans, including the Employee Share Option Plan
pursuant to which Mr. Marlier received options to purchase 31,250 Ordinary
Shares. Twenty-five percent of the options vested on appointment, the
remaining 75 percent vest over the three-year period ending July 24, 1999 at a
rate of 25 percent per annum. The employment agreement, which may be
terminated for cause by the Company at any time, contains a severance
arrangement which entitles Mr. Marlier to receive his existing salary and all
benefits for one year from the date of termination if he is terminated, other
than for cause, at any time within three years from the date of the employment
agreement. The employment agreement also contains a non-compete covenant with
a term of two years after the termination of Mr. Marlier's employment.
Douglas Smith, Vice President of Exploration of Apex Corporation, and the
Company entered into an employment agreement on January 23, 1997. Pursuant to
such employment agreement the Company, through Apex Corporation, will pay Mr.
Smith an annual salary of $120,000. In addition, the employment agreement
provides that Mr. Smith is eligible to participate in the Company's employee
benefit plans, including the Employee Share Option Plan pursuant to which Mr.
Smith received options to purchase 31,250 Ordinary Shares. Twenty-five percent
of the options vested on appointment, the remaining 75 percent vest over the
three-year period ending January 23, 2000 at a rate of 25 percent per annum.
The employment agreement also contains a confidentiality covenant with a term
of two years after the termination of Mr. Smith's employment.
SHARE OPTION PLANS
The Company has established two Share option plans; one for officers,
employees, consultants and agents of the Company and its subsidiaries, the
other for non-employee directors of the Company.
Employee Share Option Plan
The Company has established a share option plan for officers, employees,
consultants and agents of the Company and its subsidiaries (the "Employee
Share Option Plan"). The Employee Share Option Plan provides for the grant of
Ordinary Share options (including incentive Ordinary Share options as defined
in Section 422 of the U.S. Internal Revenue Code of 1986, as amended, (the
"Code")), Ordinary Share appreciation rights and other Share awards (including
restricted Ordinary Share awards, contingent Ordinary Share awards and
dividend or equivalent Ordinary Share awards) (collectively "Awards"). The
total number of options outstanding at any time cannot exceed ten percent of
the number of Ordinary Shares outstanding from time to time. Options granted
under the Employee Share Option Plan are non-assignable and exist for a term,
not to exceed ten years, fixed by the Compensation Committee of the board of
directors of the Company (the "Committee"). The exercise price of options
granted on or before the date of the Offering is $8.00 per share. The exercise
price of options granted after the date of the Offering is determined by the
Committee at the time the option is granted; provided that the exercise price
shall not be less than 100 percent of the fair market value of the share on
the date of the grant. In the case of an incentive share option granted to an
employee owning (actually or constructively under Section 422(d) of the Code),
more than ten percent of the total combined voting power of all classes of
Ordinary Shares of the Company, the price of any such option shall not be less
than 110 percent of the fair market value of the Ordinary Shares on the date
of grant. The aggregate fair market value (determined at the time the
incentive share options are granted) of the Ordinary Shares with respect to
which incentive share options are exercisable for the first time by any
optionee during any calendar year under all plans of the Company shall not
exceed $100,000. Awards may be granted by the Committee on such terms,
including vesting schedules, price, restriction
67
<PAGE>
or option period, dividend rights, post-retirement and termination rights, and
payment forms as they deem appropriate. Unless terminated by the board of
directors, the Employee Share Option Plan continues until August 1, 2006.
Options grants made under the Employee Share Option Plan provide that in the
event of a Change in Control (as defined in the Employee Share Option Plan),
the options whether or not currently vested and exercisable, shall become
immediately vested and exercisable as of the effective date of the Change of
Control.
Under the Employee Share Option Plan, as of the date hereof, options to
purchase an aggregate of 415,000 Ordinary Shares are outstanding. All such
options are exercisable at a price of $8.00 per share. See "Principal
Shareholders".
Non-Employee Director Share Option Plan
The Company has established, a share option plan for non-employee directors
of the Company (the "Non-employee Director Share Option Plan"). The total
number of options outstanding at any time cannot exceed five percent of the
number of Ordinary Shares outstanding from time to time. Options granted under
the Non-employee Director Share Option Plan are non-assignable (except for
approved assignments to immediate family members) and expire at the earlier of
(i) ten years after the date of the grant of the option or (ii) one year after
the director ceases to be a director of the Company. Options shall have an
exercise price of 100 percent of the Fair Market Value (as defined in the Non-
employee Director Share Option Plan) of the Ordinary Shares on the date of the
grant. The Non-employee Director Share Option Plan provides for the automatic
grant of (i) an option to purchase the number of Ordinary Shares equal to
$50,000 divided by the Fair Market Value of the Ordinary Shares on the date of
the grant to each non-employee director at the effective date of their initial
election to the board of directors and, (ii) an option to purchase the number
of Ordinary Shares equal to $50,000 divided by the Fair Market Value of the
Ordinary Shares on the date of the grant at the close of business of each
annual meeting of the shareholders of the Company.
No options have been granted under the Non-employee Director Share Option
Plan. However, non-employee directors have received options pursuant to
individual grants. See "Principal Shareholders".
OTHER PLANS
In 1997, Apex Corporation instituted a 401(k) Plan for its U.S. employees.
Apex Corporation makes monthly contributions to this 401(k) Plan, and
currently matches 50 percent of each employee's contribution up to an employee
contribution of six percent of base salary. Employees vest in the company's
contribution at 50 percent after one year of service and 100 percent after two
years of service. Although the Company does not currently have a formal bonus
or incentive plan for any of its employees, it anticipates instituting a bonus
plan in the future.
68
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Ordinary Shares by (i) each person known by the
Company to beneficially hold five percent or more of the outstanding Ordinary
Shares, (ii) each director of Apex Limited, (iii) each executive officer of
the Company named in the table on page 64, and (iv) all executive officers and
directors as a group. All Ordinary Share numbers set forth in the table have
been rounded up to the nearest whole number. Except as otherwise noted, the
Company believes that all of the persons and groups shown below, based on
information furnished by such owners, have sole voting and investment power
with respect to the shares indicated. See "Certain Transactions".
<TABLE>
<CAPTION>
BENEFICIAL
BENEFICIAL OWNERSHIP OWNERSHIP AFTER PRO FORMA
PRIOR TO THE OFFERING AS ADJUSTED(1) THE OFFERING(2) AS ADJUSTED(3)
------------------------- -------------------- ----------------- -----------------
NUMBER PERCENTAGE NUMBER PERCENTAGE NUMBER PERCENTAGE NUMBER PERCENTAGE
------------ ------------ --------- ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DIRECTORS, OFFICERS AND
5% SHAREHOLDERS(4)
Silver Holdings(5)...... 1 * 6,297,321 30.45%
Moore Global Investments
Ltd./Remington
Investment Strategies,
L.P.(6)................ 937,500 6.89% 937,500 4.53%
C.A. Delaney Capital
Management Limited(7).. 750,000 5.51% 750,000 3.63%
Leni S. Berliner(8)..... 27,346 * 27,346 *
Larry J. Buchanan(9).... 50,000 * 50,000 *
Michael Comninos(10).... 6,250 * 6,250
Harry S. Conger(11)..... 15,625 * 15,625 *
Marcel F. DeGuire(12)... 31,250 * 31,250 *
Johnny Delgado
Achaval(13)............ 394,591 2.90% 394,591 1.91%
Felipe de Lucio
Pezet(14).............. 27,346 * 27,346 *
Eduardo S.
Elsztain(15)........... 31,250 * 157,197 *
Dekel Golan(16)......... 52,346 * 52,346 *
David Sean Hanna(17).... 6,250 * 6,250 *
Ove Hoegh(18)........... 6,250 * 6,250 *
Keith R. Hulley(19)..... 62,500 * 62,500 *
Thomas S. Kaplan(20).... 6,674,979 49.08% 6,674,979 32.28%
Richard Katz(21)........ 6,250 * 6,250 *
Gregory G. Marlier(22).. 15,626 * 15,626 *
Kerry A. McDonald(23)... 31,250 * 31,250 *
Douglas M. Smith(24).... 7,813 * 7,813 *
Paul Soros(25).......... 6,250 * 321,116 1.52%
DIRECTORS AND OFFICERS
AS A GROUP............. 7,453,172 54.80% 7,893,985 38.17%
</TABLE>
- -------
*The percentage of Ordinary Shares beneficially owned is less than 1%.
(1) Adjusted as if Ordinary Shares were issued in exchange for all shares of
Apex LDC owned by the Minority Shareholders, on a one-for-one basis,
pursuant to the terms of the Buy-Sell Agreement. See "Certain
Transactions".
(2) Reflects the sale of Shares in the Offering (assuming no exercise of the
U.S. Underwriters and Managers over-allotment options).
(3) Adjusted as if Ordinary Shares were issued in exchange for all of the
shares of Apex LDC owned by the Minority Shareholders, pursuant to the
terms of the Buy-Sell Agreement.
(4) Unless otherwise specified, the address for directors and officers of the
Company is 1700 Lincoln Street, Suite 3050, Denver, Colorado 80203,
U.S.A.
(5) The address for Silver Holdings is Kaya Flamboyan 9, Willemstad, Curacao,
Netherlands Antilles. Quantum Industrial Partners LDC ("Quantum
Industrial"), an exempted limited duration company formed under the laws
of the Cayman Islands is a 50 percent shareholder in Silver Holdings LDC
("Silver Holdings"), an exempted limited duration company formed under
the laws of the Cayman
69
<PAGE>
Islands, the registered owner of 6,297,320 shares of Apex LDC. 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 Quantum Industrial. The sole general partner of QIHMI is QIH
Management, Inc. ("QIH Management"), a corporation formed under the laws of
the State of Delaware. Mr. George Soros, the sole shareholder of QIH
Management, has entered into an agreement with Soros Fund Management LLC
("SFM LLC"), a limited liability company formed under the laws of the State
of Delaware, pursuant to which Mr. George Soros has, among other things,
agreed to use his best efforts to cause QIH Management to act at the
direction of SFM LLC (the "QIP Contract"). Mr. George Soros is Chairman of
SFM LLC, and as a result of such position and the QIP Contract, may be
deemed the beneficial owner of shares held for the account of Quantum
Industrial. Mr. Stanley F. Druckenmiller, the Lead Portfolio Manager of SFM
LLC, by virtue of such position and the QIP Contract, also may be deemed
the beneficial owner of shares held for the account of Quantum Industrial.
Emerging Dolphin Limited is a private, open-end investment fund formed
under the laws of the Isle of Man. It is managed by Consultores Management
Company (Isle of Man) Limited, a wholly-owned subsidiary of Consultores
Asset Management, S.A., and holds a 26.5 percent interest in Silver
Holdings LDC. Geosor Corporation ("Geosor"), a corporation formed under the
laws of the State of New York which is wholly-owned by Mr. George Soros, is
a 15 percent shareholder of Silver Holdings LDC. Mr. Eduardo Elsztain is
the Chairman and Majority Shareholder of Consultores Asset Management. See
"Certain Transactions".
(6) The address is 1251 Avenue of the Americas, 53rd Floor, New York, New
York 10020. Moore Capital Management, Inc., a Connecticut corporation, is
vested with investment discretion with respect to portfolio assets held
for the account of Moore Global Investments, Ltd. ("MGI"). Moore Capital
Advisors, L.L.C., a New York limited liability company, is the sole
general partner of Remington Investment Strategies, L.P. ("Remington").
Mr. Louis M. Bacon is the majority shareholder of Moore Capital
Management, Inc. and is the majority equity holder of Moore Capital
Advisors, L.L.C. As a result, Mr. Bacon may be deemed to be the indirect
beneficial owner of the aggregate 937,500 shares held by MGI and
Remington.
(7) The address of C.A. Delaney Capital Management Limited ("C.A. Delaney")
is 161 Bay Street, Suite 5100, Toronto, Ontario M5J251. C.A. Delaney
serves as an agent on behalf of Spectrum United Canadian Growth Fund, the
beneficial owners of 750,000 Ordinary Shares.
(8) Ms. Berliner is the registered owner of 25,000 Ordinary Shares and has
vested options to purchase 2,346 Ordinary Shares pursuant to the Employee
Share Option Plan.
(9) Dr. Buchanan is the registered owner of 25,000 Ordinary Shares of the
Company. Pursuant to the Employee Plan, Dr. Buchanan has vested options
to purchase 12,500 Ordinary Shares and options to purchase 12,500
Ordinary Shares which vest on September 1, 1997.
(10) Mr. Comninos is a director of the Company and has received, pursuant to a
grant as of April 10, 1997, vested options to purchase 6,250 Ordinary
Shares as compensation for becoming a director of the Company.
(11) Pursuant to a grant as of October 8, 1996 and a grant as of April 10,
1997, Mr. Conger has been granted vested options to purchase 15,625
Ordinary Shares.
(12) Mr. DeGuire has been granted vested options to purchase 31,250 Ordinary
Shares pursuant to the Employee Share Option Plan.
(13) Mr. Delgado Achaval is the registered owner of 113,595 Ordinary Shares
and has vested options to purchase 12,500 Ordinary Shares pursuant to the
Employee Plan. In addition, Mr. Delgado Achaval has voting and
dispositive control with respect to 268,496 Ordinary Shares of the
Company owned by Mineria Tecnica Consultores, S.A.
(14) Mr. de Lucio Pezet is the registered owner of 25,000 Ordinary Shares of
the Company and has vested options to purchase 2,346 Ordinary Shares
pursuant to the Employee Share Option Plan.
70
<PAGE>
(15) Mr. Elsztain, a director of the Company, is the registered owner of
25,000 Ordinary Shares. Pursuant to a grant as of April 10, 1997, Mr.
Elsztain has vested options to purchase 6,250 Ordinary Shares of the
Company. Mr. Elsztain also serves as a director of Silver Holdings, the
registered owner of 6,297,320 shares of Apex LDC. He is the Chairman and
Majority Shareholder of Consultores Asset Management, S. A.
("Consultores") which is a 2.5 percent shareholder of Silver Holdings and
the sole owner of Consultores Management Company (Isle of Man) Limited
("Consultores Management"). Consultores Management is the manager of
Emerging Dolphin Limited, a private open-end investment fund formed under
the laws of the Isle of Man which owns 26.5 percent of Silver Holdings.
(16) Mr. Golan has voting and dispositive control of Mada Limited which is the
registered owner of 50,000 Ordinary Shares. Mr. Golan has vested options
to purchase 2,346 Ordinary Shares pursuant to the Employee Share Option
Plan.
(17) Mr. Hanna is a director of the Company and has received, pursuant to a
grant as of April 10, 1997, vested options to purchase 6,250 Ordinary
Shares of the Company.
(18) Mr. Hoegh is a director of the Company and has received, pursuant to a
grant as of April 10, 1997, options to purchase 6,250 Ordinary Shares of
the Company.
(19) Mr. Hulley has been granted vested options to purchase 62,500 Ordinary
Shares pursuant to the Employee Share Option Plan.
(20) Pursuant to Voting Trust Agreements, Mr. Kaplan has voting and
dispositive control with respect to 2,739,154 shares of the Company owned
by Argentum LLC and 3,935,825 shares of the Company owned by Consolidated
Commodities, Ltd.
(21) Mr. Katz is a director of the Company and has received, pursuant to a
grant as of April 10, 1997, vested options to purchase 6,250 shares of
the Company.
(22) Mr. Marlier has vested options to acquire 15,626 Ordinary Shares pursuant
to the Employee Share Option Plan.
(23) Mr. McDonald is the indirect owner of 31,250 shares of the Company
through Celtic Group Ltd., an international business corporation
organized under the laws of the British Virgin Islands.
(24) Mr. Smith has vested options to acquire 7,812.50 Ordinary Shares pursuant
to the Employee Share Option Plan.
(25) Mr. Soros is a director of the Company and has received, pursuant to a
grant as of April 10, 1997, options to purchase 6,250 shares of the
Company. Mr. Soros is also a director and indirect five percent
shareholder of Silver Holdings, which is the registered owner of
6,297,320 shares of Apex LDC. He also serves on the board of advisors of
Quantum Industrial, a 50 percent shareholder of Silver Holdings.
71
<PAGE>
CERTAIN TRANSACTIONS
In December of 1994, Silver Holdings LDC, a Cayman Islands exempted limited
duration company formed by (i) Quantum Industrial Partners LDC, (ii) Geosor
Corporation, (iii) VDM, Inc. (iv) entities affiliated with Mr. Elsztain, and
(v) Jack Nash, purchased a 75 percent interest in Apex LDC in exchange for a
$10 million demand note (the "Note") payable to Apex LDC. Upon Silver
Holdings' investment, Mr. Paul Soros and Mr. Elsztain were appointed to Apex
LDC's board of directors. As part of this investment, Litani Capital
Management Ltd. ("Litani Ltd."), an international business company formed
under the laws of the Bahamas was granted an option to purchase 35 percent of
the issued and outstanding shares of Apex LDC from Silver Holdings for an
amount equal to Silver Holdings' initial purchase price for such shares, plus
interest thereon calculated at an annual rate of 20 percent.
In connection with the investment by Silver Holdings, Apex LDC agreed to pay
Tigris Financial Group Ltd. ("Tigris"), a corporation formed under the laws of
the State of Delaware, an annual advisory fee of $75,000, plus expenses, in
consideration for Mr. Kaplan's services to Apex LDC and its subsidiaries. Mr.
Kaplan is the sole shareholder of Tigris. This consulting arrangement was
terminated at the end of the first quarter of 1997, following the formation of
Apex Corporation. In addition, Apex LDC agreed to pay Litani Ltd. an annual
advisory fee of $45,000, plus expenses, in consideration for Litani Ltd.'s
services to Apex LDC and its subsidiaries. The right to this fee was
subsequently assigned to LCM Holdings LDC, a limited duration company formed
under the laws of the Bahamas ("LCM Holdings LDC"). This consulting
arrangement was terminated at the end of the first quarter of 1997.
In the first half of 1995, Litani Capital Management LDC ("Litani LDC")
succeeded to Litani Ltd.'s contract rights with respect to Apex LDC, including
the option, but excluding LCM Holdings LDC's advisory fee. In July of 1995,
Litani LDC completed the sale, in a Private Placement, of 30 percent of its
shares (representing an approximately 10.5 percent beneficial economic
interest in Apex LDC) for approximately $6 million. In early August of 1995,
Litani LDC exercised its option to acquire from Silver Holdings 35 percent of
the issued and outstanding shares of Apex LDC for a price equal to
approximately $5,250,000. Substantially all of Litani LDC's assets consisted
of its shares of Apex LDC.
In January of 1996, the Company delivered to Silver Holdings a capital call
for the amount of the outstanding balance due on the Note. Silver Holdings
made its final payment under the Note, in the amount of just over $2.9
million, effective as of January 31, 1996.
In the first four months of 1996, Apex LDC was restructured in order to
facilitate the 1996 Private Placement which was completed effective August 6,
1996. As part of this restructuring, Apex Limited was formed to serve as the
majority shareholder of Apex LDC. Apex LDC also formed ASM Holdings Limited
("ASM Holdings"), an exempted limited liability company organized and existing
under the laws of the Cayman Islands, and Apex Partners in order to facilitate
the purchase of minority interests in certain of Apex LDC's subsidiaries from
five officers of Apex Corporation. Apex Partners subsequently acquired a one
percent interest in each of Apex Asia, Cordillera Minera de Zacatecas,
Cordilleras Honduras, Andean and ASC Partners. The Company also purchased
certain minority profit interests in Honduran and Mexican properties from the
individual who had represented the Company in connection with the initial
acquisition of such properties.
As part of the 1996 Private Placement, 4,256,700 shares of the Company were
sold at a price of US $8.00 per Ordinary Shares. The gross proceeds from the
1996 Private Placement were $34,053,600. The Private Placement agents for the
sale included Salomon Brothers Inc and S.G. Warburg & Co. Inc. In connection
with the 1996 Private Placement, Consolidated contributed its 25 percent
interest in Apex LDC to the Company in exchange for 3,935,825 Ordinary Shares,
and approximately 84 percent of the shareholders of Litani LDC exchanged their
interests in Apex LDC for Ordinary Shares of the Company.
Further in connection with the 1996 Private Placement, Apex LDC, the Company
and the other beneficial owners of Apex LDC entered into a Buy-Sell Agreement
dated as of August 6, 1996 (the
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Buy-Sell Agreement"). Pursuant to the terms of the Buy-Sell Agreement, upon a
request by a Minority Shareholder, the Company is required to purchase, at its
sole option, for cash, for Ordinary Shares or for a combination of cash and
Ordinary Shares, the shares of Apex LDC owned by such shareholder. The Company
currently expects that any future purchases by Apex Limited of shares of Apex
LDC from the Minority Shareholders will involve only Ordinary Shares of Apex
Limited. Any such transaction will not effect the beneficial and economic
interest in Apex LDC attributable to shareholders of Apex Limited.
Pursuant to a Shareholders' Agreement dated as of August 6, 1996 (the
"Shareholders' Agreement") by and among Apex LDC, the Company, the other
shareholders of Apex LDC, and each purchaser of Ordinary Shares in the 1996
Private Placement, such shareholders have agreed not to offer, sell, contract
to sell or otherwise dispose of, directly or indirectly, or announce the
offering of any Shares, including any such Shares beneficially or indirectly
owned or controlled by the Company, or any securities convertible into, or
exchangeable or exercisable for Shares, for 180 days from the date of this
Prospectus, without the prior written consent of Salomon.
Dr. Larry J. Buchanan and Jon Gelvin, officers of the Company, are
shareholders and directors of Begeyge Minera Ltda. ("Begeyge"), from which the
Company purchased options for three properties in Honduras for a total of
$20,000. The Company declined to exercise its option to purchase two of the
three properties. The Company spent a total of $182,324 in connection with the
returned properties. The Company still has an option to purchase the remaining
property for $3,000,000. Begeyge also serves as an associate of the Company
and during the period ended December 31, 1996, total expenditures charged to
the Company by Begeyge amounted to $106,691.
In 1996, Mr. Harry Conger, a director of the Company, received options to
purchase 25,000 Ordinary Shares at $8 per share. The option, were granted in
consideration of his consulting services for the Company and vest ratably over
four years, with the first tranch vesting on the date of grant.
In August 1997, the Company issued Mada Limited 25,000 shares in
consideration of its services to the Company.
In August of 1997, the Company exchanged 268,496 Ordinary Shares for
Mintec's 2.5 percent interest in ASC Bolivia.
In August of 1997, the Company issued Johnny Delgado Achaval, an officer of
the Company 113,595 Ordinary Shares of the Company in consideration of his
services to the Company.
The Company is negotiating an agreement with Mintec in which the Company
would purchase from Mintec (i) its non-land assets for approximately $500,000
and (ii) concessions with respect to approximately 126,000 acres of land for
approximately $550,000. The closing of such transaction will not occur until
after the Offering.
Silver Holdings and the Company intend to enter into a Board Designation
Agreement pursuant to which the Company will agree to nominate and support for
nomination two individuals designated by Silver Holdings, for so long as
Silver Holdings owns one percent of the outstanding Ordinary Shares.
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Silver Holdings, Argentum LLC, Consolidated Commodities Ltd., Thomas Kaplan,
Aurum LLC and the Company will enter into a registration rights and voting
agreement, pursuant to which each of Silver Holdings and Argentum LLC are
entitled to demand registration of any Ordinary Shares owned by either of
them. Silver Holdings and Argentum LLC may make such demand up to three times
each on
Form S-1 or S-2 of the Securities Act and up to three times each on Form S-3,
when such form is available for use by the Company. The Company is not
required to effect any demand registration within 120 days after the effective
date of a previous demand registration and may postpone, on one occasion in
any 365-day period, the filing or effectiveness of a registration statement
for a demand registration for up to 120 days under certain circumstances,
including pending material transactions. Silver Holdings, Argentum LLC, Aurum
LLC and Consolidated Commodities Ltd. are also entitled to unlimited piggyback
registrations. All such registrations would be at the Company's expense,
exclusive of underwriting discounts and commissions. The Company and such
shareholders have entered into customary indemnification and contribution
provisions. In addition, the parties to such agreement have agreed to vote for
the two individuals designated by Silver Holdings for election to the board of
directors.
Apex Corporation provides management, advisory and administrative services
for the Company pursuant to a Management Services Agreement dated October 22,
1996. The services provided by Apex Corporation include identifying and
evaluating investment opportunities, making recommendations to the board of
directors with respect to the Company's exploration and development
activities, staffing employees and providing the necessary expertise to manage
the Company's affairs and monitor its exploration and development activities,
advising the Company with respect to investments, contractual and financing
activities and providing financial services. The Company pays Apex Corporation
a service fee in an amount equal to the direct and indirect costs incurred by
Apex Corporation in providing its services, plus 10 percent of such costs.
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DESCRIPTION OF ORDINARY SHARES
The following summarizes certain provisions of the Memorandum of Association
(the "Memorandum") and the Articles of Association, as amended (the
"Articles") of the Company. Such summaries do not purport to be complete and
are subject to, and are qualified in their entirety by reference to, all of
the provisions of the Memorandum and the Articles, including the definitions
thereof to certain terms. Copies of the Memorandum and Articles are filed as
exhibits to the Registration Statement of which this Prospectus is part.
GENERAL
The authorized share capital of the Company consists of one class of
50,000,000 ordinary shares, par value $0.01 per share, of which 13,601,544
shares were outstanding as of the date of this Prospectus. Approximately
7,077,007 shares may be issued on a one-for-one basis in exchange for the
Shares of Apex LDC subject to the terms of the Buy-Sell Agreement. See
"Certain Transactions".
SHARES
The Shares offered hereby are validly issued, fully paid and nonassessable.
There are no provisions of Cayman Islands law or the Company's Articles of
Association which impose any limitation on the rights of shareholders to hold
or vote Ordinary Shares by reason of their not being resident of the Cayman
Islands.
Dividend Rights. Holders of Ordinary Shares are entitled to receive
dividends ratably when and as declared by the board of directors out of funds
legally available therefor.
Liquidation. In the event of any dissolution, liquidation or winding up of
the Company, 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 remaining assets of the Company available for distribution
to its shareholders; provided, if, at such time, the holder of Ordinary Shares
has any outstanding debts, liabilities or engagements to or with the Company
(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 the liquidation of the Company 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
the Company (whether presently payable or not). The liquidator may distribute,
in kind, to the holders of the Ordinary Shares remaining assets of the Company
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, the Company may from time to
time by special resolution alter or amend the Memorandum or Articles;
voluntarily liquidate, dissolve or wind-up the affairs of the Company; reduce
its share capital or any capital, redemption or reserve funds, or any share
premium account; or change its name or alter its objects.
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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 single
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 issued by the
Company 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 the directors of
the Company and, in such event, the holders of the remaining Ordinary Shares
will not be able to elect any directors. The board of directors of the Company
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. See "Management". Pursuant to the Articles, Directors may be
removed by the shareholders only for cause.
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 the Company
and could thus increase the likelihood that incumbent directors will retain
their positions.
Preemption Rights. No holder of shares of the Company shall, by reason of
such holding, have any preemptive right 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.
The existing holders of Ordinary Shares have agreed not to offer, sell,
contract to sell or otherwise dispose of, directly or indirectly, or announce
the offering of any Ordinary Shares, including any such Ordinary Shares
beneficially or indirectly owned or controlled by the Company, or any
securities convertible into, or exchangeable or exercisable for Ordinary
Shares, for 180 days from the date of this Prospectus, without the prior
written consent of Salomon.
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
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Articles and applicable law. Among other rights, the directors may determine:
(i) the number of shares of that class or series and the distinctive
designation thereof; (ii) the voting powers, full or limited, if any, of the
shares of that class or series; (iii) the right in respect of dividends on the
shares of that class or series, whether dividends shall be cumulative and, if
so, from which date or dates and the relative rights or priority, if any, of
payment of dividends on shares of that class or series and any limitations,
restrictions or conditions on the payment of dividends; (iv) the relative
amounts, and the relative rights or priority, if any, of payment in respect of
shares of that class or series, which the holders of the shares of that class
or series shall be entitled to receive upon any liquidation, dissolution or
winding up of the Company; (v) the terms and conditions (including the price
or prices, which may vary under different conditions and at different
redemption dates), if any, upon which all or any part of the shares of that
class or series may be redeemed, and any limitations, restrictions or
conditions on such redemption; (vi) the terms, if any, of any purchase,
retirement or sinking fund to be provided for the shares of that class or
series; (vii) the terms, if any, upon which the shares of that class or series
shall be convertible into or exchangeable for shares of any other class,
classes or series, or other securities, whether or not issued by the Company;
(viii) the restrictions, limitations and conditions, if any, upon issuance of
indebtedness of the Company so long as any shares of that class or series are
outstanding; and (ix) any other preferences and relative, participating,
optional or other rights and limitations not inconsistent with applicable law
or the Articles.
REGISTRATION RIGHTS
Silver Holdings, Argentum LLC, Consolidated Commodities Ltd., Aurum LLC,
Thomas Kaplan and the Company will enter into a registration rights and voting
agreement, dated as of , 1997, pursuant to which each of Silver Holdings
and Argentum LLC are entitled to demand registration of any Ordinary Shares
owned by either of them. Silver Holdings and Argentum LLC may make such demand
up to three times each on Form S-1 or S-2 of the Securities Act and up to
three times each on Form S-3, when such form is available for use by the
Company. The Company is not required to effect any demand registration within
120 days after the effective date of a previous demand registration and may
postpone, on one occasion in any 365-day period, the filing or effectiveness
of a registration statement for a demand registration for up to 120 days under
certain circumstances, including pending material transactions. Silver
Holdings, Argentum LLC, Aurum LLC and Consolidated Commodities Ltd. are also
entitled to unlimited piggyback registrations. All such registrations would be
at the Company's expense, exclusive of underwriting discounts and commissions.
The Company and such shareholders have entered into customary indemnification
and contribution provisions.
TRANSFER AGENT
The Company's registrar and transfer agent for all Ordinary Shares is
[ ].
DIFFERENCES IN CORPORATE LAW
The Companies Law (1995 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 the Company 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. The Company's Articles provide that any transaction
entered into by the Company in which a director has an interest is not
voidable by the Company nor can such director be liable to the Company for any
profit realized pursuant to such transaction. A director having an interest
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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. The Company 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 the Company to (i) merge,
consolidate or amalgamate with another company, (ii) reorganize or reconstruct
itself pursuant to a plan sanctioned by the Cayman Islands courts or (iii)
sell, lease or exchange all or substantially all of its assets, except in the
case of a transaction between the Company and any entity which the Company,
directly or indirectly, controls. 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 United 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 wilful default.
The Company's Articles contain provisions providing for the indemnity by the
Company of an officer, director, consultant, employee or agent of the Company
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 the Company. In addition, the board
of directors may authorize the Company 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 the company would have the power to indemnify him against such
liability under the provisions of the Articles.
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The Company also purchases directors and officers liability insurance from
third parties for its directors and officers. The Company's Article's provide
that directors and officers of the Company shall have no liability (i) for the
acts, receipts, neglects, defaults or omissions of any other such director or
officer or agent of the Company 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 property of the Company or (iv) on account
of the insufficiency of any security in or upon which any money of the Company
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 judgement or oversight on his part of (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.
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 the Company 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 the Company to negotiate with
the directors. The directors believe that, as a general rule, the interests of
the Company's 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 the Company. 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, which are filed as an exhibit to the
Registration Statement of which this Prospectus is a part.
Shareholder Action by Written Consent. Cayman law permits shareholders to
act by unanimous written consent.
Availability of Ordinary Shares of the Company for Future Issuances. The
availability for issue of shares by the directors of the Company 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 the Company, 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 the Company. The Company has no present
plan to issue any shares other than possibly pursuant to employee benefit
plans.
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 the secretary of the Company at
the principal executive offices of the Company 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
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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 shares of the Company 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 shares of the Company 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 the Company is then subject to such Regulation;
and (iv) the consent of each nominee to serve as a director of the Company, 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.
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SHARES ELIGIBLE FOR FUTURE SALE
After consummation of the Offering, there will be [ ] Ordinary Shares
still owned by the current shareholders of the Company. Approximately
7,077,007 Ordinary Shares may be issued to the Minority Shareholders on a one-
for-one basis for the shares of Apex LDC subject to the terms of the Buy-Sell
Agreement. See "Certain Transactions". Shareholders will only be able to sell
such Ordinary Shares pursuant to a registration statement under the Securities
Act or an exemption therefrom.
Rule 144 under the Securities Act provides such an exemption for resales of
securities under certain circumstances. Under Rule 144, as currently in
effect, a person (or persons whose shares are aggregated) who beneficially
owns "restricted" shares that have been issued and not held by an affiliate of
the Company for at least one year from the time the shares were fully paid for
will be entitled to sell in "brokers' transactions" or to market makers,
within any three-month period, a number of shares that does not exceed the
greater of (i) one percent of the shares then outstanding or (ii) the average
weekly trading volume of the shares on all national securities exchanges
and/or reported through the automated quotation system of a registered
securities association during the four calendar weeks preceding such sale.
Sales under Rule 144 are also subject to certain notice requirements, and the
availability of current public information about the Company. Restricted
shares held for two years by a person who is not, at the time of sale and has
not been at any time within three months prior thereto, an affiliate of the
Company may be sold without regard to the volume limitations or manner of sale
restrictions under Rule 144. The foregoing summary of Rule 144 is not intended
to be a complete description thereof.
The existing holders of Ordinary Shares have agreed with the representatives
of the U.S. Underwriters subject to certain exceptions, not to register any
transfer of such shares, without the consent of Salomon until at least the
date 180 days from the date of this Prospectus. See "Underwriting".
In addition, after the Offering approximately [ ] Ordinary Shares
(including all Ordinary Shares issuable pursuant to the Buy-Sell Agreement)
will be entitled to certain rights with respect to registration of such Shares
under the Securities Act. See "Description of Ordinary Shares--Registration
Rights".
There has been no public market in the shares prior to the Offering and no
predictions can be made as to the effect, if any, that additional sales of
Ordinary Shares in the future by any Shareholders or the availability of such
Ordinary Shares for sale will have on the market price prevailing from time to
time. Sales of substantial amounts of additional Ordinary Shares in the public
market, or the perception that such sales could occur, could adversely affect
prevailing market prices and the Company's ability to raise additional equity
capital (although the Company has no current plans to do so).
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UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
among the Company and the U.S. Underwriters (the "U.S. Underwriting
Agreement"), the Company has agreed to sell to each of the U.S. Underwriters
named below (the "U.S. Underwriters"), and each of the U.S. Underwriters for
whom Salomon Brothers Inc, PaineWebber Incorporated and Scotia Capital Markets
(USA) Inc., are acting as the representatives (the "U.S. Representatives"),
has severally agreed to purchase the number of Shares set forth opposite its
name below:
<TABLE>
<CAPTION>
UNDERWRITING
U.S. UNDERWRITERS COMMITMENT
- ----------------- ------------
<S> <C>
Salomon Brothers Inc...............................................
PaineWebber Incorporated...........................................
Scotia Capital Markets (USA) Inc. .................................
----
Total............................................................
====
</TABLE>
The Company has been advised by the U.S. Representatives that the several
U.S. Underwriters initially propose to offer such Shares to the public at the
Price to Public set forth on the cover page of this Prospectus and to certain
dealers at such price less a concession not in excess of $[ ] per Share. The
U.S. Underwriters may allow, and such dealers may re-allow, a concession not
in excess of $[ ] per Share to other dealers. After the Offerings, the Price
to Public and such concessions may be changed.
The Company has granted to the U.S. Underwriters and the Managers
(collectively, the "Underwriters") options, exercisable during the 30-day
period after the date of this Prospectus, to purchase up to [ ] additional
Shares from the Company at the Price to Public less the Underwriting Discount,
solely to cover over-allotments. To the extent that the U.S. Underwriters and
the Managers exercise such options, each of the U.S. Underwriters and the
Managers, as the case may be, will be committed, subject to certain
conditions, to purchase a number of option shares proportionate to such U.S.
Underwriter's or Manager's initial commitment.
The Company has entered into an International Underwriting Agreement with
the Managers named therein, for whom Salomon Brothers International Limited,
PaineWebber International (U.K.) Limited and ABN AMRO Rothschilds are acting
as the representatives (the "International Representatives" and, together with
the U.S. Representatives, the "Representatives"), providing for the concurrent
offer and sale of [ ] Shares (in addition to the shares covered by the over-
allotment options described above) outside the U.S. and Canada. Both the U.S.
Underwriting Agreement and the International Underwriting Agreement provide
that the obligations of the U.S. Underwriters and the Managers are such that
if any of the Shares are purchased by the U.S. Underwriters pursuant to the
U.S. Underwriting Agreement, or by the Managers pursuant to the International
Underwriting Agreement, all the Shares agreed to be purchased by either the
U.S. Underwriters or the Managers, as the case may be, pursuant to their
respective agreements must be so purchased. The Price to Public and
Underwriting Discount per Share for the U.S. Offering and International
Offering will be identical. The closing of the International Offering is a
condition to the closing of the U.S. Offering and the closing of the U.S.
Offering is a condition to the closing of the International Offering.
Each U.S. Underwriter has severally agreed that, as part of the distribution
of the [ ] Shares offered by the U.S. Underwriters: (i) it is not purchasing
any Shares for the account of anyone other than a U.S. or Canadian Person;
(ii) it has not offered or sold, and will not offer or sell, directly or
indirectly, any Shares or distribute this Prospectus to any person outside of
the U.S. or Canada, or to anyone other than a U.S. or Canadian Person; and
(iii) any dealer to whom it may sell any Shares will
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represent that it is not purchasing for the account of anyone other than a
U.S. or Canadian Person and agree that it will not offer or resell, directly
or indirectly, any Shares outside of the U.S. or Canada, or to anyone other
than a U.S. or Canadian Person or to any other dealer who does not so
represent and agree. Each Manager has severally agreed that, as part of the
distribution of the [ ] Shares offered by the Managers: (i) it is not
purchasing any Shares for the account of any U.S. or Canadian Person; (ii) it
has not offered or sold, and will not offer or sell, directly or indirectly,
any Shares or distribute any Prospectus relating to the International Offering
to any person in the U.S. or Canada, or to any U.S. or Canadian Person; and
(iii) any dealer to whom it may sell any Shares will represent that it is not
purchasing for the account of any U.S. or Canadian Person and agree that it
will not offer or resell, directly or indirectly, any Shares in the U.S. or
Canada, or to any U.S. or Canadian Person or to any other dealer who does not
so represent and agree.
The foregoing limitations do not apply to stabilization transactions or to
certain other transactions specified in the Agreement Between U.S.
Underwriters and the Managers. "U.S. or Canadian Person" means any person who
is a national or resident of the U.S. or Canada, any corporation, partnership
or other entity created or organized in or under the laws of the U.S. or
Canada or of any political subdivision thereof, and any estate or trust the
income of which is subject to U.S. or Canadian federal income taxation,
regardless of its source (other than any non-U.S. or non-Canadian branch of
any U.S. or Canadian Person), and includes any U.S. or Canadian branch of a
person other than a U.S. or Canadian Person.
Pursuant to the Agreement Between U.S. Underwriters and the Managers, sales
may be made between the U.S. Underwriters and the Managers of such number of
Shares as may be mutually agreed. The price of any Shares so sold shall be the
Price to Public, less an amount not greater than the concession to securities
dealers. To the extent that there are sales between the U.S. Underwriters and
the Managers pursuant to the Agreement Between U.S. Underwriters and the
Managers, the number of Shares initially available for sale by the U.S.
Underwriters or by the Managers may be more or less than the amount specified
on the cover page of this Prospectus.
Any offer of the Shares in Canada will be made only pursuant to an exemption
from the prospectus filing requirement and an exemption from the dealer
registration requirement (where such an exemption is not available, offers
shall be made only by a registered dealer) in the relevant Canadian
jurisdiction where such offer is made.
The U.S. Underwriting Agreement provides that the Company will indemnify the
U.S. Underwriters against certain liabilities and expenses, including
liabilities under the Securities Act, or contribute to payments the U.S.
Underwriters may be required to make in respect thereof.
The International Underwriting Agreement provides that the Company will
indemnify the Managers against certain liabilities and expenses.
The existing holders of Shares have agreed not to offer, sell, contract to
sell or otherwise dispose of, directly or indirectly, or announce the offering
of any Shares, including any such Shares beneficially or indirectly owned or
controlled by the Company, or any securities convertible into, or exchangeable
or exercisable for Shares, for 180 days from the date of this Prospectus,
without the prior written consent of Salomon.
During and after the Offerings, the Underwriters may purchase and sell the
Shares in the open market. These transactions may include overallotment and
stabilizing transactions and purchases to cover syndicate short positions
created in connection with the Offerings. The Underwriters also may impose a
penalty bid, whereby selling concessions allowed to syndicate members of other
broker-dealers, in respect of the Shares sold in the Offerings for their
account may be reclaimed by the syndicate if such Shares are repurchased by
the syndicate in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the Shares which
may be higher than the price that might otherwise prevail in the open market.
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Prior to the Offerings, there has been no public market for the Shares. The
Price to Public was determined by negotiations between the Company and the
Representatives. Among the factors considered in determining the Price to
Public were prevailing market conditions, the market values of publicly traded
companies that the Underwriters believed to be somewhat comparable to the
Company, the demand for the Shares and for similar securities of publicly
traded companies that the Underwriters believed to be somewhat comparable to
the Company, the future prospects of the Company and its industry in general,
sales, earnings and certain other financial and operating information of the
Company in recent periods, and other factors deemed relevant. There can be no
assurance that the prices at which the Shares will sell in the public market
after the Offerings will not be lower than the Price to Public.
Certain of the U.S. Underwriters and Managers provide financial advisory
services to or are engaged in other financial transactions with the Company
for which they have received and will receive customary compensation. The
Company has retained N.M. Rothschild & Sons Limited, an affiliate of ABN AMRO
Rothschilds, to act as the Company's financial advisor in connection with the
anticipated project financing with respect to the San Cristobal Project. The
Company has engaged Salomon and Credit Suisse First Boston to act as the
Company's financial advisors with respect to the identification of, and
negotiation with, potential joint venture mining partners in the San Cristobal
Project. The Company has paid Salomon and Credit Suisse First Boston financial
advisory fees and has agreed to pay them monthly advisory fees and success-
based transaction fees, and to reimburse their respective out-of-pocket
expenses. The Company has also agreed to indemnify Salomon and Credit Suisse
First Boston against certain liabilities.
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TAXATION
The following discussion is a summary of certain Cayman Islands and U.S.
federal income tax consequences of the acquisition, ownership and disposition
of Shares. The discussion does not purport to be a comprehensive discussion
and is based on the Code, and the tax laws of the Cayman Islands as in effect
on the date hereof, which are subject to change. The discussion does not
consider any specific facts or circumstances that may apply to a particular
investor, some of which (for example, tax-exempt entities, insurance
companies, banks, broker-dealers, investors liable for alternative minimum
tax, investors who hold Shares as part of straddles or hedging or conversion
transactions or constructive sales, and investors whose functional currency is
not the U.S. dollar) may be subject to special rules. In addition, the
discussion does not address special rules that could in certain circumstances
apply to a U.S. Holder (as defined below) of Shares that owns directly or by
attribution 10 percent or more of the Ordinary Shares. Because the discussion
is not exhaustive of all possible tax considerations relevant to the ownership
of Shares, prospective investors are urged to consult their tax advisors
regarding the U.S. federal, state, local and foreign tax consequences,
including the Cayman Islands tax consequences, of the acquisition, ownership
and disposition of Shares in their particular circumstances.
CAYMAN ISLANDS TAXATION
There is, at present, no direct income taxation in the Cayman Islands.
Accordingly, income and gains received by the Company, and distributions by
the Company to its shareholders and gains realized upon the disposition of
Shares, will be received free of all Cayman Islands income and withholding
taxes. The Company is registered as an exempted Company under Cayman Islands
law, and the Company has received an undertaking from the Governor-in-Council
of the Cayman Islands to the effect that, for a period of 20 years from the
date of the undertaking, no law that is enacted in the Cayman Islands imposing
any tax to be levied on profits or income or gains or appreciations will apply
to the Company nor shall any tax in the nature of estate duty or inheritance
tax be payable on the shares, debentures or other obligations of the Company.
UNITED STATES FEDERAL INCOME TAXATION
For purposes of this discussion, a "U.S. Holder" is any beneficial owner
that owns Shares as a capital asset and is (i) a citizen or resident of the
U.S., (ii) a corporation or partnership that is created or organized in the
U.S. or under the law of the U.S. or any state thereof, (iii) an estate that
is subject to U.S. federal income tax on its income regardless of source, or
(iv) a trust if a court within the U.S. is able to exercise primary
supervision over the administration of the trust and one or more U.S.
fiduciaries have authority to control all substantial decisions of the trust.
TAXATION OF DIVIDENDS
Subject to the discussion under "Passive Foreign Investment Company
Considerations" and "Foreign Personal Holding Company Considerations", under
U.S. federal income tax law, U.S. Holders will include in gross income as a
dividend the gross amount of any distribution paid by the Company to the
extent of its current or accumulated earnings and profits (as determined for
U.S. federal income tax purposes) as ordinary income when the dividend is
received by the U.S. Holder. The dividend will not be eligible for the
dividends-received deduction generally allowed to U.S. corporations. In
general, the dividend will be income from sources outside the U.S., and
generally will be treated together with other items of "passive income" (or,
in the case of certain holders, "financial services income") for U.S. foreign
tax credit purposes.
TAXATION OF CAPITAL GAINS
Subject to the discussion under "Passive Foreign Investment Company
Considerations", upon a sale or other disposition of Shares, a U.S. Holder
will recognize gain or loss for U.S. federal income
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tax purposes in an amount equal to the difference between the U.S. dollar
value of the amount realized and the U.S. Holder's tax basis (determined in
U.S. dollars) in such Shares. Such gain or loss will be capital gain or loss
and, if the U.S. Holder's holding period for such Shares exceeds 18 months,
will be long-term capital gain or loss.
PASSIVE FOREIGN INVESTMENT COMPANY CONSIDERATIONS
Classification as a PFIC. The Company will be a PFIC for any taxable year if
75 percent or more of its gross income for the taxable year is "passive"
income or 50 percent or more of its assets produce or are held for the
production of "passive" income. For purposes of applying these income and
asset tests, the Company is deemed to receive its pro rata share of the
income, and to own its pro rata share of the assets, of any corporation in
which the Company directly or indirectly owns 25 percent or more of the stock
(measured by value). In addition, although not free from doubt, it is expected
that the Company will be deemed to receive its pro rata share of the income,
and to own its pro rata share of the assets, of any partnership in which the
Company is a partner (either directly or through one or more intervening
partnerships). U.S. Holders should be aware that the Shares may be treated as
stock of a passive foreign investment company ("PFIC") for U.S. federal income
tax purposes because the Company will earn significant passive income from
investments relative to any non-passive income of the Company prior to the
commencement by the Company of substantial mining operations. Further, the
Code treats gains from transactions in commodities, such as silver, as passive
income for PFIC purposes unless "substantially all" of a company's business is
as an active producer of the commodity. Applicable U.S. Treasury Regulations
interpret "substantially all" to mean that 85 percent or more of a producer's
taxable income must be gross receipts from sales in the active conduct of a
commodities business or certain related activities. Under these rules, there
can be no assurance that the Company would not be treated as a PFIC in future
taxable years even after it has begun to earn income from mining operations.
In this regard, prospective investors should note that the Company would
likely constitute a PFIC even after it begins to generate significant income
from mining operations in the event the Company conducts its mining operations
predominantly through the use of independent contractors rather than directly
through the use of its own employees.
Prospective investors should note that the PFIC classification rules are
complex and may apply in numerous unexpected circumstances. Under these rules,
the Company could be classified as a PFIC in various circumstances in addition
to those described in the preceding paragraphs. For example, the Company could
constitute a PFIC for any taxable year as a consequence of owning substantial
"passive assets" such as cash and marketable securities (including any cash
derived from the issuance of Company securities or the sale of assets of the
Company), even in a year in which the Company generates significant income
from direct mining operations.
Consequences of PFIC Status. If the Company were treated as a PFIC, unless a
U.S. Holder makes a "QEF election" or "mark to market election" in respect of
the Company, as described below, such U.S. Holder will be subject to a special
tax regime (i) in respect of gains realized on the sale or other disposition
of Shares, and (ii) in respect of distributions on Shares held for more than
one taxable year to the extent those distributions constitute "excess
distributions". Although not entirely free from doubt, the PFIC rules should
not apply to gain realized in respect of any Shares disposed of during the
same taxable year in which the Shares are acquired. An excess distribution
generally includes dividends or other distributions received from a PFIC 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 general, under the PFIC rules, a
U.S. Holder will be required to allocate such excess distributions and any
gain realized on sale of the Shares to each day during the Holder's holding
period for the Shares, and will be taxable at the highest rate of taxation
applicable to ordinary income for the year to which the excess distribution or
gain is allocable (without regard to the U.S. Holder's other items of income
and loss for such taxable year) (the "deferred tax"). The deferred tax (other
than the tax on amounts allocable to the year of disposition or receipt of the
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distribution) will then be increased by an interest charge computed by
reference to the rate generally applicable to underpayments of tax (which
interest charge generally will be non-deductible interest expense for
individual taxpayers).
QEF Election. The special PFIC tax rules described above will not apply to a
U.S. Holder if the U.S. Holder elects to have the Company treated as a
"qualified electing fund" ("QEF election") in the first taxable year of the
holder's ownership of the Shares during which the Company is a PFIC and the
Company complies with certain reporting requirements. The Company intends to
comply with all reporting requirements necessary for U.S. Holders to make a
QEF election with respect to the Company and will upon request provide to U.S.
Holders such information as may be required to make such QEF election
effective.
A U.S. Holder that makes a QEF election with respect to the Company will be
currently taxable on its pro rata share of ordinary earnings and net capital
gain of the Company for each taxable year of the Company in which the Company
qualifies as a PFIC, regardless of whether the holder receives any
distribution from the Company. The U.S. Holder's basis in the Shares of the
Company will be increased to reflect taxed but undistributed income of the
Company. Distributions of income that previously had been taxed will result in
a corresponding reduction of basis in the Shares and will not be taxed again
as a distribution to the U.S. Holder.
During the period in which the Company may be a PFIC, the Company may be
entitled to deductions under U.S. federal income tax principles that may
substantially offset earnings of the Company. As a result, the pro rata share
of the ordinary earnings and net capital gain of the Company that would be
includable by a U.S. Holder making a QEF election may not be material. If this
were the case, U.S. Holders generally could obtain the benefits of making a
QEF election in respect of the Company (i.e., the elimination of deferred tax
and interest charges on excess distributions and realized gains) without
having to bear current inclusions of income substantially in excess of
distributions received. U.S. Holders should consult their own tax advisors
concerning the most appropriate manner in which to make a QEF election.
Lower-Tier PFICs. At the present time, none of the Company's non-U.S.
subsidiaries is classified as a corporation for U.S. federal income tax
purposes. Accordingly, U.S. Holders are not subject to the PFIC rules with
respect to their indirect ownership interests in these subsidiaries.
If, in the future, the Company acquires a non-U.S. subsidiary that is
classified as a corporation for U.S. federal income tax purposes, the Company
will notify its shareholders so that U.S. Holders may determine whether to
make a QEF election with respect to the subsidiary. If the Company were a
PFIC, U.S. Holders generally would be deemed to own, and also would be subject
to the PFIC rules with respect to, their indirect ownership interests in any
corporate subsidiaries of the Company which themselves constitute PFICs
("lower-tier PFICs"). If the Company were a PFIC and a U.S. Holder does not
make a QEF election in respect of any lower-tier PFIC, the U.S. Holder could
incur liability for the deferred tax and interest charge described above if
either (i) the Company receives a distribution from, or disposes of all or
part of its interest in, a lower-tier PFIC or (ii) the U.S. Holder disposes of
all or part of its Shares. The Company intends to cause any lower-tier PFIC to
comply with all reporting requirements necessary for a U.S. Holder to make a
QEF election with respect to the lower-tier PFIC.
Mark to Market Election. For taxable years beginning after December 31,
1997, a U.S. Holder who owns marketable stock of a PFIC may elect to recognize
any gain or loss on the stock on a mark-to-market basis at the end of the U.S.
Holder's taxable year. If an election is made, any mark-to-market gains, and
any gains realized on disposition of the stock, will be treated as ordinary
income. Mark-to-market losses, and any losses recognized on disposition of the
stock to the extent of the holder's net mark-to-market gains, will be treated
as ordinary losses. U.S. Holders should consult their tax advisors regarding
the effect of making a mark-to-market election with respect to the Shares,
including the effect of such an election on any lower-tier PFICs that the
holder is deemed to own.
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A U.S. Holder who owns Shares during any year that the Company is a PFIC
must file an Internal Revenue Service Form 8621 in respect of such Shares and,
under proposed U.S. Treasury Regulations, in respect of interests in any
lower-tier PFICs.
Prospective investors are urged to consult their own tax advisors regarding
the possible classification of the Company as a PFIC as well as the potential
tax consequences arising from the ownership and disposition (directly or
indirectly) of interests in a PFIC.
FOREIGN PERSONAL HOLDING COMPANY CONSIDERATIONS
Prospective investors should also be aware that special U.S. tax laws would
apply to U.S. Holders if the Company (or any corporate subsidiary of the
Company) is characterized as a foreign personal holding company ("FPHC"). In
particular, if the Company (or any corporate subsidiary) is an FPHC in respect
of any taxable year of the Company, U.S. Holders may be subject to current tax
on their (direct or indirect) pro rata share of the income of the FPHC (as
determined for purposes of the FPHC rules), even if no cash dividend is
actually paid by the FPHC. In general, the Company (or any corporate
subsidiary of the Company) will constitute a FPHC during a taxable year if (i)
a specified percentage of its income is passive for purposes of the FPHC
rules, and (ii) at any time during the taxable year five or fewer individuals
who are U.S. citizens or residents own (directly, indirectly or
constructively) more than 50 percent of the voting power or value of such
company's stock. The Company does not anticipate that it or any of its
subsidiaries will be an FPHC immediately following the Offering or in the
future. The Company, however, can provide no assurance as to such conclusion.
TAXATION OF 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 the Shares unless (i) the investor has
an office or other fixed place of business in the U.S. to which the dividends
are attributable and either the dividends are derived in the active conduct of
a banking, finance or similar business in the U.S. 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 and certain other conditions are met or (ii)
the investor is a foreign insurance company that conducts business in the U.S.
and the dividends are attributable to such 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 the sale or other disposition of Shares
unless (i) the investor is engaged in the conduct of a trade or business in
the U.S. and the gain is effectively connected with such trade or business or
(ii) 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 certain other
conditions are met.
UNITED STATES INFORMATION REPORTING AND BACKUP WITHHOLDING
Under current U.S. federal income tax law, payments of dividends to certain
U.S. Holders are subject to information reporting, and a "back up" withholding
tax at a rate of 31 percent if such persons fail to supply correct taxpayer
identification numbers and certain other information in the required manner.
Payments of dividends to a U.S. Holder (a) made by mail or wire transfer to an
address in the U.S. , (b) made by a paying agent, broker or other intermediary
in the U.S. or (c) made by a U.S. broker or by a custodian, nominee or agent
that is (i) a U.S. person, (ii) a controlled foreign corporation for U.S. tax
purposes, or (iii) a foreign person 50% or more of whose gross income is from
a U.S. trade or business (hereinafter, any of the persons described in (i),
(ii) and (iii) shall be referred to as a "U.S. Controlled Person") to such
holder outside the U.S. may be subject to U.S. information reporting
requirements. Payments of dividends received by investors who are not U.S.
Holders generally would be exempt from these reporting requirements, but such
persons may be required to comply with certification and identification
procedures in order to prove their exemption from the reporting requirements.
Treasury regulations currently in effect do not require backup withholding
with respect to dividends paid by a foreign corporation such as the Company.
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The payment of proceeds of the disposition of Shares by a holder to or
through the U.S. office of a broker generally will be subject to information
reporting and backup withholding at a rate of 31 percent, unless the holder
either certifies its status as a non-U.S. Holder under penalties of perjury or
otherwise establishes an exemption. The payment of proceeds of the disposition
by a holder of Shares to or through a non-U.S. office of a broker will
generally not be subject to backup withholding and information reporting.
However, information reporting (but not backup withholding) may apply to such
a holder who sells a beneficial interest in Shares through a non U.S. branch
of a U.S. broker, or through a non-U.S. office of a U.S. Controlled Person, in
either case unless the holder establishes an exemption or the broker has
documentary evidence in its files of the holder's status as a non-U.S. person.
Any amounts withheld under the backup withholding rules from payment to a
holder will be refunded (or credited against the holder's United States
federal income tax liability, if any) provided that the required information
is furnished to the United States Internal Revenue Service.
EXPERTS
The consolidated financial statements as of December 31, 1996 and 1995 and
for each of the years in the two year period ended December 31, 1996 and for
the periods from December 22, 1994 (inception) through December 31, 1994 and
from inception through December 31, 1996 included in this Prospectus have been
so included in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The estimates of the Company's development and operating costs for the San
Cristobal property appearing herein were based upon the first phase
feasibility report prepared by the independent engineering firm Kvaerner
Metals, Davy Nonferrous Division; reserves for the San Cristobal Project were
based upon estimates prepared by Mine Reserves Associates Inc. and were
corroborated by an independent grade model prepared by Pincock, Allen & Holt.
Mineral Resources Development Inc. conducted the metallurgical test work and
developed the process flow sheet. Knight Piesold LLC was contracted to perform
the preliminary environmental assessment and geotechnical estimates, including
mill tailings design. The independent engineering firm of Behre Dolbear was
hired by the Company to conduct and oversee a technical audit of Davy's
procedures and analyses as well as the work of the technical subcontractors.
All such figures are included herein in reliance upon the authority of said
firms as experts in such matters.
The estimates of the Company's development and operating costs for the El
Ocote property appearing herein were based upon the conceptual study prepared
by Davy, and are included herein in reliance upon the authority of said firm
as an expert in such matters.
LEGAL MATTERS
Certain United States legal matters will be passed upon for the Company by
Akin, Gump, Strauss, Hauer & Feld, L.L.P., New York, New York, and certain
Cayman Islands legal matters, including the validity of the Shares offered
hereby will be passed upon for the Company by W.S. Walker & Company, Grand
Cayman, Cayman Islands. Certain United States legal matters will be passed
upon for the U.S. Underwriters by Winston & Strawn, Chicago, Illinois.
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ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 under the Securities Act
with respect to the Shares offered hereby. The Prospectus does not contain all
of the information set forth in the Registration Statement and the exhibits
thereto. For further information with respect to the Company and the Shares,
reference is made to such Registration Statement and Exhibits. Statements made
in the Prospectus as to the contents of any contract, agreement or other
documents referred to are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the matter involved. The Registration Statement and exhibits may be inspected
without charge and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices at Northwestern Atrium Center, 500 West Madison,
Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center, Suite 1300,
New York, New York 10048. Copies of such material may be obtained at
prescribed rates from the Commission's Public Reference Section at 450 Fifth
Street, N.W., Washington, D.C. 20549. Such material may also be accessed
electronically by means of the Commission's home page on the Internet at
http://www.sec.gov. Material filed by the Company may also be inspected at the
offices of the American Stock Exchange.
The Company will be subject to the periodic reporting and other
informational requirements of the Exchange Act, and in accordance therewith
will file reports and other information with the Commission. Such reports and
other information concerning the Company can be inspected and copied at the
public reference facilities and regional offices referred to above, or can be
accessed electronically as referred to above.
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GLOSSARY
ADIT--a horizontal or nearly horizontal passage driven from the surface for
the working of a mine.
BACK--a mining term indicating the rock volume which is above a level in a
mine; the term may also refer to the roof of a mine working.
BRECCIATION or BRECCIA--fracturing of preexisting rocks by natural forces; a
rock type formed in this manner.
BULK MINING--surface or underground mining methods applied to large bodies
of ore which involve large-scale, automated excavation techniques.
CASH PRODUCTION COST PER EQUIVALENT OUNCE--the total equivalent ounces
divided by the sum of the mine site cash production costs plus the transport
costs of the concentrates to the market.
CONCENTRATE--a mineral processing product that generally describes the
material that is produced after crushing and grinding ore and then effecting
significant separation of gangue (waste) minerals from the metal and/or metal
minerals, discarding the waste and minor amounts of metal and/or metal
minerals leaving a "concentrate" of metal and/or metal minerals with a
consequent order of magnitude higher content of metal and/or metal minerals
than the beginning ore material.
CONCEPTUAL STUDY--an initial technical financial study of a project at a
sufficient level of accuracy and detail to allow a decision as to whether to
undertake a feasibility study with respect to a given property.
CORE--a sample of rock produced by diamond drilling.
CUT-OFF GRADE--the minimum grade of mineralization or ore used to establish
quantitative estimates of total mineralized ore.
DEVELOPMENT--work carried out for the purpose of opening up a mineral
deposit and making the actual ore extraction possible.
DIAMOND DRILL--a type of rotary drill in which the cutting is done by
abrasion rather than by percussion. The hollow bit of the drill cuts a core of
rock which is recovered in long cylindrical sections.
DORE--unrefined gold and silver in bullion form.
DRIFT--a horizontal passage underground that follows along the length of a
vein or mineralized rock formation.
EPITHERMAL--a term applied to deposits formed at shallow depths from
ascending solutions of moderate temperatures.
EQUIVALENT SILVER OUNCES--is calculated by dividing the gross net smelter
return of silver, zinc and lead by the market price of silver per ounce. For
purposes of this Prospectus, the market price of silver is assumed to be $5.00
per ounce of silver, and the market prices of zinc and lead are assumed to be
$0.55 and $0.30 per pound, respectively.
EXPLORATION--work involved in searching for ore, by geological mapping,
geochemistry, geophysics, drilling and other methods.
FAULT--a fracture in a rock where there has been displacement of the two
sides.
FEASIBILITY STUDY--a technical financial study of a project at sufficient
level of accuracy and detail to allow a decision as to whether a given project
should proceed.
FRACTURE--breaks in a rock, usually due to intensive folding or faulting.
91
<PAGE>
GRADE--the average assay of a ton of ore, reflecting metal content.
HEAP LEACHING--a process involving the percolation of a cyanide solution
through crushed ore heaped on an impervious pad or base to dissolve minerals
or metals out of the ore.
IMMEDIATELY ACCESSIBLE--blocks of ore immediately accessible from current
mine workings.
INVERSE DISTANCE ESTIMATING METHOD--a method of establishing the importance
accorded to specific data points of a three dimensional block model in order
to determine the economic value of the minerals located in such block. This
determination is a weighted average with the individual weights of each data
point computed as an inverse power of distance as follows:
<TABLE>
<C> <C> <S>
wi = di -poweri = 1. . .number of samples
---
Sdi
</TABLE>
where w is the weight computed for each sample; i, each distance; d, the
distance between the location being estimated and sample i; and -power is the
inverse distance weighting power.
KRIGING--a geostatistical estimation method for calculating a geological
three dimensional model for the estimation of mineralized material and proven
and probable reserves. This method was developed to provide the "best linear,
unbiased estimate" for grade based on a least squares minimization of the
error estimation, or Kriging errors.
LEVEL--a subhorizontal working in a mine, like a drift or a tunnel, often
given a number which relates its depth below an arbitrarily chosen reference
point, e.g., the -300 Level usually means the working is 300 meters below some
chosen reference point.
MILL--a processing plant that produces a concentrate of the valuable
minerals or metals contained in an ore. The concentrate must then be treated
in some other type of plant, such as a smelter, to effect recovery of the pure
metal.
MINEABLE--the portion of a resource for which extraction is technically and
economically feasible.
MINERALIZATION--the concentration of metals and their compounds in rocks,
and the processes involved therein.
MINERALIZED MATERIAL--mineralized rock which (i) tonnage and grade are
computed (a) partly from specific measurements, samples or production data
compiled from assays of outcrops, trenches, underground working or drill
holes, and (b) partly from projections based on geological evidence, and (ii)
has not been determined, pursuant to a full feasibility study, to be
economically and legally extractable at the time of such determination.
NET SMELTER RETURN OR NSR--a return based on the actual proceeds from sale
of metal or mineral products received less the cost of refining or smelting at
an off-site refinery.
OPEN PIT--a surface working open to daylight, such as a quarry.
ORE--material that can be economically mined and processed.
OUNCE--a unit of measurement of weight. In the precious metals industry, and
at Apex one troy ounce, the equivalent of 31.103 grams.
PORPHYRY--an igneous rock of any composition that contains conspicuous
crystals in a fine-grained rock mass.
92
<PAGE>
PROBABLE RESERVES--reserves for which quantity and grade and/or quality are
computed from information similar to that used for proven reserves (see
below), but the sites for inspection, sampling and measurement are farther
apart or are otherwise less adequately spaced. The degree of assurance,
although lower than that for proven reserves, is high enough to assume
continuity between points of observation.
PROVEN RESERVES--reserves for which (a) quantity is computed from dimensions
revealed in outcrops, trenches, workings and drill holes and grade and/or
quality are computed from the results of detailed sampling; and (b) the sites
for inspection, sampling and grade measurement are spaced so closely and the
geological character is so well defined that size, shape, depth and mineral
content of reserves are well established.
RECOVERY--the percentage of contained of metal extracted from ore in the
course of processing such ore.
REFINING--the final stage of metal production in which residual impurities
are removed from the metal.
RESERVES--that part of a mineral deposit with adequate measurements which
may be economically and legally extracted or produced at the time of the
reserve determination.
REVERSE CIRCULATION DRILL--a rotary drill or rotary percussion drill in
which the drilling fluid and cuttings return to the surface through the drill
pipe, minimizing contamination.
SEMI-AUTOGENOUS-GRINDING OR SAG--a grinding method that uses a rotating mill
drum of large diameter, versus its axial length, to tumble ores that have
characteristics of hardness and particle size requiring only small amounts of
grinding steel balls added to the mill to aid the grinding process.
SHAFT--a vertical or steeply inclined excavation for the purposes of opening
and servicing an underground mine. It is usually equipped with a hoist at the
top which lowers and raises a conveyance for handling personnel and materials.
SKARN--a rock composed of calc-silicate minerals formed by the action of
igneous bodies intruding into a calcium-rich rock such as limestone. Precious
metals and sulfides of copper, lead and zinc may be introduced as part of the
process.
SMELTING--heating ore or concentrate material with suitable flux materials
at high temperatures creating a fusion of these materials to produce a melt
consisting of two layers on top, a slag of the flux and gangue (waste)
minerals, and below molten impure metals. This generally produces an
unfinished product requiring refining.
STOCKWORK--a mineral deposit in the form of a three dimensional network of
anastomosing veinlets diffused in the host rock.
STOPE--an excavation in a mine from which ore is being or has been
extracted.
STRIKE--the course or bearing of a vein or a layer of rock.
TAILINGS--the finely-ground waste product from ore processing.
TON--a dry short ton (2,000 pounds).
TONNE--a metric ton (1,000 kilograms, or 2,205 pounds).
VEIN--a mineralized zone having a more or less regular development in
length, width and depth which clearly separates it from neighboring rock.
WASTE--barren rock in a mine, or mineralization that is too low in grade to
be mined and milled at a profit.
93
<PAGE>
CONVERSION TABLE
In this Prospectus, figures are presented in both United States standard and
metric measurements. Conversion rates from United States standard to metric and
metric to United States standard measurement systems are provided in the table
below.
<TABLE>
<CAPTION>
U.S. MEASURE METRIC UNIT
- ------------ -----------
<S> <C>
2.47 acres.............. 1 hectare
3.28 feet............... 1 meter
0.62 miles.............. 1 kilometer
0.032 ounces (troy)..... 1 gram
1.102 tons.............. 1 tonne
</TABLE>
<TABLE>
<CAPTION>
METRIC MEASURE U.S. UNIT
- -------------- ---------
<S> <C>
0.4047 hectares......... 1 acre
0.3048 meters........... 1 foot
1.609 kilometer......... 1 mile
31.103 grams............ 1 ounce (troy)
0.907 tonnes............ 1 ton
</TABLE>
94
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants......................................... F-2
Consolidated Balance Sheet at June 30, 1997 (unaudited) and at December
31, 1996 and 1995........................................................ F-3
Consolidated Statement of Operations for the six month periods ended June
30, 1997 and 1996 (unaudited), the years ended December 31, 1996 and
1995, the period from December 22, 1994 (inception) through December 31,
1994, and the period from inception through December 31, 1996............ F-4
Consolidated Statement of Changes in Shareholders' Equity for the six
month period ended June 30, 1997 (unaudited), for the years ended
December 31, 1996 and 1995, and for the period ended December 31, 1994
......................................................................... F-5
Consolidated Statement of Cash Flows for the six month periods ended June
30, 1997 and 1996 (unaudited), the years ended December 31, 1996 and
1995, the period from December 22, 1994 (inception) through December 31,
1994, and the period from inception through December 31, 1996............ F-6
Notes to the Consolidated Financial Statements............................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Apex Silver Mines Limited
(Successor to Apex Silver Mines LDC), an Exploration Stage Company
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of changes in shareholders' equity and
of cash flows present fairly, in all material respects, the financial position
of Apex Silver Mines Limited (successor to Apex Silver Mines LDC) and its
subsidiaries at December 31, 1996 and 1995 and the results of their operations
and their cash flows for the years ended December 31, 1996 and 1995, the
period from December 22, 1994 (inception) through December 31, 1994 and the
period from inception through December 31, 1996 in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Denver, Colorado
August 29, 1997
F-2
<PAGE>
APEX SILVER MINES LIMITED
(SUCCESSOR TO APEX SILVER MINES LDC)
AN EXPLORATION STAGE COMPANY
CONSOLIDATED BALANCE SHEET
(EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents............. $ 4,088,342 $25,949,771 $ 3,296,618
Short-term investments................ 9,000,000 -- --
Note and accrued interest receivable.. -- -- 2,885,830
Prepaid expenses and other assets..... 499,180 154,225 --
Cash advances to associates........... -- -- 311,246
------------ ----------- -----------
Current assets....................... 13,587,522 26,103,996 6,493,694
Plant, buildings and equipment (net)... 561,953 523,534 --
Deferred organizational costs (net).... 141,479 169,774 226,365
Loan receivable from associates........ -- -- 100,000
------------ ----------- -----------
Total assets......................... $ 14,290,954 $26,797,304 $ 6,820,059
============ =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Amounts due to related parties........ $ 1,703 $ 533,275 $ 110,933
Accrued salaries, wages and benefits.. 33,135 310,669 --
Accounts payable and other accrued
liabilities.......................... 950,642 1,642,050 247,926
------------ ----------- -----------
Current liabilities.................. 985,480 2,485,994 358,859
Commitments and contingencies
(Note 10)............................. -- -- --
Minority interest in consolidated
subsidiary............................ -- -- 2,875,927
Shareholders' equity
Ordinary shares, $.01 par value,
50,000,000 shares authorized;
13,194,453, 13,079,246 and 8,822,546,
shares issued and outstanding,
respectively (See Note 1d)........... 131,944 130,792 88,225
Contributed surplus................... 38,148,688 37,978,181 5,571,398
Accumulated deficit................... (24,975,158) (13,797,663) (2,074,350)
------------ ----------- -----------
Total shareholders' equity........... 13,305,474 24,311,310 3,585,273
------------ ----------- -----------
Total liabilities and shareholders'
equity.............................. $ 14,290,954 $26,797,304 $ 6,820,059
============ =========== ===========
</TABLE>
The accompanying notes form an integral part of these consolidated financial
statements.
F-3
<PAGE>
APEX SILVER MINES LIMITED
(SUCCESSOR TO APEX SILVER MINES LDC)
AN EXPLORATION STAGE COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
(EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
FOR THE PERIOD
DECEMBER 22, PERIOD
1994 FROM
SIX MONTHS SIX MONTHS (INCEPTION) INCEPTION
ENDED ENDED YEAR ENDED YEAR ENDED THROUGH THROUGH
JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1996 1995 1994 1996
------------ ----------- ------------ ------------ -------------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Income
Interest income........ $ 475,298 $ 71,987 $ 574,470 $ 462,247 $ 15,256 $ 1,051,973
------------ ----------- ------------ ----------- --------- ------------
Total income........... 475,298 71,987 574,470 462,247 15,256 1,051,973
------------ ----------- ------------ ----------- --------- ------------
Expenses
Exploration............ 7,961,583 4,322,867 9,590,632 1,559,874 105,185 11,255,691
Administrative......... 1,814,480 497,874 1,923,165 982,261 147,780 3,053,206
Consulting............. 1,059,669 792,417 2,506,250 560,060 144,840 3,211,150
Professional fees...... 775,863 421,055 1,096,271 657,621 20,600 1,774,492
Amortization and
depreciation.......... 41,198 28,295 57,392 56,591 -- 113,983
------------ ----------- ------------ ----------- --------- ------------
Total expenses......... 11,652,793 6,062,508 15,173,710 3,816,407 418,405 19,408,522
------------ ----------- ------------ ----------- --------- ------------
Loss before minority
interests.............. (11,177,495) (5,990,521) (14,599,240) (3,354,160) (403,149) (18,356,549)
Minority interest in
loss of consolidated
subsidiary............. -- 2,666,424 2,875,927 1,492,975 189,984 4,558,886
------------ ----------- ------------ ----------- --------- ------------
Net loss for the
period................ $(11,177,495) ($3,324,097) $(11,723,313) $(1,861,185) $(213,165) $(13,797,663)
============ =========== ============ =========== ========= ============
Net loss per ordinary
share.................. $ (0.85) $ (0.38) $ (1.11) $ (0.21) $ (0.02)
============ =========== ============ =========== =========
Weighted average
ordinary shares
outstanding
(See Note 1d).......... 13,194,453 8,822,546 10,596,171 8,822,546 8,822,546
============ =========== ============ =========== =========
</TABLE>
The accompanying notes form an integral part of these consolidated financial
statements.
F-4
<PAGE>
APEX SILVER MINES LIMITED
(SUCCESSOR TO APEX SILVER MINES LDC)
AN EXPLORATION STAGE COMPANY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
ORDINARY SHARES
-------------------- TOTAL
SHARES CONTRIBUTED ACCUMULATED SHAREHOLDERS'
OUTSTANDING AMOUNT SURPLUS DEFICIT EQUITY
----------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Issuance of shares upon
incorporation--December
22, 1994............... 8,822,546 $ 88,225 $ 5,571,398 $ -- $ 5,659,623
Net loss................ -- -- -- (213,165) (213,165)
---------- -------- ----------- ------------ -----------
Balance, December 31,
1994................... 8,822,546 88,225 5,571,398 (213,165) 5,446,458
Net loss................ -- -- -- (1,861,185) (1,861,185)
---------- -------- ----------- ------------ -----------
Balance, December 31,
1995................... 8,822,546 88,225 5,571,398 (2,074,350) 3,585,273
Issuance of shares in
private placement...... 4,256,700 42,567 32,406,783 -- 32,449,350
Net loss................ -- -- -- (11,723,313) (11,723,313)
---------- -------- ----------- ------------ -----------
Balance, December 31,
1996................... 13,079,246 130,792 37,978,181 (13,797,663) 24,311,310
Issuance of shares
(unaudited)............ 115,207 1,152 170,507 -- 171,659
Net loss (unaudited).... -- -- -- (11,177,495) (11,177,495)
---------- -------- ----------- ------------ -----------
Balance, June 30, 1997
(unaudited)............ 13,194,453 $131,944 $38,148,688 $(24,975,158) $13,305,474
========== ======== =========== ============ ===========
</TABLE>
The accompanying notes form an integral part of these consolidated financial
statements.
F-5
<PAGE>
APEX SILVER MINES LIMITED
(SUCCESSOR TO APEX SILVER MINES LDC)
AN EXPLORATION STAGE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
FOR THE PERIOD
DECEMBER 22,
1994 PERIOD FROM
SIX MONTHS SIX MONTHS (INCEPTION) INCEPTION
ENDED ENDED YEAR ENDED YEAR ENDED THROUGH THROUGH
JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1996 1995 1994 1996
------------ ----------- ------------ ------------ -------------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net loss.............. $(11,177,495) $(3,324,097) $(11,723,313) $(1,861,185) $(213,165) $(13,797,663)
Adjustments to
reconcile net loss to
net cash used in
operating activities:
Amortization and
depreciation......... 41,198 28,295 57,392 56,591 -- 113,983
Minority interest in
loss of consolidated
subsidiary........... -- (2,666,424) (2,875,927) (1,492,975) (189,984) (4,558,886)
Changes in operating
assets and
liabilities:
(Increase) decrease
in accrued interest
receivable.......... -- 66,112 66,112 (50,856) (15,256) --
(Increase) decrease
in prepaid expenses
and other assets.... (344,955) -- (154,225) 24,167 (24,167) (154,225)
(Increase) decrease
in cash advances to
and loan receivable
from associates..... -- 311,246 411,246 (411,246) -- --
Increase (decrease)
in current
liabilities......... (1,500,514) 646,351 2,127,135 244,873 113,986 2,485,994
------------ ----------- ------------ ----------- --------- ------------
Net cash used in
operating
activities......... (12,981,766) (4,938,517) (12,091,580) (3,490,631) (328,586) (15,910,797)
------------ ----------- ------------ ----------- --------- ------------
Cash flows from
investing activities:
Purchases of short-
term investments..... (9,000,000) -- -- -- -- --
Purchases of property
and equipment........ (51,322) -- (524,335) -- -- (524,335)
------------ ----------- ------------ ----------- --------- ------------
Net cash used in
investing
activities......... (9,051,322) -- (524,335) -- -- (524,335)
------------ ----------- ------------ ----------- --------- ------------
Cash flows from
financing activities:
Proceeds from issuance
of ordinary shares... 171,659 2,819,718 35,269,068 6,430,307 968,484 42,667,859
Deferred
organizational
costs................ -- -- -- -- (282,956) (282,956)
------------ ----------- ------------ ----------- --------- ------------
Net cash provided by
financing
activities......... 171,659 2,819,718 35,269,068 6,430,307 685,528 42,384,903
------------ ----------- ------------ ----------- --------- ------------
Net increase (decrease)
in cash and cash
equivalents........... (21,861,429) (2,118,799) 22,653,153 2,939,676 356,942 25,949,771
Cash and cash
equivalents:
Beginning of period... 25,949,771 3,296,618 3,296,618 356,942 -- --
------------ ----------- ------------ ----------- --------- ------------
End of period......... $ 4,088,342 $ 1,177,819 $ 25,949,771 $ 3,296,618 $ 356,942 $ 25,949,771
============ =========== ============ =========== ========= ============
</TABLE>
The accompanying notes form an integral part of these consolidated financial
statements.
F-6
<PAGE>
APEX SILVER MINES LIMITED
(SUCCESSOR TO APEX SILVER MINES LDC)
AN EXPLORATION STAGE COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
1.INCORPORATION, RECAPITALIZATION, OWNERSHIP AND OPERATIONS
a. Apex Silver Mines Limited ("Apex Limited" or the "Company") was formed
under the laws of the Cayman Islands in March of 1996 for the sole purpose of
serving as a holding company for certain ownership interests in Apex Silver
Mines LDC ("Apex LDC"). On April 15, 1996, holders of approximately 55% of the
then-outstanding shares of Apex LDC elected to participate, effective as of
the completion of a proposed private placement of shares of Apex Limited which
was completed as of August 6, 1996, in a recapitalization effected by an
exchange, on a one-for-one basis, of their shares in Apex LDC for identical
equity instruments of Apex Limited (the "Recapitalization"). The balance of
shareholders retained a direct ownership interest in Apex LDC. As a result of
this recapitalization, Apex LDC became a majority-owned subsidiary of Apex
Limited. The accompanying financial statements reflect the historical accounts
of the Company's predecessor, Apex LDC. For purposes of the accompanying
consolidated financial statements of Apex Limited, the recapitalization has
been given retroactive effect to the date of incorporation of Apex LDC, with
the results of operations and equity attributable to the other ownership
interests in Apex LDC being reflected in "minority interest in consolidated
subsidiary". Consequently, for purposes of these financial statements, Apex
Limited is considered the successor to Apex LDC.
b. In August of 1996, Apex Limited issued 4,256,700 ordinary shares in a
private placement transaction (the "Private Placement") for net proceeds of
$32.4 million. These proceeds were contributed to Apex LDC in exchange for the
issuance by Apex LDC of 4,256,700 shares of its share capital. As a result of
this private placement, the Company's ownership interest in Apex LDC was
increased from approximately 55% to 65%.
c. Apex LDC was incorporated under the laws of the Cayman Islands on November
23, 1994 as a 30-year limited duration company on the contribution of all the
assets of its predecessor entity, Apex Silver Mines Ltd., a Bermuda
corporation. (Actual contribution occurred on December 22, 1994.) The activity
of the predecessor has not been presented herein as it was immaterial.
However, all expenses incurred by the predecessor have been presented. The
Company's principal activity is the exploration of mineral properties. The
Company participates in the acquisition and exploration of mineral properties
for possible future development directly and indirectly through Apex LDC's
principal subsidiaries, Andean Silver Corporation LDC ("Andean"), ASC Bolivia
LDC ("ASC Bolivia"), Apex Asia LDC ("Apex Asia"), Minera de Cordilleras
(Honduras), S. de R.L. ("Cordilleras Honduras"), Cordilleras Silver Mines Ltd.
("Cordilleras Bahamas"), Cordilleras Silver Mines (Cayman) LDC ("Cordilleras
Cayman"), Compania Minerales de Zacatecas, S. de R.L. de C.V. ("CMZ"), Apex
Silver Mines Corporation, ("Apex Corporation") and ASC Peru LDC ("ASC Peru").
d. In conjunction with the Recapitalization and the Private Placement, Apex
Limited and the shareholders of Apex LDC entered into a Buy-Sell Agreement
(the "Buy-Sell Agreement") which is intended to maintain the same beneficial
interest in Apex LDC attributable to all shareholders of Apex LDC prior to the
Recapitalization and Private Placement. Pursuant to the terms of the Buy-Sell
Agreement, upon a request by a shareholder of Apex LDC, Apex Limited is
required to purchase, at its sole option, for cash, for ordinary shares or for
a combination thereof, the shares of Apex LDC owned by such shareholder. Apex
Limited currently expects that any purchase of shares of Apex LDC will involve
only an equal number of ordinary shares. As of August 29, 1997, Apex Limited
has approximately 13,601,544 shares outstanding and approximately 7,077,007
ordinary shares reserved
F-7
<PAGE>
APEX SILVER MINES LIMITED
(SUCCESSOR TO APEX SILVER MINES LDC)
AN EXPLORATION STAGE COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(EXPRESSED IN UNITED STATES DOLLARS)
for issuance for the approximately 7,077,007 shares of Apex LDC owned by such
shareholders. If all such ordinary shares were issued, the Company would have
approximately 20,678,551 ordinary shares outstanding. Because of the
provisions of the Buy-Sell Agreement, all of the outstanding shares of Apex
LDC are considered ordinary share equivalents for purposes of computing net
loss per ordinary share but are not included in the computation for any of the
periods presented because they are antidilutive. If all of the Apex LDC shares
were assumed to be purchased in all periods, the outstanding ordinary shares
and the net loss per ordinary share as of and for the periods ended June 30,
1997 and 1996 and December 31, 1996, 1995 and 1994, on a pro forma basis,
would have been (all unaudited) 20,271,460, 15,899,553, 17,673,178, 15,899,553
and 15,899,553 ordinary shares and $(0.55), $(0.21), $(0.66), $(0.12) and
$(0.01) net loss per ordinary share.
e. The Company, through its direct and indirect subsidiaries, is active in
Central America, South America and Central Asia and currently holds interests
in, or is the beneficial owner of, non-producing silver resource properties in
Chile, Bolivia, Honduras, Kyrghyzstan, Mexico, Mongolia, Peru and Tajikistan.
The Company is in the process of evaluating its properties to determine
economic feasibility of bringing one or more of the properties into
production.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
("GAAP"). The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could
differ from those estimates. The policies adopted, considered by management to
be significant, are summarized as follows:
a. Basis of consolidation
These consolidated financial statements include the accounts of the Company
and its majority owned subsidiaries. Investment in 50% joint ventures are
proportionately consolidated.
b. Interim financial data
The interim financial data as of June 30, 1997 and for the six-month periods
ended June 30, 1997 and 1996 are unaudited; however, in the opinion of
management, such interim data includes all adjustments (consisting only of
normal recurring adjustments) considered necessary for a fair presentation of
financial position and results of operations for the interim periods. All data
included herein as of such date and for such periods are unaudited.
c. Translation of foreign currencies
All expenditures are made in United States dollars. Accordingly, the Company
uses the United States dollar as its functional currency.
F-8
<PAGE>
APEX SILVER MINES LIMITED
(SUCCESSOR TO APEX SILVER MINES LDC)
AN EXPLORATION STAGE COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(EXPRESSED IN UNITED STATES DOLLARS)
d. Cash, cash equivalents and short-term investments
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. Short-term investments
include certificates of deposit with maturities greater than three months, but
not exceeding six months. Short-term investments are recorded at cost which
approximates fair value.
e. Exploration and development costs
The Company expenses general prospecting costs and the costs of acquiring
and exploring unevaluated mining properties. When a property is determined to
have proven and probable reserves, further exploration costs and development
costs are capitalized. When commercially profitable ore reserves are developed
and operations commence, capitalized costs will be amortized using the units-
of-production method. Upon abandonment or sale of projects, all capitalized
costs relating to the specific project are written off in the year abandoned
or sold and a gain or loss is recognized.
As of December 31, 1996, no exploration and development costs have been
capitalized.
f. Fixed assets
Buildings and equipment are carried at cost and are depreciated on a
straight-line basis over estimated useful lives of three to thirty years.
g. Deferred organizational costs
Costs incurred in the organization of the Company have been capitalized and
are being amortized on a straight-line basis over five years.
h. Asset impairment
The Company evaluates its long-lived assets for impairment when events or
changes in circumstances indicate that the related carrying amount may not be
recoverable. If the sum of estimated future net cash flows on an undiscounted
basis is less than the carrying amount of the related asset, an asset
impairment is considered to exist. The related impairment loss is measured by
comparing estimated future net cash flows on a discounted basis to the
carrying amount of the asset. Changes in significant assumptions underlying
future cash flow estimates may have a material effect on the Company's
financial position and results of operations. To date no such impairments have
been identified.
i. Fair value of financial instruments
The Company's financial instruments consist of cash, receivables, accounts
payable and other current liabilities. The carrying amounts of these financial
instruments approximate fair value due to their short maturities.
F-9
<PAGE>
APEX SILVER MINES LIMITED
(SUCCESSOR TO APEX SILVER MINES LDC)
AN EXPLORATION STAGE COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(EXPRESSED IN UNITED STATES DOLLARS)
j. Stock compensation
As permitted under Statement of Financial Accounting Standards ("SFAS") No.
123, "Accounting for Stock-Based Compensation," the Company has elected to
measure compensation expense as prescribed by Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees." Under that method,
the difference between the exercise price and the estimated fair value of the
shares at the date of grant is charged to compensation expense ratably over
the vesting period.
k. Net loss per ordinary share
Net loss per ordinary share is computed using the weighted average number of
ordinary and equivalent shares outstanding during the period. Equivalent
shares are excluded from the computation if their effect is antidilutive
except that, pursuant to the requirements of the Securities and Exchange
Commission, equivalent shares relating to options issued and ordinary shares
sold at less than the initial public offering price during the twelve-month
period prior to the initial public offering contemplated hereby are included
in the computations for all periods presented.
l. New accounting pronouncements
During February of 1997, the Financial Accounting Standards Board released
SFAS No. 128, Earnings per Share, which requires the disclosure of both basic
earnings per share and diluted earnings per share. The Company will be
required to adopt SFAS No. 128 effective December 31, 1997, and believes it
will not have a material impact on previously reported losses per share.
Other pronouncements issued by authoritative bodies with future effective
dates are either not applicable or not material to the consolidated financial
statements of the Company.
3. INCOME TAXES
The provision for income taxes includes United States federal, state and
foreign income taxes currently payable and deferred based on currently enacted
tax laws. Deferred income taxes are provided for the tax consequences of
differences between the financial statement and tax bases of assets and
liabilities. A valuation allowance is recognized if, based on the weight of
available evidence, it is more likely than not that some portion or all of the
deferred tax asset will not be realized.
There is currently no taxation imposed by the Cayman Islands. If any form of
taxation were to be enacted, the Company has been granted exemption therefrom
to January 16, 2015. The Company's subsidiaries which do business in other
countries have not generated income and therefore are not liable for local
income taxes.
Apex Corporation, a Delaware corporation, is the only entity within the
Company which is currently subject to United States federal and state income
taxes. As of June 30, 1997 and December 31, 1996, Apex Corporation had a
United States net operating loss carryforward of approximately $1,300,000
(unaudited) and $500,000, respectively. As such, no United States tax
provision is included in the accompanying financial statements. Additionally,
as of June 30, 1997 and December 31, 1996, Apex Corporation had net deferred
tax assets of approximately $500,000 (unaudited) and $200,000, respectively,
primarily as a result of operating loss carryforwards which are entirely
offset by a valuation allowance.
F-10
<PAGE>
APEX SILVER MINES LIMITED
(SUCCESSOR TO APEX SILVER MINES LDC)
AN EXPLORATION STAGE COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(EXPRESSED IN UNITED STATES DOLLARS)
As of June 30, 1997 and December 31, 1996, operating loss carryforwards
generated by ASC Bolivia amounted to approximately $9.7 million (unaudited)
and $3.4 million, respectively. Operating losses (as adjusted for inflation)
may be carried forward and deducted from taxable income indefinitely. The
deferred tax asset resulting from the operating loss carryforwards has been
entirely offset by a valuation allowance.
No net deferred tax assets related to operating losses generated through
June 30, 1997 by the Company's other foreign subsidiaries have been included
in the accompanying financial statements, as all such assets have been
entirely offset by a valuation allowance.
4. NOTE RECEIVABLE
At December 31, 1995, the note receivable represents the outstanding balance
of a $10,000,000 non-negotiable secured demand note, dated December 22, 1994,
on demand at any time, accruing interest at LIBOR, issued by Silver Holdings
LDC in consideration for 7,500 shares of the share capital (75% of the then
issued and outstanding shares) of Apex LDC. The balance at December 31, 1995
is comprised of the note receivable in the amount of $2,819,718 and accrued
interest of $66,112. The note was paid in full during 1996.
5. PLANT, BUILDINGS AND EQUIPMENT
The components of plant, buildings and equipment were as follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
----------- ------------
(UNAUDITED)
<S> <C> <C>
Buildings.......................................... $274,054 $274,054
Mining equipment................................... 228,168 183,356
Other furniture and equipment...................... 73,435 66,925
-------- --------
575,657 524,335
Less: Accumulated depreciation..................... (13,704) (801)
-------- --------
$561,953 $523,534
======== ========
</TABLE>
Depreciation expense for the six months ended June 30, 1997 and the year
ended December 31, 1996 totaled $12,903 and $801, respectively.
6. DEFERRED ORGANIZATIONAL COSTS
<TABLE>
<CAPTION>
JUNE 30, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995
------------- ----------------- -----------------
(UNAUDITED)
<S> <C> <C> <C>
Organizational costs..... $282,956 $282,956 $282,956
Less: Accumulated
amortization............ (141,477) (113,182) (56,591)
-------- -------- --------
$141,479 $169,774 $226,365
======== ======== ========
</TABLE>
Amortization expense for the six-month period ended June 30, 1997 was
$28,295 and for each of the years ended December 31, 1996 and 1995 was
$56,591.
F-11
<PAGE>
APEX SILVER MINES LIMITED
(SUCCESSOR TO APEX SILVER MINES LDC)
AN EXPLORATION STAGE COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(EXPRESSED IN UNITED STATES DOLLARS)
7. STOCK OPTION PLANS
During 1996, options to purchase 281,250 shares of the Company's ordinary
shares were granted, exercisable at a price of $8.00 per share. Of these
options, 73,438 vested immediately. The remainder of the options vest ratably
over periods of up to four years with the first tranche vesting on the date of
grant. Unexercised options expire ten years after the date of grant.
The following table summarizes stock option information:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-----------------
<S> <C>
Options granted at $8 during period........................ 281,250
Options outstanding at end of period....................... 281,250
Options exercisable at end of period....................... 73,438
</TABLE>
The weighted average grant-date fair value of options granted for the year
ended December 31, 1996 is $1.30. The weighted average remaining contractual
life of the options at December 31, 1996 is 11.1 years. To date, none of these
options have been exercised.
Pro forma information regarding net income is required by SFAS No. 123, and
has been determined as if the Company has accounted for its employees' stock
options under the fair value method of SFAS No. 123. For purposes of
calculating the fair value of options, volatility was not considered for the
options granted in 1996 since the Company was non-public at the date of grant.
The Company currently does not foresee the payment of dividends in the near
term. The fair value for these options was estimated at the date of grant
using the Black-Scholes option pricing model with the following assumptions:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-----------------
<S> <C>
Weighted average risk-free interest rate................... 6.45%
Expected dividend yield.................................... --
Weighted average expected life (in years).................. 2.78
</TABLE>
For the purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The
Company's pro forma information follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
-------------
<S> <C>
As reported
Net loss........................................................ $(11,723,313)
Net loss per ordinary share..................................... (1.11)
Pro forma
Net loss........................................................ (11,852,522)
Net loss per ordinary share..................................... (1.12)
</TABLE>
F-12
<PAGE>
APEX SILVER MINES LIMITED
(SUCCESSOR TO APEX SILVER MINES LDC)
AN EXPLORATION STAGE COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(EXPRESSED IN UNITED STATES DOLLARS)
8. EVENT SUBSEQUENT TO DECEMBER 31, 1996
Effective as of August 15, 1997, the minority shareholder of ASC Bolivia
exchanged its 2.5% interest for 268,496 shares of Apex Limited and the Company
granted two associates a total of 138,595 shares of the Company in
consideration for services.
9. RELATED PARTY TRANSACTIONS
Apex LDC engaged Tigris Financial Group Ltd. ("Tigris") and LCM Holdings LDC
("LCM") to provide management advisory services to Apex LDC and its
subsidiaries. Tigris is wholly owned by Mr. Thomas S. Kaplan, a director and
officer of Apex LDC and its subsidiaries, and an indirect shareholder. LCM is
wholly owned by an indirect shareholder of Apex LDC. This consulting
arrangement was terminated at the end of the first quarter of 1997, following
the formation of Apex Corporation. Apex Corporation provides management,
advisory and administrative services for the Company pursuant to a Management
Services Agreement dated October 22, 1996. The Company pays Apex Corporation
in providing its services, plus 10 percent of such costs. During the periods
ended December 31, 1996, 1995 and 1994 fees paid to Tigris and LCM for such
services amounted to $423,684, $143,368 and $21,250, respectively. As of
December 31, 1996, the amount payable for such services was $11,119.
Apex LDC hires both individuals and companies ("associates") to perform
services on its behalf in countries in which it has mineral interests. These
services include administrative expenses, obtaining interests in properties on
Apex LDC's behalf, and consulting services. In certain cases persons
affiliated with such associates serve as officers or directors of Apex LDC's
subsidiaries. During the periods ended December 31, 1996, 1995 and 1994, the
total amounts charged to Apex LDC by such related associates were $5,695,193,
$1,965,276 and $275,653, respectively, and are included in the statement of
operations under the applicable captions. As of December 31, 1996, the amount
payable for such services was $386,639.
During the periods ended December 31, 1996, 1995 and 1994, Apex LDC paid an
associate who, until August 6, 1996, was a shareholder of certain subsidiaries
of Apex LDC $485,179, $239,647 and $14,104, respectively, in consideration for
geology services provided and disbursements made on Apex LDC's behalf. As of
December 31, 1996, the amount payable for such services was $135,517.
During the year ended December 31, 1995, Apex LDC made an interest-free loan
to an indirect shareholder in the amount of $100,000. The loan was forgiven by
Apex LDC as of August 6, 1996, as partial payment for that shareholder's
remaining interest in one subsidiary and his profits interests in certain
properties owned or controlled by Apex LDC or its subsidiaries.
Apex LDC received interest income on the note receivable issued by Silver
Holdings LDC, a shareholder of Apex LDC. During the periods ended December 31,
1995 and 1994, such interest income amounted to $360,937 and $15,256,
respectively.
Two individuals, one of whom is an officer and indirect shareholder of Apex
LDC, the second of whom is an officer of certain of Apex LDC's subsidiaries,
are also shareholders and directors of Begeyge Minera Ltda. ("Begeyge"), with
whom the Company has a non-binding commitment to purchase the Suyatal Project
for an aggregate purchase price of $3,000,000 (see Note 10). Begeyge also
served as an associate and during the year ended December 31, 1996, total
amounts charged to Apex LDC by Begeyge were $106,691.
F-13
<PAGE>
APEX SILVER MINES LIMITED
(SUCCESSOR TO APEX SILVER MINES LDC)
AN EXPLORATION STAGE COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(EXPRESSED IN UNITED STATES DOLLARS)
10. COMMITMENTS AND CONTINGENCIES
The Company had outstanding nonbinding commitments relating to certain
mineral properties at December 31, 1996 (as adjusted for contract terminations
and modifications through August 15, 1997) as follows:
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 THEREAFTER
---------- ---------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
HONDURAS
El Ocote(/1/)......... $ 250,000 $ 93,866 $ 75,000 $ -- $ -- $ --
Suyatal(/2/).......... 15,000 25,000 40,000 40,000 40,000 2,825,000
Tatumbla(/3/)......... 66,667 66,667 66,666 -- -- --
BOLIVIA
San Cristobal(/4/).... 297,000 120,000 -- -- -- --
Choroma(/5/).......... 227,000 349,250 -- -- -- --
Cobrizos(/6/)......... 318,841 214,675 201,314 201,314 1,006,551 --
General............... 170,000 170,000 170,000 170,000 170,000 --
PERU
Otuzco(/7/)........... 36,000 18,000 18,000 18,000 18,000 450,000
Total............... $1,380,508 $1,057,458 $570,980 $429,314 $1,234,551 $3,275,000
</TABLE>
- --------
(/1/) Upon production, the Company will also pay a 5% net smelter return ("NSR")
royalty.
(/2/) Annual installments are not to exceed the greater of $40,000, or a 2% NSR.
(/3/) In addition, beginning in January of 1999, the Company will pay the
greater of a $20,000 per year advance against future NSR royalties, or a
2% NSR. Upon the earlier of the fifth anniversary of commercial production
or recovery of the Company's entire capital investment, the Company will
pay the higher of the $20,000 per year advance, or a 3% NSR, plus an
additional 2% NSR on production from the project.
(/4/) The Company, through a wholly-owned subsidiary has an option to purchase
these properties prior to October of 1998 for $2,000,000, less the sum of
all prior lease payments ($12,000 per month). In addition, the Company has
an option to acquire mining concessions for $6,000 per month until
February 1, 1998. Upon exercise of the option, a payment of $250,000 is
due, to be followed by another $250,000 due on February 1, 1999 plus the
assumption of certain indebtedness of the seller.
(/5/) Upon production, the Company will pay a royalty of 5% of operating cash
flow until the investment has been recovered, and a 15% royalty
thereafter.
(/6/) The commitments relating to the years 1999 to 2001 are for land taxes.
The amounts disclosed represent the maximum possible payment. Upon
production, the Company will pay a royalty of 5% of operating cash flow
until the investment has been recovered, and a 15% royalty thereafter.
(/7/) The lease agreement related to this property also includes payment of a
production royalty of 4.5% NSR. Concurrent with the lease is a four-year
option to purchase the property for $350,000. In addition, the Company has
a $40,400 per year payment due for land taxes on staked claims.
In addition to those summarized above, the Company has the following
nonbinding commitments:
Honduras--Portrerillos: Payments of $50,000 per year are required until
production begins. Upon production, Cordilleras Honduras will pay the greater
of $200,000, or a 3% NSR. Cordilleras Honduras may purchase the pre-production
payments and 3% NSR royalty for $3,000,000. If this option is elected prior to
June of 1999, all prior payments will be credited towards the purchase price.
F-14
<PAGE>
Bolivia--Pulacayo: ASC Bolivia is obligated to pay $1,500 per month during
exploration until completion of a feasibility study. If the property is
developed, ASC Bolivia will be required to pay a 5% NSR.
Peru--San Juan de Lucanas: Andean has contracted to purchase mining
concessions for total payment of $2,100,000 over a fourteen month period.
Tajikistan--Kanimansur Ore Field: The joint venture agreement related to
this proposed acquisition is still awaiting approval by the government. An
initial capital contribution of $49,000 must be effected within one year of
the formal registration of Kanimansur Mining.
F-15
<PAGE>
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THE PRO-
SPECTUS IN CONNECTION WITH THE OFFER MADE BY THE PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE U.S. UNDERWRITERS. NEITHER THE DE-
LIVERY OF THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUM-
STANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF
THE COMPANY SINCE THE DATE HEREOF. THE PROSPECTUS DOES NOT CONSTITUTE AN OFFER
OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITA-
TION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITA-
TION.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 1
Risk Factors............................................................. 8
Use of Proceeds.......................................................... 16
Dividend Policy.......................................................... 16
Capitalization........................................................... 17
Dilution................................................................. 18
Selected Consolidated Financial Data..................................... 19
Corporate Structure...................................................... 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 22
The Company.............................................................. 28
Properties............................................................... 30
Development Project...................................................... 31
Advanced Exploration Properties.......................................... 40
Other Mineral Properties................................................. 48
Metals Market Overview................................................... 51
Republic of Bolivia...................................................... 53
Management............................................................... 57
Executive Compensation................................................... 64
Principal Shareholders................................................... 69
Certain Transactions..................................................... 72
Description of Ordinary Shares........................................... 75
Shares Eligible for Future Sale.......................................... 81
Underwriting............................................................. 82
Taxation................................................................. 85
Experts.................................................................. 89
Legal Matters............................................................ 89
Additional Information................................................... 90
Glossary................................................................. 91
Conversion Table......................................................... 94
Index to Consolidated Financial Statements............................... F-1
</TABLE>
UNTIL [ ], 1997 ALL DEALERS EFFECTING TRANSACTIONS IN THE SHARES, WHETHER OR
NOT PARTICIPATING IN THE DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DE-
LIVER A PROSPECTUS WHEN ACTING AS U.S. UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS.
[ ] SHARES
APEX SILVER
MINES LIMITED
ORDINARY SHARES
(PAR VALUE $0.01 PER SHARE)
[LOGO OF APEX SILVER MINES LIMITED]
SALOMON BROTHERS INC
PAINEWEBBER INCORPORATED
SCOTIA CAPITAL MARKETS
PROSPECTUS
AUGUST , 1997
<PAGE>
[ALTERNATE FRONT COVER PAGE FOR INTERNATIONAL PROSPECTUS]
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THIS REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
AUGUST 29, 1997
PROSPECTUS
[ ] SHARES
[LOGO OF APEX SILVER MINES LIMITED]
APEX SILVER MINES LIMITED
ORDINARY SHARES
(PAR VALUE $0.01 PER SHARE)
Of the [ ] shares (the "Shares") of ordinary shares, par value $0.01 per
share, (the "Ordinary Shares") of Apex Silver Mines Limited (the "Company")
offered hereby (the "Offering"), [ ] Shares are being offered initially in
the United States and Canada by the U.S. Underwriters and [ ] Shares are
being offered initially outside the United States by the Managers. See
"Underwriting". Upon completion of the Offering (assuming the over-allotment
options granted to the U.S. Underwriters and the Managers are not exercised),
the Company will own [ ] percent of the outstanding share capital of Apex
Silver Mines LDC ("Apex LDC"), the Company's principal operating subsidiary.
See "Corporate Structure". The minority shareholders of Apex LDC (the "Minority
Shareholders") are entitled to sell their shares of Apex LDC to the Company
for, at the Company's sole option, shares of the Company on a one-for-one
basis, cash, or a combination of cash and Ordinary Shares. The Company
currently expects that any future purchases by the Company of shares of Apex
LDC from the Minority Shareholders will involve only Ordinary Shares of Apex
Silver Mines Limited. Any such transactions will not affect the beneficial or
economic interest in Apex LDC attributable to shareholders of Apex Silver Mines
Limited. Currently, the Company has approximately 13,601,544 Ordinary Shares
outstanding and approximately 7,077,007 Ordinary Shares reserved for issuance
for 7,077,007 shares of Apex LDC owned by the Minority Shareholders. If all
such shares of Apex LDC were issued, the Company would have 20,678,551 Ordinary
Shares outstanding. See "Certain Transactions". [AN APPLICATION WILL BE MADE TO
LIST THE SHARES FOR QUOTATION ON THE AMERICAN STOCK EXCHANGE UNDER THE TRADING
SYMBOL [" "], SUBJECT TO NOTICE OF ISSUANCE.]
Prior to the Offering, there has been no public market for the Shares. It is
anticipated that the initial offering price will be between [$ ] and [$ ]
per share. See "Underwriting" for information relating to the factors
considered in determining the initial public offering price.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
INVESTORS IN PURCHASING THE SHARES OFFERED HEREBY, SEE "RISK FACTORS" ON PAGE
8.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
<S> <C> <C> <C>
Per Ordinary Share.................. $ . $ . $ .
Total(3)............................ $ . $ . $ .
</TABLE>
- --------------------------------------------------------------------------------
(1) The Company has agreed to indemnify the Managers against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting".
(2) Before deducting certain expenses of the Offering, payable by the Company,
estimated to be [$ ].
(3) The Company has granted the Managers a 30-day option to purchase up to
[ ] additional Ordinary Shares, at the Price to Public, less Underwriting
Discount, solely to cover over-allotments, if any. If the Managers exercise
such option in full, the total Price to Public, Underwriting Discount,
Proceeds to Company [ ]. See "Underwriting".
These Shares are offered subject to receipt and acceptance by the Managers, to
prior sale, and to the Managers' right to reject any order in whole or in part
and to withdraw, cancel or modify the offer without notice. It is expected that
delivery of the Shares will be made at the office of Salomon Brothers Inc,
Seven World Trade Center, New York, New York, or through the facilities of the
Depository Trust Company, on or about [ ], 1997.
SALOMON BROTHERS INTERNATIONAL LIMITED
PAINEWEBBER INTERNATIONAL
ABN AMRO ROTHSCHILDS
The date of this Prospectus is [ ], 1997.
<PAGE>
[ALTERNATE BACK COVER PAGE FOR INTERNATIONAL PROSPECTUS]
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THE PRO-
SPECTUS IN CONNECTION WITH THE OFFER MADE BY THE PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE MANAGERS. NEITHER THE DELIVERY OF
THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF. THE PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITA-
TION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 1
Risk Factors............................................................. 8
Use of Proceeds.......................................................... 16
Dividend Policy.......................................................... 16
Capitalization........................................................... 17
Dilution................................................................. 18
Selected Consolidated Financial Data..................................... 19
Corporate Structure...................................................... 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 22
The Company.............................................................. 28
Properties............................................................... 30
Development Project...................................................... 31
Advanced Exploration Properties.......................................... 40
Other Mineral Properties................................................. 48
Metals Market Overview................................................... 51
Republic of Bolivia...................................................... 53
Management............................................................... 57
Executive Compensation................................................... 64
Principal Shareholders................................................... 69
Certain Transactions..................................................... 72
Description of Ordinary Shares........................................... 75
Shares Eligible for Future Sale.......................................... 81
Underwriting............................................................. 82
Taxation................................................................. 85
Experts.................................................................. 89
Legal Matters............................................................ 89
Additional Information................................................... 90
Glossary................................................................. 91
Conversion Table......................................................... 94
Index to Consolidated Financial Statements............................... F-1
</TABLE>
UNTIL [ ], 1997 ALL DEALERS EFFECTING TRANSACTIONS IN THE SHARES, WHETHER OR
NOT PARTICIPATING IN THE DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DE-
LIVER A PROSPECTUS WHEN ACTING AS MANAGERS AND WITH RESPECT TO THEIR UNSOLD AL-
LOTMENTS.
[ ] SHARES
APEX SILVER
MINES LIMITED
ORDINARY SHARES
(PAR VALUE $0.01 PER SHARE)
[LOGO OF APEX SILVER MINES LIMITED]
SALOMON BROTHERS INTERNATIONAL LIMITED
PAINEWEBBER INTERNATIONAL
ABN AMRO ROTHSCHILDS
PROSPECTUS
AUGUST , 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following are the estimated expenses, other than the underwriting
discounts and commissions, expected to be incurred in connections with the
issuance and distribution of the securities registered under this Registration
Statement:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............... $30,304
AMEX Listing Fee.................................................. $ **
NASD Filing Fee................................................... $10,500
Blue Sky Fees and Expenses*....................................... $ **
Printing and Engraving Expenses*.................................. $ **
Legal Fees and Expenses*.......................................... $ **
Accounting Fees and Expenses*..................................... $ **
Transfer Agent's Fees and Expenses*............................... $ **
Miscellaneous..................................................... $ **
-------
Total........................................................... $ **
=======
</TABLE>
- --------
* Estimated
** To be filed by Amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Companies Act (1995 Revision) of the Cayman Islands provides in Section
77 that:
The liability of the directors, manager or the managing director of a
company may, if so provided by the memorandum of association, be unlimited.
The Articles of Association of the Company provide as follows:
85. (a) Every Director (including for the purposes of this Article any
Alternate Director appointed pursuant to the provisions of
these Articles), Managing Director, Secretary, Assistant
Secretary, and, at the discretion of the Board of Directors,
other officer, consultant, employee or agent, for the time
being and from time to time of the Company and the personal
representatives of the same shall be indemnified and secured
harmless out of the assets and funds of the Company against all
actions, proceedings, costs, charges, expenses, losses, damages
or liabilities incurred or sustained by him in or about the
conduct of the Company's business or affairs or in the
execution or discharge of his duties, powers, authorities or
discretions, including without prejudice to the generality of
the foregoing, any costs, expenses, losses or liabilities
incurred by him in defending (whether successfully or
otherwise) any civil proceedings concerning the Company or its
affairs in any court whether in the Cayman Islands or elsewhere
provided, that no indemnification shall be available in the
case of wilful default or fraud.
(b) No such Director, Alternate Director, Managing Director, agent,
Secretary, Assistant Secretary or other officer of the Company
shall be liable (i) for the acts, receipts, neglects, defaults
or omissions of any other such director or officer or agent of
the Company 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 property of the
Company or (iv) on account of the insufficiency of any security
in or upon which any money of the Company 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
II-1
<PAGE>
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.
(c) The Board of Directors may authorize the Company to purchase
and maintain insurance on behalf of any person described in
Section 83(a), 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 the Company would have the power
to indemnify him against such liability under the provisions of
this Section 83.
To the extent that it is permitted to do so by these provisions, the Company
intends to give an indemnity to each of its directors and to arrange for the
liabilities under these indemnities to be covered.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since its formation in March of 1996, Ordinary Shares have been issued in
the following transactions:
1. Effective as of August 6, 1996, the Company issued 4,256,700 Ordinary
Shares at a price of $8.00 per share to subscribers in a Private Placement.
Salomon Brothers Inc, S.G. Warburg & Co. Inc. and Matrix U.S.A., LLC acted
as Private Placement agents for the Offering. The Company paid $1,243,050
to the Private Placement agents as a fee for their services. All of the
shares issued were issued to "accredited investors" as defined within
Regulation D under the Securities Act of 1933, as amended.
2. Effective as of August 6, 1996, the Company issued (i) 25,000 Ordinary
Shares at a price of $8.00 per share to each of Ms. Berliner and Messrs.
Buchanan, Mohamed Kashoggi and de Lucio in exchange for their respective
two and one-half percent (2.5%) interests in Andean; (ii) 25,000 Ordinary
Shares at a price of $8.00 per share to Mr. McDonald in exchange for his
profits interests in certain Mexican and Honduran properties and his one
share of Cordillera Mexico; and (iii) 25,000 Ordinary Shares at a price of
$8.00 per share to Mr. Golan in exchange for his two and one-half percent
(2.5%) interest in Apex Asia.
3. Effective as of September 30, 1996, the Company issued 115,207
Ordinary Shares to Mr. William Natbony at the then per share book value of
the Company in exchange for consulting services.
4. Effective as of August 15, 1997, the Company issued (i) 268,496
Ordinary Shares to Mintec in exchange for Mintec's two and one-half percent
(2.5%) interest in ASC Bolivia, (ii) 113,595 Ordinary Shares to Johnny
Delgado Achaval in consideration of his consulting and other work for the
Company, and (iii) 25,000 Ordinary Shares to Mada Limited in consideration
for its and Mr. Golan's work for the Company.
The Company believes that the foregoing described issuances of securities,
if they constitute sales, are exempt from registration under the Securities
Act of 1933, as amended, by virtue of the exemption provided by Section 4(2)
thereof for transactions not involving a public offering.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits. Attached hereto are the following exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
1.1 Form of Underwriting Agreement between the Registrant and the U.S.
Underwriters.**
1.2 Form of Underwriting Agreement between the Registrant and the
Managers.**
3.1 Form of Amended and Restated Memorandum of Association of the
Registrant.
3.2 Form of Amended and Restated Articles of Association of the
Registrant.
4.1 Specimen of certificates representing the Registrant's Ordinary
Shares, par value U.S. $0.01 each. **
5.1 Opinion of W.S. Walker & Company as to the validity of the Ordinary
Shares (Cayman Islands law).**
10.1 Shareholders' Agreement, dated as of August 6, 1996, among the
Shareholders of the Registrant.**
10.2 Form of consent to amendment of above Shareholders' Agreement, dated
March 21, 1995.
10.3 Buy-Sell Agreement, dated as of August 6, 1996, by and among the
Registrant, Apex LDC, Litani and Silver Holdings.
10.4 Summary of the Registrant's 401(K) Plan.
10.5 Management Services Agreement among the Registrant and its
subsidiaries.**
10.6 Form of Registrant's Non-Employee Director's Plan.
10.7 Form of Registrant's Employees' Share Option Plan.
10.8 Form of Registrant's Share Option Agreement.
10.9 Employment contract between the Registrant and Marcel F. DeGuire,
dated July 23, 1996.
10.10 Employment contract between the Registrant and Gregory Marlier, dated
September 26, 1996.
10.11 Employment contract between the Registrant and Keith R. Hulley, dated
August 14, 1996.
10.12 Employment contract between the Registrant and Douglas M. Smith, Jr.,
dated January 21, 1997.
10.13 English translation of Deed of Lease and Purchase Option Contract
between Monica de Prudencio and Mineria Tecnia Consultores Asociados
S.A. ("Mintec"), dated November 7, 1994, regarding the Tesorera
concession, with an attached note from Keith Hulley, a director of the
Registrant, as required by Rule 306 of Regulation S-T.
10.14 English translation of Assignment Agreement, between ASC Bolivia LDC
and Mintec regarding the rights to the above agreement, with an
attached note from Keith Hulley, a director of the Registrant, as
required by Rule 306 of Regulation S-T.**
10.15 English translation of the Lease and Purchase Option Contract between
Empresa Minera Yana Mallcu S.A. and Mintec, dated February 7, 1996,
regarding the Toldos concession, with an attached note from Keith
Hulley, a director of the Registrant, as required by Rule 306 of
Regulation S-T.
10.16 English translation of the Assignment of Lease and Purchase Option
Agreement among Banco Industrial S.A., Mintec and ASC Bolivia LDC,
with an attached note from Keith Hulley, a director of the Registrant,
as required by Rule 306 of Regulation S-T.
10.17 English translation of the Purchase Option Agreement between Mintec
and Litoral Mining Cooperative Ltd., dated August 17, 1995, regarding
the Animas concession, with an attached note from Keith Hulley, a
director of the Registrant, as required by Rule 306 of Regulation S-T.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.18 English translation of the Assignment and Assumption Agreement between
Mintec and ASC Bolivia LDC, dated May 22, 1996, regarding the Animas
concession, with an attached note from Keith Hulley, a director of the
Registrant, as required by Rule 306 of Regulation S-T.
10.19 English translation of the Purchase Agreement between ASC Bolivia LDC
and Litoral Mining Cooperative Ltd., regarding the Animas concessions
with an attached note from Keith Hulley, a director of the Registrant,
as required by Rule 306 of Regulation S-T.**
10.20 English translation of the Joint Venture Agreement between Corporacion
Minera Boliviano S.A. ("Comibol") and ASC Bolivia LDC, regarding the
Cobrizos Concession, with an attached note from Keith Hulley, a
director of the Registrant, as required by Rule 306 of Regulation S-T.
10.21 English translation of the Joint Venture Agreement between Comibol and
ASC Bolivia LDC, regarding the Choroma Concession, with an attached
note from Keith Hulley, a director of the Registrant, as required by
Rule 306 of Regulation S-T.
10.22 Mining Agreement between Compania Minera Ocote and Kerry A. McDonald,
dated June 24, 1994, regarding the El Ocote concession.
10.23 Assignment and Assumption Agreement between Kerry A. McDonald and
Cordilleras Silver Mines Ltd., dated September 27, 1994, regarding the
assignment of the above Mining Agreement.
10.24 Acknowledgment from Bruce Wallis in his capacity as President of
Compania Minera Octoe S. de R.L. that Cordilleras Silver Mines
(Cayman) LDC has been assigned Kerry A. McDonald's rights under the
above Mining Agreement, dated July 10, 1995.
10.25 English translation of the agreement between Andean Silver Corporation
LDC and 190 of the co-owners of the assets which previously belonged
to Empressa Minera San Juan de Lucanas, S.A. ("EMSJ"), regarding the
San Juan de Lucanas concession, dated January 12, 1995, with an
attached note from Keith Hulley, a director of the Registrant, as
required by Rule 306 of Regulation S-T.
10.26 English translation of the agreement between Andean Silver Corporation
LDC and 133 of the co-owners of the assets which previously belonged
to EMSJ, regarding the San Juan de Lucanas concession, dated January
12, 1995, with an attached note from Keith Hulley, a director of the
Registrant, as required by Rule 306 of Regulation S-T.
10.27 English translation of the form of agreement between 16 individuals
who are some of the co-owners of the assets which previously belonged
to EMSJ, regarding the San Juan de Lucanas concession, with an
attached note from Keith Hulley, a director of the Registrant, as
required by Rule 306 of Regulation S-T.
10.28 Board Designation Agreement, dated [ ], 1997, by and between the
Registrant and Silver Holdings.**
10.29 Registration Rights and Voting Agreement, dated [ ], 1997 by and
among the Registrant, Silver Holdings, Consolidated, Argentum, Aurum
LLC and Thomas S. Kaplan.**
21 List of Subsidiaries.
23.1 Consent of W.S. Walker & Company (included as part of Exhibit 5.1).**
23.3 Consent of Price Waterhouse LLP.
23.4 Consent of CPM Group.
23.5 Consent of Mineral Resource Development Inc.
23.6 Consent of Knight Piesold LLC.
23.7 Consent of Pincock, Allen & Holt.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
23.8 Consent of Mine Reserves Associates, Inc.
23.9 Consent of Kvaerner Metals.
23.10 Consent of Behre Dolbear.
24.1 Powers of attorney of the Registrant (included on page II-7 hereof).
</TABLE>
- --------
** To be filed by Amendment.
ITEM 17. UNDERTAKINGS.
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.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
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) The undersigned registrant hereby undertakes to provide the
underwriters at the closing specified in the underwriting agreements
certificates in such denominations and registered in such names as required
by the underwriters to permit prompt delivery to each purchaser.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-1 and has duly caused this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized in, Paris, France on August 29, 1997.
Apex Silver Mines Limited
/s/ Thomas S. Kaplan
By: _________________________________
THOMAS S. KAPLAN CHAIRMAN, BOARD
OF DIRECTORS
II-6
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the persons who name and
signature appears below constitutes and appoints Thomas S. Kaplan and Keith R.
Hulley and each of them, his or her true and lawful attorneys-in-fact and
agents with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and any and all registration statements relating to the Shares
filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended,
and to file the same with all exhibits thereof, and all documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully and to all intents
and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed by the following persons in the
capacities as set forth below on August 29, 1997.
SIGNATURE TITLE DATE
/s/ Thomas S. Kaplan Director
- ------------------------------------- (Registrant's
THOMAS S. KAPLAN authorized
representative in
the United States)
/s/ Harry M. Conger Director
- -------------------------------------
HARRY M. CONGER
/s/ Michael Comninos Director
- -------------------------------------
MICHAEL COMNINOS
/s/ Eduardo S. Elsztain Director
- -------------------------------------
EDUARDO S. ELSZTAIN
/s/ David Sean Hanna Director August 29, 1997
- -------------------------------------
DAVID SEAN HANNA
/s/ Ove Hoegh Director
- -------------------------------------
OVE HOEGH
/s/ Keith R. Hulley Director
- -------------------------------------
KEITH R. HULLEY
/s/ Richard Katz Director
- -------------------------------------
RICHARD KATZ
/s/ Paul Soros Director
- -------------------------------------
PAUL SOROS
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
1.1 Form of Underwriting Agreement between the Registrant and the U.S.
Underwriters.**
1.2 Form of Underwriting Agreement between the Registrant and the
Managers.**
3.1 Form of Amended and Restated Memorandum of Association of the
Registrant.
3.2 Form of Amended and Restated Articles of Association of the
Registrant.
4.1 Specimen of certificates representing the Registrant's Ordinary
Shares, par value U.S. $0.01 each.**
5.1 Opinion of W.S. Walker & Company as to the validity of the Ordinary
Shares (Cayman Islands law).**
10.1 Shareholders' Agreement, dated as of August 6, 1996, among the
Shareholders of the Registrant.**
10.2 Form of consent to amendment of above Shareholders' Agreement, dated
March 21, 1995.
10.3 Buy-Sell Agreement, dated as of August 6, 1996, by and among the
Registrant, Apex LDC, Litani and Silver Holdings.
10.4 Summary of the Registrant's 401(K) Plan.
10.5 Management Services Agreement among the Registrant and its
subsidiaries.**
10.6 Form of Registrant's Non-Employee Director's Plan.
10.7 Form of Registrant's Employees' Share Option Plan.
10.8 Form of Registrant's Share Option Agreement.
10.9 Employment contract between the Registrant and Marcel F. DeGuire,
dated July 23, 1996.
10.10 Employment contract between the Registrant and Gregory Marlier, dated
September 26, 1996.
10.11 Employment contract between the Registrant and Keith R. Hulley, dated
August 14, 1996.
10.12 Employment contract between the Registrant and Douglas M. Smith, Jr.,
dated January 21, 1997.
10.13 English translation of Deed of Lease and Purchase Option Contract
between Monica de Prudencio and Mineria Tecnia Consultores Asociados
S.A. ("Mintec"), dated November 7, 1994, regarding the Tesorera
concession, with an attached note from Keith Hulley, a director of the
Registrant, as required by Rule 306 of Regulation S-T.
10.14 English translation of Assignment Agreement, between ASC Bolivia LDC
and Mintec, regarding the rights to the above agreement, with an
attached note from Keith Hulley, a director of the Registrant, as
required by Rule 306 of Regulation S-T.**
10.15 English translation of the Lease and Purchase Option Contract between
Empresa Minera Yana Mallcu S.A. and Mintec, dated February 7, 1996,
regarding the Toldos concession, with an attached note from Keith
Hulley, a director of the Registrant, as required by Rule 306 of
Regulation S-T.
10.16 English translation of the Assignment of Lease and Purchase Option
Agreement among Banco Industrial S.A., Mintec and ASC Bolivia LDC,
with an attached note from Keith Hulley, a director of the Registrant,
as required by Rule 306 of Regulation S-T.
10.17 English translation of the Purchase Option Agreement between Mintec
and Litoral Mining Cooperative Ltd. dated, August 17, 1995, regarding
the Animas concession, with an attached note from Keith Hulley, a
director of the Registrant, as required by Rule 306 of Regulation S-T.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.18 English translation of the Assignment and Assumption Agreement between
Mintec and ASC Bolivia LDC, dated May 22, 1996, regarding the Animas
concession, with an attached note from Keith Hulley, a director of the
Registrant, as required by Rule 306 of Regulation S-T.
10.19 English translation of the Purchase Agreement between ASC Bolivia LDC
and Litoral Mining Cooperative Ltd., regarding the Animas Concession
with an attached note from Keith Hulley, a director of the Registrant,
as required by Rule 306 of Regulation S-T.**
10.20 English translation of the Joint Venture Agreement between Corporacion
Minera Boliviano S.A. ("Comibol") and ASC Bolivia LDC, regarding the
Cobrizos Concession, with an attached note from Keith Hulley, a
director of the Registrant, as required by Rule 306 of Regulation S-T.
10.21 English translation of the Joint Venture Agreement between Comibol and
ASC Bolivia LDC, regarding the Choroma Concession, with an attached
note from Keith Hulley, a director of the Registrant, as required by
Rule 306 of Regulation S-T.
10.22 Mining Agreement between Compania Minera Ocote and Kerry A. McDonald,
dated June 24, 1994, regarding the El Ocote concession.
10.23 Assignment and Assumption Agreement between Kerry A. McDonald and
Cordilleras Silver Mines Ltd., dated September 27, 1994, regarding the
assignment of the above Mining Agreement.
10.24 Acknowledgment from Bruce Wallis in his capacity as President of
Compania Minera Octoe S. de R.L. that Cordilleras Silver Mines
(Cayman) LDC has been assigned Kerry A. McDonald's rights under the
above Mining Agreement, dated July 10, 1995.
10.25 English translation of the agreement between Andean Silver Corporation
LDC and 190 of the co-owners of the assets which previously belonged
to Empressa Minera San Juan de Lucanas, S.A. ("EMSJ"), regarding the
San Juan de Lucanas concession, dated January 12, 1995, with an
attached note from Keith Hulley, a director of the Registrant, as
required by Rule 306 of Regulation S-T.
10.26 English translation of the agreement between Andean Silver Corporation
LDC and 133 of the co-owners of the assets which previously belonged
to EMSJ, regarding the San Juan de Lucanas concession, dated January
12, 1995, with an attached note from Keith Hulley, a director of the
Registrant, as required by Rule 306 of Regulation S-T.
10.27 English translation of the form of agreement between 16 individuals
who are some of the co-owners of the assets which previously belonged
to EMSJ, regarding the San Juan de Lucanas concession, with an
attached note from Keith Hulley, a director of the Registrant, as
required by Rule 306 of Regulation S-T.
10.28 Board Designation Agreement, dated [ ], 1997, by and between the
Registrant and Silver Holdings.**
10.29 Registration Rights and Voting Agreement, dated [ ], 1997 by and
among the Registrant, Silver Holdings, Consolidated, Argentum, Aurum
LLC and Thomas S. Kaplan.**
21 List of Subsidiaries.
23.1 Consent of W.S. Walker & Company (included as part of Exhibit 5.1).**
23.3 Consent of Price Waterhouse LLP.
23.4 Consent of CPM Group.
23.5 Consent of Mineral Resource Development Inc.
23.6 Consent of Knight Piesold LLC.
23.7 Consent of Pincock, Allen & Holt.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
23.8 Consent of Mine Reserves Associates, Inc.
23.9 Consent of Kvaerner Metals.
23.10 Consent of Behre Dolbear.
24.1 Powers of attorney of the Registrant (included on page II-7 hereof).
</TABLE>
- --------
** To be filed by Amendment.
<PAGE>
EXHIBIT 3.1
THE COMPANIES LAW (1995 REVISION)
---------------------------------
COMPANY LIMITED BY SHARES
-------------------------
MEMORANDUM OF ASSOCIATION
OF
APEX SILVER MINES LIMITED
(Amended and Re-Stated by Special Resolution dated _______, 1997)
1. The name of the Company is Apex Silver Mines Limited.
2. The Registered Office of the Company will be situate at the offices of
CALEDONIAN BANK & TRUST LIMITED, GROUND FLOOR, CALEDONIAN HOUSE, MARY
STREET, P.O. BOX 1043, GEORGE TOWN, GRAND CAYMAN, CAYMAN ISLANDS or at such
other location as the Directors may from time to time determine.
3. The objects for which the Company is established are unrestricted and the
Company shall have full power and authority to carry out any object not
prohibited by any law as provided by Section 6(4) of The Companies Law
(1995 Revision).
4. The Company shall have and be capable of exercising all the functions of a
natural person of full capacity irrespective of any question of corporate
benefit as provided by Section 26(2) of The Companies Law (1995 Revision).
5. Nothing in the preceding sections shall be deemed to permit the Company to
carry on the business of a Bank or Trust Company without being licensed in
that behalf under the provisions of the Banks and Trust Companies Law (1995
Revision), or to carry on Insurance Business from within the Cayman
Islands or the business of an Insurance Manager, Agent, Sub-agent or Broker
without being licensed in that behalf under the provisions of the Insurance
Law (1995 Revision), or to carry on the business of Company Management
without being licensed in that behalf under the provisions of the Companies
Management Law (1996 Revision).
6. The Company will not trade in the Cayman Islands with any person, firm or
corporation except in furtherance of the business of the Company carried on
outside the Cayman Islands; Provided that nothing in this section shall
be construed as to prevent the Company effecting and concluding contracts
in the Cayman Islands, and exercising in the Cayman Islands all of its
powers necessary for the carrying on of its business outside the Cayman
Islands.
7. The liability of the Shareholders is limited.
8. The capital of the Company is US$750,000.00 divided into 75,000,000 shares
of a nominal or par value of US$0.01 each provided always that subject to
the provisions of The Companies Law (1995 Revision) and the Articles of
Association the Company shall have power to redeem or purchase any of its
shares and to sub-divide or consolidate the said shares or any of them and
to issue all or any part of its capital whether original, redeemed,
increased or reduced with or without any preference, priority or special
privilege or subject to any postponement of rights or to any conditions or
restrictions whatsoever and so that unless the conditions of issue shall
otherwise expressly provide every issue of shares whether stated to be
Ordinary, Preference or otherwise shall be subject to the powers on the
part of the Company hereinbefore provided.
9. The Company may exercise the power contained in Section 223 of The
Companies Law (1995 Revision) to deregister in the Cayman Islands and be
registered by way of continuation in some other jurisdiction.
<PAGE>
EXHIBIT 3.2
THE COMPANIES LAW (1995 REVISION)
---------------------------------
COMPANY LIMITED BY SHARES
-------------------------
ARTICLES OF ASSOCIATION
OF
APEX SILVER MINES LIMITED
(Amended and Re-Stated by Special Resolution dated _______, 1997)
The Articles contained or incorporated in Table 'A' in the First Schedule of the
Companies Law (1995 Revision) shall not apply to this Company and the following
Articles shall comprise the Articles of Association of the Company:-
1. In these Articles:-
(a) "Holder" means, in relation to registered shares, the Shareholder
whose name is entered in the Register of Members as the holder of
those shares and, in the case of shares issued in bearer form, the
holder for the time being of the certificate representing the same;
(b) "Law" means the Companies Law (1995 Revision) of the Cayman Islands
and any statutory amendment or modification thereof. Where any
provision of the law is referred to, the reference is to that
provision as modified by any law for the time being in force. Unless
the context otherwise requires, expressions defined in the law or any
statutory modification thereof in force at the date at which these
Articles become binding on the Company, shall have the meanings so
defined;
(c) "Ordinary Resolution" means a resolution of a general meeting of the
Shareholders passed by simple majority vote;
(d) "Register of Members" means the Register of Members of the Company
maintained in accordance with Section 39 of the Law at such place or
places as the Directors may from time to time determine;
(e) "Registered Office" means the registered office of the Company in the
Cayman Island, as determined by the Directors from time to time;
(f) "Secretary" means any person appointed by the Directors to perform any
of the duties of the Secretary of the Company;
(g) "Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended, of the United States of America;
<PAGE>
(h) "Shareholder" means a Shareholder of the Company whose name is entered
in the Register of Members;
(i) "Special Resolution" means a special resolution of the Company passed
in accordance with Section 59 of the Law.
SHARES
2. Subject as herein provided all shares in the capital of the Company for the
time being and from time to time unissued shall be under the control of the
Directors, and may be allotted or disposed of in such manner, to such
persons and on such terms as the Directors in their absolute discretion may
think fit.
3. If at any time the share capital is divided into different classes of
shares, the rights attached to any class (unless otherwise provided by the
terms of issue of the shares of that class) may be varied with the consent
in writing of the holders of two-thirds of the issued shares of that class,
or with the sanction of a special resolution passed at a separate general
meeting of the holders of the shares of the class. To every such separate
general meeting the provisions of these Articles relating to general
meetings shall mutatis mutandis apply, but so that the necessary quorum
shall be one person at least holding or representing by proxy one-third of
the issued shares of the class and that any holder of shares of the class
present in person or by proxy may demand a vote.
SHARE CERTIFICATES
4. No Share may be issued other than as fully paid and the Company shall
decline to allot Shares to satisfy any application unless cleared funds in
full payment of the Shares to which an application relates have been
received by the Company by close of business in such place on such date as
may be determined by the Directors.
5. Every person whose name is entered as a Shareholder in the Register of
Members shall, without payment, be entitled to a certificate under the seal
of the Company specifying the share or shares held by him and the amount
paid up thereon, provided that in respect of a share or shares held jointly
by several persons the Company shall not be bound to issue more than one
certificate, and delivery of a certificate for a share to one of several
joint holders shall be sufficient delivery to all.
6. If a share certificate is defaced, lost or destroyed it may be renewed on
such terms, if any, as to evidence and indemnity as the Directors think
fit.
FRACTIONAL SHARES
7. The Directors may issue fractions of a share of any class of shares, and,
if so issued, a fraction of a share shall be subject to and carry the
corresponding fraction of liabilities (whether with respect to nominal or
par value, premium, contribution, calls or otherwise howsoever),
limitations, preferences, privileges, qualifications, restrictions, rights
(including, without prejudice to the foregoing generality, voting and
participation rights) and other attributes of a whole share of the same
class of shares. If more than one fraction of a share of the same class
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is issued to or acquired by the same Shareholder such fractions shall be
accumulated. For the avoidance of doubt it is hereby declared that in these
Articles the expression "share" shall include a fraction of a share.
TRANSFER OF SHARES
8. The instrument of transfer of any share shall be executed by or on behalf
of the transferor and if so required by the Directors shall also be
executed on behalf of the transferee and the transferor shall be deemed to
remain a holder of the share until the name of the transferee is entered in
the Register of Members in respect thereof. Transfers of shares shall be
made on only by the registered holder thereof, or by such holder's attorney
thereunto authorized by power of attorney filed with the Secretary or any
transfer agent. The Company shall be entitled to recognize the exclusive
right of a person registered in the Register of Members as the owner of
shares to receive dividends, and to vote as such owner.
9. The following provisions shall apply to all shares:-
(a) Shares shall be transferred in any usual or common form approved by
the Directors or failing such determination in the following form:
"I [TRANSFEROR] for good and valuable consideration received by me
from [TRANSFEREE] do hereby transfer to the said [TRANSFEREE] the [
] share(s) standing in my name in the Register of APEX SILVER MINES
LIMITED to hold unto the said [TRANSFEREE] his executors,
administrators and assigns, subject to the several conditions on which
I held the same at the time of the execution hereof: and I, the said
[TRANSFEROR] do hereby consent that my name remain on the Register of
the said Company until such time as the said Company may enter the
transferee's name thereon; And I the said [TRANSFEREE] do hereby agree
to take the said share(s) subject to the same conditions.
As witness our hands
Signed by the said [TRANSFEROR]
on the day of [199 ]
in the presence of:
__________________ ____________________
Witness Transferor
Signed by the said [TRANSFEREE]
on the day of [199 ]
in the presence of:
____________________ ____________________
Witness Transferee
(b) The Directors may decline to recognize any instrument of transfer
unless the instrument of transfer is accompanied by the certificate
of the shares to which it relates, and such other evidence as the
Directors may reasonably require to show the right of the transferor
to make the transfer.
(c) The legal personal representative of a deceased sole holder of a
share shall be the
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only person recognized by the Company as having any title to the
share. In the case of a share registered in the name of two or more
holders, the survivors or survivor, or the legal personal
representatives of the deceased survivor, shall be the only person
recognized by the Company as having any title to the share.
(d) Any person becoming entitled to a share in consequence of the death
or bankruptcy of a Shareholder shall upon such evidence being
produced as may from time to time be properly required by the
Directors, have the right either to be registered as a Shareholder
in respect of the share or, instead of being registered himself, to
make such transfer of the share as the deceased or bankrupt person
could have made; but the Directors shall, in either case, have the
same right to decline or suspend registration as they would have had
in the case of a transfer of the share by the deceased or bankrupt
person before the death or bankruptcy.
(e) A person becoming entitled to a share by reason of the death or
bankruptcy of the holder shall be entitled to the same dividends and
other advantages to which he would be entitled if he were the
registered holder of the share, except that he shall not, before
being registered as a Shareholder in respect of the share, be
entitled in respect of it to exercise any right conferred by
Shareholdership in relation to meetings of the Company.
ALTERATION OF CAPITAL
10. The Company may from time to time by Ordinary Resolution increase the
share capital by such sum, to be divided into shares of such amount, as
the resolution shall prescribe.
11. The new shares shall be subject to the same provisions with reference to
the payment of calls, lien, transfer, transmission, forfeiture and
otherwise as the shares in the original share capital.
12. The Company may by Ordinary Resolution:-
(a) consolidate and divide all or any of its share capital into shares
of larger amount than its existing shares;
(b) sub-divide its existing shares, or any of them into shares of
smaller amount than is fixed by the Memorandum of Association,
subject nevertheless to the provisions of Section 12 of the Law;
(c) cancel any shares which, at the date of the passing of the
resolution, have not been taken or agreed to be taken by any person.
13. The Company may by Special Resolution reduce its share capital and any
capital redemption reserve in any manner authorized by law.
REDEMPTION AND PURCHASE OF OWN SHARES
14. (a) Subject to the provisions of the Law, the Company may
(i) issue shares which are to be redeemed or are liable to be
redeemed at the option of the Company or the holder;
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<PAGE>
(ii) purchase its own shares (including any redeemable shares); and
(iii) make a payment in respect of the redemption or purchase of
its own shares otherwise than out of profits or the proceeds of
a fresh issue of shares.
(b) A share which is liable to be redeemed may be redeemed by either the
Company or the Holder giving to the other not less than thirty days
notice in writing of the intention to redeem such shares specifying
the date of such redemption which must be a day on which banks in
the Cayman Islands are open for business.
(c) The amount payable on such redemption on each share so redeemed
shall be the amount determined by the Directors as being the fair
value thereof as between a willing buyer and a willing seller.
(d) Any share in respect of which notice of redemption has been given
shall not be entitled to participate in the profits of the Company
in respect of the period after the date specified as the date of
redemption in the notice of redemption.
(e) The redemption or purchase of any share shall not be deemed to give
rise to the redemption or purchase of any other share.
(f) At the date specified in the notice of redemption or purchase, the
holder of the shares being redeemed or purchased shall be bound to
deliver up to the Company at its registered office the certificate
thereof for cancellation and thereupon the Company shall pay to him
the redemption or purchase monies in respect thereof.
(g) The Directors may when making payments in respect of redemption or
purchase of shares in accordance with the provisions of this , if
authorized by the terms of issue of the shares being redeemed or
purchased or with the agreement of the holder of such shares, make
such payment either in cash or in specie.
CLOSING REGISTER OF MEMBERS OF FIXING RECORD DATE
15. For the purpose of determining Shareholders entitled to notice of or to
vote at any meeting of Shareholders or any adjournment thereof, or
Shareholders entitled to receive payment of any dividend, or in order to
make the determination of Shareholders for any other proper purpose, the
Directors may provide that the Register of Members shall be closed for
transfers for a stated period but not to exceed in any case forty days.
If the Register of Members shall be so closed for the purpose of
determining Shareholders entitled to notice of or to vote at a meeting of
Shareholders such register shall be so closed for at least ten days
immediately preceding such meeting and the record date for such
determination shall be the date of the closure of the Register of Members.
16. In lieu of or apart from closing the Register of Members, the Board may
fix in advance a date as the record date for any such determination of
Shareholders entitled to notice of or to vote at a meeting of the
Shareholderss, and for the purpose of determining the Shareholders
entitled to receive payment of any dividend, the Board may fix a
subsequent date no later than the date of payment as the record date for
such dividend.
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17. If the Register of Members is not so closed and no record date is fixed
for the determination of Shareholders entitled to notice of or to vote at
a meeting of Shareholders or Shareholders entitled to receive payment of a
dividend, the date on which notice of the meeting is mailed or the date on
which the resolution of the Board declaring such dividend is adopted, as
the case may be, shall be the record date for such determination of
Shareholders. When a determination for Shareholders entitled to vote at
any meeting of Shareholders has been made as provided in this Article,
such determination shall apply to any adjournment thereof. For the
purpose of determining Shareholders entitled to notice of or to vote at
any meeting of Shareholders or any adjournment thereof, or Shareholders
entitled to receive payment of any dividend, or in order to make the
determination of Shareholders for any other proper purpose, the Directors
may provide that the Register of Members shall be closed for transfers for
a stated period but not to exceed in any case forty days. If the Register
of Members shall be so closed for the purpose of determining Shareholders
entitled to notice of or to vote at a meeting of Shareholders such
register shall be so closed for at least ten days immediately preceding
such meeting and the record date for such determination shall be the date
of the closure of the Register of Members
GENERAL MEETINGS
18. (a) The Directors may, whenever they think fit, convene a general
meeting of the Company.
(b) Except as otherwise required by law, and subject to the terms of any
class or series of shares issued by the Company having a preference
over the ordinary shares as to dividends or upon liquidation, or to
elect directors, general meetings may also be convened upon the
written request of Shareholders holding a majority of the
outstanding ordinary shares generally entitled to vote. General
meetings shall also be convened on the written requisition of any
two Shareholders of the Company deposited at the Registered Office
of the Company specifying the objects of the meeting and signed by
the requisitionists, and if the Directors do not within twenty-one
days from the date of deposit of the requisition proceed duly to
convene the meeting, the requisitionists themselves may convene the
general meeting in the same manner, as nearly as possible, as that
in which meetings may be convened by the Directors, and all
reasonable expenses incurred by the requisitionists as a result of
the failure of the Directors shall be reimbursed to them by the
Company.
NOTICE OF GENERAL MEETINGS
19. Subject to the provisions of Section 59 of the Law relating to Special
Resolutions, seven days' notice at the least counting from the date
service is deemed to take place as provided in these Articles specifying
the place, the day and the hour of the meeting and, in case of special
business, the general nature of that business, shall be given in manner
hereinafter provided or in such other manner (if any) as may be prescribed
by the Company in general meeting to such persons as are, under the
Articles of the Company, entitled to receive such notices from the
Company; but with the consent of all the Shareholders entitled to receive
notice of some particular meeting, that meeting may be convened by such
shorter notice or without notice and in such manner as those Shareholders
may think fit.
20. The accidental omission to give notice of a meeting to or the non-receipt
of a notice of a meeting by any Shareholder shall not invalidate the
proceedings at any meeting.
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PROCEEDINGS AT GENERAL MEETINGS
21. All business carried out at a general meeting shall be deemed special with
the exception of sanctioning a dividend, the consideration of the
accounts, balance sheets, and ordinary report of the Directors and
auditors, and the appointment and removal of Directors and the fixing of
the remuneration of the auditors. No special business shall be transacted
at any general meeting without the consent of all Shareholders entitled to
receive notice of that meeting unless notice of such special business has
been given in the notice convening that meeting.
22. No business shall be transacted at any general meeting unless a quorum of
Shareholders is present at the time when the meeting proceeds to business;
save as herein otherwise provided one or more Shareholders holding at
least a majority in number of the issued shares of the Company present in
person or by proxy shall be a quorum.
23. If within half an hour from the time appointed for the meeting a quorum is
not present, the meeting, if convened upon the requisition of
Shareholders, shall be dissolved; in any other case it shall stand
adjourned to the same day in the next week, at the same time and place,
and if at the adjourned meeting a quorum is not present within half an
hour from the time appointed for the meeting the Shareholder or
Shareholders present shall be a quorum.
24. The Chairman, if any, of the Board of Directors, or an Director designated
by the Board of Directors, shall preside as Chairman at every general
meeting of the Company.
25. If there is no such Chairman, or if at any meeting he is not present
within one hour after the time appointed for holding the meeting or is
unwilling to act as Chairman, and the Board of Directors shall not elect
someone to act as Chairman, the Shareholders present shall choose one of
their number to be Chairman.
26. The Chairman may with the consent of any meeting at which a quorum is
present (and shall if so directed by the meeting) adjourn a meeting from
time to time and from place to place, but no business shall be transacted
at any adjourned meeting other than the business left unfinished at the
meeting from which the adjournment took place. When a meeting is
adjourned for ten days or more, notice of the adjourned meeting shall be
given as in the case of an original meeting. Save as aforesaid it shall
not be necessary to give any notice of an adjournment or of the business
to be transacted at an adjourned meeting.
27. At any general meeting a resolution put to the vote of the meeting shall
be decided by Ordinary Resolution unless required by Law or these
Articles to be decided by Special Resolution.
28. Subject to the terms of any class or series of shares issued by the
Company, if a Shareholder desires to nominate persons for election as
Directors at any general meeting duly called for the election of
Directors, written notice of such Shareholder's intent to make such a
nomination must be given and received by the Secretary of the Company at
the principal executive offices of the Company not later than (i) with
respect to an annual general meeting of Shareholders, sixty days in
advance of the anniversary date of the immediately preceding annual
general meeting, and (ii) with respect to an extraordinary general or
special 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.
Each such notice shall set forth (i) the name and address, as it appears
in the Register of Shareholder, of the Shareholder who intends to make the
nomination and of the person or persons to be nominated, (ii) a
representation that the
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Shareholder is a holder of record of shares of the Company entitled to
vote at such meeting and intends to appear in person or by proxy at the
meeting to nominate the person or persons specified in the notice, (iii)
the class and number of shares of the Company which are beneficially owned
by the Shareholder, (iv) a description of all arrangements or
understandings between the Shareholder and each nominee and any other
person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the Shareholder, (v) such
other information regarding each nominee proposed by such Shareholder as
would be required to be included in a proxy statement filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934, whether or not
the Company is then subject to such Regulation and (vi) the consent of
each nominee to serve as a Director. The Chairman of the annual general
meeting or extraordinary general or special meeting shall, if the facts
warrant, refuse to acknowledge a nomination not made in compliance with
the foregoing procedure, and any such nomination not properly brought
before the meeting shall not be considered.
29. Subject to the terms of any class or series of shares issued by the
Company, if a Shareholder desires to submit a proposal for consideration
by the Shareholders at any general or special meeting, written notice of
such Shareholder's intent to submit such a proposal must be given and
received by the Secretary of the Company at the principal executive
offices of the Company not later than (i) with respect to an annual
general meeting of Shareholders, sixty days in advance of the anniversary
date of the immediately preceding annual general meeting, and (ii) with
respect to an extraordinary general or special 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. Each such notice shall
set forth (i) the name and address, as it appears in the Register of
Shareholder, of the Shareholder who intends to submit such proposal, (ii)
a representation that the Shareholder is a holder of record of shares of
the Company entitled to vote at such meeting and intends to appear in
person or by proxy at the meeting to submit such proposal, (iii) the class
and number of shares of the Company which are beneficially owned by the
Shareholder, (iv) such other information regarding each proposal submitted
by such Shareholder as would be required to be included in a proxy
statement filed pursuant to Regulation 14A under the Securities Exchange
Act of 1934, whether or not the Company is then subject to such Regulation
and (vi) the consent of each nominee to serve as a Director. The Chairman
of the annual general meeting or extraordinary general or special meeting
shall, if the facts warrant, refuse to acknowledge a proposal not made in
compliance with the foregoing procedure, and any such proposal not
properly brought before the meeting shall not be considered.
30. A vote demanded on the election of a Chairman or on a question of
adjournment shall be taken forthwith. A vote demanded on any other
question shall be taken at such time as the Chairman of the meeting
directs.
VOTES OF SHAREHOLDERS
31. Subject to the terms of any class or series of shares issued by the
Company,on a vote every Shareholder and every person representing a
Shareholder by proxy shall have one vote for each share of which he or the
person represented by proxy is the holder.
32. In the case of joint holders the vote of the senior who tenders a vote
whether in person or by proxy shall be accepted to the exclusion of the
votes of the joint holders; and for this purpose seniority shall be
determined by the order in which the names stand in the Register of
Members.
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33. A Shareholder of unsound mind, or in respect of whom an order has been
made by any court having jurisdiction in lunacy, may vote by his
committee, or other person in the nature of a committee appointed by that
court, and any such committee or other person, may vote by proxy.
34. No Shareholder shall be entitled to vote at any general meeting unless he
is registered as a Shareholder of the Company on the record date for such
meeting or holds a valid proxy of such a Shareholder and unless all sums
presently payable by him in respect of shares in the Company have been
paid.
35. Votes may be given either personally or by proxy.
36. The instrument appointing a proxy shall be in writing under the hand of
the appointor or of his attorney duly authorized in writing or, if the
appointor is a corporation, either under seal or under the hand of an
officer or attorney duly authorized. A proxy need not be a Shareholder of
the Company.
37. An instrument appointing a proxy may be in any form approved by the
Directors, or failing any such approval by the Directors, shall be in the
following form:-
APEX SILVER MINES LIMITED
I/We the undersigned being a Shareholder in the above Company HEREBY
APPOINT [ ] whom failing [ ] to be my
proxy and on my/our behalf to attend, vote at and do all acts and
things which I/We could personally have done at a meeting of
Shareholders of the said Company to be held at the Registered Office
of the Company on the day of [199 ] and at all
continuations and adjournments thereof.
Date:____________________ _____________________
Signature of Shareholder
38. The instrument appointing a proxy shall be deemed to confer authority to
demand or join in demanding a vote.
39. A resolution in writing signed by all of the Shareholders for the time
being entitled to receive notice of and to attend and vote at general
meetings (or being corporations by their duly authorized representatives)
shall be as valid and effective as if the same had been passed at a
general meeting of the Company duly convened and held.
CORPORATIONS ACTING BY REPRESENTATIVES AT
MEETINGS
40. Any corporation which is a Shareholder or a Director of the Company may by
resolution of its directors or other governing body authorize such person
as it thinks fit to act as its representative at any meeting of the
Company or of any class of Shareholders of the Company or of the Board of
Directors of the Company or of a Committee of Directors, and the person so
authorized shall be entitled to exercise the same powers on behalf of the
corporation which he represents as that corporation could exercise if it
were an individual Shareholder or Director of the Company.
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DIRECTORS
41. (a) The Board of Directors shall consist of not less than five nor more
than twenty-one persons. Subject to Article 41(c), the Board of Directors
shall have the exclusive power and right to set the exact number of
Directors within that range from time to time by resolution adopted by the
vote of a majority of the whole Board of Directors. Until the Board of
Directors adopts such a resolution, the exact number of Directors shall be
nine.
(b) The Directors shall be divided into three classes of equal size,
designated as Class I, Class II and Class III, each class to be comprised
of at least three Directors; provided, however, if the total number of
Directors is 5, 7, 8, 10, 11, 13, 14, 16, 17, 19 or 20, one Class may have
one fewer or one more Director than the other two Classes. The Board of
Directors shall make the subsequent appointments of individual Directors
to particular Classes. The Directors initially appointed to Class I will
hold office for a term expiring at the 1998 annual general meeting of
Shareholders; the Directors initially appointed to Class II will hold
office for a term expiring at the 1999 annual general meeting of
Shareholders; and the Directors initially appointed to Class III will hold
office for a term expiring at the 2000 annual general meeting of
Shareholders. At each annual general meeting of Shareholders, the
successors of the class of Directors whose terms expire at that meeting
shall be of the same class as the Directors they succeed and shall be
elected for three-year terms.
(c) Unless for cause, no resolution of the Board of Directors may be
adopted if its effect would be to remove from office, or shorten the term
of, any incumbent Director.
(d) A Director shall hold office until the annual general meeting for the
year in which his term expires and until his successor shall be elected
and shall qualify, subject, however, to prior death, resignation,
retirement or removal from office. Any newly created directorship
resulting from an increase in the number of Directors and any other
vacancy on the Board of Directors, however caused, may be filled by a
majority of the Directors then in office, although less than a quorum, or
by a sole remaining Director. Any Director elected by the Board of
Directors to fill a vacancy shall hold office until the annual general
meeting of Shareholders for the year in which the term of the Director
vacating office expires and until his successor shall have been elected
and qualified. Any newly created directorship resulting from an increase
in the number of Directors may be created in any class of Directors that
the Board of Directors may determine, and any Director elected to fill the
newly created vacancy shall hold office until the term of office of such
class expires.
(e) One or more or all of the Directors of the Company may be removed only
for cause by the affirmative vote of the holders of at least a majority of
the outstanding shares generally entitled to vote, voting together as a
single class, at a meeting of Shareholders for which proper notice of the
proposed removal has been given.
42. The Board of Directors shall have the authority to fix the compensation of
Directors, which may include their expenses, if any, of attendance at each
meeting of the Board of Directors or of a committee.
43. A Director may hold any other office or place of profit under the Company
in conjunction with his office of Director for such period and on such
terms as to remuneration and otherwise as the Board of Directors may
determine.
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44. A Director may act by himself or his firm in a professional capacity for
the Company and he or his firm shall be entitled to remuneration for
professional services as if he were not a Director. No share ownership
qualification for Directors shall be required.
45. A Director of the Company may be or become a Director or other officer of
or otherwise interested in any company promoted by the Company or in which
the Company may be interested as Shareholder or otherwise and no such
Director shall be accountable to the Company for any remuneration or other
benefits received by him as a director or officer of, or from his interest
in, such other company.
46. No person shall be disqualified from the office of Director or prevented
by such office from contracting with the Company, either as vendor,
purchaser or otherwise, nor shall any such contract or any contract or
transaction entered into by or on behalf of the Company in which any
Director shall be in any way interested or be liable to be avoided, nor
shall any Director so contracting or being so interested be liable to
account to the Company for any profit realized by any such contract or
transaction by reason of such Director holding office or of the fiduciary
relation thereby established. A Director shall be at liberty to vote in
respect of any contract or transaction in which he is so interested as
aforesaid; provided, however, that the nature of the interest of any
Director in any such contract or transaction shall be disclosed by him at
or prior to its consideration and any vote thereon.
47. A general notice that a Director is an officer, director or Shareholder of
any specified firm or company and is to be regarded as interested in any
transaction with such firm or company shall be sufficient disclosure under
Article 46 and after such general notice it shall not be necessary to give
special notice relating to any particular transaction.
ALTERNATE DIRECTOR
48. Any Director may in writing appoint another person to be his alternate to
act in his place at any meeting of the Directors at which he is unable to
be present. Every such alternate shall be entitled to notice of meetings
of the Directors and to attend and vote thereat as a Director when the
person appointing him is not personally present and where he is a Director
to have a separate vote on behalf of the Director he is representing in
addition to his own vote. A Director may at any time in writing revoke
the appointment of an alternate appointed by him. Such alternate shall
not be an officer of the Company and shall be deemed to be the agent of
the Director appointing him. The remuneration of such alternate shall be
payable out of the remuneration of the Director appointing him and the
proportion thereof shall be agreed between them.
49. Any Director may appoint any person, whether or not a Director of the
company, to be the proxy of that Director to attend and vote on his
behalf, in accordance with instructions given by that Director, or in the
absence of such instructions at the discretion of the proxy, at a meeting
or meetings of the Directors which that Director is unable to attend
personally. The instrument appointing the proxy shall be in writing under
the hand of the appointing Director and shall be in the form printed below
or any other form approved by the Directors, and must be lodged with the
Chairman of the meeting of the Directors at which such proxy is to be
used, or first used, prior to the commencement of the meeting:-
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APEX SILVER MINES LIMITED
I the undersigned being a Director of the above Company HEREBY APPOINT
[ ] when failing [ ] to be my
Proxy and on my behalf to attend, vote at and to do all acts and
things which I could personally have done at a meeting of Directors of
the said Company to be held on the day of
[199 ] and all continuations and adjournments thereof.
Date:____________________ ________________________
Signature of Director
POWERS AND DUTIES OF DIRECTORS
50. The business of the Company shall be managed by the Directors, who may pay
all expenses incurred in getting up and registering the Company and may
exercise all such powers of the Company as are not, by the Law or these
Articles, required to be exercised by the Company in general meeting,
subject, nevertheless, to any regulation of these Articles, to the
provisions of the Law, and to such Articles, being not inconsistent with
the aforesaid Articles, or provisions as may be prescribed by the Company
in general meeting; but no Article made by the Company in general meeting
shall invalidate any prior act of the Directors which would have been valid
if that Article had not been made.
51. The Directors may from time to time appoint any person, whether or not a
director of the Company to hold such office in the Company as the Directors
may think necessary for the administration of the Company, including
without prejudice to the foregoing generality, the office of President, one
or more Vice-Presidents, Treasurer, Assistant Treasurer, Manager or
Controller, and for such term and at such remuneration (whether by way of
salary or commission or participation in profits or partly in one way and
partly in another), and with such powers and duties as the Directors may
think fit. The Directors may also appoint one or more of their number to
the office of Managing Director upon like terms, but any such appointment
shall ipso facto determine if any Managing Director ceases from any cause
to be a Director, or if the Company in general meeting resolves that his
tenure of office be terminated.
52. The Directors shall appoint the Company Secretary (and if need be an
Assistant Secretary or Assistant Secretaries) who shall hold office for
such term, at such remuneration and upon such conditions and with such
powers as they think fit. Any Secretary or Assistant Secretary so
appointed by the Directors may be removed by the Directors.
53. The Directors may delegate any of their powers to committees consisting of
such Shareholder or Shareholders of their body as they think fit; any
committee so formed shall in the exercise of the powers so delegated
conform to any Articles that may be imposed on it by the Directors.
54. The Directors may from time to time and at any time:
(a) by power of attorney appoint any company, firm or person or body of
persons, whether nominated directly or indirectly by the Directors, to
be the attorney or attorneys of the Company for such purposes and with
such powers, authorities and discretion (not exceeding those vested in
or exercisable by the Directors under these Articles) and for such
period and subject to such conditions as they may think fit, and any
such power of attorney may contain such provisions for the protection
and convenience of persons dealing with any such attorney as the
Directors may think fit, and may also authorize any such attorney to
delegate all or any of the powers, authorities and discretion vested
in him.
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(b) provide for the management of the affairs of the Company in such
manner as they shall think fit and the provisions contained in the
three next following paragraphs shall be without prejudice to the
general powers conferred by this paragraph.
(c) establish any committees, local boards or agencies for managing any of
the affairs of the Company and may appoint any persons to be
Shareholders of such committees or local boards and may appoint any
managers or agents of the Company and may fix the remuneration of any
of the aforesaid.
(d) delegate to any such committee, local board, manager or agent any of
the powers. authorities and discretion for the time being vested in
the Directors and may authorize the Shareholders for the time being of
any such local board, or any of them to fill up any vacancies therein
and to act notwithstanding vacancies and any such appointment or
delegation may be made on such terms and subject to such conditions as
the Directors may think fit and the Directors may at any time remove
any person so appointed and may annul or vary any such delegation, but
no person dealing in good faith and without notice of any such
annulment or variation shall be affected thereby.
Any such delegates as aforesaid may be authorized by the Directors to
subdelegate all or any of the powers, authorities, and discretion for the
time being vested to them.
BORROWING POWERS OF DIRECTORS
55. The Directors may exercise all the powers of the Company to borrow money
and to mortgage or charge its undertaking, property and uncalled capital or
any part thereof, to issue debentures, debenture stock and other securities
whenever money is borrowed or as security for any debt, liability or
obligation of the Company or of any third party.
THE SEAL
56. (a) The Seal of the Company shall not be affixed to any instrument except
by the authority of a resolution of the Board of Directors provided
always that such authority may be given prior to or after the affixing
of the Seal and if given after may be in general form confirming a
number of affixings of the Seal. The Seal shall be affixed in the
presence of a Director or the Secretary (or an Assistant Secretary) of
the Company or in the presence of any one or more persons as the
Directors may appoint for the purpose and every person as aforesaid
shall sign every instrument to which the Seal of the Company is so
affixed in their presence.
(b) The Company may maintain a facsimile of its Seal in such countries or
places as the Directors may appoint and such facsimile Seal shall not
be affixed to any instrument except by the authority of a resolution
of the Board of Directors provided always that such authority may be
given prior to or after the affixing of such facsimile Seal and if
given after may be in general form confirming a number of affixings of
such facsimile Seal. The facsimile Seal shall be affixed in the
presence of such person or persons as the Directors shall for this
purpose appoint and such person or persons as aforesaid shall
13
<PAGE>
sign every instrument to which the facsimile Seal of the Company is so
affixed in their presence and such affixing of the facsimile Seal and
signing as aforesaid shall have the same meaning and effect as if the
Company Seal had been affixed in the presence of and the instrument
signed by a Director or the Secretary (or an Assistant Secretary) of
the Company or in the presence of any one or more persons as the
Directors may appoint for the purpose.
(c) Notwithstanding the foregoing, the Secretary or any Assistant
Secretary shall have the authority to affix the Seal, or the facsimile
Seal, to any instrument for the purposes of attesting authenticity of
the matter contained therein but which does not create any obligation
binding on the Company.
DISQUALIFICATION OF DIRECTORS
57. The office of Director shall be vacated, if the Director:-
(a) becomes bankrupt or makes any arrangement or composition with his
creditors;
(b) is found to be or becomes of unsound mind; or
(c) resigns his office by notice in writing to the Company.
PROCEEDINGS OF DIRECTORS
58. The Directors may meet together (either within or without the Cayman
Islands) for the despatch of business, adjourn, and otherwise regulate
their meetings and proceedings as they think fit. Questions arising at any
meeting shall be decided by a majority of votes. Any two Directors or the
Chariman may, and the Secretary or Assistant Secretary on the requisition
of such persons shall, at any time summon a meeting of the Directors.
59. At least one meeting to the Board of Directors shall be held in the Cayman
Islands in each calendar year.
60. A Director or Directors may participate in any meeting of the Board, or of
any committee appointed by the Board of which such Director or Directors
are Shareholders, by means of telephone or similar communication equipment
by way of which all persons participating in such meeting can hear each
other and such participation shall be deemed to constitute presence in
person at the meeting.
61. The quorum necessary for the transaction of the business of the Directors
may be fixed by the Directors, and unless so fixed, if there be more than
two Directors shall be a majority of Directors, and if there be two or less
Directors shall be one. A director represented by proxy or by an Alternate
Director at any meeting shall be deemed to be present for the purposes of
determining whether or not a quorum is present.
62. A Director who is in any way, whether directly or indirectly, interested in
a contract or proposed contract with the Company shall declare the nature
of his interest at a meeting of the Directors. A general notice given to
the Directors by any Director to the effect that he is a Shareholder of any
specified company or firm and is to be regarded as interested in any
contract which may thereafter be made with that company or firm shall be
deemed a sufficient declaration of interest in regard to any contract so
made. A Director may vote in respect of any contract or proposed contract
or arrangement notwithstanding that he may be interested
14
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therein and if he does so his vote shall be counted and he may be counted
in the quorum at any meeting of the Directors at which any such contract or
proposed contract or arrangement shall come before the meeting for
consideration.
63. A Director may hold any other office or place of profit under the Company
(other than the office of auditor) in conjunction with his office of
Director for such period and on such terms (as to remuneration and
otherwise) as the Directors may determine and no Director or intending
Director shall be disqualified by his office from contracting with the
Company either with regard to his tenure of any such other office or place
of profit or as vendor, purchaser or otherwise, nor shall any such contract
or arrangement entered into by or on behalf of the Company in which any
Director is in any way interested, be liable to be avoided, nor shall any
Director so contracting or being so interested be liable to account to the
Company for any profit realized by any such contract or arrangement by
reason of such Director holding that office or of the fiduciary relation
thereby established. A Director, notwithstanding his interest, may be
counted in the quorum present at any meeting whereat he or any other
Director is appointed to hold any such office or place of profit under the
Company or whereat the terms of any such appointment are arranged and he
may vote on any such appointment or arrangement.
64. Any Director may act by himself or his firm in a professional capacity for
the Company, and he or his firm shall be entitled to remuneration for
professional services as if he were not a Director; provided that nothing
herein contained shall authorize a Director or his firm to act as auditor
to the Company.
65. The Directors shall cause minutes to be made in books or loose-leaf folders
provided for the purpose of recording:
(a) all appointments of officers made by the Directors;
(b) the names of the Directors present at each meeting of the Directors
and of any committee of the Directors;
(c) all resolutions and proceedings at all meetings of the Company, and of
the Directors and of committees of Directors.
66. When the Chairman and Secretary of a meeting of the Directors sign the
minutes of such meeting the same shall be deemed to have been duly held
notwithstanding that all the Directors have not actually come together or
that there may have been a technical defect in the proceedings.
67. A resolution signed by all the Directors shall be as valid and effectual as
if it had been passed at a Meeting of the Directors duly called and
constituted. When signed a resolution may consist of several documents
each signed by one or more of the Directors.
68. The continuing Directors may act notwithstanding any vacancy in their body
but if and so long as their number is reduced below the number fixed by or
pursuant to these Articles as the necessary quorum of Directors, the
continuing Directors may act for the purpose of increasing the number, or
of summoning a general meeting of the Company, but for no other purpose.
69. The Directors may elect a Chairman of their meetings and determine the
period for which he is to hold office; but if no such Chairman is elected,
or if at any meeting the Chairman is not present within one hour after the
time appointed for holding the same, the Directors present may choose one
of their number to be Chairman of the meeting.
15
<PAGE>
70. A committee appointed by the Directors may elect a Chairman of its
meetings; if no such Chairman is elected, or if at any meeting the Chairman
is not present within five minutes after the time appointed for holding the
same, the Shareholders present may choose one of their number to be
Chairman of the meeting.
71. A committee appointed by the Directors may meet and adjourn as it thinks
proper. Questions arising at any meeting shall be determined by a majority
of votes of the committee Shareholders present.
72. All acts done by any meeting of the Directors or of a committee of
Directors, or by any person acting as a Director, shall notwithstanding
that it be afterwards discovered that there was some defect in the
appointment of any such Director or person acting as aforesaid, or that
they or any of them were disqualified, be as valid as if every such person
had been duly appointed and was qualified to be a Director.
DIVIDENDS
73. Subject to Law, the Board of Directors may from time to time declare
dividends on shares of the Company outstanding and authorize payment of the
same out of the profits of the Company (realized or unrealized), share
premium account, or any other account permitted by Law, and may from time
to time pay to the Shareholders such interim dividends, as appears to the
Board of Directors to be appropriate.
74. The Board of Directors may declare that any dividend be paid wholly or
partly by the distribution of shares or other securities of the Company
and/or specific assets and in particular of paid up shares, debentures, or
debenture stock of any other company or in any one or more of such ways and
where any difficulty arises in regard to such distribution, the Board of
Directors may settle the same as it deems expedient and in particular may
issue fractional shares and fix the value for distribution of such specific
assets or any party thereof and may determine that cash payments shall be
made to any Shareholder upon the basis of the value so fixed in order to
adjust the rights of all Shareholders and may vest any such specific assets
in trustees as may seem expedient to the Board of Directors.
75. No dividend shall bear interest against the Company unless expressly
authorized by the Board of Directors.
ACCOUNTS
76. The books of account relating to the Company's affairs shall be kept in
such manner as may be determined from time to time by the Directors.
77. The books of account shall be kept at the Registered Office of the Company,
or at such other place or places as the Directors think fit, and shall
always be open to the inspection of the Directors.
78. The Directors shall from time to time determine whether and to what extent
and at what times and places and under what conditions or Articles the
accounts and books of the Company or any of them shall be open to the
inspection of Shareholders not being Directors, and no Shareholder (not
being a Director) shall have any right of inspecting any account or book or
document of the Company except as conferred by Law or authorized by the
Directors or by the Company in general meeting.
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<PAGE>
CAPITALIZATION OF PROFITS
79. The Company may upon the recommendation of the Directors resolve that it is
desirable to capitalise any part of the amount for the time being standing
to the credit of any of the Company's reserve accounts or to the credit of
the profit and loss account or otherwise available for distribution, and
accordingly that such sum be set free for distribution amongst the
Shareholders who would have been entitled thereto if distributed by way of
dividend and in the same proportions on condition that the same be not paid
in cash but be applied either in or towards paying up any amounts for the
time being unpaid on any shares held by such Shareholders respectively or
paying up in full unissued shares or debentures of the Company to be
allotted and distributed credited as fully paid up to and amongst such
Shareholders in the proportion aforesaid, or partly in the one way and
partly in the other, and the Directors shall give effect to such
resolution; Provided always that a share premium account and capital
redemption reserve may only be applied in accordance with the provisions of
the Law.
80. Whenever such a resolution as aforesaid shall have been passed the
Directors shall make all appropriations and applications of the undivided
profits resolved to be capitalised thereby, and all allotments and issues
of fully paid shares or debentures, if any, and generally shall do all acts
and things required to give effect thereto, with full power to the
Directors to make such provision by payment in cash or otherwise as they
think fit for the case of shares or debentures becoming distributable in
fractions.
NOTICES
81. A notice may be given by the Company or by the persons entitled to give
notice to any Shareholder personally by sending it by post, air courier,
cable, facsimile transmission or telex to him to the address as shown in
the Register. Any such notice shall be deemed to have beenb effected on
the date the letter containing the same is posted as aforesaid, or sent by
air courier, cable, facsimile transmission or telex.
82. A notice may be given by the Company to the joint holders of a share by
giving the notice to the joint holder named first in the Register of
Members in respect of the share.
83. A notice may be given by the Company to the persons entitled to a share in
consequence of the death or bankruptcy of a Shareholder by sending it
through the post in a prepaid letter addressed to them by name, or by the
title of representatives of the deceased, or trustee of the bankrupt, or by
any like description at the address, if any, supplied for the purpose by
the persons claiming to be so entitled, or (until such address has been so
supplied) by giving the notice in any manner in which the same might have
been given if the death or bankruptcy had not occurred.
84. Notice of every general meeting shall be given in some manner hereinbefore
authorized to:-
(a) all Shareholders who have supplied to the Company an address for the
giving of notices to them; and
(b) every person entitled to a share in consequence of the death or
bankruptcy of a Shareholder, who but for his death or bankruptcy would
be entitled to receive notice of the meeting.
No other person shall be entitled to receive notices of general meetings.
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<PAGE>
INDEMNITY
85. (a) Every Director (including for the purposes of this Article any
Alternate Director appointed pursuant to the provisions of these
Articles), Managing Director, Secretary, Assistant Secretary, and, at
the discretion of the Board of Directors, other officer, consultant,
employee or agent, for the time being and from time to time of the
Company and the personal representatives of the same shall be
indemnified and secured harmless out of the assets and funds of the
Company against all actions, proceedings, costs, charges, expenses,
losses, damages or liabilities incurred or sustained by him in or
about the conduct of the Company's business or affairs or in the
execution or discharge of his duties, powers, authorities or
discretions, including without prejudice to the generality of the
foregoing, any costs, expenses, losses or liabilities incurred by him
in defending (whether successfully or otherwise) any civil proceedings
concerning the Company or its affairs in any court whether in the
Cayman Islands or elsewhere, provided, that no indemnification shall
be available in the case of wilful default or fraud.
(b) No such Director, Alternate Director, Managing Director, agent,
Secretary, Assistant Secretary or other officer of the Company shall
be liable (i) for the acts, receipts, neglects, defaults or omissions
of any other such director or officer or agent of the Company 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 property of the Company or (iv) on account of the insufficiency
of any security in or upon which any money of the Company 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 judgement 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.
(c) The Board of Directors may authorize the Company to purchase and
maintain insurance on behalf of any person described in Section 83(a),
against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as suche, whether or not
the Company would have the power to indemnify him against such
liability under the provisions of this Article 85.
NON-RECOGNITION OF TRUSTS
86. No person shall be recognized by the Company as holding any shares upon any
trust and the Company shall not be bound by or be compelled in any way to
recognize (even when having notice thereof) any equitable, contingent,
future or partial interest in any of its shares or any other rights in
respect thereof except an absolute right to the entirety thereof in each
Shareholder registered in the Company's Register of Members.
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<PAGE>
WINDING UP
87. If the Company shall be wound up the liquidator may, with the sanction of
an Ordinary Resolution of the Company divide amongst the Shareholders in
specie or kind the whole or any part of the assets of the Company (whether
they shall consist of property of the same kind or not) and may, for such
purpose set such value as he deems fair upon any property to be divided as
aforesaid and may determine how such division shall be carried out as
between the Shareholders or different classes of Shareholders. The
liquidator may, with the like sanction, vest the whole or any part of such
assets in trustees upon such trusts for the benefit of the contributories
as the liquidator, with the like sanction shall think fit, but so that no
Shareholder shall be compelled to accept any shares or other securities
whereon there is any liability.
AMENDMENT OF MEMORANDUM AND ARTICLES OF ASSOCIATION
88. Subject to and insofar as permitted by the provisions of the Law, the
Company may from time to time by Special Resolution alter or amend its
Memorandum of Association or these Articles in whole or in part.
REGISTRATION BY WAY OF CONTINUATION
89. (a) The Company may by Special Resolution resolve to be registered by way
of continuation in a jurisdiction outside the Cayman Islands or such
other jurisdiction in which it is for the time being incorporated,
registered or existing;
(b) In furtherance of a resolution adopted pursuant to sub-clause (a) of
this Article, the Directors may cause an application to be made to the
Registrar of Companies to deregister the Company in the Cayman Islands
or such other jurisdiction in which it is for the time being
incorporated, registered or existing and may cause all such further
steps as they consider appropriate to be taken to effect the transfer
by way of continuation of the Company.
19
<PAGE>
Exhibit 10.2
APEX SILVER MINES LIMITED
CALEDONIAN HOUSE, MARY STREET
GEORGE TOWN, GRAND CAYMAN
CAYMAN ISLANDS
March 21, 1997
Dear Investor:
Reference is made to the terms of that certain Shareholders' Agreement (the
"Agreement") dated as of August 6, 1996 by and among Apex Silver Mines Limited
(the "Company"), you (or your organization, as applicable), and certain other
shareholders of the Company or Apex Silver Mines LDC.
The Company has determined that it is in its best interests to have the
flexibility to increase or decrease the size of its board of directors.
Therefore, the parties to the Agreement agree as follows:
1. All defined terms used herein and not otherwise defined are as defined
in the Agreement.
2. Section 2(c) of the Agreement is hereby amended by designating such
section 2(d) and substituting the following as Section 2(c):
"(c) Notwithstanding anything else contained in Sections 2(a) or 2(b) to
the contrary, the Board shall have the authority to increase or decrease the
size of the Board (and fill any vacancy occurring from such increase) so long as
each of the Consolidated Representatives, the Litani Representative and the
Silver Holdings Representatives approves such increase or decrease and any such
new director. To the extent Litani has not exercised such right then the
Consent of Litani shall be required."
3. Except as so modified, the Agreement is hereby ratified and confirmed
in all respects.
APEX SILVER MINES LIMITED
Thomas S. Kaplan
Chairman
APPROVED AND AGREED TO AS OF THE DATE FIRST WRITTEN ABOVE.
- ----------------------------------------------------------
By:
----------------------------
Name:
Title:
PLEASE FAX SIGNED CONSENT TO: AKIN, GUMP STRAUSS, HAUER & FELD, L.L.P.
ATTENTION: STEPHEN CULHANE, ESQ.
FACSIMILE NO.: (212) 872-1002
<PAGE>
Exhibit 10.3
BUY-SELL AGREEMENT
------------------
THIS BUY-SELL AGREEMENT (this "Agreement") is made as of August 6, 1996, by
---------
and among Apex Silver Mines Limited, an exempted limited liability company
organized and existing under the laws of the Cayman Islands (the "Company"),
-------
Apex Silver Mines LDC, an exempted limited duration company organized and
existing under the laws of the Cayman Islands ("Apex LDC"), Litani Capital
--------
Management LDC, a limited duration company organized and existing under the laws
of the Bahamas ("Litani"), Silver Holdings LDC, an exempted limited duration
------
company organized and existing under the laws of the Cayman Islands ("Silver
------
Holdings").
- --------
WHEREAS, each of the LDC Shareholders, together with Consolidated
Commodities Ltd., a limited liability company organized and existing under the
laws of Bermuda ("Consolidated"), are the sole owners of shares of Apex LDC (the
------------
"Sub Shares");
----------
WHEREAS, the Company has agreed to sell shares of its common stock (such
shares, "Shares") in a private placement (the "Placement") closing as of the
------ ---------
date hereof;
WHEREAS, in connection with the Placement, Consolidated will contribute its
Sub Shares to the Company in exchange for an equal number of Shares and the sole
shareholders of Apex LDC will be the Company, Litani and Silver Holdings (Litani
and Silver Holdings, collectively, the "LDC Shareholders");
----------------
WHEREAS, in connection with the Placement, the Company shall enter into a
Shareholders' Agreement dated as of the date hereof (the "Shareholder's
-------------
Agreement") by and between each of the Company, Apex LDC, Consolidated, Litani,
- ---------
Silver Holdings and each of the shareholders from time to time of the Company
(such shareholders, collectively, the "Stockholders") which shall establish,
------------
inter alia, certain voting and transfer restrictions on the Sub Shares and the
Shares;
WHEREAS, the Company and Apex LDC shall during such time as this Agreement
shall remain in effect have the same number of authorized shares of common
stock, and the Company shall retain in treasury form Shares equal in number to
the number of Shares required to purchase, in exchange for Shares, any and all
outstanding Sub Shares and such authorized and unissued Shares shall be reserved
and set aside by the Company exclusively for the purpose of purchasing such Sub
Shares as the LDC Shareholders may from time to time sell to the Company
pursuant to the terms hereof;
<PAGE>
WHEREAS, the LDC Shareholders wish to be able to sell their Sub Shares to
the Company in connection with, or subsequent to, a Public Sale or an Approved
Sale (as such terms defined herein), and the Company has agreed that it will
purchase such Sub Shares;
WHEREAS, the parties hereto desire to enter into this Agreement to
establish the terms and conditions upon which the LDC Shareholders shall be
entitled to sell from time to time all or any portion of their Sub Shares to the
Company;
NOW, THEREFORE, the parties to this Agreement hereby agree as follows:
1. DEFINITIONS. All terms not otherwise defined herein shall have the
-----------
meanings set forth in this Section 1:
"APPROVED SALE" has the meaning set forth in the Shareholders' Agreement.
"CONVERSION PRICE" with respect to each Sub Share, the amount in
immediately available United States dollars equal to the then prevailing Market
Price of each Company Share.
"MARKET PRICE" means the average of the closing prices of sales of Shares
on all securities exchanges on which such Shares may at the time be listed, or,
if there have been no sales on any such exchange on any day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of such
day, or, if on any day such security is not so listed, the average of the
representative bid and asked prices quoted in the NASDAQ System as of 4:00 P.M.,
New York time, on such day, or, if on any day Shares are not quoted in the
NASDAQ System, the average of the highest bid and lowest asked prices on such
day in the over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization, in each such case averaged
over a period of 21 days consisting of the day as of which "Market Price" is
being determined and the 20 consecutive business days prior to such day. If at
any time Shares are not listed on any securities exchange or quoted in the
NASDAQ System or the over-the-counter market, the "Market Price" shall be the
fair value thereof determined jointly by the Company and the LDC Shareholders
seeking to sell their Sub Shares. If such parties are unable to reach agreement
within a reasonable period of time, such fair value shall be determined by an
independent appraiser experienced in valuing securities jointly selected by the
Company and the LDC Shareholders seeking to sell their Sub Shares. The
determination of such appraiser shall be final and binding upon the parties, and
the Company shall pay the fees and expenses of such appraiser.
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"PUBLIC SALE" means any sale of Shares to the public pursuant to an
offering registered under the Securities Act or any similar statute of any
jurisdiction in which the Shares may be registered or to the public through a
broker, dealer or market maker pursuant to the provisions of Rule 144 adopted
under the Securities Act.
2
<PAGE>
"SECURITIES ACT" means the United States Securities Act of 1933, as amended
from time to time.
2. EFFECTIVE DATE. The LDC Shareholders' right to sell Sub Shares
--------------
hereunder shall vest immediately prior to the earlier of (i) an Approved Sale,
or (ii) the first Public Sale, which Public Sale may or may not include, at the
Company's discretion, Shares or Sub Shares held by the LDC Shareholders.
3. SALE AND PURCHASE OF SUB SHARES. Following the completion of the
-------------------------------
initial Public Sale, the LDC Shareholders, individually, shall be entitled, from
time to time, to require the Company, upon ten days written notice to the
Company, to purchase all or any portion of their Sub Shares. The Company shall
purchase from such LDC Shareholders the number of Sub Shares indicated in the
LDC Shareholder's notice to the Company, on the tenth day following the delivery
of such notice, for, at the option of the Company (i) immediately available
United States dollars equal to the aggregate Conversion Price for such tendered
Sub Shares, (ii) an equal number of Shares, or (iii) a combination of Shares and
immediately available United States dollars as determined at the applicable
Conversion Price.
4. SHARE CAPITAL. For so long as this Agreement remains in effect, the
-------------
Company and Apex LDC shall maintain an equal number of shares of capital stock.
In the event the capital structure of the Company or Apex LDC is altered, or the
number of issued and outstanding Shares or Sub Shares is changed as the result
of a stock dividend, split or consolidation, the ratio at which Shares may be
exchanged for Sub Shares shall be adjusted to reflect such change in the ratio
of issued and outstanding Shares to Sub Shares so that the LDC Shareholders'
beneficial interest in the Company shall not be affected by such stock dividend,
split or consolidation.
5. COMPANY TREASURY SHARES. For so long as this Agreement remains in
-----------------------
effect, the Company shall retain at all times authorized and unissued Shares in
a number equal to the number of Shares required to purchase for Shares any and
all issued and outstanding Sub Shares held by the LDC Shareholders.
6. EXCHANGE OF SHARES FOR SUB SHARES. In the event the Company elects to
---------------------------------
purchase in exchange for Shares any Sub Shares tendered by the LDC Shareholders
in accordance with the provisions of this Agreement, all such Shares, when
issued, shall be duly and validly issued, fully paid and nonassessable and free
from all taxes, liens and charges. The Company shall take all such actions as
may be necessary to assure that all such Shares may be so issued without
violation of any applicable law or governmental regulation or any requirements
of any domestic securities exchange upon which Shares may be listed (except for
official notice of issuance which shall be immediately delivered by the Company
upon each such issuance). In addition, prior to the issuance of any Shares
hereunder, the Company shall at its expense procure the listing of such Shares
as then may be required on all stock exchanges or interdealer quotation systems
on which the common stock of the Company is then listed and shall maintain such
listing if and so long as any shares of the common stock of the Company shall be
listed on such stock exchanges or interdealer quotation systems.
3
<PAGE>
7. AMENDMENT AND WAIVER. Except as otherwise provided herein, no
--------------------
modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company unless such modification, amendment or waiver is
approved in writing by the Company. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement shall be
effective against the LDC Shareholders unless such modification, amendment or
waiver is approved in writing by the LDC Shareholders.
8. SEVERABILITY. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement shall be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
9. ENTIRE AGREEMENT. Except as otherwise expressly set forth herein, this
----------------
document, the Shareholders' Agreement, and the Amended Investment Agreement
embody the complete agreement and understanding among the parties hereto with
respect to the subject matter hereof and supersede and preempt any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way.
10. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, this
----------------------
Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and the LDC Shareholders and any
subsequent holders of Sub Shares and the respective successors and assigns of
each of them, so long as they hold Sub Shares. The parties hereto hereby agree
that the shareholders of Litani and Silver Holdings constitute third party
beneficiaries of this Agreement and are hereby entitled to enforce the terms of
this Agreement against the Company.
11. COUNTERPARTS. This Agreement may be executed in separate counterparts
------------
each of which shall be an original and all of which taken together shall
constitute one and the same agreement.
12. REMEDIES. The parties hereto agree and acknowledge that money damages
--------
may not be an adequate remedy for any breach of the provisions of this Agreement
and that the Company and any LDC Shareholder shall have the right to injunctive
relief, in addition to all of its rights and remedies at law or in equity, to
enforce the provisions of this Agreement. Nothing contained in this Agreement
shall be construed to confer upon any Person who is not a signatory hereto any
rights or benefits, as a third party beneficiary or otherwise.
13. EXPIRATION. This Agreement shall expire upon the purchase by the
----------
Company of all outstanding Sub Shares held by or on behalf of the LDC
Shareholders, their successors or assigns.
4
<PAGE>
14. NOTICES. All notices, demands or other communications to be given or
-------
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when personally delivered or
received by certified mail, return receipt requested, confirmed telecopy or sent
by guaranteed overnight courier service. Such notices, demands and other
communications will be sent to the LDC Shareholders at the addresses indicated
for such Persons in the Company's or Apex LDC's shareholders' register, or to
such other or additional addresses as such Persons have specified by prior
written notice to the Company.
15. GOVERNING LAW. The corporate law of the Cayman Islands will govern
-------------
all issues concerning the relative rights of the Company and its stockholders.
All other issues concerning this Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of New
York or any other jurisdiction) that would cause the application of the law of
any jurisdiction other than the State of New York.
16. DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement are
--------------------
inserted for convenience only and do not constitute a part of this Agreement.
* * * * *
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Buy-Sell Agreement
on the day and year first above written.
APEX SILVER MINES LIMITED
By: /s/ Thomas S. Kaplan
------------------------------
Name: Thomas S. Kaplan
Title: Director
APEX SILVER MINES LDC
By: /s/ Thomas S. Kaplan
------------------------------
Name: Thomas S. Kaplan
Title: Director
LITANI CAPITAL MANAGEMENT LDC
By: /s/ David Sean Hanna
------------------------------
Name: David Sean Hanna
Title: Director
SILVER HOLDINGS LDC
By: /s/ Sean C. Warren
------------------------------
Name: Sean C. Warren
Title:
<PAGE>
EXHIBIT 10.4
- --------------------------------------------------------------------------------
APEX SILVER MINES CORPORATION
401(K) PLAN
SUMMARY PLAN DESCRIPTION
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
INTRODUCTION TO YOUR PLAN
GENERAL INFORMATION ABOUT YOUR PLAN
ELIGIBILITY AND PARTICIPATION
YOUR CONTRIBUTIONS TO THE PLAN
YOUR EMPLOYER'S CONTRIBUTIONS TO THE PLAN
YOUR BENEFITS UNDER THE PLAN
SPECIAL DISTRIBUTION EVENTS
LOANS
TOP HEAVY RULES
ROLLOVERS AND TRANSFERS
PERIOD OF SEVERANCE RULES
QUALIFIED DOMESTIC RELATIONS ORDERS
PLAN AMENDMENT OR TERMINATION
SPECIAL TAX TREATMENT OF DISTRIBUTIONS
STATEMENT OF ERISA RIGHTS
PENSION BENEFIT GUARANTY CORPORATION
2
<PAGE>
INTRODUCTION TO YOUR PLAN
Your Employer has instituted this Plan to reward efforts made by Employees who
contribute to the overall success of the Company. The Plan is exclusively for
the benefit of Participants and their Beneficiaries. The purpose of the Plan is
to help you build financial security for your retirement and to help protect you
and your Beneficiaries in the event of your death or Disability.
This Plan is commonly known as a 401(k) plan. It offers you a built in savings
system through pre-tax payroll deductions. It also offers attractive tax
advantages, the freedom to choose investments according to your needs, the
flexibility to change your investments as your needs change, and a way to build
capital for a secure retirement.
Under the terms of this Plan, you may choose to defer a portion of your current
salary, which your Employer then contributes to the plan on a pre-tax basis.
Contributions are not subject to Federal income tax, and in most cases are also
exempt from state or local income taxes. Since your contributions are not
included in your compensation for Federal income tax purposes, your taxable
income is reduced.
The laws governing plans like this one contain many provisions that may affect
your retirement. You should contact your Plan Administrator with any questions
about the Plan before you make any decisions related to your retirement. For
specific tax advice, you should contact your tax advisor.
This Summary Plan Description (SPD) summarizes the key features of your Plan,
and your rights, obligations and benefits under the Plan. Some of the
statements made in this SPD are dependent upon this Plan being "qualified", or
approved by the Internal Revenue Service. Please contact your Plan
Administrator with any questions you may have after you have read this summary.
Every effort has been made to make this description as accurate as possible.
However, this booklet is not a Plan document. This SPD is not meant to
------------------------
interpret, extend, or change the provisions of the Plan in any way. The terms
- ------------------------------------------------------------------------------
of the Plan are stated in and will be governed in every respect by the Plan
- ---------------------------------------------------------------------------
document. Your right to any benefit depends on the actual facts and the terms
- ---------
and conditions of the Plan document, and no rights accrue by reason of any
statement in this summary. A copy of the Plan document is available at the
principal office of your Employer for inspection by you, your Beneficiaries, or
your legal representatives at any reasonable time.
3
<PAGE>
GENERAL INFORMATION ABOUT YOUR PLAN
There is certain general information you may need to know about the Plan. This
section summarizes that information for you:
EMPLOYER/PLAN SPONSOR PLAN TRUSTEE(S)
- --------------------- ---------------
Apex Silver Mines Corporation Gregory G. Marlier
1700 Lincoln Street Suite 3050 1700 Lincoln Street Suite 3050
Denver, CO 80203-4530 Denver, CO 80203-4530
(303) 839-5060
PLAN ADMINISTRATOR
EMPLOYER'S TAX I. D. NUMBER: ------------------
84-1363747
Apex Silver Mines Corporation
PLAN INFORMATION 1700 Lincoln Street Suite 3050
- ---------------- Denver, CO 80203-4530
(303) 839-5060
PLAN NAME: Apex Silver Mines
Corporation 401(k) Plan TAX YEAR: January 1st through
December 31st.
PLAN NUMBER: 001 PLAN YEAR: January 1st through
December 31st.
PLAN EFFECTIVE DATE: January 1, 1997
All Plan Records will be kept on the
basis of the Plan Year.
The Plan Administrator keeps the records for the Plan, and is responsible for
the interpretation and administration of the Plan. The Plan Administrator may
engage the services of a third party record keeper to perform the administrative
functions of the Plan, however, any questions you have about the Plan should be
directed, in writing, to the Plan Administrator. THE PLAN ADMINISTRATOR AND THE
TRUSTEES ARE DESIGNATED AS THE AGENTS FOR SERVICE OF LEGAL PROCESS.
4
<PAGE>
ELIGIBILITY AND PARTICIPATION
All Employees of the Employer are eligible to participate in this Plan.
If you were employed on or before 06/01/97, you will be a Participant as of that
date If you were employed after 06/01/97, you will be eligible to Participate
after you have attained age twenty-one (21) and completing one-half of a (1/2)
Year of Service.
Since the service requirement is less than one year, you are not required to
complete a specific number of Hours of Service during the service period.
Instead, your service will be measured by the length of time you are employed.
You will become eligible to participate in the Plan on your 6 month anniversary
of your Date of Hire. For example: If your Date of Hire is April 1st, you will
become eligible to participate in the Plan on October 1st.
You will become a Participant in the Plan on the Entry Date coincident with or
next following the date you meet the participation requirements.
The Entry Dates for this Plan are January 1, April 1, July 1, and October 1.
To begin payroll deductions, you must complete an Enrollment Form and submit it
to the Plan Administrator.
If you do not meet the eligibility requirements, you will not be eligible to
participate in this Plan.
YOUR CONTRIBUTIONS TO THE PLAN
Your Contributions to your Plan are based on your Compensation. Compensation
means the total salary or wages paid to you by your Employer during the Plan
Year, including bonuses, commissions and overtime. For purposes of your Salary
Deferral Contributions, you may defer only current Compensation. The total
Compensation that can be considered for contribution purposes for 1997 is
$160,000. This limit is adjusted periodically by the IRS.
SALARY DEFERRAL CONTRIBUTIONS
You may elect to defer any percentage of your current Compensation into the
Plan, subject to a maximum of 15% or $9,500, whichever is least. This
limitation is an aggregate limit that applies to all deferrals you make to this
Plan and to any other salary deferral plan, including tax sheltered annuity
contracts, simplified employee pension plans, or other 401(k) plans. The $9,500
limit for 1997 is subject to possible cost of living adjustments each year by
the IRS.
5
<PAGE>
You may increase or decrease your Salary Deferral Contribution Percentage at
quarterly intervals throughout the Plan Year. You may suspend your Salary
Deferral Contributions at any time upon written notice to your Plan
Administrator. Your instructions to cease Salary Deferrals will be implemented
as of the first payroll period following the date you notified your Plan
Administrator. To resume your Salary Deferral Contributions, you must provide
written notice to your Plan Administrator, and wait until the next quarterly
interval.
Investment of Contributions
- ---------------------------
As a Participant in this Plan, you direct the investment of your Salary Deferral
Contributions, Employer Profit Sharing Contributions, and Employer Matching
Contributions. Your Plan provides a menu of investment options from which you
may select your investments. You may modify your investment elections, transfer
existing account balances, and obtain information regarding your investments on
a daily basis, through the Interactive Voice Response System.
You should be aware that your investment decisions will ultimately affect the
retirement benefits to which you will become entitled. Your Employer and the
Plan Trustee(s) cannot provide you with investment advice, nor are they
obligated to reimburse any participant for any investment loss that may occur as
a result of his or her investment decisions. There is no guarantee that any of
the investment options available in this Plan will retain their value or
appreciate.
YOUR EMPLOYER'S CONTRIBUTIONS TO THE PLAN
Your Employer's Contributions to your Plan are based on your Compensation.
Compensation means the total salary or wages paid to you by your Employer during
the Plan Year, including bonuses, commissions and overtime. For the first year
you participate in the Plan, only Compensation earned after your Entry Date will
be used to determine your share of your Employer's Contribution. The total
Compensation that can be considered for contribution purposes for 1997 is
$160,000. This limit is adjusted periodically by the IRS.
401(K) MATCHING CONTRIBUTIONS
Your Employer will make a contribution to the Plan, known as a 401(k) Matching
Contribution, on behalf of those Participants who have made Salary Deferral
Contributions. Only those Participants who have made Salary Deferral
Contributions will receive a 401(k) Matching Contribution. Your Employer's
401(k) Matching Contribution will be an amount to equal 50% of the first 6% of
your Compensation contributed as a Salary Deferral.
6
<PAGE>
PROFIT SHARING CONTRIBUTIONS
Your Employer may make a contribution to the Plan for you and other
Participants. The amount of this contribution, if any, will be determined by
your Employer.
Your share of your Employer's Profit Sharing Contribution will be allocated to
your account based on the ratio that your Compensation bears to the total
Compensation of all Participants eligible for a share of this Contribution.
Eligibility for Employer Profit Sharing Contributions
- -----------------------------------------------------
To receive a share of your Employer's Profit Sharing Contribution, you must
complete 1,000 Hours of Service during the Plan Year, and be employed on the
last day of the Plan Year.
In addition, any Participant who died, retired or became Disabled during the
Plan Year will receive an Employer Profit Sharing Contribution, if any, for the
Plan Year.
BENEFITS UNDER YOUR PLAN
Benefits Upon Termination of Employment
- ---------------------------------------
If you terminate Employment for reasons other than death, Disability or
retirement, you will be entitled to receive only that portion of your benefit in
which you are vested.
Vesting means that for each Year of Service you complete, you become entitled to
all or a portion of your Employer Contributions Account. For purposes of
determining your vested account balance, all of your Years of Service, beginning
on your date of hire, will be counted.
You will have completed a Year of Service for vesting purposes on each
anniversary of your Date of Hire with your Employer.
You will be vested according to the following schedule:
<TABLE>
<CAPTION>
YEARS OF SERVICE VESTED PERCENTAGE
<S> <C>
1 50%
2 100%
</TABLE>
YOU ARE ALWAYS 100% VESTED IN YOUR SALARY DEFERRAL CONTRIBUTIONS.
7
<PAGE>
Forfeitures
- -----------
If you terminate service prior to being fully vested in your Employer
Contributions Account, you forfeit the amount in which you are not vested.
Forfeitures on Matching 401(k) Contributions will be used to reduce future
Employer Contributions to the Plan. Forfeitures on Profit Sharing Contributions
will be reallocated among remaining Participants.
If you terminate service prior to accruing any vested interest in your Employer
Contributions Account, your unvested account balance will be forfeited
immediately.
Retirement Benefits
- -------------------
You will be 100% vested in your Employer Contributions Account upon attaining
your Normal Retirement Age, which is age sixty-five (65).
Your Retirement Date is the first day of the month following attainment of
Normal Retirement Age. Benefit payments will begin as soon as feasible after
your Retirement Date.
Disability Retirement Benefits
- ------------------------------
You will be considered to be disabled if your injury or medical condition causes
you to be unable to perform your usual and customary duties for your Employer
for a continuous period of at least twelve months. If it is determined that you
are disabled, you will be treated as though you have retired. You will become
100% vested in your Employer Contributions Account, and benefit payments will
begin as soon as feasible after your Disability Retirement Date.
Death Benefits
- --------------
Your Employer Contributions Account becomes 100% vested upon your death. Your
Beneficiary will be entitled to receive the vested benefit.
If you are married at the time of your death, your spouse is your Beneficiary
unless:
. You elect otherwise in writing (with the consent of your spouse),
. Your spouse cannot be located,
. Your spouse has validly waived any right to the death benefit.
If you want to designate a Beneficiary other than your spouse, (an "alternate
Beneficiary") you must do so on a form provided by the Plan Administrator. You
may revoke or change this designation at any time by filing written notice with
the Plan Administrator, however, your spouse must consent, in writing, to any
alternate Beneficiary. Your spouse's consent must be witnessed by a Notary
Public or Plan official.
It is important that you notify the Plan Administrator of any change in your
marital status or change in your Beneficiary Designation.
8
<PAGE>
If death occurs before Retirement Benefits begin, your Beneficiary may choose to
defer payment, or to receive payment based on the following general guidelines:
. Payment may be made in the form of a life annuity for Participants who
transferred money from a prior plan where this option was available,
. Payment may be made in installments payable in cash or kind, or part in
cash and part in kind over a period not to exceed your lifetime, or the
joint lifetime of you and your spouse,
. The entire sum may be distributed no later than the last day of the year
of the fifth anniversary of your death,
. If your Beneficiary is your spouse, payment may be postponed until
December 31st of the calendar year in which you would have attained age
65.
If you fail to designate an alternate Beneficiary, or your alternate Beneficiary
does not survive you, the benefit payable from this Plan as a result of your
death will be payable to your Surviving Spouse, or if you have no Surviving
Spouse, the death benefit will be paid to your estate.
Forms of Benefit
- ----------------
The normal form of benefit payable under this Plan is a lump sum. If the amount
payable to you is $3,500 or less, you will receive a lump sum distribution as
soon as feasible following the date you terminated employment, and no optional
form of benefit will be available to you. If the amount payable to you is
greater than $3,500, you (and your spouse, if applicable) must give written
consent before the distribution can be made.
A second form of benefit is installments payable in cash or kind, or part in
cash and part in kind over a period not to exceed your lifetime, or the joint
lifetime of you and your spouse.
A third possible form of benefit which may be available to certain Participants*
is annuity contracts payable as:
. A single life annuity.
. A joint and 50% survivor annuity with a contingent annuitant.
. A joint and 100% survivor annuity with a contingent annuitant.
. An annuity for the life of the Participant with 120 months certain.
*Annuities are only available to Participants who transferred money from a prior
plan where this option was available.
9
<PAGE>
SPECIAL DISTRIBUTION EVENTS
Although your Plan is designed as a way for you to build savings for the future,
it also allows you access to your accounts under certain circumstances:
In-Service Distributions: As an active Participant in the Plan, you may, upon
- -------------------------
attaining age 59 1/2, submit a written application to the Plan Administrator to
withdraw all or a portion of your vested account balance.
Hardship Withdrawals: As an active Participant in the Plan, you may submit a
- ---------------------
written application to the Plan Administrator for a hardship withdrawal, if you
are experiencing an immediate and heavy financial need.
Generally, to qualify as a reason for a hardship distribution, the request must
be made for one of the following reasons:
. to cover medical expenses incurred by you, your spouse or your
dependents;
. for the purchase of a principal residence (excluding mortgage payments);
. for the payment of post-secondary education tuition expenses;
. for the payment of amounts necessary to prevent eviction from or
foreclosure on your principal residence.
You will be eligible for a hardship withdrawal only after all other forms of
financial assistance have been explored and exhausted, including Plan loans.
If you take a hardship withdrawal, your Salary Deferral Contributions must be
suspended for a period of twelve months following the date of the withdrawal.
Tax Consequences of Taking Distributions While Still Actively Employed
- ----------------------------------------------------------------------
Any distribution of your account balance will reduce the value of benefits you
will receive at retirement. Distribution or withdrawal of your pre-tax
contributions or earnings on your pre-tax contributions may be subject to
ordinary income taxes or early distribution penalties. Please consult your tax
advisor prior to taking any distribution or withdrawal.
10
<PAGE>
LOANS
As an active Participant in the Plan, you may request a loan from the Plan. The
loan amount is available by calling the 800#. Once you request a loan, your
Employer is required to approve the loan. After approval, you will receive a
check with an attached promissory note. By endorsing the check, you agree to
the terms and repayment conditions in the Promissory note.
A loan allows you to borrow money from your account without incurring a
distribution penalty. You must repay the loan with interest on an after tax
basis, through payroll deduction. Loans are subject to certain requirements.
Among these are the following:
. Loans are available to all participants in the Plan on a uniform and
nondiscriminatory basis.
. Loans must bear a reasonable rate of interest. A reasonable rate of
interest is the prevailing commercial rate for loans of similar types.
. The loan must be adequately secured.
. Loans can be granted after approval from your Employer.
Loan Limitations
- ----------------
You may borrow the lesser of 50% of your vested account balance or $50,000. The
amount available to you for borrowing will be reduced by the amount of your
highest outstanding loan balance during the previous one year period. The
available loan balance may be obtained by calling your 800#.
Loan Repayments
- ---------------
Repayment of a loan is required within a five year period, except for the
purchase of a primary residence.
Tax Consequences of Plan Loans
- ------------------------------
If you fail to make loan repayments when they are due, you may be considered to
have defaulted on the loan. Defaulting on a loan may be considered a
distribution to you from the Plan, resulting in taxable income to you and may
ultimately reduce your benefit from the Plan.
11
<PAGE>
YOUR PLAN'S TOP HEAVY RULES
A plan that primarily benefits "key employees" is called a "top-heavy" plan.
Key Employees are certain owners or officers of your Employer. Your Plan will
become top-heavy when more than 60% of the Plan's assets have been allocated to
key employees. Each year, the Plan Administrator is responsible for determining
whether your Plan is a top-heavy plan.
If your Plan becomes top heavy, non-key employees may be entitled to certain
top-heavy minimum benefits, and other special rules may apply. Among these top-
heavy rules are the following:
. Each non-key employee may receive a minimum contribution from the
Employer. The minimum contribution will be at least as much as the
lesser of:
. three percent (3%) of Compensation; or
. the largest percentage of Compensation contributed by the Employer
on behalf of key employees.
. If you are a Participant in more than one Plan maintained by your
Employer, you may not be entitled to minimum benefits in more than one
plan.
. The Vesting Schedule outlined earlier in this booklet will apply.
ROLLOVERS AND TRANSFERS
You may be able to rollover or transfer to this Plan a distribution you received
from your previous employer's plan, subject to the following:
. You must submit a written request to your Plan Administrator, who will
determine whether the rollover or transfer is acceptable;
. You may make such a contribution to this Plan prior to being eligible for
the Plan;
. Any amount rolled over or transferred to this Plan cannot include personal
IRA contributions;
. Prior to making a rollover or transfer, you should consult with your tax
advisor.
12
<PAGE>
PERIOD OF SEVERANCE RULES
Under the elapsed time method, your Period of Service runs from the date you
first perform an Hour of Service for your Employer until the severance from
service date. A Period of Severance begins on the earlier of:
. The date you quit, retire, are discharged, or die.
OR
. The first anniversary of the first date of a period in which you remain
absent from service with your Employer (with or without pay) for any reason
other than quitting, retirement, discharge, or death. These reasons include
vacation, holiday, sickness, disability, leave of absence, or layoff. A leave
of absence includes maternity or paternity leave.
For example, if you went on maternity leave on October 1, 1995, you would not be
considered to have severed service with your Employer if you returned to work
and performed an Hour of Service before October 1, 1996. If you did not return
to work on or before October 1, 1996, you would incur a Period of Severance.
Reemployment After a Period of Severance
- ----------------------------------------
If you are reemployed after you incur a Period of Severance and you were vested
when you terminated employment, upon your reemployment, you will be immediately
eligible for the Plan, and you will be vested at the same percentage as when you
left.
If you are reemployed after you incur a Period of Severance and you were not
vested when you terminated employment, you will lose credit for service you
completed prior to your termination if your absence is longer than five years.
If you are reemployed after you incur a Period of Severance, and you received a
full or partial distribution, you may repay the amount distributed to you to the
Plan. If you make such a repayment, your account balance will be restored to
its original amount as though you had never left.
If you terminate service prior to becoming a Participant in the Plan, you will
be treated as a new employee upon your reemployment. To participate, you must
meet the Eligibility Requirements.
13
<PAGE>
QUALIFIED DOMESTIC RELATIONS ORDERS
As a general rule, your account balance, including your vested portion, may not
be assigned. This means that your accounts cannot be sold, used as collateral
for a loan, given away, or otherwise transferred. In addition, your creditors
may not attach, garnish or otherwise interfere with your account.
An exception to this general rule is a "Qualified Domestic Relations Order" or
QDRO. A QDRO is a domestic relations order that creates, recognizes, or assigns
to an alternate payee the right to receive all or a portion of your benefits in
the Plan. An "alternate payee" may be a spouse, former spouse, child or other
dependent.
If a QDRO in which you are involved is received by your Plan Administrator, all
or a portion of your benefits may be used to satisfy the obligation. Your Plan
Administrator will determine if the order is a QDRO based on uniform and
nondiscriminatory policies.
PLAN AMENDMENT OR TERMINATION
Your Employer reserves the right to amend the Plan at any time. However, no
amendment can deprive you of any vested benefits.
Although your Employer expects to continue this Plan permanently, it reserves
the right to terminate the Plan. If the Plan is terminated, you will be 100%
vested in your total account balance under the Plan.
In general, funds that have been paid to the Plan by your Employer may not,
under any circumstance, revert to your Employer.
SPECIAL TAX TREATMENT OF DISTRIBUTIONS
This section of your Summary Plan Description contains important information you
will need before you decide how to receive your benefits from the Plan upon
termination or retirement. You should consult your tax advisor prior to taking
any distribution from the Plan.
A payment from the Plan that is an "eligible rollover distribution" can be taken
in two ways. You can have all or a portion of your payment either: 1) Paid in a
"DIRECT ROLLOVER" or 2) PAID TO YOU. This choice will affect the tax you owe.
14
<PAGE>
An "eligible rollover distribution" is the taxable portion of a payment except a
payment that is part of a series of equal (or almost equal) payments that are
made at least once a year and will last for:
. your lifetime (or your life expectancy), or
. your lifetime and your beneficiary's lifetime (or life expectancies), or
. a period of ten years or more.
PLEASE NOTE: The portion of any payments made to you after you reach age 70 1/2
to meet your required minimum payments may not be rolled over.
If you choose a DIRECT ROLLOVER:
. Your payment will be made directly to your IRA, or if you choose, to your
new employer's retirement plan, provided it accepts rollovers.
. Your payment will not be taxed in the current year, and no income tax will
be withheld.
. Your payment will be taxed later when you take it out of the IRA or
employer plan.
If you choose to have your eligible rollover distribution PAID TO YOU:
. Your Plan Administrator is required to withhold 20% of the eligible
rollover distribution and send it to the IRS as income tax withholding to
be credited against your taxes.
. Your payment will be taxed in the current year unless you roll it over. You
may be able to use special tax rules that could reduce the tax you owe.
However, if you receive the payment before age 59 1/2, you may also have to
pay an additional 10% tax.
. After you have received the distribution, if you want to roll over 100% of
the payment to an IRA or to your new employer's plan, YOU MUST FIND OTHER
MONEY TO REPLACE THE MONEY THAT WAS WITHHELD. If you roll over only the 80%
that you received, you will be taxed on the 20% that was withheld and that
is not rolled over.
STATEMENT OF ERISA RIGHTS
Participant Rights
- ------------------
As a Participant in the Plan, you are entitled to certain rights and protection
under the Employee Retirement Income Security Act of 1974 (ERISA). Your
Employer may not fire you or discriminate against you to prevent you from
obtaining a benefit from the Plan or exercising your rights under ERISA.
ERISA provides that all Plan Participants shall be entitled to:
. Examine, without charge, at your Plan Administrator's office, all Plan
documents, insurance contracts, if any, and copies of all documents filed
by your Plan with the U. S. Department of Labor, such as annual reports and
Plan descriptions.
. Obtain copies of all Plan documents and other Plan information upon written
request to your Plan Administrator. Your Plan Administrator may impose a
reasonable charge for the copies.
. Receive a summary of the Plan's annual financial report. Your Plan
Administrator is required by law to provide each Participant with a copy of
the Plan's Summary Annual Report.
. Obtain an annual statement telling you whether you have a right to receive
a benefit under the Plan, and if so, what your benefits would be if you
stop working for your Employer now. If you do not have a right to a benefit
under the Plan, the statement must tell you how many years you have to work
to get a benefit under the Plan. The Plan may require a written request
for this statement, but it must be provided free of charge.
. File suit in Federal court if any materials requested are not received
within 30 days of your request unless the materials were not sent because
of matters beyond the control of your Plan Administrator. The court may
require your Plan Administrator to pay you up to $100 per day for each
day's delay until the materials are received by you.
In addition to creating rights for Plan participants, ERISA imposes obligations
upon the persons who are responsible for the operation of the Plan. These
persons are referred to as "fiduciaries". Fiduciaries must act solely in the
interest of plan participants and must exercise prudence in the performance of
their plan duties. Fiduciaries who do not comply with ERISA may be removed and
required to make good any losses they have caused the Plan.
If Plan fiduciaries are misusing the Plan's assets, as a Participant in the
Plan, you have the right to file suit in a Federal court or to request
assistance from the U. S. Department of Labor. If you are successful in your
lawsuit, the court may require the other party to pay your legal costs,
including attorney's fees. If you are unsuccessful in your lawsuit, or the
court finds your action frivolous, the court may order you to pay these costs
and fees.
15
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Claims Procedures
- -----------------
If your Employer denies your claim for benefits under the Plan, you must be
given written notice within 90 days after the claim was filed with your Employer
or its representatives (or 180 days if special circumstances exist). Any notice
of denial must include the following information:
. The specific reason or reasons for the denial;
. The specific plan provisions on which the denial is based;
. An explanation of what additional material or information is necessary
for you to correct your claim if it is incomplete, along with an
explanation of why that information is needed; and
. An explanation of the Plan's claims review procedure.
Following receipt of such denial, you or your authorized representatives may:
. Request a review of the denial by filing a written application for review
with your Employer within 60 days of receipt of the denial;
. Review documents pertinent to your claim at such reasonable time and
location as can be mutually agreed upon by all parties involved in the
dispute; and
. Submit issues and comments in writing to your Employer relating to its
review of your claim.
After consideration of your request for review, your Employer will make a
decision and provide you with written notice of the decision within 60 days of
receiving your request for review. The notice to you must include the specific
reasons for the decision and specific references to the provisions of the Plan
on which the decision is based. If your claim is denied or ignored in whole or
in part, you may file suit in Federal court.
If you have any questions about this statement or your rights under ERISA, you
should contact your Plan Administrator or the nearest district office of the U.
S. Department of Labor, specifically, the Labor-Management Service
Administration.
PENSION BENEFIT GUARANTY CORPORATION
The type of Plan your Employer has adopted is a defined contribution plan. As a
rule, the benefits provided by this Plan are not subject to or insured by the
Pension Benefit Guaranty Corporation (PBGC). Under Title IV of ERISA, the
insurance provisions of the PBGC do not apply to this Plan.
16
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Exhibit 10.6
APEX SILVER MINES LIMITED
NON-EMPLOYEE DIRECTORS' SHARE PLAN
1. PURPOSE. The purpose of this Non-Employee Directors' Share Plan (the
"Director Plan") of APEX SILVER MINES LIMITED (the "Company"), is to advance the
interests of the Company and its shareholders by providing a means to attract
and retain highly qualified persons to serve as non-employee directors of the
Company and to enable such persons to acquire or increase a proprietary interest
in the Company, thereby promoting a closer identity of interests between such
persons and the Company's shareholders.
2. DEFINITIONS. In addition to terms defined elsewhere in the Director
Plan, the following are defined terms under the Director Plan:
(a) "Code" means the U.S. Internal Revenue Code of 1986, as amended
from time to time. References to any provision of the Code shall be deemed to
include regulations thereunder and successor provisions and regulations thereto.
(b) "Exchange Act" means the U.S. Securities Exchange Act of 1934,
as amended. References to any provision of the Exchange Act shall be deemed to
include rules thereunder and successor provisions and rules thereto.
(c) "Fair Market Value" of a Share on a given date means the last
sales price or, if last sales information is generally unavailable, the average
of the closing bid and asked prices per Share on such date (or, if there was no
trading or quotation in the stock on such date, on the next preceding date on
which there was trading or quotation) as reported in the WALL STREET JOURNAL;
PROVIDED, HOWEVER, that the "Fair Market Value" of a Share subject to Options
granted effective on the date on which the Company commences an Initial Public
Offering shall be the price of the shares so issued and sold, as set forth in
the first final prospectus used in such Initial Public Offering.
(d) "Initial Public Offering" means an initial public offering of
Shares in a firm commitment underwriting register with the U.S. Securities and
Exchange Commission in compliance with the provisions of the U.S. Securities Act
of 1933, as amended.
(e) "Option" means the right, granted to a director under Section 6,
to purchase a specified number of Shares at the specified exercise price for a
specified period of time under the Director Plan. All Options will be non-
qualified Share Options.
<PAGE>
(f) "Participant" means a person who, as a non-employee director of
the Company, has been granted an Option which remains outstanding.
(g) "Share" means a share of the share capital, $.01 par value, of
the Company and such other securities as may be substituted for such share or
such other securities pursuant to Section 7.
3. SHARES AVAILABLE UNDER THE DIRECTOR PLAN. Subject to adjustment as
provided in Section 7, the total number of Shares reserved and available for
issuance under the Director Plan shall not exceed 5 percent of the Company's
share capital. Such Shares may be authorized but unissued Shares, treasury
Shares, or Shares acquired in the market for the account of the Participant. For
purposes of the Director Plan, Shares that may be purchased upon exercise of an
Option will not be considered to be available after such Option has been
granted, except for purposes of issuance in connection with such Option;
PROVIDED, HOWEVER, that, if an Option expires for any reason without having been
exercised in full, the Shares subject to the unexercised portion of such Option
will again be available for issuance under the Director Plan.
4. ADMINISTRATION OF THE DIRECTOR PLAN. The Director Plan will be
administered by the board of directors (the "Board") of the Company; PROVIDED,
HOWEVER, that any action by the Board relating to the Director Plan will be
taken only if, in addition to any other required vote, such action is approved
by the affirmative vote of a majority of the directors who are not then eligible
to participate in the Director Plan.
5. ELIGIBILITY. Each director of the Company who, on any date on which
an Option is to be granted under Section 6, is not an employee of the Company or
any subsidiary of the Company will be eligible, at such date, to be granted an
Option under Section 6. No person other than those specified in this Section 5
will be eligible to participate in the Director Plan.
6. OPTIONS. An Option to purchase the number of Shares equal to $50,000
divided by the Fair Market Value of the Shares on the date of the grant, subject
to adjustment as provided in Section 7, will be automatically granted, (i) at
the effective date of initial election to the Board, to each person so elected
or appointed who is eligible under Section 5 at that date (the "Initial Grant").
In addition, an Option to purchase the number of Shares equal to $50,000 divided
by the Fair Market Value of the Shares on the date of the grant, subject to
adjustment as provided in Section 7, will be automatically granted, at the close
of business of each annual meeting of shareholders of the Company, to each
member of the Board who is eligible under Section 5 at the close of business of
such annual meeting (the "Annual Grant"). Notwithstanding the foregoing, any
person who received an Initial Grant shall not automatically receive an Annual
Grant at the first annual meeting of shareholders if such annual meeting takes
place within three months of the effective date of such person's receipt of an
Initial Grant.
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(a) EXERCISE PRICE. The exercise price per Share purchasable upon
exercise of an Option will be equal to 100% of the Fair Market Value of a Share
on the date of grant of the Option.
(b) OPTION EXPIRATION. A Participant's Option will expire at the
earlier of (i) 10 years after the date of grant or (ii) one year after the date
the Participant ceases to serve as a director of the Company for any reason.
(c) EXERCISABILITY. Each Option may be exercised commencing
immediately upon its grant.
(d) METHOD OF EXERCISE. A Participant may exercise an Option, in
whole or in part, at such time as it is exercisable and prior to its expiration,
by giving written notice of exercise to the Secretary of the Company, specifying
the Option to be exercised and the number of Shares to be purchased, and paying
in full the exercise price in cash (including by check) or by surrender of
Shares already owned by the Participant having a Fair Market Value at the time
of exercise equal to the exercise price, or by a combination of cash and Shares.
7. ADJUSTMENT PROVISIONS.
(a) RECAPITALIZATION. The aggregate number of Shares as to which
Options may be granted to Participants, the number of Shares thereof covered by
each outstanding Option granted or to be granted in accordance with the formula
set forth in Section 6 hereof, and the price per Share thereof in each such
Option, shall all be proportionately adjusted for any increase or decrease in
the number of issued Shares resulting from a subdivision or consolidation of
Shares or other capital adjustment, or the payment of a Share dividend or other
increase or decrease in such Shares, effected without receipt of consideration
by the Company, or other change in corporate or capital structure; provided,
however, that any fractional shares resulting from any such adjustment shall be
eliminated. The Board may also make the foregoing changes and any other changes,
including changes in the classes of securities available, to the extent it is
deemed necessary or desirable to preserve the intended benefits of the Director
Plan for the Company and the Participants in the event of any other
reorganization, recapitalization, merger, consolidation, spin-off, extraordinary
dividend or other distribution or similar transaction. Notwithstanding any other
provision of the Director Plan, the Board may cause any Option granted hereunder
to be canceled in consideration of a cash payment or alternative award made to
the holder of such canceled Option equal in value to the Fair Market Value of
such canceled Option. Notwithstanding anything to the contrary in this Section
7, no issuance of Shares effected pursuant to the terms of the Buy-Sell
Agreement dated as of August 6, 1996 by and among, inter alia, the Company,
Consolidated Commodities Ltd., Argentum LLC and Silver Holdings LDC or certain
entities affiliated therewith, that does not constitute
3
<PAGE>
a change in control shall result in any adjustment to the number or value of any
Shares to be issued pursuant to any Option hereunder.
(b) INSUFFICIENT NUMBER OF SHARES. If at any date an insufficient
number of Shares are available under the Director Plan for the automatic grant
of Options, Options will be automatically granted proportionately to each
eligible director, to the extent Shares are then available (provided that no
fractional Shares will be issued upon exercise of any Option) and otherwise as
provided under Section 6.
8. CHANGES TO THE DIRECTOR PLAN. The Board may amend, alter, suspend,
discontinue, or terminate the Director Plan or authority to grant Options under
the Director Plan without the consent of shareholders or Participants, except
that any amendment or alteration will be subject to the approval of the
Company's shareholders at or before the next annual meeting of shareholders for
which the record date is after the date of such Board action if such shareholder
approval is required by any U.S. federal or state law or regulation or the rules
of any stock exchange or automated quotation system as then in effect, and the
Board may otherwise determine to submit other such amendments or alterations to
shareholders for approval; PROVIDED, HOWEVER, that, without the consent of an
affected Participant, no such action may materially impair the rights of such
Participant with respect to any previously granted Option or any previous
payment of fees in the form of Shares.
9. GENERAL PROVISIONS.
(a) AGREEMENTS. Options may be evidenced by agreements or other
documents executed by the Company and the Participant incorporating the terms
and conditions set forth in the Director Plan, together with such other terms
and conditions not inconsistent with the Director Plan, as the Board may from
time to time approve.
(b) COMPLIANCE WITH LAWS AND OBLIGATIONS. The Company will not be
obligated to issue or deliver Shares in connection with any Option in a
transaction subject to the registration requirements of the Securities Act of
1933, as amended, or any other U.S. federal or state securities law, any
requirement under any listing agreement between the Company and any stock
exchange or automated quotation system, or any other law, regulation, or
contractual obligation of the Company, until the Company is satisfied that such
laws, regulations, and other obligations of the Company have been complied with
in full. Certificates representing Shares issued under the Director Plan will be
subject to such stop-transfer orders and other restrictions as may be applicable
under such laws, regulations, and other obligations of the Company, including
any requirement that a legend or legends be placed thereon.
(c) LIMITATIONS ON TRANSFERABILITY. Options will not be transferable
by a Participant except by will or the laws of descent and distribution or to a
Beneficiary in the event of the Participant's death, and, if exercisable, shall
be
4
<PAGE>
exercisable during the lifetime of a Participant only by such Participant or
his guardian or legal representative. Notwithstanding the foregoing, the
Committee may, in its discretion, authorize all or a portion of the Options
granted to a Participant to be on terms which permit transfer by such
Participant to (i) the spouse, children or grandchildren of such Participant
("Immediate Family Members"), (ii) a trust or trusts for exclusive benefit of
such Immediate Family Members, or (iii) a partnership in which such Immediate
Family Members are the only partners, provided that (x) there may be no
consideration for any such transfer, (y) the Option must be approved by the
Committee and must expressly provide for transferability in a manner consistent
with this Section, and (z) subsequent transfers of transferred Options shall be
prohibited except those occurring by laws of descent and distribution. Following
transfer, any such awards shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer, provided that for
purposes of the Director Plan, the term Participant shall be deemed to refer to
the transferee. Options may not be pledged, mortgaged, hypothecated or otherwise
encumbered, and shall not be subject to the claims of creditors.
(d) NO RIGHT TO CONTINUE AS A DIRECTOR. Nothing contained in the
Director Plan or any agreement hereunder will confer upon any Participant any
right to continue to serve as a director or advisory director of the Company.
(e) NO SHAREHOLDER RIGHTS CONFERRED. Nothing contained in the
Director Plan or any agreement hereunder will confer upon any Participant (or
any person or entity claiming rights by or through a Participant) any rights of
a shareholder of the Company unless and until Shares are in fact issued to such
Participant (or person) or, in the case an Option, such Option is validly
exercised in accordance with Section 6.
(f) NONEXCLUSIVITY OF THE DIRECTOR PLAN. Neither the adoption of the
Director Plan by the Board nor its submission to the shareholders of the Company
for approval shall be construed as creating any limitations on the power of the
Board to adopt such other compensatory arrangements for directors as it may deem
desirable.
(g) GOVERNING LAW. The validity, construction, and effect of the
Director Plan and any agreement hereunder will be determined in accordance with
the laws of the Cayman Islands.
10. SHAREHOLDER APPROVAL, EFFECTIVE DATE, AND DIRECTOR PLAN TERMINATION.
The Director Plan will be effective as of the date of its adoption by the Board,
subject to shareholder approval prior to the commencement of the Initial Public
Offering, and, unless earlier terminated by action of the Board, shall terminate
at such time as no Shares remain available for issuance
5
<PAGE>
under the Director Plan and the Company and Participants have no further rights
or obligations under the Director Plan.
6
<PAGE>
Exhibit 10.7
APEX SILVER MINES LIMITED
EMPLOYEES' SHARE OPTION PLAN
I. PURPOSE.
--------
The purpose of the Apex Silver Mines Limited (the "Company")
Employees' Share Option Plan (the "Employee Plan") is to attract and retain and
provide incentives to employees, officers, consultants and agents of the
Company, and to thereby increase overall shareholder value. The Employee Plan
generally provides for the granting of Shares options, Shares appreciation
rights, restricted shares or any combination of the foregoing to the eligible
participants.
II. DEFINITIONS.
------------
(a) "Award" includes, without limitation, Share options
(including incentive Share options within the meaning of Section 422(b) of
the Code) with or without stock appreciation rights, dividend equivalent
rights, Share awards, restricted Share awards, or other awards that are
valued in whole or in part by reference to, or are otherwise based on,
Shares ("other Share-based Awards"), all on a stand alone, combination or
tandem basis, as described in or granted under this Employee Plan.
(b) "Award Agreement" means a written agreement setting forth
the terms and conditions of each Award made under this Employee Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Cause" means (i) the commission of a felony or a crime
involving moral turpitude or the commission of any other act involving
dishonesty, disloyalty or fraud with respect to the Company, (ii) conduct
tending to bring the Company into substantial public disgrace or disrepute,
(iii) substantial and repeated failure to perform duties as reasonably
directed by the Board, (iv) gross negligence or willful misconduct with
respect to the Company or any of its Subsidiaries, or (v) any other
material breach of any agreement between the Participant and the Company or
its Subsidiaries which is not cured within 15 days after written notice
thereof to the Participant.
(e) "Change of Control" shall be deemed to have occurred if, at
any time following the Effective Date, (i) two of the three Founders sell
or dispose of 50 percent or more of the Shares held by such Founders on the
Effective Date to any Person who was not either (A) an Affiliate of the
Company on the Effective Date, or (B) a Permitted Transferee, (ii) at least
two
<PAGE>
of the three Founders, or their respective designees, do not continue
as senior managers or members of the Board other than as a result of death
or Disability, or (iii) all or substantially all of the Company's assets
are sold.
(f) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(g) "Committee" means the Compensation Committee of the Board or
such other committee of the Board as may be designated by the Board from
time to time to administer this Employee Plan, provided however, that the
Committee shall consist of at least two (2) nonemployee directors within
the meaning of Rule 16b-3(b)(3).
(h) "Shares" means the Company's ordinary shares, par value
US$0.01 and other rights with respect to such shares.
(i) "Company" means Apex Silver Mines Limited, an exempted
limited liability company organized and existing under the laws of the
Cayman Islands.
(j) "Disability" means the Participant's inability, due to
illness, accident, injury, physical or mental incapacity or other
disability, to carry out effectively his duties and obligations to the
Company and its Subsidiaries or to participate effectively and actively in
the management of the Company and its Subsidiaries for a period anticipated
to last at least six (6) months, as determined in the good faith judgment
of the Board. In the event the Company adopts a plan which provides for
long-term disability insurance, "Disability" shall have the meaning set
forth in such plan.
(k) "Employee" means an employee of the Company or a
Subsidiary.
(l) "Fair Market Value" means the closing price for the Shares
as officially reported on the relevant date (or if there were no sales on
such date, on the next preceding date on which such closing price was
recorded) by the principal national securities exchange on which the Shares
are listed or admitted to trading, or, if the Shares are not listed or
admitted to trading on any such national securities exchange, the closing
price as furnished by the National Association of Securities Dealers
through NASDAQ or a similar organization, or if NASDAQ is no longer
reporting such information, or, if the Shares are not quoted on NASDAQ, as
determined in good faith by resolution of the Committee (whose
determination shall be conclusive), based on the best information available
to it.
2
<PAGE>
(m) "Founders" means Consolidated Commodities Ltd., Argentum LLC
and Silver Holdings LDC and their respective shareholders or affiliates as
of the date hereof.
(n) "Participant" means an employee, officer, consultant or
agent who has been granted an Award under the Plan.
(o) "Plan Year" means a twelve-month period beginning with
January 1 of each year.
(p) "Qualified Public Offering" means the sale in a firm
commitment underwritten public offering registered under the Securities Act
of Shares.
(q) "Retirement" means (i) a Participant's retirement from the
Company or a Subsidiary, as applicable (other than for Cause), or (ii) as
otherwise defined by the Committee.
(r) "Subsidiary" means any corporation or other entity, whether
organized under the laws of the Cayman Islands or any other jurisdiction,
in which the Company has or obtains, directly or indirectly, a proprietary
interest of more than 50 percent by reason of Shares ownership or
otherwise.
III. ELIGIBILITY.
------------
Any person selected by the Committee who is an employee, officer,
consultant or agent of the Company or any Subsidiary, selected by the Committee
is eligible to receive an Award. Notwithstanding the foregoing, only employees
of the Company and any present or future corporation which is or may be a
"subsidiary corporation" of the Company (as such term is defined in Section
424(q) of the Code) shall be eligible to receive incentive Share options.
IV. EMPLOYEE PLAN ADMINISTRATION.
-----------------------------
(a) Except as otherwise determined by the Board, the Employee
Plan shall be administered by the Committee. The Board, or the Committee to
the extent determined by the Board, shall periodically make determinations
with respect to the participation of employees, officers, consultants and
agents in the Employee Plan and, except as otherwise required by law or
this Employee Plan, the grant terms of Awards, including vesting schedules,
exercise, awards price, restriction or option period, dividend rights,
post-retirement and termination rights, payment alternatives such as cash,
Shares, contingent awards or other means of payment consistent with the
purposes of this Employee Plan, and such other terms and conditions as the
3
<PAGE>
Board or the Committee deems appropriate which shall be contained in an
Award Agreement with respect to a Participant.
(b) The Committee may delegate to one or more of its members or
to any other persons such ministerial duties as it may deem advisable. The
Committee may also employ attorneys, consultants, accountants, or other
professional advisors and shall be entitled to rely upon the advice,
opinions or valuations of any such advisors.
(c) The Committee shall have authority to interpret and construe
the provisions of the Employee Plan and any Award Agreement and make
determinations pursuant to any Employee Plan provision or Award Agreement
which shall be final and binding on all persons. No member of the Committee
shall be liable for any action or determination made in good faith, and the
members shall be entitled to indemnification and reimbursement in the
manner provided in the Company's Memorandum and Articles of Association, as
the same may be amended from time to time, or as otherwise provided in any
agreement between any such member and the Company.
(d) No member of the Committee, nor any person to whom
ministerial duties have been delegated, shall be personally liable for any
action, interpretation or determination made with respect to the Employee
Plan or awards made thereunder and each member of the Committee shall be
fully indemnified and protected by the Company with respect to any
liability he or she may incur with respect to any such action,
interpretation or determination, to the extent permitted by applicable law
and to the extent provided in the Company's Memorandum and Articles of
Association, as amended from time to time, or under any agreement between
any such member and the Company.
(e) The Committee shall have the authority at any time to
provide for the conditions and circumstances under which Awards shall be
forfeited. The Committee shall have the authority to accelerate the vesting
of any Award and the times at which any Award becomes exercisable.
V. SHARES SUBJECT TO THE PROVISIONS OF THIS PLAN.
---------------------------------------------
(a) The shares of the Company's share capital subject to the
provisions of this Employee Plan shall be authorized but unissued Shares
and treasury Shares. Subject to adjustment in accordance with the
provisions of Section X, and subject to Section V(c) below, the total
number of Shares available for grants of Awards shall not exceed 10 percent
of the Company's share capital.
(b) The grant of a restricted Share Award shall be deemed to be
equal to the maximum number of Shares which may be issued under the
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<PAGE>
Award. Awards payable only in cash will not reduce the number of Shares
available for Awards granted under the Employee Plan.
(c) There shall be carried forward and be available for Awards
under the Employee Plan, in addition to Shares available for grant under
paragraph (a) of this Section V, all of the following: (i) any unused
portion of the limit set forth in paragraph (a) of this Section V; (ii)
Shares represented by Awards which are canceled, forfeited, surrendered,
terminated, paid in cash or expire unexercised; and (iii) the excess amount
of variable Awards which become fixed at less than their maximum
limitations.
VI. AWARDS UNDER THIS EMPLOYEE PLAN .
---------------------------------
As the Board or Committee may determine, the following types of Awards
and other Share-based Awards may be granted under this Employee Plan on a stand
alone, combination or tandem basis:
(i) Share Options. A right to buy a specified number of Shares
at a fixed exercise price during a specified time, all as the
Committee may determine. The exercise price of options granted prior
to a Qualified Public Offering shall be $8.00 per Share. The exercise
price of any option granted after a Qualified Public Offering shall
not be less than 100 percent of the Fair Market Value of the Shares on
the date of grant of the Award unless the Committee determines that an
exercise price lower than the Fair Market Value is warranted. In the
case of incentive Share options granted to an employee owning
(actually or constructively under Section 422(d) of the Code), more
than ten percent (10%) of the total combined voting power of all
classes of shares of the Company or of a Subsidiary (a "10%
Shareholder"), the price of any such option shall not be less than 110
percent of the Fair Market Value of the Shares on the date of grant.
(A) Limitation on Time of Grant. No grant of a Share Options
---------------------------
shall be made after August 1, 2006.
(B) Term. The term of each Share option granted hereunder shall
----
be determined by the Committee; provided that
notwithstanding any other provision of the Employee Plan, in
no event shall a Share option be exercisable after 10 years
from the date it is granted.
(ii) Incentive Share Options. An Award in the form of a share
options which shall comply with the requirements of Section 422
of the Code or any successor section as it may be amended from
time to time.
(A) Limitation on Amount of Incentive Share Options. In the
-----------------------------------------------
case of incentive Share options, the aggregate Fair Market
5
<PAGE>
Value (determined at the time the incentive Share options
are granted) of the Shares with respect to which incentive
Share options are exercisable for the first time by any
optionee during any calendar year (under all plans of the
Company and any Subsidiary) shall not exceed $100,000.
(B) Limitation on Time of Grant. No grant of incentive Share
---------------------------
options shall be made under the Employee Plan more than ten
(10) years after the date the Employee Plan is approved by
shareholders of the Company.
(C) Term. Notwithstanding any other provision of the Employee
----
Plan, in no event shall incentive Share options be
exercisable after ten (10) years from the date they are
granted, or in the case of incentive Share options granted
to a 10% shareholder, five (5) years from the date they are
granted.
(iii) Share Appreciation Rights. Rights, which may or may not be
contained in the grant of share options or incentive Share options, to
receive in cash (or its equivalent value in Shares) the excess of the
Fair Market Value of the Shares on the date the rights are surrendered
over the options exercise price or other price specified in the Award
Agreement. (iv) Restricted Shares. The issuance of Shares to a
Participant subject to forfeiture until such restrictions, terms and
conditions as the Committee may determine are fulfilled.
(v) Dividend or Equivalent. A right to receive dividends or
their equivalent in value in Shares, cash or in a combination of both
with respect to any new or previously existing Award.
(vi) Share Awards. The issuance of Shares, which may be on a
contingent basis, to a Participant. (vii) Other Share-Based Awards.
Other Share-based Awards which are related to or serve a similar
function to those Awards set forth in this Section VI.
VII. AWARD AGREEMENTS.
-----------------
Each Award under the Employee Plan shall be evidenced by an Award
Agreement setting forth the terms and conditions of the Award and executed by
the Company and Participant.
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VIII. OTHER TERMS AND CONDITIONS.
---------------------------
(a) Assignability. Unless provided to the contrary in any Award,
no Award shall be assignable or transferable except by will or by the laws
of descent and distribution and, during the lifetime of a Participant, the
Award shall be exercisable only by such Participant.
(b) Termination of Employment or Other Relationship. The
Committee shall determine the disposition of the grant of each Award in
the event of the retirement, disability, death or other termination of a
Participant's employment or other relationship with the Company or a
Subsidiary.
(c) Rights as a Shareholder. A Participant shall have no rights
as a shareholder with respect to Shares covered by an Award until the date
the Participant is the holder of record. No adjustment will be made for
dividends or other rights for which the record date is prior to such date.
(d) No Obligation to Exercise. The grant of an Award shall
impose no obligation upon the Participant to exercise the Award.
(e) Payments by Participants. The Committee may determine that
Awards for which a payment is due from a Participant may be payable: (i)
in U.S. dollars by personal check, bank draft or money order payable to
the order of the Company, by money transfers or direct account debits;
(ii) through the delivery of Shares with a Fair Market Value equal to the
total payment due from the Participant; (iii) pursuant to a broker-
assisted "cashless exercise" program if established by the Company; (iv)
by a combination of the methods described in (i) through (iii) above; or
(v) by such other methods as the Committee may deem appropriate.
(f) Exercise of Awards. Awards shall be exercisable at such
times, or upon the occurrence of such event or events as the Committee
shall determine at or subsequent to grant. Awards may be exercised in
whole or in part. Shares purchased upon the exercise of an Award shall be
paid for in full at the time of such purchase. Such payment may be made
(i) the deduction of withholding and any other taxes required by law will
be made from all amounts paid in cash and (ii) in the case of payments of
Awards in Shares, the Participant shall be required to pay the amount of
any taxes required to be withheld prior to receipt of such Shares, or
alternatively, a number of Shares the Fair Market Value of which equals
the amount required to be withheld may be deducted from the payment.
(g) Share Certificates. All Share certificates representing
Shares acquired pursuant to the exercise of an option or any other award
issued by the Company shall contain, until such time as their has been a
Qualified Public Offering of Shares, a legend substantially in the
following form:
7
<PAGE>
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE SOLD, TRANSFERRED, ASSIGNED FOR HYPOTHECATED UNLESS THERE IS AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES.
THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT OR THE COMPANY
RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF THESE SECURITIES
REASONABLY SASTISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SUCH.
IN ADDITION, THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN TRANSFERS AND VOTING RESTRICTIONS PURSUANT TO A
SHAREHOLDERS' AGREEMENT AMONG THE COMPANY AND CERTAIN OF THE COMPANY'S
MEMBERS. A COPY OF SUCH SHAREHOLDERS' AGREEEMENT WILL BE FURNISHED WITHOUT
CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST."
(h) Listing and Qualification of Shares. The Employee Plan and
grant and exercise of options or other awards hereunder, and the
obligation of the Company to sell and deliver Shares under such awards,
shall be subject to all applicable United States federal and state laws,
rules and regulations and to such approvals by any government or
regulatory agency as may be required. The Company, in its discretion, may
postpone the issuance or delivery of Shares upon any exercise of an Award
until completion of any stock exchange listing, or other qualification of
such Shares under any United States federal or state law rule or
regulation as the Company may consider appropriate, and may require any
individual to whom an Award is granted, such individual's beneficiary or
legal representative, as applicable, to make such representations and
furnish such information as the Committee may consider necessary,
desirable or advisable in connection with the issuance or delivery of the
shares in compliance with applicable laws, rules and regulations.
(i) Non-Uniform Determinations. The Committee's determinations
under the Employee Plan (including, without limitation, determinations of
the persons to receive Awards, the form, term, provisions, amount and
timing of the grant of such Awards and of the Agreements evidencing the
same) need not be uniform and may be made by it selectively
8
<PAGE>
among persons who receive, or are eligible to receive, Awards under the
Employee Plan, whether or not such persons are similarly situated.
IX. TERMINATION, MODIFICATION AND AMENDMENTS.
-----------------------------------------
(a) The Board may at any time terminate the Employee Plan or
from time to time make such modifications or amendments of the Employee
Plan as it may deem advisable; provided, however, that the Board shall not
make any material amendments to the Employee Plan without the approval of
at least the affirmative vote of the holders of a majority of the
outstanding Shares of the Company present or represented and entitled to
vote at a duly held Shareholders meeting.
(b) No termination, modification or amendment of the Employee
Plan may adversely affect the rights conferred by an Award without the
consent of the recipient thereof.
X. RECAPITALIZATION.
-----------------
The aggregate number of Shares as to which Awards may be granted to
Participants, the number of Shares thereof covered by each outstanding Award and
by each option Award granted or to be granted in accordance with the formula set
forth in paragraph (ii) of Section VI hereof, and the price per Share thereof in
each such Award, shall all be proportionately adjusted for any increase or
decrease in the number of issued Shares resulting from a subdivision or
consolidation of Shares or other capital adjustment, or the payment of a Share
dividend or other increase or decrease in such Shares, effected without receipt
of consideration by the Company, or other change in corporate or capital
structure; provided, however, that any fractional shares resulting from any such
adjustment shall be eliminated. The Committee may also make the foregoing
changes and any other changes, including changes in the classes of securities
available, to the extent it is deemed necessary or desirable to preserve the
intended benefits of the Employee Plan for the Company and the Participants in
the event of any other reorganization, recapitalization, merger, consolidation,
spin-off, extraordinary dividend or other distribution or similar transaction.
Notwithstanding any other provision of the Employee Plan or the Award Agreement,
the Committee may cause any Award granted hereunder to be canceled in
consideration of a cash payment or alternative Award made to the holder of such
canceled Award equal in value to the Fair Market Value of such canceled Award.
Notwithstanding anything to the contrary in this Section X, no issuance of
Shares effected pursuant to the terms of the Buy-Sell Agreement dated as of
August 6, 1996 by and among, inter alia, the Company and the Founders, or
certain entities affiliated therewith, that does not constitute a change in
control shall result in any adjustment to the number or value of any shares to
be issued pursuant to any Award hereunder.
9
<PAGE>
XI. NO RIGHT TO EMPLOYMENT.
-----------------------
No person shall have any claim or right to be granted an Award, and
the grant of an Award shall not be construed as giving a Participant the right
to be retained in the employ of, or in any other relationship with, the Company
or any Subsidiary. Further, the Company and each Subsidiary expressly reserve
the right at any time to dismiss a Participant free from any liability, or any
claim under the Employee Plan, except as provided herein or in any Award
Agreement issued hereunder.
XII. GOVERNING LAW.
--------------
To the extent that United States federal laws do not otherwise
control, the Employee Plan shall be construed in accordance with and governed by
the laws of the Cayman Islands.
XIII. SAVINGS CLAUSE.
---------------
This Employee Plan is intended to comply in all aspects with
applicable laws and regulations. In case any one more of the provisions of this
Employee Plan shall be held invalid, illegal or unenforceable in any respect
under applicable law or regulation, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby
and the invalid, illegal or unenforceable provision shall be deemed null and
void; however, to the extent permissible by law, any provision which could be
deemed null and void shall first be construed, interpreted or revised
retroactively to permit this Employee Plan to be construed in compliance with
all applicable laws so as to foster the intent of this Plan.
XIV. EFFECTIVE DATE AND TERM.
------------------------
The effective date of this Employee Plan is August 1, 1996. The
Employee Plan shall terminate on the tenth anniversary of the date of the
adoption of this Employee Plan. No awards shall be granted after the termination
of the Employee Plan.
10
<PAGE>
Exhibit 10.8
APEX SILVER MINES LIMITED
SHARE OPTION AGREEMENT
This Share Option Agreement (the "Agreement"), made as of the [ ]
--
day of [DATE OF ISSUANCE OF OPTION], by and between Apex Silver Mines Limited,
an exempted limited liability company duly formed and existing under the laws of
the Cayman Islands (the "Company"), and [ ] (the "Participant").
-------
WHEREAS, the Company desires to encourage and enable the
Participant tO acquire a proprietary interest in the Company through the
ownership of the Company's ordinary shares, par value US$0.01 per share (the
"Shares") pursuant to the terms and conditions of the Apex Share Option Employee
Plan (the "Employee Plan") and this Agreement. Such ownership will provide the
Participant with a more direct stake in the future welfare of the Company and
encourage the Participant to remain with the Company and/or its Subsidiaries, as
applicable.
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth and for other good and valuable consideration, the parties
agree as follows:
1. DEFINITIONS. For purposes of this Agreement, all capitalized
------------
terms used herein and not otherwise defined herein shall have the meanings
ascribed to them in the Employee Plan.
2. GRANT OF OPTION. The Company hereby grants to the Participant a
---------------
non-qualified (unapproved) option (the "Option") to purchase l ] Shares at a
share exercise price (the "Exercise Price") of $8.00 per Share, subject to the
terms hereof.
3. OPTION TERM. The Option granted hereby is granted for a period
------------
of 10 years and shall expire on [A DATE NO LATER THAN THE TENTH ANNIVERSARY
HEREOF] (the "Expiration Date"). No Option may be exercised after the Expiration
Date.
4. WHEN VESTED AND EXERCISABLE. Subject to Section 5, the Option
---------------------------
shall vest and be exercisable by the Participant in accordance with the
following schedule:
<PAGE>
YEARS TO DATE AMOUNT
OF GRANT VESTED
-------- ------
One *%
Two *%
Three *%
Four *%
Five *%
5. TERMINATION OF EMPLOYMENT: DEATH; DISABILITY; RETIREMENT; CAUSE.
--------------------------------------------------------------
(a) If the services of a Participant who holds an unexercised
Option are terminated for any reason other than death, Disability,
Retirement, or Cause, the portion of the Option that was not vested on
the date of such termination of employment shall expire and be
forfeited; however, the vested portion of the Option shall be
exercisable by the Participant at any time prior to the Expiration Date
of the Option or within 180 days after the date of such termination of
employment, whichever is earlier. Any Option not exercised within the
period described in the preceding sentence, for whatever reason, shall
terminate.
(b) In the event of the Disability or Retirement of a
Participant, the unvested portion of the Option shall immediately vest
and the entire Option which is held by such Participant on the date of
such Disability or Retirement shall be exercisable at any time until the
Expiration Date of the Option or within 12 months and one day after the
date of termination of employment, whichever is earlier. Any Option not
exercised within the period described in the preceding sentence, for
whatever reason, shall terminate.
(c) In the event of the death of a Participant while an employee
of the Company or any Subsidiary, the unvested portion of the Option
shall immediately vest and the entire Option which is held by such
Participant at the date of death shall be exercisable by the beneficiary
designated by the Participant for such purpose (the "Designated
Beneficiary") or if no Designated Beneficiary shall be appointed or if
the Designated Beneficiary shall predecease the Participant, by the
Participant's personal representatives, heirs or legatees at any time
within 12 months and one day from the date of death. Any Option not
exercised within the period described in the preceding sentence, for
whatever reason, Shall terminate.
2
<PAGE>
(d) In the event of the death of a Participant following a
termination of employment due to Retirement or Disability, if such death
occurs before the Option is exercised, the Option held by such
Participant on the date of termination of employment shall be
exercisable by such Participant's Designated Beneficiary, or if no
Designated Beneficiary shall be appointed or if the Designated
Beneficiary shall predecease such Participant, by such Participant's
personal representatives, heirs or legatees, to the same extent such
Option was exercisable by the Participant following such termination of
employment.
(e) In the event the Participant is terminated for Cause, the
Option (including any vested portion) shall be forfeited as of the date
of termination.
6. CHANGE OF CONTROL. Subject to Section 5, in the event of a
-----------------
Change in Control, the Company shall give the Participant notice thereof and the
Option, whether or not currently vested and exercisable, shall become
immediately vested and exercisable as of the effective date of the Change of
Control.
7. NON-ASSIGNABILITY. The Option granted hereby and any right
-----------------
arising thereunder may not be transferred, assigned, pledged or hypothecated
(whether by operation of law or otherwise), except as provided by testate or the
applicable laws of descent and distribution, and the Option and any right
arising thereunder shall not be subject to execution, attachment or similar
process. Any attempted assignment, transfer, pledge, hypothecation or other
disposition of an Option not specifically permitted herein shall be null and
void and without effect. An Option may be exercised by the Participant only
during his or her lifetime, or following his or her death pursuant to Section
5(c) hereof.
8. TRANSFER RESTRICTIONS. At any time prior to the consummation of
---------------------
a Qualified Public Offering of the Shares, each Share acquired by an exercise of
an Option granted under the Employee Plan may not be transferred other than by
the laws of descent and distribution. The Participant acknowledges that the
Shares will be purchased for investment only.
The Participant further understands that the Shares issuable upon
the exercise of the Option will contain the following legend:
"THE SHARES OF APEX SILVER MINES LIMITED EVIDENCED BY
THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND RESTRICTIONS OF
THE APEX SHARE OPTION EMPLOYEE PLAN. SUCH SHARES MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED, PLEDGED, ENCUMBERED OR OTHERWISE
ALIENATED OR HYPOTHECATED EXCEPT PURSUANT TO THE PROVISIONS OF
SUCH EMPLOYEE PLAN
3
<PAGE>
AND THE AGREEMENT ENTERED INTO PURSUANT THERETO, A COPY OF SUCH
EMPLOYEE PLAN AND AGREEMENT ARE AVAILABLE FROM THE SECRETARY OF
APEX SILVER MINES LIMITED UPON REQUEST."
9. MODE OF EXERCISE. Subject to section 5, the Option may be
----------------
exercised in whole or in part. Shares purchased upon the exercise of the Option
shall be paid for in full at the time of such purchase. Such payment shall be
made in cash or by wire transfer in immediately available funds in either event
denominated in the lawful currency of the United States. Upon receipt of notice
of exercise and payment in accordance with procedures to be established by the
Committee, the Company or its agent shall deliver to the person exercising the
Option (or his or her designee) a certificate for such Shares. [Payment for this
Option may also be made by cashless exercise.]
10. OPTION SUBJECT TO THE EXCHANGE ACT AND OTHER REGULATIONS. An
--------------------------------------------------------
Option granted hereunder shall be subject to the requirement that if at any time
the Committee or the Board, as the case may be, shall determine, in its
discretion, that the listing, registration or qualification of the Shares
subject to the Option upon any securities exchange or under any state or federal
securities or other law or regulation, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition to or in
connection, with the granting of the Option or the issuance or purchase of
Shares thereunder, no Option may be granted or exercised, in whole or in part,
unless such listing, registration, qualification, consent or approval shall have
been effected or OBTAINED FREE OF ANY conditions not acceptable to the Committee
or the Board. The holders of such Option shall supply the Company with such
certificates, representations and information as the Company shall request and
shall otherwise cooperate with the Company in obtaining such listing,
registration, qualification, consent or approval. If the Company, as part of an
offering of securities or otherwise, finds it desirable because of United States
federal or state regulatory requirements to reduce the period during which any
Option may be exercised, the Committee or the Board may, in its discretion and
without the Participant's consent, so reduce such period on not less than 15
days' written notice to the holders thereof.
11. ANTIDILUTION ADJUSTMENTS. The aggregate number of Shares as
------------------------
to which Awards may be granted to Participants, the number of Shares thereof
covered by each outstanding Award and by each option Award granted or to be
granted in accordance with the formula set forth in paragraph (ii) of Section VI
hereof, and the price per Share thereof in each such Award, shall all be
proportionately adjusted for any increase or decrease in the number of issued
Shares resulting from a subdivision or consolidation of Shares or other capital
adjustment, or the payment of a Share dividend or other increase or decrease in
such Shares, effected without receipt of consideration by the Company, or other
change in corporate or capital structure; provided, however, that any fractional
shares resulting from any such adjustment shall
4
<PAGE>
be eliminated. The Committee may also make the foregoing changes and any other
changes, including changes in the classes of securities available, to the extent
it is deemed necessary or desirable to preserve the intended benefits of the
Employee Plan for the Company and the Participants in the event of any other
reorganization, recapitalization, merger, consolidation, spin-off, extraordinary
dividend or other distribution or similar transaction. Notwithstanding any other
provision of the Employee Plan or the Award Agreement, the Committee may cause
any Award granted hereunder to be canceled in consideration of a cash payment or
alternative Award made to the holder of such canceled Award equal in value to
the Fair Market Value of such canceled Award. Notwithstanding anything to the
contrary in this Section X, no issuance of Shares effected pursuant to the terms
of the Buy-Sell Agreement dated as of August 6, 1996 by and among, inter alia,
the Company and the Founders, or certain entities affiliated therewith, that
does not constitute a change in control shall result in any adjustment to the
number or value of any shares to be issued pursuant to any Award hereunder.
12. EMPLOYEE PLAN CONTROLLING. This Agreement is intended to
-------------------------
conform in all respects with the Employee Plan. Inconsistencies between this
Agreement and the Employee Plan shall be resolved according to the terms of the
Employee Plan. The Participant acknowledges receipt of a copy of the Employee
Plan.
13. RIGHTS PRIOR TO EXERCISE OF OPTION. The Participant shall not
----------------------------------
have any rights as a shareholder with respect to any Shares subject to the
Option prior to the date on which he is recorded as the holder of such Shares on
the records of the Company.
14. TAXES. The Company shall have the right to require
-----
Participants or their beneficiaries or legal representatives to remit to the
Company an amount sufficient to satisfy any Cayman Islands or United States
federal, state and local withholding tax requirements. Whenever payments under
the Employee Plan are to be made to any Participant in cash, such payments shall
be net of any amounts sufficient to satisfy all applicable taxes, including
without limitation, all applicable Cayman Islands or United States federal,
state and local withholding tax requirements. The Committee may, in its sole
discretion, permit a Participant to satisfy his or her tax withholding
obligation either by (i) surrendering Shares owned by the Participant or (ii)
having the Company withhold from Shares otherwise deliverable to the
Participant. Shares surrendered or withheld shall be valued at their Fair Market
Value as of the date on which income is required to be recognized for income tax
purposes.
15. NO LIABILITY OF BOARD MEMBERS. No member of the Board shall be
-----------------------------
personally liable by reason of any contract or other instrument executed by such
member or on his behalf in his capacity as a member of the Board nor for any
mistake of judgment made in good faith.
5
<PAGE>
* * * * *
6
<PAGE>
16. GOVERNING LAW. This Agreement and all rights arising hereunder
-------------
shall be governed by, and construed and interpreted in accordance with, the
laws of the Cayman Islands.
THE EMPLOYEE PLAN AND THIS AGREEMENT SHALL NOT BE CONSTRUED AS
GIVING THE PARTICIPANT THE RIGHT TO BE RETAINED IN THE EMPLOY OF THE CORPORATION
OR ANY SUBSIDIARY THEREOF, NOR SHALL THEY INTERFERE IN ANY WAY WITH THE RIGHT OF
THE CORPORATION OR ANY SUBSIDIARY THEREOF, AS APPLICABLE, TO TERMINATE THE
PARTICIPANT'S EMPLOYMENT AT ANY TIME WITH OR WITHOUT CAUSE.
Executed as of the day and year first above written.
APEX SILVER MINES LIMITED
By: __________________________________
Name:
Title:
PARTICIPANT
By: ___________________________________
Name:
Title
7
<PAGE>
EXHIBIT 10.9
APEX SILVER MINES LIMITED
Caledonian House
Mary Street, P.O. Box 1043
George Town, Grand Cayman
Cayman Islands
July 23, 1996
Mr. Marcel F. DeGuire
1079 Soda Creek Drive
Evergreen, Colorado 80439
Re: Apex Silver Mines Limited Offer Of Employment
Dear Mac,
In line with our recent discussions, we are pleased to present herein the terms
of our employment offer with Apex Silver Mines Limited or its United States
affiliate as applicable (collectively the "Company").
I. THE POSITION
We have discussed, at some length, the content of the job and I believe we
are in agreement on it. As I now envision it the principal
responsibilities of this position involve:
. Developing initial evaluations of all the Company's mineral projects by
preparing economic models;
. Preparing and maintaining on an ongoing basis priorities for further
evaluation and development and projections for the further evaluation
and development of requisite capital costs;
. Developing economic models for new mining opportunities brought into the
Company;
. Overseeing the preparation of prefeasibility and feasibility studies and
participating in them at key points;
. Identifying the critical scheduling elements of each development
project;
. Overseeing design, development and construction of projects;
. Providing technical services to the ongoing operations;
. Monitoring the technical performance of the properties;
. Reviewing major capital expenditures for technical performance and
economics;
<PAGE>
Mr. Marcel DeGuire
July 23, 1996
Page 2
. Acting as the Company's eyes and ears for new technical developments;
. Monitoring all environmental activities.
You will report to the Executive Vice President, Development and
Operations. You will be an officer of the Company with the title of Vice
President.
Naturally, you agree all information concerning the Company business will
be treated as confidential.
You will be based in Denver, Colorado, and travel will be based upon the
requirements of the position. You agree to devote your full working time
to the Apex Silver Mines Group of companies.
II. START DATE
You may start employment with us at a mutually agreed upon date. Your
compensation and benefits will commence on your first day of employment.
Your base compensation will be reviewed on a formal basis at least once
every two years.
III. COMPENSATION
1. BASE COMPENSATION
You will be paid an annual base compensation of US$180,000, payable
monthly.
2. BENEFITS
The Company presently has no benefit plans (because it has no
employees; our present staff of 15 people for the most part function
as independent contractors mostly on a full-time basis). We (assisted
by Anderson & Schwab) are in the process of establishing an
appropriate and attractive benefits package that reflects competitive
U.S. mining industry practice. We invite you to provide your inputs
as well.
3. STOCK OPTIONS
You will be eligible for participation in the Company's stock option
plan. Thus, we will provide you with options on approximately
$500,000 of stock of Apex Silver Mines Limited at a price to be
determined by the current private placement program being managed by
Salomon and S. G. Warburg. You will vest in these options over a four
year period at 25 percent per year. You will be eligible to vest
immediately upon joining the Company, at which time you will be
subject to the same shareholders' agreement entered into by all Apex's
shareholders.
<PAGE>
Mr. Marcel DeGuire
July 23, 1996
Page 3
4. VACATION
You will be eligible for four weeks vacation per year.
5. REIMBURSABLE EXPENSES
You will be reimbursed for all expenses incurred in connection with
travel on Company business.
IV. SEVERANCE AGREEMENT
In the event the Company should desire to terminate your employment, except
for cause, within three years after your employment starting date, you will
be entitled to severance pay for a twelve-month period at your existing
salary, as well as a continuation of your benefits. Upon such an
occurrence, bonus awards and stock options will be suspended.
You agree that in the event you leave Apex that for a period of two years
you will not join any company whose primary business is the acquisition and
development of silver mines.
* * * *
I have enjoyed getting acquainted with you over the last several months. As a
result of getting to know you, I believe that you can make a major contribution
to our business and that you will find the work interesting and challenging. I
hope you will find these terms of employment attractive. If you accept it,
please sign in the space indicated below and return the designated copy to us.
Sincerely,
/s/ Thomas S. Kaplan
--------------------
Thomas S. Kaplan
Chairman
AGREED TO AND ACCEPTED:
- -----------------------
/s/ Marcel F. DeGuire
---------------------
Marcel F. DeGuire
August 5, 1996
--------------
Date
<PAGE>
Exhibit 10.10
APEX SILVER MINES LIMITED
Caledonian House
Mary Street, P.O. Box 1043
George Town, Grand Cayman
Cayman Islands
September 26, 1996
Mr. Gregory G. Marlier
6237 South Locust Street
Englewood, CO 80111
Re: Apex Silver Mines Limited
Offer Of Employment
Dear Greg,
In line with our recent discussions, we are pleased to present herein the terms
of our employment offer with Apex Silver Mines Limited or its United States
affiliate as applicable (collectively the "Company").
I. THE POSITION
The principal responsibilities of this position involve:
. Formulate, with the approval of the CEO, the company's financial
policies.
. Develop and manage the company's financial controls.
. Administer and manage the company's accounting structure, systems, and
processes.
. Prepare, issue and explain the company's financial statements.
. Administer the company's budgetary process.
. Manage the company's cash.
. Be responsible for all internal audit activities.
. Be responsible for all tax activities, to include policies and
execution.
. Take the lead in structuring the financial aspects of mining deals.
. Play a hands-on-role in preparation and management of all financial
structures for financings.
. Play a hands-on role in selecting the company's offices in Denver and
negotiating the deal for the space and furnishings.
<PAGE>
Mr. Gregory G. Marlier
September 26, 1996
Page 2
. Supervise the company's administration functions to include the
administrative aspects of its human resource activities.
. Handle the company's SEC filings (when the company becomes public).
Naturally, you agree that all information concerning the Company's business
will be treated as confidential.
You will be based in Denver, Colorado, and travel will be based upon the
requirements of the position. You agree to devote your full working time
to the Apex Silver Mines Group of companies.
II. TITLE AND REPORTING RELATIONSHIPS
1. TITLE
Your title will be Vice President Finance & Controller.
2. REPORTING RELATIONSHIPS
You will report directly to the CEO.
III. START DATE
You may start employment with us at a mutually agreed upon date. Your
compensation and benefits will commence on your first day of employment.
IV. COMPENSATION
1. BASE COMPENSATION
You will be paid an annual base compensation of US$125,000, payable
monthly. Your first review of base compensation will be in 18 months of
your joining the company.
2. BONUS
I plan to install a Performance Bonus Plan at Apex covering the
Calendar Year 1998 to be paid out according to the provisions of the
Performance Bonus Plan when it is adopted which will undoubtedly occur
after 1998.
<PAGE>
Mr. Gregory G. Marlier
September 26, 1996
Page 3
3. BENEFITS
Quite obviously a mining junior does not compete with a major mining
company in terms of providing a complete comprehensive and top of the
line benefit plan. However, I plan to install an appropriate personnel
benefit plan for Apex's U.S. based executives at the earliest possible
time.
In that regard, as you may know, I recently commissioned Anderson &
Schwab to conduct a compensation and benefit survey comprising juniors,
intermediate and senior mining companies. I then asked A&S to recommend
what they considered to be relevant competitive benefit plans that
would be suitable for Apex.
These plans, which are discussed below represent our present thinking
on benefits that we plan to adopt for Apex. Although these plans are
likely to be adopted, they have not yet been finalized.
Apex' intent with regard to each benefit plan is as follows:
<TABLE>
<CAPTION>
Title of Plan Likely Apex Plan
------------- ----------------
<S> <C>
Medical Plan HMO or PPO.
If PPO: 80/20 coverage, deductible
$200 per person, $400 per family,
annual maximum $1,000 per person,
$2,000 per family, $1,000,000 lifetime
maximum.
Dental Plan Either a plan with a $150 family
deductible and $1,250 maximum annual
benefit or a Dental HMO.
Vision Plan None, but a Medical Reimbursement
Account is contemplated, funded by the
Company, that can be used for certain
health care expenditures such as
vision.
Short-Term Disability 6 months full pay based on service.
</TABLE>
<PAGE>
Mr. Gregory G. Marlier
September 26, 1996
Page 4
<TABLE>
<S> <C>
Long-Term Disability 66% of pay up to $12K per month.
Survivor Benefit Plan Probably won't have one
Life Insurance Plan 2 x salary at $500K maximum
AD&D Insurance Plan 2 x salary at $500K maximum
Travel Accident Insurance Plan Covered by life insurance and AD&D
insurance
Savings Plan 401K plan or equivalent savings plan
with company matching 50% of
individual's contribution up to 6% of
individual's salary up to a federally
mandated cap, which is currently
$150K. Increase in Apex's
contributions to be considered when
company is in production and has a
positive cash flow.
Pension Plan Some form of pension to be considered
in the long-term future.
</TABLE>
Should you accept this offer of employment, it is our intent to work
with you regarding your being covered under these plans in a timely
way. This work will be done by A&S' Dick Hinkel, who is a career long
human resources specialist whose prior assignment (for fifteen years)
was as Vice President, Human Resources, for Homestake Mining. Dick took
the lead in doing the compensation and benefits survey described above.
4. STOCK OPTIONS
You will be eligible for participation in the Company's stock option
plan. Thus, we will provide you with options on approximately $225,000
of stock of Apex Silver Mines Limited. The price of Apex's stock is
based on the value of the company (US $160 million) as was determined
by the recent successful completion of our private placement.
. You will vest in these options over a four year period at 25 percent
per year.
<PAGE>
Mr. Gregory G. Marlier
September 26, 1996
Page 5
. You will be eligible to vest 25% immediately upon joining the
Company, at which time you will be subject to the same shareholders'
agreement entered into by all Apex's shareholders.
V. OTHER
1. VACATION
Four weeks vacation per year.
2. REIMBURSABLE EXPENSES
. You will be reimbursed in accordance with company policy and
guidelines for all reasonable expenses incurred in connection with
travel on company business.
. The company is considering and probably will adopt the policy of
providing corporate credit cards to cover travel, hotel, etc.
However, a final judgment on this point has not been made.
. As to class of travel, domestic travel will be coach and all
international travel will be business class.
. Frequent flyer miles will be the property of the user.
3. YOUR PAY
Upon joining, and until Apex establishes a Denver office, you will be
paid by wire to your bank account.
4. COMPANY OFFICE
The company will establish a Denver office but it will take a while to
do so. Until then the company will require that you work out of your
home when you are in Denver. This, of course, means that if it will
take a month or even longer before an office is established, that the
company would expect you to put in a separate business telephone line
and a fax machine for which they would reimburse you fully for both
installation and use.
If you find for this interim period your home to be an unacceptable
place to work, then the company will arrange some type of interim
office arrangements.
<PAGE>
Mr. Gregory G. Marlier
September 26, 1996
Page 6
VI. SEVERANCE AGREEMENT
In the event the Company should desire to terminate your employment, except
for cause, within three years after your employment starting date, you will
be entitled to severance pay for a twelve-month period at your existing
salary, as well as a continuation of your benefits. Upon such an
occurrence, bonus awards and stock options will be suspended.
You agree that in the event you leave Apex that for a period of two years
you will not join any company whose primary business is the acquisition and
development of silver mines.
* * * *
I have enjoyed getting acquainted with you over the last several months. As a
result of getting to know you, I believe that you can make a major contribution
to our business and that you will find the work interesting and challenging. I
hope you will find these terms of employment attractive.
If you accept our offer of employment, please sign in the space indicated below
and return the designated copy to us.
Sincerely,
/s/ Thomas S. Kaplan
--------------------------------
Thomas S. Kaplan
Chairman
AGREED TO AND ACCEPTED:
- -----------------------
/s/ Gregory G. Marlier
- -----------------------
Gregory G. Marlier
October 2, 1996
- -----------------------
Date
<PAGE>
Exhibit 10.11
APEX SILVER MINES LIMITED
Caledonian House
Mary Street, P.O. Box 1043
George Town, Grand Cayman
Cayman Islands
August 14, 1996
FAX: 011-613-9824-8475
Mr. Keith R. Hulley
6 Boandyne Court
Toorak, VIC 3142, Australia
Re: Apex Silver Mines Limited Offer Of Employment
Dear Keith,
In line with our recent discussions, we are pleased to present herein the terms
of our employment offer with Apex Silver Mines Limited or its United States
affiliate as applicable (collectively the "Company").
I. THE POSITION
We have discussed, at some length, the content of the job and I believe we
are in agreement on it. As I now envision it the principal
responsibilities of this position involve:
. Determine and provide to the Chairman views on optimum strategies for
development as well as relevant implementation programs and timetable.
Function along with the Chairman and Mining Oriented Director as key
participants in the strategic development process.
. Manage the evaluation of specific potential acquisitions, i.e., land
positions, reserves, abandoned mines and active mines from both a
future economic and risk assessment point of view.
. Manage mine/mill development programs to include all prefeasibility and
feasibility studies, involving both underground and open pit mines.
. Assure that all significant design, engineering and construction work
is done in a cost and quality effective mode in a manner consistent
with the company's strategy, long term plan and financial and people
resources. Oversee the preparation of prefeasibility and feasibility
studies and participate in them at key points.
. Assure that a satisfactory transition is made from a development
project to an operating mine/mill.
. Build a solid core of operating management that can function
effectively in all the company's properties.
<PAGE>
Mr. Keith R. Hulley
August 14, 1996
Page 2
. Provide input to the Chairman on the current operating capabilities of
proposed joint venture partner(s).
. Function as principal operating liaison with joint venture partners.
. Participate, along with the Chairman, in the formulation of the
internal capital development process and programs for the Company as
decided on by the Chairman.
. Take the management responsibility for the successful execution of
these programs.
. Participate in the formulation of the planning and budget process for
all properties for which the company has operating responsibilities
and/or minority rights and veto powers.
. Stay on top of all environmental developments, domestic and
international and assure that they are handled/managed effectively.
. Provide judgments to the CEO as to how effectively the company is
interfacing with the host country governments, culture and other mining
companies operating there.
. Be prepared to travel extensively as required by the needs of the
business.
Naturally, you agree that all information concerning the Company business
will be treated as confidential.
You will be based in Denver, Colorado, and travel will be based upon the
requirements of the position. You agree to devote your full working time
to the Apex Silver Mines Group of companies You agree not to accept any
additional Directorships unless approved by Apex's Chairman.
II. TITLE AND REPORTING RELATIONSHIPS
1. TITLE
Your title will be Executive Vice President and Chief Operating
Officer. In addition, upon your joining the company, I will recommend
to the Board of Directors that you be elected a Director of the
company.
2. REPORTING RELATIONSHIPS
You will report directly to me.
<PAGE>
Mr. Keith R. Hulley
August 14, 1996
Page 3
III. START DATE
You may start employment with us at a mutually agreed upon date. Your
compensation and benefits will commence on your first day of employment.
IV. COMPENSATION
1. BASE COMPENSATION
You will be paid an annual base compensation of US$225,000, payable
monthly. Your first review of base compensation will be in 18 months of
your joining the company.
2. BONUS
I plan to install a Performance Bonus Plan at Apex covering the
Calendar Year 1998 to be paid out according to the provisions of the
Performance Bonus Plan when it is adopted which will undoubtedly occur
after 1998.
3. BENEFITS
Quite obviously a mining junior does not compete with a major mining
company in terms of providing a complete comprehensive and top of the
line benefit plan. As you know, I recently commissioned Anderson &
Schwab to conduct a compensation and benefit survey comprising juniors,
intermediate and senior mining companies. I then asked A&S to recommend
what they considered to be relevant competitive benefit plans that
would be suitable for Apex.
These plans, which are discussed below represent our present thinking
on benefits that we plan to adopt for Apex. Although these plans are
likely to be adopted, they have not yet been finalized.
Apex' intent with regard to each benefit plan is as follows:
<TABLE>
<CAPTION>
Title of Plan Likely Apex Plan
------------- ----------------
<S> <C>
Medical Plan HMO or PPO.
If PPO: 80/20 coverage, deductible
$200 per person, $400 per family,
annual maximum $1,000 per person,
$2,000 per family, $1,000,000 lifetime
maximum.
Dental Plan Either a plan with a $150 family
deductible and $1,250 maximum annual
benefit or a Dental HMO.
Vision Plan None, but a Medical Reimbursement
Account is contemplated, funded by
</TABLE>
<PAGE>
Mr. Keith R. Hulley
August 14, 1996
Page 4
<TABLE>
<S> <C>
the Company, that can be used for
certain health care expenditures such
as vision.
Short-Term Disability 6 months full pay based on service.
Long-Term Disability 66% of pay up to $12K per month.
Survivor Benefit Plan Probably won't have one
Life Insurance Plan 2 x salary at $500K maximum
AD&D Insurance Plan 2 x salary at $500K maximum
Travel Accident Insurance Plan Covered by life insurance and AD&D
insurance
Savings Plan 401K plan or equivalent savings plan
with company matching 50% of
individual's contribution up to 6% of
individual's salary up to a federally
mandated cap, which is currently
$150K. Increase in Apex's
contributions to be considered when
company is in production and has a
positive cash flow.
Pension Plan Some form of pension to be considered
in the long-term future.
</TABLE>
Should you accept this offer of employment, it is our intent to work
with you regarding your being covered under these plans in a timely
way. This work will be done by A&S' Dick Hinkel, who is a career long
human resources specialist whose prior assignment (for fifteen years)
was as Vice President, Human Resources, for Homestake Mining. Dick took
the lead in doing the compensation and benefits survey described above.
4. STOCK OPTIONS
You will be eligible for participation in the Company's stock option
plan. Thus, we will provide you with options on approximately
$1,000,000 of stock of Apex Silver Mines Limited. The price of Apex's
stock is based on the value of the company (US $160 million) as was
determined by the recent successful completion of our private
placement.
. You will vest in these options over a four year period at 25
percent per year.
<PAGE>
Mr. Keith R. Hulley
August 14, 1996
Page 5
. You will be eligible to vest immediately upon joining the Company,
at which time you will be subject to the same shareholders'
agreement entered into by all Apex's shareholders.
V. OTHER
1. VACATION
Four weeks vacation per year.
2. REIMBURSABLE EXPENSES
. You will be reimbursed for all expenses incurred in connection with
travel on company business.
, The company is considering and probably will adopt the policy of
providing corporate credit cards to cover travel, hotel, etc.
However, a final judgment on this point has not been made.
. As to class of travel, domestic travel will be coach and all
international travel will be business class.
. Frequent flyer miles will be the property of the user.
3. YOUR PAY
Upon joining, and until Apex establishes a Denver office, you will be
paid by wire to your bank account.
4. COMPANY OFFICE
The company will establish a Denver office but it will take a while to
do so. Until then the company will require that you work out of your
home when you are in Denver. This, of course, means that if it will
take a month or even longer before an office is established, that the
company would expect you to put in a separate business telephone line
and a fax machine for which they would reimburse you fully for both
installation and use.
5. ALLOWANCE FOR MOVING/RELOCATION
In principle, Apex will pay the moving expenses for you and your wife
from Melbourne to Denver in accordance with the provisions of generally
accepted relocation plans of mid sized mining companies. I have asked
A&S to recommend an appropriate relocation plan to cover its senior
management people which plan will apply to your forthcoming relocation.
VI. SEVERANCE AGREEMENT
In the event the Company should desire to terminate your employment, except
for cause, within three years after your employment starting date, you will
be entitled to severance pay for a twelve-month period at your existing
salary, as well as a
<PAGE>
Mr. Keith R. Hulley
August 14, 1996
Page 6
continuation of your benefits. Upon such an occurrence, bonus awards and
stock options will be suspended.
You agree that in the event you leave Apex that for a period of two years
you will not join any company whose primary business is the acquisition and
development of silver mines.
* * * *
I have enjoyed getting acquainted with you over the last six months. As a
result of getting to know you, I believe that you can make a major contribution
to our business and that you will find the work interesting and challenging. I
hope you will find these terms of employment attractive. If you accept our
offer of employment, please sign in the space indicated below and return the
designated copy to us.
Sincerely,
/s/ Thomas S. Kaplan
--------------------------------
Thomas S. Kaplan
Chairman
AGREED TO AND ACCEPTED:
- -----------------------
/s/ Keith R. Hulley
- -----------------------
Keith R. Hulley
September 2, 1996
- -----------------------
Date
<PAGE>
Exhibit 10.12
APEX SILVER MINES CORPORATION
1700 Lincoln Street Suite 3050
Denver, Colorado 80203
(303) 839-5060
(303) 839-5907 Fax
January 21, 1997
Mr. Douglas M. Smith, Jr.
358 Greystone Road
Evergreen, Colorado 80439
Dear Doug:
Further to our discussions, this letter is to offer you the position of
Vice President Exploration of Apex Silver Mines Corporation based in Denver,
reporting to me. Your starting base salary will be $120,000 with fringe benefits
as outlined in the attached. You will be entitled to four weeks annual vacation.
As I indicated to you, a stock option plan is also part of your package and
I believe it is important to your expectations and consideration of this offer.
You will be eligible to participate in the company's stock option plan. You will
receive approximately $250,000 of stock of Apex Silver Mines Limited. The price
of Apex's stock is based on the value of the company (US$160 million) as was
determined by the recent successful completion of our private placement. You
will commence vesting in these options immediately upon joining the company and
will vest at the rate of 25 percent per year.
In addition to the above and the health and life insurance plans attached,
the company will be considering a bonus plan in the near future.
Your prime responsibilities will be as follows:
. Visit and evaluate all Apex Silver Mines' exploration activities and
programs world-wide and advise local and corporate management.
. Visit and monitor all Apex Silver Mines' geologists providing them with
intellectual support and guidance, coaching and council. In so doing
you are expected to set high standards and provide an example of
professionalism.
. Respond to calls from the various satellite corporate offices to provide
trouble shooting and other forms of exploration and geological
assistance as needed.
<PAGE>
Mr. Douglas M. Smith, Jr.
January 21, 1997
Page 2
. Participate in corporate planning and propose strategies to optimize the
outcome of all exploration activities.
. Participate in the planning and guidance of all the field sampling and
drilling programs and estimating methodology and activities pursued in
the development of mineral resource determinations.
. Participate in corporate presentations to bankers and investors, sharing
this role with Larry Buchanan.
Your reporting framework will be "solid" line to me and "dotted" line to
the senior geologists working in and for the Apex satellite organizations, per
the attached organization chart. However, whilst we observe this organization,
we encourage a free flow of information, and development and use of strong
networks throughout the organization. We require only that superiors should be
kept informed so as to minimize surprises. Proper protocol should also be
observed when entering and leaving an Apex satellite domain ensuring that its
CEO is well informed of your activities, council, and recommendations.
Further to our discussion, Laity Buchanan will be semi-retiring to become
our Executive Geological Consultant ("Guru"). He expects to spend initially
approximately half of his time monitoring and advising the on-going exploration
and geological activities. It is important that you are willing and comfortable
in embracing him in this role as he is highly regarded at all levels in the
company and by its investors.
You are expected to provide your own transportation from you home to your
office in Denver. Business travel will be provided by the company with economy
domestic fares and business class fares for all international flights.
Business communications expenses will be reimbursed by the company. You
will be expected to maintain a fax machine or equivalent at home.
Being a member of a small executive group based in Denver, it is important
that we have confidence in each other and have good "chemistry" in our
relations. We all felt comfortable with you in our meetings which should give
you comfort in your deliberations.
The matter of confidentiality of data and intellectual property is
particularly important in the role you would play during and after employment
with Apex Silver Mines Corporation. I know that you are familiar with this issue
and therefore expect that you will accept the industry standards of behavior in
this regard. Specifically you must treat all sensitive and valuable Apex
information and intellectual property that is not in the public domain during
and for at least two
2
<PAGE>
Mr. Douglas M. Smith, Jr.
January 21, 1997
Page 3
years after terminating your employment with Apex as confidential. Your
signature below will indicate your acceptance of this confidentiality
requirement.
I ask that you give us your decision by January 24, 1997. Should you have
any further issues or questions, please call me and we will discuss them.
I look forward to the prospect of you joining our team.
Sincerely,
/s/ Keith R. Hulley
--------------------
Keith R. Hulley
Chief Operating Officer
KRH:po
Attachments
I agree to the above /s/ Douglas M. Smith, Jr. January 23, 1997
------------------------- ----------------
Douglas M. Smith, Jr. Date
3
<PAGE>
Attach to Exhibit 10.13
Attached hereto is an English translation of the original Spanish version
of the Deed of Lease and Purchase Option contract between Monica de Prudencio
and Mineria Tecnica Consultores Asociados S.A. ("Mintec") dated November 7,
1994, regarding the Tesorera concession. The Company employed translators to
translate the above referenced agreement and based on this the undersigned
believes that the attached is a fair and accurate English translation of the
above referenced agreement.
/s/ Keith R. Hulley
-------------------
Keith R. Hulley
Director
Apex Silver Mines Limited
Date: August 29, 1997
<PAGE>
Exhibit 10.13
Unofficial Translation
Contract between MINTEC and Monica de Prudencio/1/
Mr. Special Notary for Mines and Petroleum: in the registries of public deeds
under your responsibility, please insert [a deed] of lease with option to buy
mining concessions which we, the undersigned, celebrate under the following
clauses:
First I, Monica de Prudencio, of age, married, teacher, from Potosi, resident
- -----
in this city [La Pas], with I.D. No. 089567 L.P. and capable by law, declare
myself to be the legitimate and sole owner of the following mining concessions,
located in the Canton of San Cristobal, of the Province of Nor Lipez, Department
of Potosi:
SANTA BARBARA DE JAYULA of 49 mining claims with Title Document No. 14,
dated December 19, 1990; SAN JUAN DE DIOS SEGUNDA of 18 mining claims with
Title Document No. 33 dated December 18, 1990; SAN JUAN DE DIOS of 8 mining
claims with Title Document No. 32 dated December 18, 1990; CASUALIDAD of 10
mining claims with Title Document No. 38 dated December 24, 1990; LOS
PERDIDOS of 20 mining claims with Title Document No. 36 dated December
21,1990; SUCESIVAS DON JOSE of 12 mining claims with Title Document No. 31
dated December 17, 1990; 25 DE MAYO SEGUNDA of 71 mining claims with Title
Document No. 30 dated December 17, 1990; CALAMEnA SEGUNDA of 52 mining
claims with Title Document No. 37 dated December 21, 1990; HALCA of 117
mining claims with Title Document No. 35 dated December 19, 1990, and DON
JOSE of 102 mining claims with Title Document No. 27 dated October 18,
1993.
All of the Title Documents referred to above were given by the Regional
Superintendent of Mines of the provinces of Nor and Sud Chicas, Nor and Sud
Lipez, Daniel Campos, Modesto Omiste and Enrique Baldivieso of the Department of
Potosi, Dr. Feliciano Torrico Tapia, via public deeds whose numbers were
specified individually in the foregoing paragraph of the present clause, and
extended before the Special Notary and Registrar of Mines of Tuoiza, Mr.
Saturnino Vargas Fernandez.
Second Now, as it is convenient to my interests, of my free and spontaneous
- ------
will, I given in lease, with option to buy, the mining concessions referred to
above, in favor of Mineri Teonica Consultores "MINTEC S.A.", represented on this
occasion by Ing. Johnny Delgado Achaval, whose power to do so forms part of the
respective public deed, under the following conditions and modalities:
A. The term of the lease shall be for four years counted from the date of public
deed corresponding to the present document.
<PAGE>
B. The term of the option to buy shall be two years counted from the 15th of
November 1996 to the 15 of November 1998.
C. The rental fee to be paid by MINTEC is US$12,000 (twelve thousand and 00/00
U.S. dollars) monthly from the 15th of November of the present year in
advance form.
D. The rental fee described in the previous subsection shall be made the 15th of
each month, with a tolerance of 15 days which, if passed without payment
having been made, the present contract shall be automatically concluded
without any obligation for the owner and with responsibility of MINTEC.
E. The price for execution of the option is US$2,000,000 (two million and 00/00
U.S. dollars) which MINTEC may pay at any time from entry into the period of
the option, at one time.
F. The taxes owed for the lease and for the option, will be on the account of
the owner.
G. The payment of annual mineral patents for each and every one of the
concessions, will be on the account of the owner.
H. In the event the option is exercised all of the monthly payments made to the
owner, shall be counted against the total price.
Third Within the period of leasing and the mining concessions motive of this
- -----
contract, MINTEC shall have the ability and the right to, at its exclusive
judgment, make studies, technical tests, reconnaissance and works of exploration
and/or exploitation with no limit whatsoever, including the purchase of
equipment and machinery, contracting of personnel and implementation of mineral
sales or exports which it deems convenient.
Fourth During the life of this contract, the owner may not sell concessions to
- ------
third parties, nor may she lien them or constitute on them any real or personal
right, nor give any class of rights, which in any way could affect that
conferred on MINTEC S.A., under penalty of nullity of any contract given in
contravention tot his clause, and without having to pay MINTEC any damages which
this may occasion.
Fifth Should MINTEC S.A., in use of the right given in this contract, decide to
- -----
execute the option, and consequently acquire the concessions, the following
stipulations shall be observed:
a) MINTEC, S.A. will notify the owner in writing about the execution
b) The owner, together with her husband, within five days of receipt of the
notification, commits herself to sign the respective document and public
deed of transfer which will include all of the usages and easements of the
concessions and the price of US$2,000,000 (two million U.S. dollars),
deducting from that the amounts paid by way of lease fees, which shall be
paid on the owner's signing of the cited public deed.
2
<PAGE>
c) The transactions tax shall be on the account and charge of the owner, and all
of the expenses required to perfect the property right of MINTEC, S.A. shall
be at its expense.
d) The owner will confirm in the public deed of sale, that the concessions have
their titles in order, and have no class of lien or mortgage against them.
Thus, the owner shall deliver to MINTEC S.A. the corresponding up to date
receipts of payment of patents.
Sixth MINTEC S.A., at its discretion and without need to show cause, may
- -----
communicate to the owner at any time during the life of the contract, regarding
recission of same.
In such case, the present contract, from the date of the owner having received
this notification, will be resolved [sic: should be "dissolved"] fully and
without any legal affect nor further responsibility by the contracting parties.
As a result of this contractual recission, MINTEC S.A. may freely withdraw all
of the machinery and equipment which may have been installed on the concessions.
The contracting parties commit, and at the requirement of either of them, to
sign a document and public deed of recission.
Seventh Any discrepancy arising from this Contract shall be resolved via
- -------
arbitration in accordance with the norms and regulations of the Interamerican
Commission on Commercial Arbitration (CLAC).
Eighth For communication between the parties, the following domiciles are
- ------
signalled:
Owner: Monica Prudencio, Edificio Castillo 7th Floor, Office 701
MINTEC S.A.: Avenida Arce 2678, La Paz, Bolivia
Ninth MINTEC, S.A. is expressly authorized to subrogate, in whole or in part,
- -----
the present contract, to any other person, natural or juridical, dedicated to
mining activity and of good reputation.
Tenth All of the mining claims made by the owner or the lessee/optioner in the
- -----
area where the concessions subject of this contract are located, for 5 km [11
miles] beyond the limits of the properties, shall pertain to this contract.
Eleventh I, Luis Prudencio Tardio, of age, married, resident of this city, with
- --------
I.D. no. 2022219 L.P., and qualified by law, manifest my complete agreement with
the entire tone of the present contract, and declare that I understand that it
includes my community property rights which I as husband of Mrs. Monica de
Prudencio possess in the mining concessions object of this contract.
3
<PAGE>
Twelfth I, Johnny Delgado Achaval, of age, married, resident of this city,
- -------
engineer, with I.D. No. 39745 L.P., and qualified by law in my capacity as
Chairman of the Board of Directors of MINTEC, S.A., accept the tenor of each and
every one of the preceding clauses.
Mr. Notary, please add the other clauses of rigor and style for legal validity.
La Paz, October 15, 1994
- ----------------------- -------------------------
Sra. Monica de Prudencio Luis Prudencio Tardio
---------------------------
Ing. Johnny Delgado Achaval
-------------------------
Alberto Sivila Cortas
(lawyer)
4
<PAGE>
Attach to Exhibit 10.15
Attached hereto is an English translation of the original Spanish version
of the Lease and Purchase Option Contract between Empressa Minera Yana Mallcu
S.A. and Mintec, dated February 7, 1996, regarding the Toldos concession. The
Company employed translators to translate the above referenced agreement and
based on this the undersigned believes that the attached is a fair and accurate
English translation of the above referenced agreement.
/s/ Keith R. Hulley
-------------------
Keith R. Hulley
Director
Apex Silver Mines Limited
Date: August 29, 1997
<PAGE>
Exhibit 10.15
Special Notary of Mines and Petroleum Dr. Maria Esther Vallejos
In the registries of public deed under your charge, please insert one of option
to buy and irrevocable promise to sell, which the contracting parties sign below
the following clauses:
First. - (Contracting Parties). - There are party to the present contract the
- -----
Empresa Minera Yana Mallcu S.A. "EMYAMSA", represented by its Executive
Chairman, Mr. Jaime A. Quiroga M., as witnessed by order no. 166 given on May
26, 1989, henceforth called the Company, constituted via public deed number
152/82 with commercial license 7-8569-1 TIN 2190664, and Mineria Tecnica
Consultores Asociados "MINTEC S.A.", represented by Mr. Jaime Rubin de Celis, as
witnessed by order number 186/93 given on June 15, 1993, henceforth called the
Optioner.
Second. - (Antecedents). - The Company is the sole and exclusive owner of the
- ------
following mining concessions on lead, silver and other ores, located in San
Cristobal canton of the province of Nor Lipez in the department of Potosi.
"Don Luis". - Of 65 (sixty-five) hectares [mining pertenences], with
Executive Title number 1/1940, dated January 26, 1940 given before the
Notary of Mines of the city of Potosi, Mr. Daniel Valencia Valle.
"Sucesivas Don Luis". - Of 72 (seventy-two hectares), with Executive Title
number 14/1971, dated February 25, 1971, given before the Notary of Mines
of the locality of Tupiza, Dr. Fernando Humerez C.
"Don Luis II". - Of 33 (thirty-three) hectares, with Executive Title
number 13/1971, given before the Notary of Mines of the locality of Tupiza,
Dr. Saturnino Humerez C.
"Yana Mallcu". - Of 286 (two hundred eighty six) hectares, with Executive
Title number 8/1988, dated February 4, 1988, given before the Notary of
Mines of the locality of Tupiza, Dr. Saturnino Vargas Fernandez.
"Toldos II". - Of 286 (two hundred eighty six) hectares, with Executive
Title number 21/1978, dated october 20, 1978, given before the Notary of
Mines of the locality of Tupiza, Dr. Fernando Humerez C.
"Toldos". - Of 91 (ninety-one) hectares, with Executive Title number
35/1973, dated [??], given before the Notary of Mines of the locality of
Tupiza Dr. Fernando Humerez C.
"Augusto". - Of 56 (fifty-six) hectares, with Executive Title number
17/1971, dated February 26, 1971, given before the Notary of Mines of the
locality of Tupiza, Dr. Fernando Humerez C.
<PAGE>
"Luis Miguel". - Of 110 (one hundred ten) hectares, with Executive Title
number 16/1971, dated February 26, 1971, given before the Notary of Mines
of the locality of Tupiza, Dr. Fernando Humerez C.
"16 de Julio". - Of 15 (fifteen) hectares, with Executive Title number
45/1973, dated November 12, 1973, given before the Notary of Mines of the
locality of Tupiza, Dr. Fernando Humerez C.
"EMILIO". - Of 20 (twenty) hectares, with Executive Title number 18/1920
dated April 22, 1920, given before the Notary of Mines of the city of
Potosi, Dr. Vicente Larrazabal Vargas.
"DON CRISTIAN". - Of 50 (fifty) hectares, with Executive Title number
64/1920, dated December 20, 1920, given before the Notary of Mines of the
city of Potosi, Dr. Alejandro Vera.
"Carlos Antonio". - Of 52 (fifty-two) hectares, with Executive Title
number 63/1967, dated December 23, 1967, given before the Notary of Mines
of the locality of Tupiza, Dr Fernando Humerez C.
"Victoria". - Of 30 (thirty) hectares with Executive Title number 35/1974
dated December 6, 1974, given before the Notary of Mines of the locality of
Tupiza, Dr. Fernando Humerez C.
"Virgen del Carmelo". - Of 30 (thirty) hectares with Executive Title
number 36/1974, dated December 6, 1974, given before the Notary of Mines of
the locality of Tupiza, Dr. Fernando Humerez C.
"Jose". - Of 33 (thirty-three) hectares, with Executive Title number
15/1971, dated February 26, 1971, given before the Notary of Mines of the
locality of Tupiza, Dr. Fernando Humerez C.
"Maria Dolores". - Of 115 (one hundred fifteen) hectares, with Executive
Title number 7/1988, dated [SEPTEMBER 10, 1992], given before the Notary of
Mines of the city of Potosi, Dr. Saturnino Vargas Fernandez.
"Don Julio". - Of 81 (eighty-one) hectares, with Executive Title number
27/1974, dated September 24, 1974, given before the Notary of Mines of the
locality of Tupiza, Dr. Fernando Humerez C.
"Delfin". - Of 32 (thirty-two) water concession hectares, with Executive
Title number 34/1977, dated October 16, 1977, given before the Notary of
Mines of the city of Potosi, Dr. Julio Ugarte Ramos.
2
<PAGE>
"La Perdida". - Of 83 (eighty-three) water concession hectares, with
Executive Title number 16/1977, dated May 25, 1977, given before the Notary
of Mines of the locality of Tupiza, Dr. Fernando Humerez Canaviri.
"Ingenio Mayu". - Of 64 (sixty-four) water concession hectares with
Executive Title number 23/1978, dated October 26, 1978, given before the
Notary of Mines of the city of Potosi, Dr. Julio Ugarte Ramos.
"Hidro I". - Of 91 (ninety-one) water concession hectares, with Executive
Title number 21/1977, dated June 1, 1977, given before the Notary of Mines
of the locality of Tupiza, Dr. Fernando Humerez Canaviri.
Third. - (Purpose of the Contract). The purpose of the present contract is
- -----
the giving on the part of the Company an option to buy with firm and irrevocable
promise to sell in favor of the Optioner, of [sic] each and every one of the
mining concessions specified in the preceding second clause, with all of the
uses, customs, easements, tailings, waste piles, water rights and civil works as
well as all of the machinery and equipment existing as of this date on the
reference concessions, in conformity with Annex 1 which, duly signed by the
contracting parties, forms part of the present contract. The option to buy with
irrevocable promise to sell, is agreed under the following modalities and
conditions:
1. (Price). - The price for the mining concessions including their rights,
machinery and equipment referred to in the preceding clauses consists of:
I. The Optioner will pay the Company the sum of US$500,000 -- (five
hundred thousand and no hundredths american dollars) in two payments of
$US250,000 -- (two hundred fifty thousand and no hundredths American
dollars) each, the first to be paid at the moment of signing the public
deed exercising the option, and the second, one year from having
exercised the option, in both cases without postponement of any kind.
II. The Optioner takes under this executive responsibility, the obligations
which the Company owes to banks and natural and juridical persons up to
the sum of US$5,750,000 -- (five million seven hundred and fifty
thousand and no hundredths American dollars) once these debts have been
negotiated by the Optioner with the corresponding creditors, which
negotiation should take place, necessarily, during the period in which
the option to buy is in force.
Should the Optioner achieve reduction in any of the debts, these
reductions shall be to his exclusive benefit.
III. Whichever payment made by the Company during the two years duration of
the option to buy, to whichever of the creditors included in Annex 2,
by way of principal and/or interest, with whom the Optioner will not
have arrived at
3
<PAGE>
an agreement during the period of the option, will be recognized by the
Optioner and paid to the Company at the moment of signing the contract
of sale, if any only if the Optioner will have had due knowledge and
have authorized those payments.
The creditors referred to in sub-paras. II and III of the third clause
of the present contract, with their respective receivables, are
detailed in Annex 2 which, duly signed by the contracting parties,
forms part of the present contract.
2. (Term). - The option to buy with firm and irrevocable promise of sale
object of the present contract, shall have a duration of two years, counted
from the signature of the public deed corresponding to this minute.
Fourth. - (Collateral Obligations). The Optioner will pay the Company the sum
- ------
of US$6,000 -- (six thousand and 00/100 American dollars) monthly for the term
of two years duration of the Option, and obligation which is totally independent
of the price of the Option and has the character of being non-reimbursable
whether or not the option to purchase is exercised. If the Optioner exercises
his right to purchase the concessions before the two years fixed by this
contract, this payment will be suspended on the date the deed of sale is signed.
Likewise this payment will be suspended in the event the Optioner should not
exercise the option, from 30 days after having made known his decision to the
Company via notarized letter.
Fifth. - (Freedom of Work). During the two years of the option, the Company
- -----
remains in complete freedom to continue its current mining operations or to
expand them, in accordance with its will but under its exclusive risk and
benefit, making unrestricted use of all of the facilities of the sector,
concerning its mining operations.
Sixth. - (Faculties of the Optioner). During the time stipulated for the
- -----
option, the Optioner has the faculty and exclusive right to buy the concessions,
the civil works and all existing machinery and equipment and the Company has the
obligation to sell them, the Optioner being able to exercise the Option in his
favor, cede it or transfer it in favor of any individual or collective person,
national or foreign. The Optioner has also the right to make, without any
limitation, studies of reconnaissance, prospection, works of exploration on all
of the concessions, being able to obtain samples in the quantities he deems
necessary. All of the works of exploration will be brought to bear following
norms and techniques appropriate to the effect, [he may also] enter freely the
concessions without prior authorization it being sufficient the present
contract, he may use the infrastructure that may be necessary, [with] prior
authorization of the Company.
Seventh. - (Obligations of the Seller). - During the period of the Option, the
- -------
Company may not sell, cede, transfer any of the concessions, civil works,
machinery and equipment object of this contract, neither may it lien them or
constitute on them any real or personal right, with the exception of those
exiting at present, nor give any class of rights which
4
<PAGE>
may in any way affect those conferred on the Optioner, under penalty of nullity
of whichever contract may be given in contravention of this clause with
prejudice to payment of damages which may be occasioned. The Company obliges
itself as well to maintain current its right on the concessions and to guarantee
the quiet and pacific possession of the goods and if necessary defend against
any suit or action which could be presented against it.
Eighth. - (Executive of the Option). Should the Optioner in use of the right
- ------
given him by this contract decide to execute the option and consequently acquire
the concessions, he will notify the Company in writing and the latter in the
period of seven days from notification, will sign the corresponding public deed
of definitive transfer, pending compliance with that agreed in the third clause,
sub-para 1, and the other stipulations contained in this contract; in the
negative instance [should the Company not sign], the parties concede sufficient
competence and jurisdiction to whichever circuit judge of La Paz, authority to
extend the corresponding minute of sale.
Ninth. - (Renouncement of the Option). The Optioner reserves to himself the
- -----
right to conclude the present contract during the life of the option, without
showing cause and at any time. To this effect he will notify the Company of his
decision to not exercise the option and with this notification the contract will
be resolved in full law and without need of judicial intervention, as supported
by Article 569 of the Civil Code. During the fifteen days after receipt of this
notification, the parties obligate themselves to sign the corresponding minute
and public deed of conclusion of the contract.
Tenth. - (Domicile of the Parties) To effect communications that as a
- -----
consequence of this contract the parties must make between themselves, the
following domiciles are indicated: the Company: Avenida 20 de Octubre number
2201 La Paz, Box number 5821, telephone number 35-1238. The Optioner: Calle
Campos number 265 La Paz, Box number 13790, telephone number 43-3800.
Eleventh. - (Arbitration). Whatever divergence between the contracting parties
- --------
in relation to this contract, shall be resolved via arbitration in accordance
wit the dispositions contained in the Code of Civil Procedure, and in the event
the third arbitrator is not designated by one of the parties, he shall be named
by the Confederacion de Empresarios Privados de Bolivia.
Twelfth. - (Reach of this Document). Until its is raised to public deed, this
- -------
document is assigned the value and effect of a private document.
Thirteenth. - (Acceptance). We, Jaime A. Quiroga M., of age, married, mining
- ----------
industrialist, resident of this city, empowered by law, with identity card No.
209506 L.P., in representation of EMYAMSA for one part, and for the other Jaime
Rubin de Celis, of age, married, resident of this city, empowered by law, with
identity card no. 371070 in representation of MINTEC S.A., manifest our
acceptance and full agreement with the
5
<PAGE>
integral tenor of the present contract in each and every one of its clauses and
sub-paragraphs.
Madam notary please add the other clauses of rigor and style for its legal
validity.
La Paz, February 1, 1996
- ----------------------- ------------------------
Jaime A. Quiroga M. Jaime Rubin de Celis
6
<PAGE>
Attached hereto is an English translation of the original Spanish
version of the assignment of Lease and Purchase Option contract among Banco
Industrial S.A., Mineria Tecnica Consultores Asociados and ASC Bolivia. The
Company employed translators to translate the above referenced agreement and
based on this the undersigned believes that the attached is a fair and accurate
English translation of the above referenced agreement.
/s/ Keith R. Hulley
---------------------------
Keith R. Hulley
Director
Apex Silver Mines Limited
Date: August 28, 1997
<PAGE>
Exhibit 10.16
PRIVATE DOCUMENT
Witness by the present private document, able to be raised to public instrument
at the request of whichever of the contracting parties, the following agreement,
signed to the tenor of the following clauses:
First. (of the parties).
There are parties to the present document: the Banco Industrial S.A.,
henceforth called simply Bank, for one part, and for the other ASC Bolivia LDC
and Mineria Tecnica Consultores Asociados-MINTEC S.A., henceforth called simply
MINTEC.
Second. (antecedents).
1. The Bank is a creditor of the Empresa Minera Yana Mallcu S.A. (EMYAMSA),
for the sum of US$911,388.31 (nine hundred eleven thousand three hundred eighty-
eight and 31/100 american dollars), which is witnessed by Public Deed No. 59,
extended before the Special Notary of Mines and Petroleum of La Paz dated March
18, 1992, a sum which may be paid with 5% (five percent) of the gross
production of the Toldos Mining Group.
2. MINTEC has signed with Empresa Minera Yana Mallcau S.A. (EMYAMSA), an
option contract to purchase Toldos Mining Group, for the period of two years,
via Public Deed No. 25 given before the Notary of Mines and Petroleum of La Paz
on February 23, 1996. The mentioned purchase option will be subrogated by
MINTEC in favor of ASC Bolivia LDC.
Third. (object).
By the present contract, the parties, since it is convenient to their
interests, commit themselves to the following obligations:
ASC Bolivia LDC commits itself to:
I. Realize on Toldos Mining Group an investment of risk [sic] in
exploration, determination of positive reserves and metallurgical studies to
design the definitive feasibility project in a period of two years counted from
February 23, 1996, date of the signing of the purchase option contract,
informing BISA periodically on the advance of the works.
II. Deliver to the Bank 5% (five percent) of the gross production or its
equivalent in US dollars, until paying the amount of US$911,388.31 owed by the
Empresa Minera Yana Mallcu S.A. (EMYAMSA), should ASC Bolivia LDC exercise its
right of option to purchase the Toldos Mining Group. These payments will begin
in the first year of business production of the indicated Mining Group.
<PAGE>
III. Deliver to the Bank, 5% (five percent) of the gross production, if
during the period of two years of the option ASC Bolivia LDC were to have any
production which was not destined for metallurgical sampling and analysis.
IV. Permit that the Bank make periodic supervisions, having to allow free
access to personnel of the Bank.
ASC Bolivia LDC reserves the right to drop the option contract to purchase the
Toldos Mining Group within the two years of life of same, in which case the
present contract will remain with no effect whatsoever.
The Bank, for its part, commits itself to:
I. Give its consent for ASC Bolivia LDC to exercise its right to purchase
the Toldos Mining Group, the Bank maintaining in its favor the guarantees it has
at present, until the entirety of its credit of US$911,388.31 has been paid.
II. Defend the rights contained in Contract No. 59 of March 18, 1992,
against any intervention of third parties whatever, to the end of maintaining
and conserving during the aforementioned option period, its quality of mortgage
creditor, with the first mortgage on Toldos Mining Group.
Fourth. (Life of Contract).
It is expressly established that the present contract does not enervate nor
diminish in virtue the terms of the contract signed by public deed no. 59 of
March 18, 1992 extended before the Special Notary of Mines and Petroleum, which
remains in full force until the debtor, Empresa Minera Yana Mallcu S.A., has
paid the entirety of the sum owed.
Fifth. (Acceptance).
Empresa Minera Yana Mallcu S.A., represented by Mr. Jaime Quiroga Matos,
expresses its agreement and acceptance with the foregoing clauses, signing this
document.
Sixth. (Agreement).
We, Banco Industrial S.A., represented by Messrs. Jose Luis Aranguren A.
and Jorge Velasco T., National Business Manager and La Paz Business Manager, and
ASC Bolivia LDC and MINTEC, represented by Ing. Johnny Delgado A., manifest
their agreement with the foregoing clauses and oblige themselves to its faithful
and strict fulfillment.
2
<PAGE>
BANCO INDUSTRIAL S.A.
-------------------
By: Jorge Velasco T.
La Paz Business Manager
--------------------------
By: Jose Luis Aranguren
National Business Manager
Signed by: EMPRESA MINERA YANA MALLOV S.A.
--------------------
Jaime Quiroga M.
Signed by: ASC BOLIVIA L.D.C. Y MINTEC
---------------------
Johnny Delgado A.
3
<PAGE>
Attached hereto is an English translation of the original Spanish
version of the purchase option contract between Mineria Tecnica Consultores
Asociados and Litoral Mining Cooperative Ltd. regarding the Animas concession,
dated August 17, 1995. The Company employed translators to translate the above
referenced agreement and based on this the undersigned believes that the
attached is a fair and accurate English translation of the above referenced
agreement.
/s/ Keith R. Hulley
-------------------------
Keith R. Hulley
Director
Apex Silver Mines Limited
Date: August 28, 1997
<PAGE>
Exhibit 10.17
Animas Contract
Witness No. 173 of the inscription of option to buy and irrevocable promise to
sell of the mining concessions "Animas" and "Sucesivas Animas" located in San
Cristobal canton of the province of Nor Lipez of the department of Potosi,
signed between Cooperative Mineria Litoral Ltd. and the company Mineria Tecnica
Consultores Asociados S.A. MINTEC S.A.
In the City of La Paz at 5:30 pm August 17, 1995, before me lawyer Maria Esther
Vallejos H., Special Notary of Mines and Petroleum and witnesses named at the
end who signed. There were present Cooperative Mineral Litoral Ltd. represented
by Messrs. Pedro Calcina Quispe, Epifanio Calcina Calcina and Hillarton Calcina
Quispe for the one part, and for the other Empresa Mineria Tecnica Consultores
Asociados S.A. MINTEC S.A. represented by Ing. Jaime Rubin de Cells Navarro, all
of age, empowered by law, residents of this city, whom I swear I know and they
said: that they agree to raise to public deed the minute which they have
presented to me accompanied by the legalized Act of Assembly of Members of the
Cooperative Minera Litoral Ltd. of June 4, 1995, witness of power, mining
patents and receipt of bank deposit, whose literal tenor is as follows:
Minute Special Notary of Mines and Petroleum - In the registries of public
- ------
mining deed under your charge, please insert the present option to buy and
irrevocable promise to sell the mining concessions denominated "Animas" and
"Sucesivas Animas", signed under the following clauses:
One, Of the Parties: They are parties to this contract the Cooperative Minera
- --------------------
Litoral Ltd., with juridical personality duly recognized via Resolution No.
00296 dated November 11, 1963, and represented in this contract by Messrs. Pedro
Calcina Quispe, Epifario Calcina Calcina and Hilarion Calcina Quispe with
special power of attorney sufficient for this act No. 5/1995 officially recorded
before the Notary of Mines in the city of Tupiza, dated July 10, 1995, which
forms part of this deed.
The company Mineria Tecnica Consultores Asociados S.A. MINTEC S.A., which is a
company legally constituted in the country, via public deed No. 4 dated January
11, 1991, given before the Notary of Mines of this city, inscribed in the
Commercial Registry with Administrative Resolution no. 26157 dated November 7,
1991, license No. 7-21907-1, TIN No. 2197049, represented in the contract by its
General Manager Ing. Jaime Rubin de Celis Navarro.
Second, Declaration of Property. Say that the Mining Cooperative "Litoral Ltd."
- --------------------------------
declares itself to be the legitimate and sole concession-holder of the mining
concessions denominated "Animas" and "Sucesivas Animas" comprised of 200 and 80
mining claims respectively, for exploitation, on veins, placers and gravels of
lead, silver, zinc and other ores, located in the jurisdiction of San Cristobal
canton, province of Nor Lipez,
<PAGE>
department of Potosi, which are found under Executive Title under Law No. 7/1970
dated February 11, 1970 and No. 24/1968 dated August 15, 1968, both duly
inscribed in the Mining Registry and the Registry of Real Property, there being
found all of the documentation which accredits the rights of property in order,
as well as the mining patents paid up to date.
Third, Object of the Contract. It being agreeable to the Interest of the
- -----------------------------
Cooperative in a free and voluntary form, in its status of legitimate
concession-holder of the mining concessions "Animas" and "Sucesivas Animas", it
is given in favor of the company Mineria Tecnica Consultores S.A. MINTEC S.A.,
represented by Ing. Jaime Rubin de Cells Navarro, of an exclusive and
irrevocable character, the right of option to purchase the concessions "Animas"
and "Sucesivas Animas" in all of their extension and also their uses, water
rights, customs and easements without any limitation whatsoever, assuming the
obligation to sell the concessions in accordance with the stipulations of this
contract, subject to the unilateral decision of the operator, in conformity with
that disposed by Article 64 of the Civil Code, a right which the optioner shall
exercise in his favor or in favor of the individual or collective person he may
designate.
Fourth, Period. The option to which the present contract refers will have a
- ---------------
duration of two years counted from the date of official registry of this
document.
Fifth, Authorities of the Optioner. During the time stipulated for the option,
- -----------------------------------
MINTEC S.A. will have the authority and the exclusive right to purchase the
concessions and the Cooperative [will have] the irrevocable obligation to sell
them, the optioner being able to use this option in his favor, code it or
transfer it in favor of any person, likewise it may do, without any limitation
whatever and during the referred period, studies, reconnaissance, exploration
and exploitation work on the concessions "Animas" and "Sucesivas Animas" being
able to obtain samples in the quantities deemed necessary. All of the works of
exploration shall be done following appropriate norms and techniques for the
purpose. [MINTEC] may also freely enter the concessions without prior
authorization it being sufficient the present contract, [and] may use that
Infrastructure which may be necessary including the camp. All of the works
effected by the optioner shall be at his own risk and expense.
During the life of this contract, the Cooperative may continue its habitual
works, without interfering with those of MINTEC.
Sixth, Price of Option and Form of Payment. The price freely agreed between the
- -------------------------------------------
parties for exercise of the purchase option and subsequent transfer of the
concessions "Animas" and "Sucesivas Animas" is US$ 150,000 (one hundred fifty
thousand american dollars), which shall be paid in the following manner. During
the first six months of the life of this contract, no sum will be paid, MINTEC
being able to realize its work in a most complete way. From the seventh month
of the life of this contract under the twenty-third month inclusive, MINTEC S.A.
will pay the Cooperative the sum of US$ 2,000 (two thousand american dollars)
monthly, at the end of each month.
2
<PAGE>
If MINTEC S.A. decides to exercise its right of option to purchase before the
two years [are up], the monthly payments are suspended and the balance of total
price will be paid. If MINTEC S.A. acquires the concessions "Animas" and
"Sucesivas Animas", 50% of the monthly payments until that time will be
considered as payment counted toward the total price and the other 50% will
benefit the Cooperative.
Seventh. Obligations of the Seller. During the period of the option, the
- -----------------------------------
Cooperative may not sell the concessions to third persons, nor may it lien them
or constitute on them any real or personal right, nor give any class of rights,
which in any way could affect that conferred on the optioner, under penalty of
nullity of whatever contract given in contravention of this clause and without
prejudice to payment of damages which may be occasioned.
The Cooperative is also obliged to maintain current its right on the concessions
"Animas" and "Sucesivas Animas", and when necessary defend any suit which may be
presented against it. The patents during the life of the contract shall be paid
by MINTEC.
Eighth. Execution of the Option. Should the company in exercise of its right
- --------------------------------
given by this contract, decide to execute the option and consequently acquire
the concessions "Animas" and "Sucesivas Animas", it will notify the Cooperative
of this in writing; within; within seven days of notification, it will sign the
corresponding public deed of definitive transfer, against delivery of the
balance and complying with the other conditions stipulated in the contract;
[should it] not do so, the parties concede sufficient competency and
jurisdiction to any district judge of the city of La Paz the authority to extend
the corresponding minute of sale.
Ninth. Renouncement of the Option. MINTEC S.A. reserves the right to conclude
- ----------------------------------
[sic] this contract during the period of the option, without demonstration of
cause, at any time. To this effect, it will notify the seller of its decision
to not exercise the option 30 days in advance and with this notification the
present contract will remain concluded, with full right and without need of
judicial intervention covered by Article 589 of the Civil Code.
The monies which may have been paid to the seller under this contract shall
remain to the benefit of the Cooperative, and the optioner will deliver to the
Cooperative the studies and maps elaborated on the concessions "Animas" and
"Sucesivas Animas" at no cost. Within 15 days of receipt of notification, the
parties oblige themselves to sign the respective minute and public deed of
conclusion of the contract, in which it will be stated that the concessions
revert to the seller and the optioner is freed of payment of the balance of the
total price and monthly quotas.
Tenth. Priorities for the Cooperative. During the exploration phase, MINTEC
- --------------------------------------
S.A. concedes priority right to the cooperative members for contracting workers
in accordance to its needs, equally should it enter the exploitation phase, with
priority it will contract Cooperative personnel for these works.
3
<PAGE>
In the event MINTEC does not exercise its right of option, all of the
improvements made on the concessions "Animas" and "Sucesivas Animas" will remain
in benefit of the Cooperative, however MINTEC may freely withdraw its machinery
and equipment from its property.
Eleventh. Notices. For the purpose of communications resulting from this
- ------------------
contract, the parties indicate the following domiciles: La Cooperative Minera
"Litoral Ltda", Calle Avenida Arce esquina Peru No. 401, Uyuni telephone 0693-
2198. MINTEC S.A. Calle Campos No. 265, P.O. Box 13790, telephone 433800.
Twelfth. Arbitration. Any divergence between the contracting parties in
- ---------------------
relation to this contract shall be resolved via binding arbitration in
accordance with dispositions of the Code of Civil Procedure and in the event the
third arbiter is not designated by the parties, he shall be designated by the
President of the Bolivian Confederation of Private Businessmen.
Thirteenth. Reaches of this Document. Until it is raised to public deed, this
- -------------------------------------
minute is given the value and effect of a private document.
Fourteenth. Acceptance. We Pedro Calcina Quispe, Epifanio Calcina Calcina, and
- -----------------------
Hilarion Calcina Quispe, President, Secretary and Treasurer of the
Administrative Council, respectively, of the Cooperative Minera Litoral Ltda.
For the one part, and for the other Ing. Jaime Rubin de Celis Navarro, legal
representative of the company Mineria Tecnica Consultores Asociados S.A. MINTEC
S.A., manifest our acceptance and full agreement with the entire tone of the
present contract in each and every one of its clauses.
----------------------------
- ------------------- Dra. Maria Esther Vallejos H.
Nieves Rocha U. Special Notes of Mines and Petroleum
Witness
------------------
Guido Ortiz M.
Witness
------------------------
Signed by Pedro Calcina Quispe
----------------------------
Signed by Epifanio Calcina Clacina
---------------------------
Signed by Hilarion Calcina Quispe
------------------------
Signed by Jaime Rubin de Celis (Mintec S.A.)
4
<PAGE>
Attach to Exhibit 10.18
Attached hereto is an English translation of the original Spanish version
of the Assignment Agreement regarding Mintec's rights and obligations under the
Purchase Option Agreement between Mintec and ASC Bolivia LDC. The Company
employed translators to translate the above referenced agreement and based on
this the undersigned believes that the attached is a fair and accurate English
translation of the above referenced agreement.
/s/ Keith R. Hulley
-------------------
Keith R. Hulley
Director
Apex Silver Mines Limited
Date: August 29, 1997
<PAGE>
Exhibit 10.18
Special Notary of Mines and Petroleum, La Paz, Bolivia. Deed number 111:
Cession of Option to Buy with Irrevocable Promise to Sell mining concessions
called Animas and Sucesivas Animas, located in the jurisdiction of San Cristobal
canton in Nor Lipez and Villa Martin provinces, respectively, of Potosi
Department, signed between the Litoral Mining Cooperative, Ltd., Empresa Minera
Tecnica Consultores Asociados S.A. (MINTEC) and the company ASC Bolivia LDC.
First. Antecedents. Via Deed No. 173 ("Contract") given on the 17/th/ of
- -------------------
August 1995 by the Special Notary of Mines and Petroleum of this City, the
Litoral Ltd. Mining Cooperative ("Seller") gave in favor the company Mineria
Tecnica Consultores SA (MINTEC) the option to purchase the following mining
concessions:
1. "Animas" of 200 mining pertenences of exploitation, with Executive Title of
Law No. 7/1970 dated February 11, 1970 duly inscribed in the Mining and Real
Property registry.
1. "Sucesivas Animas" of 80 mining pertenences of exploitation, with Executive
Title of Law No. 24/1968 dated August 15/th/ nineteen sixty-eight, duly
inscribed in the Mining and Real Property Registry.
The mentioned mining concessions are to be found in the jurisdiction of San
Cristobal canton, Nor Lipez province, Potosi Department.
Second. Cession. It being convenient to the interests of the mentioned
- ----------------
contracting parties, MINTEC S.A. under the support of articles 539 et seq of the
Civil Code cedes the Contract in favor of ASC Bolivia LDC. As a consequence,
from the date of this document ASC Bolivia LDC assumes all of the rights and
obligations of MINTEC S.A. under the Contract, the Seller recognizing in favor
of ASC Bolivia LDC exclusively and irrevocably, the right to purchase the mining
concessions described in the first clause of this clause, with more [sic] its
uses, customs and easements, without any limitation save that stipulated in the
Contract, which remains in force and with legal validity between the Seller and
ASC Bolivia LDC and in all ways which are not contradictory to this contract.
Third. Liberation of MINTEC S.A. As a consequence of this cession, MINTEC S.A.
- ---------------------------------
has been completely freed of each and every one of its obligations under the
Contract, the same that has been assumed by ASC Bolivia LDC in accordance with
the stipulated in same.
Fourth, Acceptance. Expenses and Registrations. All of the expenses including
- ------------------
notarial and other registrations shall be borned by ASC Bolivia LDC.
<PAGE>
Fifth. Acceptance.
- ------------------
for the Cooperative: Pedro Calcina Quispe, Epifanio Calcina Calcina and
Hilarion Calcina Quispe.
for MINTEC:
------------------------
Jaime Rubin de Celis
for ASC Bolivia:
------------------
Fernando Rojas
Witness:
-----------------------------
Sandra Salinas Valdivieso
Powers of Attorney...
Signed, May 22, 1996.
<PAGE>
Attach to Exhibit 10.20
Attached hereto is an English translation of the Joint Venture Agreement
between Corporacion Minera Boliviano S.A. ("Comibol") and ASC Bolivia LDC,
regarding the Cobrizos Concession. The Company employed translators to
translate the above referenced agreement and based on this the undersigned
believes that the attached is a fair and accurate English translation of the
above referenced agreement.
/s/ Keith R. Hulley
-------------------
Keith R. Hulley
Director
Apex Silver Mines Limited
Date: August 29, 1997
<PAGE>
1
C O R R E S P O N D S
(SEAL)
*******************************AFFIDAVIT No.230/96*****************************
FOR THE JOINT VENTURE WRIT FOR THE DEVELOPMENT OF MINING ACTIVITIES, SUBSCRIBED
BETWEEN: THE CORPORACION MINERA DE BOLIVIA (COMIBOL), REPRESENTED BY DR.
ALBERTO ALANDIA BARRON - PRESIDENT AND LIC. LUIS ARNAL VELASCO - MANAGER OF THE
CONTRACTS AND FINANCES UNIT, AND "ASC BOLIVIA LDC" COMPANY, REPRESENTED BY MR.
JOHNNY DELGADO ACHAVAL.=
********************************************************************************
In La Paz city, at nine hours of October fifteen of the year nineteen ninety
six; before me, lawyer Dr. MARIA ESTHER VALLEJOS H., SPECIAL NOTARY OF MINES AND
PETROLEUM and witnesses named and signed at the end, presented themselves: For
one party, the CORPORACION MINERA DE BOLIVIA (COMIBOL), REPRESENTED BY DR.
ALBERTO ALANDIA BARRON, with ID No. 1191239 PT. (PRESIDENT) AND LIC. LUIS ARNAL
VELASCO, with ID No. 332387 L.P. (MANAGER OF THE CONTRACTS AND FINANCES UNIT),
and "ASC BOLIVIA LDC" COMPANY, REPRESENTED BY MR. JOHNNY DELGADO ACHAVAL, with
ID No. 39745 L.P.; all full of age, able by right, neighbors of this city, of
whose identity I certify, and said: They agree to convert into a public deed
the writ presented to me related to: WRIT FOR A JOINT VENTURE FOR THE
DEVELOPMENT OF MINING ACTIVITIES, accompanied by: Supreme Resolution No. 213601
dated 16/II/94; COMIBOL's Board of Directors Resolution No. 1084 dated
22/XII/95; COMIBOL's Board of Directors Resolution No. 1105 dated 06/II/96;
COMIBOL's Board of Directors Resolution No. 1183 dated 28/VI/96; Power of
Attorney Affidavits Nos. 140/94, 205/94 and 105/96; Annex "A" and "B"; Payment
Receipts for Mining License for the "Cobrizos" Mining Concession; Industry and
Commerce Registration Certificate for the "ASC BOLIVIA LDC" Company (Bolivian
Branch); and Bank Deposit Receipt; documents that fully transcribed are as
follows: ==================
WRIT.- SPECIAL NOTARY OF MINES: In the public deeds register under your
- ------
charge, please insert a Joint Venture Contract for the Development of mining
activities subscribed between the CORPORACION MINERA DE BOLIVIA (COMIBOL) and
ASC BOLIVIA LDC company, according to the following clauses and conditions:
==========================================
FIRST.- OF THE LEGAL CAPACITY OF THE PARTIES AND THOSE UNDERSIGNING.- 1.1
- -------
Undersign this Joint Venture Contract, on one side the
<PAGE>
2
CORPORACION MINERA DE BOLIVIA, from now on called COMIBOL, a decentralized
Autarkic Entity belonging to the State created by S.D. 3196 dated October second
nineteen fifty two, passed as law on the twenty ninth of October, nineteen fifty
six with its own legal capacity and total administration autonomy, exercising
the Administration and High Direction of all the mining deposits, tailings, mill
tailings and slags, establishments, facilities, mine camps, complementary
properties in general, without exceptions, constituting the state owned mining,
whether they might be a result of the Mines' Nationalization or acquired after
it.========================
1.2. Subscribing the CONTRACT on the other side, the company whose trade name
is ASC BOLIVIA LDC, a limited liability company, a subsidiary of ANDEAN SILVER
CORPORATION LDC, an international mining company constituted at the Cayman
Islands through a constitution certificate dated September seventh nineteen
ninety five, whose original has been legalized by the Bolivian Consulate in
London (England) on the fourteenth of the same month and year, a subsidiary
legally constituted in Bolivia, through public Deed No. 49, issued before the
Special Notary of Mines of La Paz on the tenth of November nineteen ninety five,
registered at the General Register of Commerce and Stock Companies under
Register No. 09-037162-01 dated December six nineteen ninety five and at the
Taxpayers' Unique Register with RUC No. 7836635. ===== 1.3. LEGAL CAPACITY OF
THE SUBSCRIBING PARTIES. - COMIBOL subscribes the Contract represented by its
PRESIDENT, DR. ALBERTO ALANDIA BARRON, who has the legal representation of the
entity by virtue of S.D. 23727 dated February eleventh nineteen ninety four, of
his official appointment made by Supreme Resolution No. 213601 dated February
sixteenth of the same year and exercising the capacity conferred to him by
COMIBOL's General Board of Directors, by Resolution No. 826/94 dated March
fifteenth, nineteen ninety four, as well as LIC. LUIS ARNAL VELASCO, MANAGER OF
THE CONTRACTS AND FINANCES UNIT, appointed as such by COMIBOL'S General Board of
Directors Resolution No. 860/94 dated June thirteenth, nineteen ninety four and
in use of the powers conferred through Special Power by the said PRESIDENT OF
COMIBOL, through instrument No. 222/94 dated July eleventh, nineteen ninety four
undersigned before Public Notary in La Paz under the charge of Dr. Nelly Alfaro
and registered before the Notary of Mines in La Paz, under No. 205 dated twenty
eight of July nineteen ninety four; that will be inserted in the corresponding
Public Deed. ===========
1.4. Subscribing the Contract, in representation of ASC BOLIVIA LDC, by virtue
of a Limited Power conferred to him, mister JOHNNY DELGADO ACHAVAL, as truly and
legal agent and proxy, through instrument granted the seventh of March nineteen
ninety six before Notary Public at the Cayman Islands, George M. Shortridge,
certified by the Bolivian Consul in London (England), documents that have been
judicially translated from English to Spanish, by the authority of the Fifth
Civil Trial Judge in La Paz, and legalized before the Special Notary of Mines of
this capital city, under No. 105 on the first of April nineteen ninety six and
registered at the General Register of Commerce under Entry No. 728 in Book 07-0
on the eighth of the same month and year, special power that, as a whole, will
be inserted in the corresponding Public Deed.
=======================
<PAGE>
3
SECOND.- CONTRACT BACKGROUND.- 2.1. In compliance of the Supreme Government's
- --------
Mining Policies and within the framework of the legal provisions in force, on
the matter, COMIBOL has publicly invited Mining Companies, national and foreign,
interested in the EXPLORATION with the option to EXPLOITATION and subsequent
MARKETING of the non-developed mining deposits, among others, those of the LOS
LIPEZ zone in the Department of Potosi, so that they can present proposals to
that end, and the Terms of Reference and the legal and administrative
requirements for the Public Tender have been widely published. In order to
guarantee the total legality of the public tender's results, as well as the
greatest efficiency in the judgment of the proposals to be presented,
independent consulting companies of recognized technical experience and
managerial solvency were equally involved. The evaluation results by BEHRE
DOLBEAR & COMPANY INC., the independent consultant selected, according to that
presented in the report dated January, nineteen ninety six, qualifies ASC
BOLIVIA LDC to be awarded the JOINT VENTURE CONTRACT for Mining Concessions to
be later described and that form part of ANNEX "A" of the Contract, a report
that has been approved by COMIBOL'S Board of Directors with Resolution No.
1105/96 dated February six, nineteen ninety six, and that at the same time
authorized the negotiations for the respective CONTRACT with ASC BOLIVIA LDC.
=============================================
THIRD.- DEFINITIONS.- The following definitions are established in the present
- -------
Contract, in an enunciative but not limited manner: 3.1. AREA GRANTED.- The
--------------
mining concessions belonging to COMIBOL included in this Contract and whose
total area is 1,687 hectares plus 4 hectares of Demasias Cobrizos. ========
The concessions of the AREA GRANTED are described individually in page four of
the Technical-Economical Proposal by ASC BOLIVIA LDC and in ANNEX "A" of the
Contract.- COMIBOL by express and written request from ASC BOLIVIA LDC will be
able to formulate mining petitions or grant complementary areas neighboring to
the GRANTED AREA, in which case ASC BOLIVIA LDC will formulate a Specific Work
Plan and will guarantee a minimal investment in the same conditions to that for
the AREA GRANTED. =======================
3.2. INVESTED CAPITAL.- Are all the expenses and investments made by ASC
------------------
BOLIVIA LDC for the exploration and development of mineral reserves, preparation
of pre-feasibility and feasibility studies; basic and in-detail engineering
designs; purchase, transport and import of equipment, machinery and materials;
installation of all the mining equipment and machinery, minerals concentrating
and refinery plants, workshops, laboratories, warehouses, offices, etc.;
construction of camps and buildings, tailings and waste accumulation systems,
energy distribution systems, energy plants, security systems, water reception
and storage systems; etc. and starting of the production operations, according
to generally accepted accounting principles. ===================
3.3. MINING CONCESSIONS.- Set of mining properties (Art. 33 of the Mining
--------------------
Code), in which the activities foreseen in the Contract can be performed. =====
3.4 MARKETING COMMISSION.- Payment in money for the sale management of the
----------------------
minerals or metals produced by ASC BOLIVIA LDC.- This commission is not an
integral part of the Marketing Costs. ============================
<PAGE>
4
3.5 PRODUCTION EXPENSES.- Are all the operational expenses made by ASC BOLIVIA
---------------------
LDC during the minerals production process, up to obtaining the final products
to be marketed or exported placed in the mine, either these be mineral
concentrates or metals, according to generally accepted accounting principles.
=================
3.6 ADMINISTRATIVE EXPENSES (OVERHEADS).- Are all the expenses made by ASC
-------------------------------------
BOLIVIA LDC in the administrative duties and direction of the Joint Venture
Contract, different from the production expenses, according to generally
accepted accounting principles. =====================================
3.7 MARKETING EXPENSES.- Are all those that are made to convert the minerals in
--------------------
metals, by the smelting or refining company; they include metallurgical
deductions, treatment expenses, smelting and refining, analysis, assays,
arbitrations, penalties and other deductions and expenses directly related to
the conversion process to marketable metals. =============================
3.8 DEPRECIATION.- A deduction made according to Bolivian laws, due to the
--------------
reduction, wear and loss of value of the capital assets, for their reposition.
=====
3.9 DELIVERY.- The date in which COMIBOL will deliver and officially the
----------
GRANTED AREA to ASC BOLIVIA LDC.- The physical delivery will be documents
through a detailed Minutes to be drawn up in some place of the AREA GRANTED.
The Minutes will be signed by the parties' representatives appointed to that
end, with a prior written notice to them. The delivery will be done not later
than within thirty (30) days after the CONTRACT is signed. =====
3.10 OPERATIONAL CASH FLOW.- It is the sales values minus the costs of
-----------------------
disposal, marketing commissions, marketing expenses, production expenses and
administrative expenses, excluding the financial expenses, depreciation,
deferred expenses or taxes. ========================================
3.11 COSTS OF DISPOSAL.- Are all those directly related to the transport of
-------------------
concentrates or final products, from the mine to the smelter; they include
decreases, road, air and sea transport fees, transport insurance, handling, port
charges and other related. These costs of disposal are not an integral part of
the Marketing Expenses. =============================================
3.12 DEFERRED EXPENSES.- Are all payments or charges made and whose application
-------------------
is deferred until some previously stated terms are complied with or the
application period of the expense has expired. ======================
3.13 FINANCIAL EXPENSES.- Are all the capital amortization expenses and bank or
--------------------
from financial entities credits, interests, contracted by ASC BOLIVIAL LDC for
the compliance and execution of the Joint Venture Contract. ===============
3.14 TAXES.- Are all taxes, national, municipal or of any other nature, created
-------
or to be created by Law, that are applied to mining operations developed by ASC
BOLIVIA LDC, as a result of this Contract. ============================
3.15 PAY BACK PERIOD.- Any period, either be the initial one or any later one,
-----------------
including the month starting now, in which an expense has been made for
improvements in the capital and previous to the first day of the following month
to that in which ASC BOLIVIA LDC has recovered from the Cash Flow all the costs
and expenses for capital improvements. ===============================
<PAGE>
5
3.16 PRODUCT(S).- All the materials, minerals, precipitates from mineral
------------
resources, concentrates, dore and any other product or sub-product, originated
in the GRANTED AREA. ==========================================
3.17 PAY BACK.- Means the date in which ASC BOLIVIA LDC'S shareholders have
----------
received from the Cash Flow all the costs and expenses for capital improvements
really made and registered according to generally accepted principles in
Bolivia. The calculation will be done at the end of each ASC BOLIVIA LDC's
fiscal year.- Nonetheless, COMIBOL's participation, mentioned in paragraph
11.1.2, will be applied from the moment in which the pay back is finished.
===========================
3.18 SALES GROSS VALUE.- Are the payments that ASC BOLIVIA LDC will receive
-------------------
from third parties, natural or juristic, for the sale of the refined metals or
concentrates, produced during the exploitation period, from which all the
expenses and costs established in point 3.7 will be deducted. ==============
FOURTH.- APPLICABLE LAWS.- 4.1. This Contract is subscribed and is governed by
- --------
the legal provisions that in a merely enunciative and not limitative manner are
expressed as follows: Arts. 136 and 138 of the Pol. Const. of Bolivia, S.D.
3196 (2-10/52), L. (2910/56), S.D. 22407 (11-01/90), S.D. 22408 (11-01/90), L.
1182 (17-09/90), L. 1297 (27-11/91), S.D. 23059 (13-02/92), L. 1243 (11-04/92),
L. 1333 (29-04/92), without regulations that came into force by S.D. 24176 dated
8/12/95, S.D. 23214 (21-07/92), D.S. 23230-A (30-07/92) and other legal
provisions in force on the matter or to be enacted in the future. This Joint
Venture Contract was approved by COMIBOL'S Board of Directors, through
Resolution No. 1183/96 dated June twenty eight nineteen ninety six. =========
FIFTH.- OF THE JOINT VENTURE CONTRACT, NAME AND ADDRESS.- 5.1. The Joint
- -------
Venture Contract, constituted by this document, called from now on CONTRACT,
does not compromise the patrimony of either of the associates nor affects in any
way the legal capacity of the signing parties; nor constitutes a society, nor
establishes an independent jurisdic person. ======= In the CONTRACT, it is not
established, for associates, a responsibility, solidary, jointly nor unlimited
for the acts, contracts and obligations that each one could perform, celebrate
and assume in the execution and compliance with the CONTRACT. ==
5.2 As a consequence of the CONTRACT, ASC BOLIVIA LDC does not acquire a right
of property at all in the civil regime nor as mining concessionaire in the
mining regime, on the land nor on the underground of the GRANTED AREA, nor on
the water rights, servitudes and customs, access roads, camps, constructions or
any other facilities that could exist. =================================
5.3. In the terms and conditions given in the CONTRACT, COMIBOL grants ASC
BOLIVIA LDC, in an express manner, the exclusive exploration rights, the option
to enter into the exploitation phase, once the first phase exploration is
entirely finished, as well as the marketing of the minerals to be mined over an
area of One Thousand Six Hundred and Eighty Seven (1,687) hectares of the
"COBRIZOS" Mining Concession, plus Four (4) hectares of Demasias Cobrizos,
located in the Rio Grande County, Nor Lipez Province of the Department of
Potosi, whose detail is expressed in Annex "A" of the CONTRACT. ==========
<PAGE>
6
5.4. This exclusive right, in the conditions stated in the CONTRACT, is the
sole and total contribution by COMIBOL to the Joint Venture Contract convened in
this document, without any obligation nor responsibility from COMIBOL for the
execution and compliance with the CONTRACT. It also means that COMIBOL, during
the term of the contract, will not reduce, transfer, effect nor compromise its
rights and interests on the deposits it contributes to the joint venture, in any
measure nor for any motive, guaranteeing ASC BOLIVIA LDC the peaceful
possession, the use and enjoyment of the mining concessions object of the
CONTRACT. ===================================================
5.5. The parties, by mutual agreement convene in naming this Joint Venture
Contract as COMIBOL - ANDEAN - COBRIZOS R.C., with legal address in La Paz city,
Campos Street No. 265, Telephone 433800, Telefax (5912) 433737.
==============================================================
SIXTH.- OBJECT OF THE CONTRACT.- 6.1. Based on the background previously
- -------
stated, COMIBOL and ASC BOLIVIA LDC, through this contract convene in
subscribing a Joint Venture Contract for the exploration and exploitation
option, concentration, refining and smelting without any reserve and the
marketing of the mineral, metal products and sub-products that will be exploited
at the deposits situated in the GRANTED AREA, under the technical conditions
described in the proposal by ASC BOLIVIA LDC and accepted by COMIBOL, as stated
in its Proposal and constitutes part of the present CONTRACT.
===============================
6.2. The activities, object of the CONTRACT, comprise the identification and
development of reserves, design of the mining operation, rational and efficient
exploitation of the mineral resources, optimizing treatment processes and
metallurgical recovery, preparation of the respective technical and economical
feasibility projects and, in general, the application of a modern technology and
an efficient management of the performance of the mining operations, as well as
comply with the environmental obligations established by law, according to
Seventeenth Clause of the CONTRACT. ==============================
SEVENTH.- TERM OF EXPLORATION.- 7.1. The maximum term for the Exploration
- ---------
period will be of Five (5) years starting from the physical and official
delivery of the GRANTED AREA in this CONTRACT by COMIBOL to ASC BOLIVIA LDC.-
This delivery will be registered in a detailed minutes drawn up on site or where
the parties agree upon, and it must be subscribed by the officials to be
appointed to that end, with the presence of a competent authority.
===================================
7.2. The term of five (5) years of exploration, divided in three (3) phases is
as follows: ===== FIRST PHASE with a duration of twenty four (24) months. =====
SECOND PHASE with a duration of twenty four (24) months. ===== THIRD PHASE with
a duration of twelve (12) months. ===== TOTAL SIXTY (60) MONTHS, equivalent to
FIVE (5) YEARS.==============================
7.3. The First Phase is compulsory and thus its strict obeyance is guaranteed
by ASC BOLIVIA LDC, according to that stated in Clauses 9.1 and 9.2 of this
CONTRACT. ===================================================
7.4. During the First Phase, ASC BOLIVIA LDC, will execute the Work Program
consisting of page six up to page ten of their accepted and awarded Proposal, a
work
<PAGE>
7
plan that will form part of this CONTRACT without the need of officially
registering it. ASC BOLIVIA LDC can explore the entire mining concessions or
part of them according to their election, but in any sectors the Work Plan will
be executed faithfully and totally, COMIBOL at a written and express request by
ASC BOLIVIA LDC can formulate mining petitions or grant complementary areas
within two (2) neighboring kilometers with the GRANTED AREA, in that case ASC
BOLIVIA LDC will formulate a specific Work Plan and will guarantee a minimal
investment to be made in such complementary areas, which will be subject to the
same conditions established for the Work Plan as well as the minimal investment
of the GRANTED AREA. ===========================
7.5 ASC BOLIVIA LDC, during the First Phase, can anticipate the conclusion of
the twenty four (24) months term, under the express condition that the execution
of the pledged Work Program has been finished for this Phase and, as a
consequence, can enter into the other exploration phases or exercise immediately
its option right to enter into the Exploitation Phase in the areas its studies
would have determined as positives. In this case, the Bank Guarantee
Certificate for the Compliance of Contract will be returned by COMIBOL within a
term not longer than sixty (60) days after the First Exploration Phase is
finished. The compliance with the Work Plan, as well as the starting of the
Exploitation will be unreservedly verified by COMIBOL, which will present the
detailed reports of one and the other situation, within sixty (60) days.
==========================
7.6. ASC BOLIVIA LDC, at any time during the First Phase, but only after the
Minimum Work Program has been complied with, and not later than the last day of
the maximum term for the Phase, can suspend definitely the exploration of the
areas object of this CONTRACT and withdraw from the Joint Venture Contract, in
which case the CONTRACT will be resolved of full right at the date ASC BOLIVIA
LDC gives notice to COMIBOL of its decision. If ASC BOLIVIA LDC has not
fulfilled the Minimum Work Program, COMIBOL will cash the Bank Guarantee
Certificate of Contract Compliance, without the right to an appeal, claim nor
any exception that ASC BOLIVIA LDC could oppose against COMIBOL in the judicial
or extra-judicial way. The Joint Venture Contract will thus be rendered totally
null and judicially void. ===================
7.7. The simple reduction of the extension of any of the areas, constituting
the AREA GRANTED, according to that recommended by the studies done by ASC
BOLIVIA LDC, will not mean the suspension of the exploration according to that
stated by point 7.6 previous and ASC BOLIVIA LDC is obliged to continue the
execution of the Work Plan pledged in its proposal on the areas selected as
attractive, which will be executed until the expiry of the term established for
the First Phase. ======================
EIGHT.- EXPLORATION INITIAL PAYMENTS.- 8.1. ASC BOLIVIA LDC, according to the
- -------
Terms of Reference of the Public Tender will pay COMIBOL the following scale of
Exploration Initial Payments:
FIRST PHASE.- Three 57/100 American Dollars ($US 3.57) per hectare on the
- -------------
entire extension of the GRANTED AREA on 1.687 hectares plus 4 hectares of
Demasias Cobrizos. ==============================================
8.2. The payments described and stated in the previous Point (8.1), will be
paid on the 1.687 hectares plus 4 hectares of Demasias Cobrizos or mining
properties, within thirty
<PAGE>
8
(30) days of the physical delivery of the concessions by COMIBOL to ASC BOLIVIA
LDC. Any reduction in the extension of the areas in any of the concessions of
the GRANTED AREA, either be during the maximum term of 24 months, or the Second
or Third Phases, will not cause the return or reimbursement of the Exploration
Initial Fees agreed upon in Points 8.1, 8.3 and 8.4 of this CONTRACT, by COMIBOL
to ASC BOLIVIA LDC and the amounts paid will be consolidated definitely in
favor of COMIBOL. ==================
8.3. SECOND PHASE: One Hundred and Nineteen 05/100 American Dollars ($US 119.05)
per Hectare on the extension of the concessions that, at the start of the Second
Phase, decides to explore within the term of 24 months established for this
Phase. The exploration operations discontinuity is admitted within a same
mining concession.- The first phase area can also be reduced or request
COMIBOL, or perform mining petitions to the State for larger extensions should
there be free land, according to that explained in the Twenty Sixth Clause of
this CONTRACT and according to that laid down in the last part of Clause 7.4 of
the CONTRACT.- ASC BOLIVIA LDC is obliged to notify COMIBOL of any area
reductions of the GRANTED AREA with a thirty (30) days' notice prior to the
ending of the preceding Phase term. It will also notify of any anticipation in
the term computing due to entering to the Exploitation Phase, in the same
conditions. =====================================================
8.4 THIRD PHASE: Five Hundred Ninety Five 24/100 American Dollars ($US 595.24)
per hectare as Initial Exploration Fee on the extensions of the mining
concessions, that at the start of the Third phase decides to exploit within the
term of TWELVE (12) MONTHS. ===== In this phase, the exploration operations
discontinuity is admitted within the same concession. The exploration area can
also be reduced with relation to the First and Second Phases or request COMIBOL
or make mining petitions to the State for a larger extension should there be
free land according to that established in Clause Twenty Sixth of this
CONTRACT.- ASC BOLIVIA LDC is obliged to notify COMIBOL of any reduction of
areas of the GRANTED AREA, with no less of THIRTY (30) DAYS before the
conclusion of the Second Phase. ===== It will also notify COMIBOL of the
anticipated conclusion within the term of this Phase when it decides to enter
the Exploitation Phase. =======================================
8.5. All the Payments of the Exploration Initial Fees established in Points
8.1, 8.2, 8.3 and aforementioned will be done by ASC BOLIVIA LDC before the
start of the corresponding Phase and within a term of thirty (30) days maximum,
at COMIBOL'S offices in La Paz city, receiving the corresponding fiscal receipts
for tax purposes. ===================================================
NINTH.- MINIMUM GUARANTEED INVESTEMENT DURING THE FIRST PHASE OF EXPLORATION.-
- -------
9.1. According to the Public Tender's Terms of Reference, ASC BOLIVIA LDC
accepts and is compelled to make a guaranteed Minimum Investment during the
First Phase of the Exploration Period of Six Hundred and Twenty Five Thousand
00/100 American Dollars ($US625,000.00), pledged in the Chapter and Investment
Plan, Page Eleven of its Proposal. =====
9.2. As a consequence, ASC BOLIVIA LDC guarantees the minimum total investment
of the established amount in the previous Point, through the presentation to
COMIBOL of a Bank Guarantee Certificate for Contract Compliance, issued
irrevocably in favor of
<PAGE>
9
COMIBOL by BHN MULTIBANCO Bank of La Paz City, under No. 10001821 dated
September six nineteen ninety six for One Hundred and Twenty Five Thousand
00/100 American Dollars ($US 125,000.00) valid for Thirty (30) Months,
equivalent to twenty percent (20%) of the minimum investment pledged.
================
9.3. Whilst ASC BOLIVIA LDC, during the First Phase, is making the
corresponding investments, it can request COMIBOL the return of the original
Guarantee Certificate, simultaneously substituting it with a new certificate
covering the rest of the guarantee for the investment not yet made, and for the
corresponding term until in the term of twenty four (24) months, or before it if
the exploration term for the First Phase is anticipated, the minimum total
investment pledged has been made according to Clauses 7.3 and 9.1 of this
CONTRACT. The changeover of the guarantee certificates will be done within 30
days maximum, with prior verification and acceptance by COMIBOL that the
investments have been made by ASC BOLIVIA LDC, through documented evidence, with
attesting receipts and a report by an independent auditor. ======
9.4. If the last day of the twenty four (24) month period for the First Phase
has expired, and there would be a remainder of the investment not made by ASC
BOLIVIA LDC, COMIBOL will be able to execute and cash the Guarantee Certificate
valid at that date, and ASC BOLIVIA LDC won't be able to oppose a recourse nor
an exception of any nature. ==============================
9.6. The Three Phases that form part of the Exploration Period, have the
objective of developing mineralogical reserves, design of treatment plants and
the preparation of a rational and mechanized exploitation plan, design and
optimization of the metallurgical treatment and recovery processes, drawing up
technical-economical feasibility projects and the adoption of appropriate
measures for the protection of the environment, pollution control and recovery
of the land, objectives described in ASC BOLIVIA LDC'S Proposal Work Program.
==============================================================
9.7. Thus, it is agreed that, if ASC BOLIVIA LDC considered attractive
determined areas to start in them the Exploitation Phase, at any time within the
determined terms for any of the Three Phases, but if and when the Work Program
has been complied with entirely of the Exploration Phase given in ASC BOLIVIA
LDC'S proposal described in ANNEX "B" of this CONTRACT and the minimum
investment has been entirely made, apart from the technical-economical study,
ASC BOLIVIA LDC can enter into the exploitation phase, and must notify COMIBOL
of this decision for the purposes of verifying the compliance of the
aforementioned conditions and the financial-accounting management of the
corresponding share of COMIBOL established in ASC BOLIVIA LDC'S proposal.
=========================================
9.8. If ASC BOLIVIA LDC does not exercise its Exploitation option rights at the
end of the Exploitation Period, either it occurs at the expiry of any of its
Phases determined in the CONTRACT, or before, be decision of ASC BOLIVIA LDC,
the latter is obliged to present COMIBOL, without any charge or reimbursement of
any nature, all the technical information, drawings, maps, designs, calculations
and reports. ===========
9.9. The suspension or no performance of the compulsory minimum investment
pledged by ASC BOLIVIA LDC within the terms and conditions stated in this
<PAGE>
10
CONTRACT, will mean for all legal ends and purposes, the statement by ASC
BOLIVIA LDC of its decision to withdraw from the Joint Venture Contract
constituted in this CONTRACT and COMIBOL without the need to comply with the
prior special formality will cash the Bank Guarantee Certificate presented by
ASC BOLIVIA LDC, without any right to appeal, exception nor protest of any kind
by the latter, either be judicially or extra-judicially. ====================
9.10. As a result, also, all the extension of the AREA GRANTED, object of this
CONTRACT, will be reverted to COMIBOL'S total domain. Within ninety (90) days
maximum, ASC BOLIVIA LDC must withdraw all the equipment and machinery employed
until then, assuming the costs and risks. ==============
The buildings, access roads and other facilities adhered to the ground that
would have been installed will remain for the benefit of COMIBOL as
improvements, without the right to a reimbursement nor any type of compensation
and the CONTRACT will be extinguished purely and simply. ======================
The equipment and machinery adhered to the ground can also be withdrawn if and
only the foundations nor the walls to which they are adhered, are not destroyed.
These tasks will be executed under the exclusive risk and charge of ASC BOLIVIA
LDC. =============================================
9.11. If the exploration areas cover only part of the GRANTED AREA, they must
conform squares parallel to the perimeter of such concessions. =============
9.12. The areas that in turn are rejected by ASC BOLIVIA LDC at the end of each
exploration phase, they will be excluded from the CONTRACT and will be reverted
to COMIBOL'S exclusive domain. In turn, the new areas will be annexed to the
CONTRACT, in the conditions stated in Clauses 3.1, 7.4 of the CONTRACT.
===================================================
TENTH.- OF THE EXPLOITATION PERIOD.- 10.1. Once all the stated conditions in
- -------
this CONTRACT are complied with, for the First and in its case for the Second
and/or Third Phases of the Exploration Period by ASC BOLIVIA LDC, without any
exception, not later than the last day of the maximum term for each phase, ASC
BOLIVIA LDC will notify COMIBOL about the areas it has selected in order to
start the Exploitation Period of the deposits contained therein, which will mean
the exercise of its option rights, which will be notified to COMIBOL through a
notarized letter enclosing the technical-economical feasibility studies for the
exploitation to be done and the marketing of the products.
======================================================
10.1. COMIBOL will issue its approval of the feasibility study or its
observations of the same, within ninety (90) days. COMIBOL can post
observations due to technical and economical reasons, the same will be
transmitted to ASC BOLIVIA LDC for their solution. If ASC BOLIVIA LDC dissents
from COMIBOL'S opinion, the dispute will be resolved via the arbitral procedures
established in Clause Twenty Third of this CONTRACT.
===================================
10.2. When ASC BOLIVIA LDC exercises its exploitation option rights, the
parties will not be subject to any negotiation, limiting themselves to the
compliance of the provisions in this CONTRACT.
===================================
10.4. Before the Exploitation Period is started, ASC BOLIVIA LDC is empowered
to establish the non-attractive areas and that will be rejected, the same will
be reverted of
<PAGE>
11
right to COMIBOL'S whole domain and will be automatically
excluded from this Joint Venture Contract. =============================
10.5. COMIBOL will exercise its full and irrestrict right and administrative
powers on the rejected areas. ============================================
ELEVENTH.- OF COMIBOL'S SHARE OF THE EXPLOITATION RESULTS.- 11.1 COMIBOL'S
- ----------
share of the exploitation period is determined as follows, according to ASC
BOLIVIA LDC'S Proposal, of 14 pages. =================
11.1.1. During the recovery period of the capital invested by ASC BOLIVIA LDC
in the construction, installation and starting stages of the production
operations, ASC BOLIVIA LDC will pay COMIBOL an income equivalent to Five
percent (5%) of the Positive Operational Cash Flow, according to the definition
of the Third Clause Point 3.10 of this CONTRACT. ===========================
11.1.2. After the repayment of the initial investment, ASC BOLIVIA LDC will pay
COMIBOL Fifteen percent (15%) of the Positive Operational Cash Flow as defined
in Clause Three Point 3.10 of this CONTRACT. ===================
11.1.4. ASC BOLIVIA LDC is also compelled to increase COMIBOL'S share for each
Ten Cents of a Dollar ($US 0.10), on One Dollar Fifty Cents ($US 1.50) of the
international price of a pound of copper, with One percent (1%), up to a ceiling
of Twenty Two percent (22%) of the share of the operational cash Flow (e.g., for
$US 1.60 for a pound of copper, COMIBOL'S share will be 16%; for $US 1.70
COMIBOL'S share will be 17% and so on). =========================
11.1.5. The periodicity of the payments for the share by ASC BOLIVIA LDC to
COMIBOL will be done every three months with settlements or annual adjustments.
===================================================
11.2. It is expressly agreed that COMIBOL, during all the time this CONTRACT is
in force, will have the right to supervise, verify and control the regularity of
the financial processes described in Points 11.1.1, 11.1.2., 11.1.3, 11.1.4 and
11.1.5 aforementioned, through the accounting analysis of ASC BOLIVIA LDC
documents, in order to establish exactingly COMIBOL'S share, and ASC BOLIVIA LDC
is compelled to disclose to COMIBOL the complete and authentic documents so that
the financial and accounting revisions be effective. ASC BOLIVIA LDC is also
compelled to employ generally accepted accounting principles, for the accounting
of its financial and marketing operations. The supervision, verification and
control of the operations accounting, will be done by COMIBOL in ASC BOLIVIA
LDC's offices and will be executed periodically, according to that determined by
the Administration Committee in the Internal Regulations, approved by the
parties. =========================
TWELFTH.-CONSTRUCTION, INSTALLATION, STARTING AND OPERATION STAGES.- 12.1. The
- ---------
Construction, Installation and Starting of the Operations as a whole, will not
exceed Three (3) years starting as of the date ASC BOLIVIA LDC notifies COMIBOL
as stated in Point 10.1 of Clause Tenth of this CONTRACT, unless force majeure
defined later on in this CONTRACT. ====
12.2. During the Exploitation Period, ASC BOLIVIA LDC will hold the exclusive
administration and will run all the risks of the operations, with absolute
autonomy in managerial decision making. With the same reaches and risks will
also have the
<PAGE>
12
exclusive administration and autonomy in the marketing of the
minerals it produces, without any limitation, either be it locally or through
exports. =========
12.3. COMIBOL will not be held responsible at all for the development or the
financial results of the operations, its performance will be limited to the
punctual perception of its share in the Cash Flow and its share in the
coordinating, information and supervision organisms.
===============================
12.4. Nonetheless, the hiring parties agree that the administrative expenses of
the joint venture can not exceed Five percent (5%) of the production direct
costs.- Equally, it is also stated that the marketing commission and the
marketing costs can not exceed, as a whole, Two percent (2%) of the Net
Smelter's Return. ================================================
12.5. ASC BOLIVIA LDC will establish and execute a minerals marketing system
that will allow an efficient, transparent management, guaranteeing the
nonexistence of eventual benefits within or outside the country, for the benefit
of one of the parties to the detriment of the other. =========================
12.6. The purchase of equipment, machinery, materials, facilities and raw
materials by ASC BOLIVIA LDC will be done in such a manner that the interests of
the parties will not be affected and in particular COMIBOL's share. ========
THIRTEENTH.-TERM OF THE CONTRACT.- 13.1. This Joint Venture Contract will have
- ------------
a term of Forty (40) Years, starting as of the physical and official delivery of
the areas stated in this CONTRACT by COMIBOL to ASC BOLIVIA LDC. ===== This
term will be renewed in the same contract conditions for just one more time,
with a prior technical and economical justification, if ASC BOLIVIA LDC
expresses, in writing, its will to do it.- The stated term includes the
Exploration Period, either be in its entirety (5 years) or less, if ASC BOLIVIA
LDC enters into the Exploitation Period beforehand according to that laid down
in Clause 8.4 of the CONTRACT. ===================================
FOURTEENTH.- INVESTMENTS AND FINANCING.- 14.1. ASC BOLIVIA LDC Is empowered to
- ------------
finance on its account and risk the exploitation operations, either be with its
own or from others. COMIBOL will not acquire any type of obligation related to
such financing, whose service will be exclusively in charge of ASC BOLIVIA
LDC.============================================
14.2. The previous powers are translated in that ASC BOLIVIA LDC is obliged and
pledges to perform all the necessary investments in order to implement into the
operations modern technology, services, machinery, equipment, implements,
materials, facilities, constructions and suchlike, as well as assume the
commitments that will allow a rational exploitation of the mineralogical
deposits of the AREA GRANTED, object of this CONTRACT. =====================
14.3. The investments regime, initial as well as future, will respect
invariably and at all times, that stated in Clauses Eleventh of this CONTRACT,
relative to COMIBOL'S share of the results, regime that will remain invariable
during the whole term of the CONTRACT. =====================================
FIFTEENTH.- LABOR RELATIONS- 15.1. The hiring and administration of the
- -----------
workforce, technicians and employees during the Exploration Stage, as well as
during the Exploitation Stage is of the absolute and total responsibility of ASC
BOLIVIA LDC,
<PAGE>
13
and it is of its entire responsibility the compliance with the
Labor General Law, its Regulatory Decree and related legal provisions and
complementary in force or to be enacted, as well as those provisions relative to
social security, professional risks, employer's and employee's contributions,
whilst COMIBOL is totally exempt of responsibility, and can not be demanded in
any lawsuit of labor nature nor in any civil, penal, tax, fiscal coactive,
social coactive nature, nor administrative, as an result of acts or omissions
resulting from the execution of this CONTRACT by ASC BOLIVIA LDC. =============
15.2. COMIBOL will deliver ASC BOLIVIA LDC the AREA GRANTED, object of this
CONTRACT, free from encumbrance or obligations of labor or legal character.
=====================================================
SIXTEENTH.- FORCE MAJURE.- 16.1. None of the hiring parties can demand of the
- -----------
other the compliance with the obligations acquired in this CONTRACT, when the
compliance has been delayed, hindered or impeded by causes not blamed on the
obligated party. Such causes will constitute those of force majeure or
fortuitous cases, as earthquakes, flooding, fire, strikes declared illegal,
civil commotion, factors that can affect transport in general, governmental
prohibitions and catastrophes in general, according to that laid down by
articles 379 and 380 of the Civil Code. ===== It will also be considered as a
force majeure a sustained fall for over six (6) months in the price of minerals
to be produced under the minimum established by the feasibility study, if and
when such situation causes the stoppage of the extraction or production
operations of the minerals. If these operations continue even under such market
conditions, the force majeure will disappear.
====================================
16.2. The period during which ASC BOLIVIA LDC will be hindered to normally
comply with this CONTRACT, will be added to the term stated in Clause
Thirteenth. =====================================================
16.3. Should a force majeure cause happen, ASC BOLIVIA LDC is obliged to notify
COMIBOL within the next five days, describing the nature of the happening and
its effects. =========================================
16.4. The omission of this notice will maintain COMIBOL'S indemnity in the
regularity of its share in the results and in the accounting of the time period.
===
16.5. When the force majeure causes are of such nature and magnitude that the
objectives of this CONTRACT and the joint venture in general are substantially
and permanently harmed or are affected in a continuous manner for more than six
months, the hiring parties can agree upon the termination of the CONTRACT.
==============================================================
SEVENTEENTH.- ENVIRONMENTAL STANDARDS AND ENVIRONMENTAL MANAGEMENT PLAN.- 17.1.
- -------------
During the performance of the works and during the life of this CONTRACT, ASC
BOLIVIA LDC will be subject to the environmental requirements, that is to say,
the allowable pollution limits in force in the country, established by Law. No.
1333 dated April twenty seventh nineteen ninety two and the regulations enacted
by S.D. 24176 dated December nineteen ninety five and other provisions in force
or to be enacted in the future. ========
17.2 ASC BOLIVIA LDC will draw up the environmental management plan, starting
from an initial audit, in order to avoid or mitigate the environmental impact,
as
<PAGE>
14
established by the next Clause 17.4, as well as the work plan for the
execution and closure of activities. ==================================
17.3. The environmental management mainly comprises the recovery of the
exploited areas, in order to control the erosion, stabilize the ground and
protect the waters and the atmosphere, perform the treatment of waster
materials and eliminate in a safe manner the tailings, mill tailings and dumps.
=======================
17.4. When ASC BOLIVIA LDC starts its activities, it will determine the
environmental liabilities that could exist in the deposits, object of this
CONRACT, through the performance of the respective environmental audit,
according to that established in Clause 17.8.1. =========
17.5. ASC BOLIVIA LDC will be held responsible for the environmental pollution
flows originated in its mining works and through the accumulation of wastes
during the performance of its activities. In turn, COMIBOL will be responsible
for the accumulations and flows coming from mining works, done prior to this
CONTRACT, established in the environmental audit according to the previous
Clause 17.4. ============================================
17.6. When ASC BOLIVIA LDC does not comply with that determined in Clause 17.4
it will assume the exclusive responsibility for the flows and accumulations
resulting from the old and new mining works. ===========================
17.7. ASC BOLIVIA LDC will pay for damages, to those affected by the
environmental pollution generated by the accumulations and flows coming from its
mining works with absolute exclusion of COMIBOL. ====================
17.8. The environmental management, particularly in order to establish the
polluting accumulations and flows, will be controlled by ASC BOLIVIA LDC in the
following manner:==================
17.8.1. Through the drawing up of an initial environmental audit done by ASC
BOLIVIA LDC, to be done during the first six (6) months of the Exploitation
Period. ========================================================
17.8.2. Should COMIBOL have its own audit and ASC BOLIVIA LDC accept it, it
will be applicable and ASC BOLIVIA LDC must draw up the environmental management
plan within four (4) months, starting from the date of the affidavit
corresponding to the CONTRACT. ===================================
17.8.3. Through environmental audits for the compliance of obligations and the
establishment of responsibilities, resulting from the environmental management
plan, to be done every three years by specialized companies or entities of
national or international prestige, hired and paid by ASC BOLIVIA LDC. ======
17.8.4. Through annual reports on the environmental management prepared by ASC
BOLIVIA LDC.==============================================
17.8.5. COMIBOL can ask ASC BOLIVIA LDC the environmental information it
considers necessary and can perform on its own the audits it deems necessary.
=============================================================
17.8.6 The environmental management according to that established in Point
17.4, comprises the recovery of the exploited areas in order to reduce and
control erosion, stabilize the grounds and protect the waters and the
atmosphere, perform the treatment
<PAGE>
15
of waste materials and eliminate in a safe manner the tailings, mill tailings
and dumps. ============================
17.8.7. The joint venture will not be able to be resolved as long as the terms
given in this Clause are not complied with. ===== On the other hand, ASC
BOLIVIA LDC will continue having the responsibilities corresponding to its
environmental management, according to the law, once the CONTRACT is dissolved.
=====================================================
17.8.8. In order to avoid controversies ASC BOLIVIA LDC will timely and
sufficiently inform the representatives of the local populations, on the aspects
related to the protection of the environment and will try to interest them in
the environmental repair works. ===== Also, ASC BOLIVIA LDC must comply with
the legal requirements regarding the information to third parties and others
that correspond. ====================================================
EIGHTEENTH.- INEXISTENCE OF SOLIDARITY.- 18.1. it is expressly agreed that the
- ------------
hiring parties do not assume a joint solidarity of any nature with respect to
the obligations contracted by any of them for the compliance of the obligations
resulting from this CONTRACT, unless that eventually and by free will and in an
express manner any of them assumes such obligations, which will be truly
recorded in a notarized document. ===================================
18.2. It is also expressly convened that this document contains all the
agreements, specifications and provisions agreed by the hiring parties, and none
of them will be obliged nor related to the other by any statement, pledge or
verbal or written agreement that is not expressly incorporated in this CONTRACT.
===================================================
NINETEENTH.- QUALITY OF THE CONCESSIONAIRE.- 19.1. According to that laid down
- ------------
by Art. 197 of Law No. 1243 for the Updating of the Mining Code, ASC BOLIVIA LDC
does not acquire property rights nor a mining concession at all on the soil or
underground of the mining concessions forming part of the AREA GRANTED. ===
19.2. Nonetheless, COMIBOL grants in favor of ASC BOLIVIA LDC the operational
exclusiveness during the exploration phase as well as during the construction,
installation, starting and exploitation and the annexing of facilities,
equipment, machinery and other complementary assets, such as constructions,
access roads, water and right of way servitudes and customs of the said
concessions, understanding as exclusiveness the fact that during the life of
this CONTRACT none of COMIBOL's rights on such concessions, understanding as
exclusiveness the fact that during the life of this CONTRACT none of COMIBOL's
rights on such concessions, servitudes, uses and customs will be affected,
reduced nor harmed in any way, guaranteeing the quiet and peaceful possession,
use and enjoyment of the same, protecting all the investment and development of
ASC BOLIVIA LDC's activities, defending such rights against incursions,
invasions and other disturbances by third parties, either they be trade unions,
cooperatives, entities or persons, appealing to the means and resources given by
the laws of the Republic. ==================
TWENTIETH.- COORDINATION, INFORMATION AND SUPERVISION OF THE JOINT VENTURE.-
- -----------
20.1. ASC BOLIVIA LDC will have under its exclusive and autonomous control and
responsibility the management of all the exploration and exploitation
<PAGE>
16
operations, without any exclusion nor limitation, with the restrictions
established in the laws of the Republic. ===============================
20.2. Nonetheless, this Joint Venture Contract will have as coordination,
information and follow-up organism, a COMMITTEE constituted at the signing of
the CONTRACT, that will be composed by four (4) members, two (2) of them
appointed by COMIBOL, and the other two (2) by ASC BOLIVIA LDC, whose emoluments
will be paid by the party appointing them. ====================
20.3. The COMMITTEE will constitute the main relationship means between COMIBOL
and ASC BOLIVIA LDC during the life of the CONTRACT.- The main responsibility
of the COMMITTEE will be to maintain the best managerial relations between the
parties and to contribute so that any disagreement, that could come up between
them, be discussed and resolved in a concerted manner.
=======================================================
20.4. The COMMITTEE's attributions, among others that it will determine, will
be: ===========================================================
a) Approve during its first meetings an internal bylaw that will regulate the
COMMITTEE's activities. ==========================================
b) Verify the proper compliance of the conditions of this CONTRACT. ========
c) Create a communications system between ASC BOLIVIA LDC'S managerial body and
the COMMITTEE in order to ease the flow of the relations between both bodies.
=================================================
d) Formulate the recommendations it considers opportune for the better
compliance of the CONTRACT'S objectives, not meaning that such recommendations
are compulsory for the parties. ========================
e) Gather all the technical, administrative and financial information in order
to conserve it within reach for its inspection and study by the parties.
===========
f) Recommend the execution of technical audits of the performed operations by
the virtue of this CONTRACT, taking care that such audits at no time hinder or
interfere with the operations or impairs ASC BOLIVIA LDC's administrative
autonomy. These audits will be paid by the party requiring them. ============
g) Periodically formulate the recommendations that are considered necessary,
with relation to the development of ASC BOLIVIA LDC's operational plans. ====
TWENTY-FIRST.- BOARD OF DIRECTORS.- 21.1. Within fifteen days of having signed
- --------------
the parties this CONTRACT, these will organize a BOARD OF DIRECTORS.
==================================================
21.2. This BOARD OF DIRECTORS will be formed by representatives from both
parties, COMIBOL and ASC BOLIVIA LDC, with equal number of members, whose
emoluments will be paid by the party appointing them. ==============
21.3. The BOARD OF DIRECTORS will meet whenever necessary and called by the
President at his/her own initiative or at the request of the parties. =======
21.4. The President of the BOARD OF DIRECTORS will be appointed by the members
of the BOARD OF DIRECTORS at the first ordinary meeting of such organism.
======================================================
21.5. The responsibilities of the BOARD OF DIRECTORS are, apart from those it
decides: =====================================================
<PAGE>
17
21.5.1. To determine the general policies of the joint venture; ==============
21.5.2. To approve the financial statements of the joint venture; ============
21.5.3. To approve the hire of external independent auditors so they will emit
an opinion on the joint venture's annual financial statements; =================
21.5.4. To know and approve the recommendations with regard to the plans,
projects and reports put before them by the COMMITTEE;=================
21.5.5. The joint venture's BOARD OF DIRECTORS will be the relations organism
between COMIBOL'S Board of Directors and ASC BOLIVIA LDC's executive body,
for everything concerning to the running of the joint venture.============
21.5.6. To know the audited financial statements done by external and
independent auditors of optimum quality, at the end of each fiscal year; =======
21.6 The BOARD OF DIRECTORS' duties will, at no time, interfere nor impair the
administrative autonomy of ASC BOLIVIA LDC, on the joint venture's operations
during the Exploitation Stage and marketing of the minerals. ======
21.7 The BOARD OF DIRECTORS will carry a chronological and circumstantial
minutes of every and all their meetings, and the former will be signed by those
present. =======================================================
TWENTY-SECOND.- TAX AND CONTRIBUTIONS REGIME.-22.1 All the taxes and liens
- ---------------
applicable to the mining industry, as well as those applicable to the import of
equipment, machinery, raw materials, materials and other assets, to the
marketing of minerals locally and for export, in force at the date of the
signing of this CONTRACT that will be enacted in the future will be exclusively
paid by ASC BOLIVIA LDC, and effects on COMIBOL'S corresponding share will be
regulated by that stated in Clause Eleventh of this CONTRACT.
=================================================
22.2. Those taxes applicable to profits each party will obtain from the mining
operation, object of this CONTRACT will be the entire responsibility of each of
them, without any other responsibility for the other party. =================
22.3 The contributions to entities of Social Security Complementary Funds or
similar other ones existing or to be created, are of the exclusive
responsibility and charge of ASC BOLIVIA LDC, with COMIBOL's absolute exclusion.
======
TWENTY-THIRD.- RESOLVING OF CONFLICTS BETWEEN PARTIES AND ARBITRATION.- 23.1
- --------------
All controversies and claims that could arise between parties with regards to
the interpretation or execution of this CONTRACT, will be tried to resolve them
amicably and fast between such parties. In case they can not resolve them
through mutual negotiations within sixty (60) days, any of the hiring parties
can request the matter under conflict to be put before an arbitrator.
========================================================
23.2 In such circumstances, the controversy or interpretation will be resolved
through settlement and/or arbitration according to the Regulations given by the
National Chamber of Commerce's Settlement and Arbitration Center in La Paz
(Bolivia) that, forming part of this Clause, the parties declare to know and
accept. The Center will appoint the arbitrator from among the members of the
Arbitral Body of such Settlement and Arbitration Center belonging to the
aforementioned Chamber. =========================================
<PAGE>
18
23.3 No recourse will proceed against the Arbitrator's decisions, thus the
parties expressly resign to put it forward. ====================================
23.4 The arbitration costs will be paid by the loser in the Arbitral Decision.
====
TWENTY-FOURTH.- CONTRACT TRANSFERRAL TO A THIRD PARTY.- 24.1. This Joint
- ---------------
Venture Contract is a result of the award to a proposal formulated by ASC
BOLIVIA LDC to COMIBOL involving the evaluation of certain technical, financial
conditions and of the industrial capability and competence of the bidder.
Nonetheless, ASC BOLIVIA LDC is empowered to incorporate into the CONTRACT's
execution one or more members of known prestige and capability in the Mining
Industry, or in the investments and financial branch, as well as transfer or
subrogate partially their share or obligations resulting from this CONTRACT.-
To that effect, the previous conditions stated as follows must be complied with:
==================================================
24.2 To this effect, it will request the prior and written authorization from
COMINOL, providing all the details demonstrating the suitability of the
collective or individual persons that are pretended to be incorporated or those
that will partially substitute ASC BOLIVIA LDC's participation.
====================
24.3 COMIBOL reserves itself the right to assess the industrial and/or
financial sufficiency of the Entity or person acquiring or is subrogated the
partial share of ASC BOLIVIA LDC in the CONTRACT, with the right to veto if that
or this does not have the required conditions to the effect, with the sole
obligations to give the concrete and reasonable motives restricting its
acceptance. ===== The third parties that could be incorporated to the Joint
Venture Contract, will assume the obligations, that as members, are stated in
this CONTRACT. ===============
24.4 Any modification to the partial participation or share of ASC BOLIVIA LDC
in this CONTRACT, by virtue of having obtained it through a public tender under
special conditions, either be the incorporation of new members, transfer of
rights, subrogation of rights or other contractual forms, the rights and shares
corresponding to COMIBOL stated in this CONTRACT won't be able to be altered,
modified, reduced nor affected. ===============================
TWENTY FIFTH.- RESCISSION OF CONTRACT.- 25.1. During the exploration phases,
- --------------
COMIBOL will be able to rescind the CONTRACT unilaterally, in the following
cases: ===================================
25.1.1. Nonfulfillment of the initial payments by ASC BOLIVIA LDC for each
phase, which should be done within the first thirty (30) days. ===============
25.1.2. Nonfulfillment in executing the work program and minimum investment
pledged by ASC BOLIVIA LDC for the First Exploration Phase, in which case the
Bank Guarantee Certificate presented by ASC BOLIVIA LDC to COMIBOL will be
cashed, and COMIBOL will give notice to ASC BOLIVIA LDC furnishing the motives.
====================================================
25.2. In case the contract is terminated for any reason during the Exploration
Phase, all the improvements made by ASC BOLIVIA LDC in the areas of the CONTRACT
will stay behind for the benefit of the concessions, object of the former,
without any charge for COMIBOL, with the exception of the tools, equipment,
vehicles, materials and those facilities liable to be withdrawn that have not
been adhered to the ground, all of which
<PAGE>
19
will be able to be withdrawn by ASC BOLIVIA LDC. ===== All the technical
information related to the explored areas, together with the charts, studies,
calculations and complementary details, will also pass as COMIBOL'S property,
without any charge to it. =============
25.3. The CONTRACT can also be terminated due to the following causes: ===
25.3.1. If the CONTRACT has expired, if it hadn't been extended according to
that laid down in Clause Thirteenth; ==================================
25.3.2. By mutual agreement of the hiring parties; =======================
25.3.3. By ASC BOLIVIA LDC's unilateral decision, when certain circumstances
appear that make unviable the exploitation in rentable economical conditions. ==
25.3.4. When the construction, installation and starting of the operation
exceed Three (3) years since the notification by ASC BOLIVIA LDC to COMIBOL
announcing its exercise of right to option, unless there are force majeure
causes.
==============================================================
25.3.5. When the force majeure causes are produced, such as defined in Clause
Sixteenth of this CONTRACT. ====================================
25.4. In case of termination of this contract for any of the motives stated in
this CONTRACT, either be during the Exploration Period or in the Exploitation
phase, ASC BOLIVIA LDC will be obliged to comply with the delivery of the
studies and other information in the next ninety (90) days.
==========================
TWENTY-SIXTH.- EXCLUSION AREA.- 26.1 ASC BOLIVIA LDC can not formulate petitions
- --------------
nor perform mining activities, either by itself or through an intermediary, in
an area of two (2) kilometers from the perimeter of the concession the object of
this CONTRACT, unless there is an express authorization from COMIBOL. In any
case, the petition made infringing this prohibition, will be considered as done
for and for COMIBOL's benefit. ========================
26.2 COMIBOL also won't be able to perform mining activities, either by itself
or through an intermediary, in an exclusion area of one kilometer from the
perimeter of the concessions object of this CONTRACT, unless the parties agree
to the contrary. ======================================================
TWENTY-SEVENTH.- OPTION TO PURCHASE.- 27.1. At the definitive closure of
- -----------------
operations due to the CONTRACT's expiry, ASC BOLIVIA LDC grants COMIBOL the
option rights, for a period of ninety (90) days, for the purchase of its rights
and tangible assets in the joint venture, in equal opportunities as other
interested parties. =======================================================
27.2. COMIBOL and ASC BOLIVIA LDC will appoint an expert appraiser in charge of
establishing the price of the assets, using as basis for the appraisal the
market value. ===============================================
27.3. If COMIBOL decides to exercise its option rights, it must notify so of
its decision to ASC BOLIVIA LDC through a notarized letter, within the term
established in Point 27.1. ====================================================
27.4. The payment of the price will be done within the following sixty (60)
days after the notice provided in the previous point is given.
===================
<PAGE>
20
TWENTY EIGHT.- CONTRACT'S CONSTITUTIVE DOCUMENTS.- 28.1. Are part of this
- --------------
CONTRACT and will be inserted in the corresponding Public Deed the following
documents: =============================================
A) Supreme Decree No. 213601 dated February sixteenth nineteen
ninety four.=
B) COMIBOL'S Board of Directors Resolution No. 1084 dated
December twenty second nineteen ninety five.
========================================
C) COMIBOL's Board of Directors Resolution No. 1105 dated
February six nineteen ninety six. ==============================================
D) General Administration Power of Attorney conferred to Dr.
Alberto Alandia Barron No. 140 awarded in the Notary of Mines in La Paz on may
seventeenth nineteen ninety four. ============================================
E) Special Power of Attorney conferred to Lic. Luis Arnal
Velasco, registered in the Notary of Mines in La Paz, under No. 205 on July
twenty eight nineteen ninety four.
========================================================
F) Special Power of Attorney conferred to Mr. Johnny Delgado
Achaval, registered in the Notary of Mines in La Paz, under No. 105 on April
first nineteen ninety six, registered in the Commerce General Register, Entry
728, Book 07-0 the same month and year.
G) COMIBOL'S Board of Directors Resolution No. 1183/96 dated
June twenty eight nineteen ninety six.
==============================================
H) Pages 4, 11, and 14 of ASC BOLIVIA LDC'S proposal.
=================
TWENTY-NINTH.- MINING LICENSES.- 29.1.- During the Exploration Phase, the
- --------------
mining licenses on all the areas forming part of the mining concessions of the
AREA GRANTED will be in charge of COMIBOL. =============================
29.2. Starting from the date ASC BOLIVIA LDC notifies COMIBOL that it will make
use of its option right, the mining licenses on the areas declared as positive
by ASC BOLIVIA LDC and in which the Exploration Phase will be developed, will be
paid by ASC BOLIVIA LDC on behalf of COMIBOL and the receipts will be given by
ASC BOLIVIA LDC to COMIBOL since they are documents representative of its
concessionaire right. This payment won't be compensated nor reimbursed by
COMIBOL nor by the joint venture and will be done exclusively by ASC BOLIVIA
LDC. ======================================================
THIRTIETH.- OFFICIAL REGISTRATION OF THE CONTRACT.- 30.1. The official
- -----------
registration's expenses for this CONTRACT, together with the ANNEXES and
corresponding documents, will be paid by ASC BOLIVIA LDC, at the Special Notary
of Mines in La Paz city. ====================================
30.1 ASC BOLIVIA LDC is obliged to present COMIBOL Three (3) Affidavits of the
officially registered CONTRACT, without any charge for COMIBOL, within sixty
(60) days after the writ is signed. =======================================
THIRTY-FIRST.- CONSENT AND ACCEPTANCE.- 31.1. We, DR. ALBERTO ALANDIA BARRON,
- --------------
PRESIDENT OF THE CORPORACION MINERA DE BOLIVIA (COMIBOL) and LIC. LUIS ARNAL
VELASCO, MANAGER OF THE CONTRACTS AND FINANCE UNIT OF THE CORPORACION MINERA DE
BOLIVIA (COMIBOL), both full of age, neighbors of this city, with ID.'s No.
1191230 Pt. and No. 332387 L.P., respectively, able by right, on one side, and
MR. JOHNNY DELGADO ACHAVAL, in
<PAGE>
21
representation of ASC BOLIVIA LDC, of full age, neighbor of this city, with ID
No. 39745 L.P., able by right, we give our full consent and accept every and
each of the clauses, terms and conditions of this CONTRACT, to which we give
full validity as Private Document between parties, whilst it is converted into a
public deed, pledging to a faithful and strict compliance, subscribing it in La
Paz city, on the Eleventh of September nineteen ninety six.- And you, Special
Notary of Mines will add all the rest of safety and style clauses.
==========================================
FOR CORPORACION MINERA DE BOLIVIA: Signed.- Lic. Luis Arnal Velasco.- MANAGER OF
CONTRACTS AND FINANCES.- Signed.- Dr. Alberto Alandia Barron.- PRESIDENTE. =====
FOR ASC BOLIVIA LDS: Signed.- Mr. Johnny Delgado Achaval. AGENT AND PROXY. =====
Signed. Dr. Jorge Eyzaguirre Duran. - RUC 02199106.- C. Ab. 0157.- LEGAL ADVISOR
COMIBOL. ===== JED/rav. ======================================================
ANNEX "A".- ASC BOLIVIA LDC.- MINING CONCESSION TO BE EXPLORED.- The area of
- -----------
interest is located in the Lipez region and our proposal is specifically
referred to the following mining concessions: =========
<TABLE>
<CAPTION>
NAME OF THE CONCESSION NO. OF HECTARES
- ------------------------------ ---------------
<S> <C>
Cobrizos 168
Ines 99
Kohollpani 100
Puntillas 250
Reintegro 100
Santo Tomas 500
Santo Tomas II 470
TOTAL 1,687
</TABLE>
Our offer puts emphasis on the development of a complete exploration program for
the First Phase in the mining concessions Cobrizos and Reintegro. Also proposes
a minimum work scope in the rest of the concessions without the restriction
that, if the results are encouraging, they will continue with exploration works
over the minimum investment proposed for each one. =====SEAL: Legal Advisory
COMIBOL. It is a faithful copy of the original. La Paz, 13 Sept. 1996.-
Signed: Dr. Jorge Eyzaguirre Duran.- RUC 02199106 C. Ab. 0157. LEGAL ADVISOR
COMIBOL. ============
Signed: Dra. Nelly A. Maldonado.- Lawyer - 048903.- Notary Public 1/st/ class. -
La Paz - Bolivia 003. ================================================
BUDGETS AND INVESTMENT PLAN.- For the execution of the First Phase in
- -----------------------------
Reintegro, we propose a minimum investment of US$ 248,000 (Two hundred seventy
seven thousand American dollars). For Cobrizos we propose a minimum investment
of US$ 248,000 (Two hundred forty eight thousand American dollars, in the
understanding that in this concession US$ 29,000 have already been invested for
the execution of the prospection visit, mapping, outcrops sampling and part of
soil geochemistry. For the First Phase in Cobrizos and Reintegro, it is
proposed a total minimum investment of US$ 525,000.- The execution of the
Second Phase will depend on the results obtained in the First Phase and in the
case it is decided to continue with the Second Phase in one or both properties,
this will be timely notified to COMIBOL. An investment of US$
<PAGE>
22
425,000 has been estimated for the Second Phase in each of the selected
properties. ===== We also propose to execute only Stage One of the First Phase
in the Ines, Kohllpani, Puntillas, Santo Tomas and Santo Tomas II concessions,
with a minimum investment of US$ 20,000 (Twenty thousand American dollars) in
each, making a total of US$ 100,000 (One hundred thousand American dollars) for
all five concessions. Should we decide to stop after executing Stage One or to
continue exploring in any of these concessions, COMIBOL will be timely notified
of such; and the rest of the Stages of the First Phase can thus immediately
continue. ===== The estimated costs for each exploration activity are given
below, pointing out that are referred only to direct exploration expenses and
the administrative expenses are not considered. ===== SEAL: Legal Advisory
COMIBOL.- It is a faithful copy of the original.- La Paz, 13 Sept. 1996.-
Signed: Dr. Jorge Eyzaguirre Duran.-RUC 02199106.- C. Ab. 0157.- Legal Advisor
COMIBOL.- Signed: Dra. Nelly A. de Maldonado.- Lawyer 048903.- Notary Public
1/st/ Class. - La Paz - Bolivia 003. ===
PARTICIPATION OFFERED TO COMIBOL.- In case the feasibility study for one or
- ----------------------------------
several concessions is positive and our company decides to exercise its right to
exploitation, a detailed investment plan will be prepared. At present, we are
in conditions to offer COMIBOL the following participation terms during the
production period: ==============================================
1. 5% (Five percent) of the positive operational cash flow during the recovery
period of the invested capital. =====================================
2. 15% (Fifteen percent) of the positive operation cash flow after the recovery
of the investments. ==============================================
3. For each 10 cents of a dollar over US $1.50 of the international price for
one pound of copper, we will increase on 1% COMIBOL'S share up to a ceiling of
22% of the operational cash flow's share (e.g.: for US$ 1.60 for one pound
copper, COMIBOL'S share will be 16%, for US$ 1.70 it will be 17%, etc.). =====
The advantage of applying this scale as a function of the market's price for
copper is that COMIBOL'S share improves when the project by itself considers it
feasible; that is to say, improves COMIBOL'S share whilst at the same time the
company's situation improves. ===== ASC BOLIVIA LDC does not wish to speculate
and we do not refuse to offer fixed share percentages before knowing the results
from the feasibility study; we think that it should be clear that our wish is to
offer COMIBOL a substantial share when the market conditions so allow. =====
SEAL: Legal Advisory COMIBO.- It is a faithful copy of the original.- La Paz, 13
Sept. 1996.- Signed: Dr. Jorge Eyzaguirre Duran.- RUC 02199106.- C. Ab. 0157.
Legal Advisor COMIBOL. Signed: Dra. Nelly A. De Maldonado.- Lawyer 048903.-
Notary Public 1/st/ Class. - La Paz - Bolivia 003. ============
ANNEX "B".- ASC BOLIVIA LDC. - EXPLORATION PROGRAM.- OBJECTIVES.- Our
- -----------
objective is to discover, delimit, make feasible and exploit at least one low
grade copper - silver deposit and a minimum volume of 10 millions tons,
susceptible to be open pit exploited. ===== GENERAL PLAN.- The exploration
program for the First Phase in the Cobrizo and Reintegro concessions will
consist of the following: geological mapping, detailed sampling of the
outcrops, soil geochemistry, geophysical survey when necessary, trench
geological sampling and mapping, preliminary drillings,
<PAGE>
23
metallurgical tests and pre-feasibility conceptual study.- The First Phase in
the Ines, Kohollpani, Puntillas, Santo Tomas and Santo Tomas II properties will
consist only of the execution, during the first year, of detailed geological
mapping and detailed samplings of rocks and soils. Depending on the results it
will be decided whether or not to continue with exploration works during the
second year. ===== The First Phase will be divided in three stages: Stage 1 will
include a prospection visit, rocks outcrops mapping and sampling; Stage 2 will
consist of the enabling and ventilation of old mining workings, soil
geochemistry, geophysics of trenches; finally Stage 3 will include primary
drillings using reverse circulation, metallurgical tests and a pre-feasibility
conceptual study. ===== We propose to gradually perform the following tasks:
===== YEAR 1: Mapping, sampling, geochemistry/geophysics. ===== YEAR 2:
Trenches, preliminary drilling, metallurgical tests and pre-feasibility study.
===== A field team will be working permanently during Year one and a second team
will be added in Year two for the start and continuation of the drilling if we
decide to continue with more than one concession. ===== Apart from the
geological field work to be completed during Year one of the First Phase, we
will pay greater attention in the neighboring areas to COMIBOL'S concessions
with the objective of obtaining new concessions in case that the results of the
exploration done so justify. ===== FIRST PHASE IN COBRIZOS AND REINTEGRO.- In
July nineteen ninety five, our company signed an agreement with the Litoral
Cooperative in order to explore the Cobrizos concession in the understanding
that this Cooperative had a lease CONTRACT in force with COMIBOL. Based on this
agreement we have completed Stage One of the exploration program of the First
Phase for Cobrizos. It will be required to execute Stage One in Reintegro and
then the program will continue until the First Phase is completed in both
concessions. ===== FIRST PHASE IN THE REMAINING CONCESSIONS.- The exploration in
the other concession (Ines, Kohollpani, Puntialls, Santo Tomas and Santo Tomas
II), will start after the mapping/sampling is done in Reintegro.- The team will
got to the extreme southwest and will start the geological mapping and sampling
in Santo Tomas, then in Santo Tomas II, Ines, Puntillas and finally Kohollpani.
All this work will be done during the first year. ===== Where the results from
the first year work be favorable, we will continue with the next exploration
stages programmed for the First Phase, otherwise the property(ies) will be
rejected. ===== Chart No. 1 shows a general chronogram for the execution of the
works programmed. ===============================
<PAGE>
24
"A S C B O L I V A L D C"
<TABLE>
<CAPTION>
CHART NO. 1
GENERAL CHRONOGRAM
***********************************************************************************************************************************
CONCESSIONS FIRST PHASE: SECOND PHASE: THIRD PHASE:
NAME/ACTIVITY EXPLORATION FEASIBILITY DEVELOPMENT
YEAR 1 YEAR 2 YEAR 1 YEAR 2 YEAR 1 YEAR 2
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COBRIZOS
MAPPING done
SAMPLING partially done
REHABILITATION OF GALLERIES X
GEOCHEMISTRY done
GEOPHYSICS/TRENCHES X
PRELIMINARY DRILLINGS X
METALLURGICAL TESTS X
PRE-FEASIBILITY X
DRILLING TO TEST RESERVES X
FEASIBILITY X
FINANCING X
START OF DEVELOPMENT X
- ----------------------------------------------------------------------------------------------------------------------------------
REINTEGRO
MAPPING X
SAMPLING X
REHABILITATION OF GALLERIES X
GEOCHEMISTRY X
GEOPHYSICS/TRENCHES X
PRELIMINARY DRILLINGS X
METALLURGICAL TESTS X
PRE-FEASIBILITY X
DRILLING TO TEST RESERVES X
FEASIBILITY X
FINANCING X
START OF DEVELOPMENT X
- -----------------------------------------------------------------------------------------------------------------------------------
PUNTILLAS-INES
MAPPING X
SAMPLING X
REHABILITATION OF GALLERIES X
GEOCHEMISTRY X
GEOPHYSICS/TRENCHES X
PRELIMINARY DRILLINGS X
METALLURGICAL TESTS X X
PRE-FEASIBILITY X
DRILLING TO TEST RESERVES X
FEASIBILITY X
FINANCING X
START OF DEVELOPMENT X
- -----------------------------------------------------------------------------------------------------------------------------------
SANTO TOMAS I - II
MAPPING X
SAMPLING X
REHABILITATION OF GALLERIES X
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
25
<TABLE>
<CAPTION>
************************************************************************************************************************************
CONCESSIONS FIRST PHASE: SECOND PHASE: THIRD PHASE:
NAME/ACTIVITY EXPLORATION FEASIBILITY DEVELOPMENT
YEAR 1 YEAR 2 YEAR 1 YEAR 2 YEAR 1 YEAR 2
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
GEOCHEMISTRY X
GEOPHYSICS/TRENCHES X
PRELIMINARY DRILLINGS X
METALLURGICAL TESTS X
PRE-FEASIBILITY X
DRILLING TO TEST RESERVES X
FEASIBILITY X
FINANCING X
START OF DEVELOPMENT X
- -----------------------------------------------------------------------------------------------------------------------------------
KOHOLLPANI
MAPPING X
SAMPLING X
REHABILITATION OF GALLERIES X
GEOCHEMISTRY X
GEOPHYSICS/TRENCHES X
PRELIMINARY DRILLINGS X
METALLURGICAL TESTS X
PRE-FEASIBILITY X
DRILLING TO TEST RESERVES X
FEASIBILITY X
FINANCING X
START OF DEVELOPMENT X
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
26
WORK SCOPE, METHODOLOGY AND EXCUTORS - FIRST PHASE. =======
Using Cobrizos as an example, we proposed the following work scope: =====
MAPPING.- The geological mapping will be done at scales of 1:2,000 and
1:10,000. Where there are underground workings, the mappings will be done at a
scale of 1:200. These mappings will be done by Scott McDonald, a geologist from
Andean Silver, and/or Dra. Catrin Ellis Jones, geologist from MINTEC.- The
mapping at Cobrizos has been finished except in areas where there are old
underground workings, where the mapping will be done at a scale 1:500 after
clearing and an adequate ventilation. ===== SAMPLING.- The exact nature of the
sampling programs will depend on the own characteristics of each mining
concession.- In some places we will sample intensively the rock outcrops; in
other places the rock wall will be sampled in order to determine if
dissemination exists or not.- Approximately 300 samples will be taken from the
outcrops and mining workings at Cobrizos; to date, 83 samples have already been
obtained, the remainder will be obtained from underground workings once they
have been cleared and ventilated. Geochemical sampling programs will be
executed in each concession.- Recently, at Cobrizos we have done a geochemical
sampling in an area 750 x 750 meters, taking samples every 25 meters on a square
grid. In total, 480 samples have been obtained that will be analyzed for Au,
Ag, Cu, Pb and Zn. We propose to perform similar programs at each of the
concessions of interest. These works will also be executed by geologists Scott
McDonald and Catrin Ellis Jones and support personnel from MINTEC. =====
TRENCHES AND/OR GEOPHYSICS.- In areas where there are no rock outcrops, low
frequency geophysical methods will be employed in order to determine the most
propitious places to dig trenches, which will be mapped and sampled in detail.
Also, when necessary and advisable, detailed geophysical surveys in order to
direct and if possible, pinpoint the drilling objectives. ==== A local services
company that has experience in similar jobs and good quality equipment, will be
hired for trench digging; an alternative is Terra Ltda. That has already done
several similar jobs for MINTEC's projects.- The geophysical surveys will be
executed by a specialized company from Canada or U.S.A. (Val D'or, Gradient,
Quantec, etc.).- The mapping and sampling will be done by the aforementioned
geologists. ====== PRELIMINARY DRILLING.- For these works we will hire with
priority the known drilling services company Layne Drilling; the supervision,
control and samples preparation will be in charge of specialized personnel from
MINTEC, the samples' chemical analysis will be done at Bondar Clegg's laboratory
in Oruro or S.G.S. in La Paz; the control for these analysis will be done in
prestigious laboratories in Canada or U.S.A. ====== 1,200 meters will be drilled
in six wells using reverse circulation equipment in order to verify geological
concepts and estimate mineral contents. Each well will have an approximate
depth of 200 meters, with a 5.5" diameter and samples to be analyzed will be
taken every meter. ===== METALLURGICAL TESTS.- At present we are using and will
continue to do so, the services from Kappes Cassidy to perform metallurgical
tests; also, should the case be, we would hire the University of Cardiff to do
this work for Cobrizos and those concessions related with possible copper-silver
deposits.- These laboratories will perform, at our request, cyaniding tests
(cyanide leach), flotation tests, solvent extraction tests and other required
mineralogical tests. ===== PRE-FEASIBILITY STUDY.- Before starting with
<PAGE>
27
the drilling program in detail, a pre-feasibility conceptual study will be made
for the Cobrizos - Reintegro projects and for any concession reaching this
exploration stage.- In order to make this study, the services of Pincock Allen &
Holt will be hired, who have already done similar studies for ASC Peru LDC. ====
SECOND PHASE.- With the execution of the Second Phase in Cobrizos -Reintegro, it
is hoped to reach the target of delimiting a minimum of 10 million tons of
reserves indicated up to 50 million tons depending on the results from the
metallurgical tests and pre-feasibility analysis. At the present state of our
knowledge, it is not yet possible even to estimate the reach of the Second Phase
at the rest of the mining properties. ====== DRILLING TO DELIMIT RESERVES.- In
order to delimit a minimum of 10 million tons, approximately 2,250 meters will
be drilled with reverse circulation, distributed in 15 wells of around 150
meters deep each. Should the metallurgical tests and other results indicate that
we can hope to delimit some 50 million tons, 25 wells, 200 meters deep each,
will be drilled, totaling 5,000 meters of drilling of an equivalent amount
depending on the nature of the deposit. ====== FEASIBILITY STUDY.- In order to
perform this study, the services of Pincock Allen & Holt will be hired.- This
study will be done if and when the drilling results are sufficient; otherwise
more drilling and other works will be done to prepare this
study during the Third Phase. ====================================== PAYMENT
-------
RECEIPT FOR THE "COBRIZOS" MINING LICENSES.- DATE: La Paz, 15 March 1996.-
- --------------------------------------------
NAME: CORPORATION MINERA DE BOLIVIA.- Register No. 03.- TRADE NAME: GRUPO
MINERO NOR LIPEZ.- Address: Potosi.- KEYS: 526.0.4.- 1165.0.5.- 1123.0.0.-
TAX CODE.- 1105.0.7. ===== DETAILS: Payment for mining licenses call
CONCESSION: 25 de Julio.- Aguilar.- Alianza.- Bolivar.- COBRIZOS.- Copacabana.-
- -----------
Don Bruno.- El Morro.- German Busch.- Ines. === COUNTY: Soniquera.- Soniquera.
- -San Agustin.- San Cristobal. - Rio Grande.- Soniquera.- San Agustin.- San
Agustin.- San Agustin ====PROVINCES: -Nor Lipez. Nor Lipez. Nor Lipez - Nor
Lipez.- Nor Lipez.- Nor Lipez.- Nor Lipez.-Nor Lipez.- Nor Lipez.- Nor Lipez.-
====== HAS: 1.000.-300.-120.-500.-168.-80.- 136.- 10.- 180.-99.- TOTAL:
2.593==== corresponding to the 1/st/ Semester 1996. ===== Interests.- Fines on
interests.-Art. 121 Fines for non-compliance. - Rep. Of Receipt ===== TAXES: Bs.
6.482,50.-Bs. 88,07. - Bs. 8,81. - Bs. 648,25. - Bs. 2,00. - TOTAL:
------
SONIQUERA.- San Agustin. ==== PROVINCES: Nor Lipez.- Nor Lipez. ====== HAS:
- --------- ---------- ----
1.000.- 300.- 120.- 500.- 168.- 80.- 136.- 10.- 180.- 99.- TOTAL: 2.593. ======
------
corresponding to the 1/st/ Semester 1996. ===== Interests.- Fines on interests.
- - Art. 121 Fines for non-compliance. - Rep. Of Receipt ===== TAXES: Bs.
7.229,63. ===== THEY ARE: Seven Thousand Two Hundred and Twenty Nine 63/100
Bolivianos. ==== SEAL: Regional Administration Revenue Service.- Paid.- 15 Mar.
1996.- Teller 1.- La Paz - Bolivia. === Signed: Rene Burgoa Calderon.- Chief
Fiscal Obligations Control Unit a.i..- Reg. Administration. === Initials of
Paymaster: G.O.A. ====== OTHER PAYMENT RECEIPT OF THE "COBRIZOS" MINING
----------------------------------------------
LICENSE.- DATE: La Paz, 27 May 1996.- NAME: CORPORATION MINERA DE BOLIVIA.-
- ---------
Register No. 03.- TRADE NAME: GRUPO MINERO NOR LIPEZ.- Address: Potosi.-
KEYS: 526.0.4.- 1165.0.5- 1123.0.0- TAX CODE.- 1105.0.7. ===== DETAILS: Payment
for mining licenses called: CONCESSION: 25 de Julio.- Aguilar.- Alianza.-
-----------
Bolivar.- COBRIZOS.- Copacabana.- Don Bruno.- El Morro.- German Busch.- Ines.
=== COUNTY: Soniquera.- Soniquera.- San Agustin.- San Cristobol.- Rio Grande.-
-------
Soniquera.- San Agustin.- San Agustin.- San Agustin. ==== PROVINCES: Nor Lipez.-
----------
Nor Lipez.- Nor Lipez.- Nor Lipez.- Nor Lipez.- Nor Lipez.- Nor Lipez.- Nor
Lipez.- Nor Lipez.- Nor Lipez.- Nor Lipez. ====== HAS: 1.000.- 300.- 120.- 500.-
----
168.- 80.- 136.- 10.- 180.- 99.- TOTAL:
-----
<PAGE>
28
2.593. ==== Corresponding to the 2/nd/ Semester 1996. === Rep. of Receipt. ====
TAXES: Bs. 6,573,26.- Bs. 2,00. TOTAL:
Bs. 6,575.26. ===== THEY ARE: Six Thousand Five Hundred and Seventy Five 26/100
Bolivianos. ==== SEAL: Regional Administration Revenue Service.- Paid.- 4 Jun.
1996.- Teller 1.- La Paz - Bolivia. === Signed: Rene Burgoa Calderon.- Chief
Fiscal Obligations Control Unit a.i..- Reg. Administration. === Initials of
Paymaster: G.O.A. === REGISTRATION CERTIFICATE AT THE INDUSTRY AND COMMERCE
-----------------------------------------------------
REGISTER FOR "ASC BOLIVIA LDC" COMPANY.- MINISTRY OF FINANCES AND ECONOMICAL
- ----------------------------------------
DEVELOPMENT.- National Secretariat for Industry and Commerce.- General Direction
for the Register of Commerce and Stock Companies.- Bolivia.- CERTIFICATE OF
--------- --------------
REGISTRATION.- No. 016458.- The General Director for the Register of Commerce
- --------------
and Stock Companies, empowered by the Code of Commerce and Decree Law No. 16833
dated July 19, 1979, at the written request by the interested party. ====
CERTIFIES: That the company of Trade Name: ASC BOLIVIA L.D.C. (BOLIVIAN
- ----------
BRANCH).- Dedicated to the main activity of: MINING, GEOLOGY.- With legal
representation by Mr. JOHNNY DELGADO ACHAVAL.- and Legal Address at: Federico
Zuazo Street No. 1598,.- La Paz District,.- and type of legal organization:
BRANCH OF COMPANY CONSTITUTED OVERSEAS.- With a principal paid of Bs. 24,400.-
According to Balance Sheet AP.AL 15-11-95.- Taxpayer Unique Register RUC
7836635.- It is legally registered in this Direction.- Under Register No. 9-
--------------------------------------------
37162-1.- Approved by Administrative
Resolution No. 6594,- dated 06-12-95.- Having complied with the requirements
demanded by Law, the aforementioned company can perform activities in its
sector.- This Certificate only certifies the object pointed out before and is
valid for Sixty days starting from the date it was issued, IT IS NOT RENEWED.
=== La Paz, July Third nineteen ninety six. ==== Seal: National Secretariat for
Industry and Commerce.- La Paz - Bolivia.- Signed: Dra. Angelina Vucsanovich de
Vargas.- GENERAL DIRECTOR FOR THE REGISTER OF COMMERCE AND STOCK COMPANIES.
======== BANK DEPOSIT RECEIPT.- Banco de La Paz S.A. Place: La Paz.- Day:
----------------------
twelve.- Month: September.- Year: Ninety six.- Current Account X.- Account
Number: 11101077251.- Name or Trade Name: Annex: Official Gazette.- National
Chamber of Mining.- Cobrizos Project Joint Venture COMIBOL and ASC BOLIVIA LDC.-
Depositor's illegible signature.- Cash Deposit: 40.- Total deposited: 40.- They
are: Forty 00/100 Bolivianos. --- Bank Signature and Seal: Banco de La Paz
S.A..- Main Office.- 12 Sept. 1996. === Ninoska Quint Pantoja.- Teller Section.-
Illegible signature. =========================== CONCLUSIONS: It is according
------------
to the original writ and annexed documents presented before me, the same after
being numbered and signed by me the Notary, have been added to the collection of
its class according to articles thirty one of the Law of the Notary and two
hundred and sixteen of the Mining Code.- Those appearing before approve and
ratify this JOINT VENTURE CONTRACT AFFIDAVIT FOR THE DEVELOPMENT OF MINING
ACTIVITIES, SUBSCRIBED BETWEEN: THE CORPORACION MINERA DE BOLIVA (COMIBOL),
REPRESENTED BY DR. ALBERTO ALANDIA BARRON - PRESIDENT AND LIC. LUIS ARNAL
VELASCO - MANAGER OF THE CONTRACT AND FINANCES UNIT, AND THE COMPANY "ASC
BOLIVIA LDC", REPRESENTED BY MR. JOHNNY DELGADO ACHAVAL, signing together with
the witnesses citizens Custodia Claure J., with ID No. 467852 L.P. and Leonardo
Linares N., with ID No. 3361005 L.P., full of age,
<PAGE>
29
able by right, neighbors of this city, who are informed of this contents,
without any observations to the latter. I GIVE FAITH. ==== Signed: FOR
CORPORACION MINERA DE BOILIVA: DR. ALBERTO ALANDIA BARRON - PRESIDENT. === and
LIC. LUIS ARNAL VELASCO - MANAGER OF CONTRACTS AND FINANCES. === Signed: FOR ASC
BOLIVIA LDC: MR. JOHNNY DELGADO ACHABAL.- AGENT AND PROXY. === Signed: Custodia
Claure J. ID No. 467852 L.P.-WITNESS.- Signed: Leonardo Linares N., ID No.
3361005 L.P.- WITNESS.- Signed before me, Lawyer MARIA ESTHER VALLEJOS H.-
SPECIAL NOTARY OF MINES AND PETROLEUM. VERIFIES: THIS AFFIDAVIT COMPARES WITH
--------
THE ORIGINAL REFERRED TO AND TO WHICH I REMIT MYSELF, THE SAME THAT AFTER BEING
COMPARED, FAITHFULLY AND LEGALLY CORRECTED, I AUTHORIZE, SEAL, SIGN AND STAMP IN
LA PAZ CITY ON THE TWENTY EIGHTH OF OCTOBER NINETEEN NINETY SIX.
=================================
(SEAL): Special Notary of Mines and Petroleum
MARIA ESTHER VALLEJOS H.
LAWYER
NOTARY
La Paz - Bolivia
(Signed)
Dra. Maria Esther Vallejos H.
SPECIAL NOTARY OF MINES AND PETROLEUM
La Paz - Bolivia
NOTE OF MINING REGISTER: Date: 30 of
October 1996, under item 248
of Book 'B' the previous Affidavit
has been registered
La Paz, 30 of October 1996
(Signed)
Dra. Maria Esther Vallejos H.
SPECIAL NOTARY OF MINES AND PETROLEUM
La Paz - Bolivia
<PAGE>
Attach to Exhibit 10.21
Attached hereto is an English translation of the original Spanish version
of the Joint Venture Agreement between Comibol and ASC Bolivia LDC, regarding
the Choroma Concession. The Company employed translators to translate the above
referenced agreement and based on this the undersigned believes that the
attached is a fair and accurate English translation of the above referenced
agreement.
/s/ Keith R. Hulley
-------------------
Keith R. Hulley
Director
Apex Silver Mines Limited
Date: August 29, 1997
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EXHIBIT 10.21
PROTOCOL No.244/97
FOR THE: JOINT VENTURE CONTRACT WRIT FOR THE DEVELOPMENT OF MINING ACTIVITIES;
SUBSCRIBED BETWEEN THE CORPORACION MINERA DE BOLIVIA (COMIBOL) REPRESENTED BY
ITS PRESIDENT DR. ALBERTO ALANDIA BARRON AND ITS CONTRACTS AND FINANCES MANAGER
LIC. LUIS ARNAL VELASCO; AND ASC BOLIVIA LDC REPRESENTED BY JOHNNY DELGADO
ACHAVAL.
In La Paz City, Republic of Bolivia, at fifteen thirty hours August fourteen
ninety seven, before me, lawyer MARIA ESTHER VALLEJOS H., SPECIAL NOTARY OF
MINES AND PETROLEUM and witnesses that at the end are named and sign the
document, presented themselves, on one side DR. ALBERTO ALANDIA BARRON with ID
1191230 Pt. and LIC. LUIS ARNAL VELASCO with ID 332387 LP, PRESIDENT AND MANAGER
OF CONTRACTS AND FINANCES RESPECTIVELY, FOR THE "CORPORATION MINERA DE BOLIVIA"
and on the other side ENG. JOHNNY DELGADO ACHAVAL with ID 39745 LP,
REPRESENTATIVE FOR "ASC BOLIVIA LDC," all full of age, able by right, neighbors
of this city, whom I certify to have identified and said: That, they agree to
convert into a public deed the WRIT that has been presented to me, together
with: ASC BOLIVIA LDC'S PROPOSAL, PAGES 5, 9, 10 AND 11, BOARD OF DIRECTOR'S
RESOLUTION NO. 1105/96, GENERAL BOARD OF DIRECTORS' RESOLUTION No. 1229/96,
SUPREME RESOLUTION No. 213601/94, POWER OF ATTORNEY No. 140/94, POWER OF
ATTORNEY NO. 205/94 AND POWERS WRIT No. 105/96, with literal contents as
follows:
WRIT.- CONT. GUC-DJ-352/96 SPECIAL NOTARY OF MINES: In the public deeds
- ----
register under your charge, please insert a Joint Venture Contract for the
development of mining activities subscribed between the CORPORACION MINERA DE
BOLIVIA (COMIBOL) and ASC BOLIVIA LDC company, with the clauses and conditions
given below:
FIRST.- THE JURISTIC PERSON OF THE PARTIES AND THE LEGAL STATUS OF THE
SUBSCRIBING PERSONS.
1.1. This Joint Venture Contract is subscribed by, on one side, the CORPORACION
MINERA DE BOLIVIA, known from now on as COMIBOL, a decentralized Autarkic
Entity of the State, created by S.D.3196 dated October two, nineteen fifty
six, enacted as Law on October twenty nine, nineteen fifty six, with its
own juristic person and full administration autonomy, exercising the
Administration and Higher Direction of all the mining deposits, dumps,
tailings and slags, establishments, facilities, camps, complementary
property in general, without exception, constituting the state owned
mines, either these be as a result of the mines' nationalization or
purchased after it
1.2. On the other hand, the company subscribing the CONTRACT IS ASC BOLIVIA
LDC, a stock company, SUBSIDIARY OF ANDEAN SILVER CORPORATION LDC, an
international mining company constituted in the Great Cayman Islands,
through constitution certificate
<PAGE>
dated September seven, nineteen ninety five, whose original copy has been
certified by the Bolivian Consulate in London (England) on the 14th of the
same month and year, a legally constituted subsidiary in Bolivia, through
Public Deed No 49, granted by the Special Notary oF Mines in La Paz on
November ten, nineteen ninety five, registered in the General Registry of
Commerce and Stock Companies, under Registration No 09-037169-01 dated
December six, nineteen ninety five and in the Unique Taxpayers' Register
with RUC No 7836635.
1.3. LEGAL STATUS OF THOSE SUBSCRIBING.
COMIBOL'S subscribes the Contract represented by its PRESIDENT, DR. ALBERTO
ALANDIA BARRON, who exercises the legal representation of the entity by
virtue of S. D 23727 dated February elevens nineteen ninety four, by
official appointment given by Supreme Resolution No 213601 dated February
sixteen of the same year and exercising the powers conferred to him by
COMIBOL'S General Board of Directors, through Resolution No 896194 dated
March fifteen. Nineteen ninety four, as well as LIC. LUIS ARNAL VELASCO,
MANAGER OF THE CONTRACTS AND FINANCES UNIT, appointed in such position
through COMIBOL'S General Board of Directors' Resolution No 860/94 dated
June thirteen, ninety four and empowered through Special Power of Attorney
by the said PRESIDENT OF COMIBOL, through instrument No. 222/94 dated July
eleven, nineteen ninety tour before a Public Notary in La Paz in charge of
Dra. Nelly Alfaro and Registered in the Notary of Mines in La Paz, under No
205 dated July twenty eight, nineteen ninety four; which will be enclosed
in the corresponding public deed
14. Subscribes the Contract, in representation of ASC BOLIVIA LDC, by virtue of
the Limited Power of Attorney conferred to him, Mr. JOHNNY DELGADO ACHAVAL,
as its truly and legal agent and proxy, through instrument granted on March
seven, nineteen ninety six before Notary Public in the Cayman Islands,
George M Shortridge, certified by the Bolivian Consul in London (England),
documents that have been judicially translated from English into Spanish,
by orders from the Fifth Civil Judge in La Paz, and registered before the
Special Notar of Mines of this Capital City, under No 105 dated April
first, nineteen ninety six and registered in the General Register of
Commerce under item No 798 of Book 07-0 on the eighth of the same month and
year. Special power of attorney that, as a whole, will be enclosed in the
corresponding Public Deed.
SECOND.- BACKGROUND FOR THE CONTRACT.
2.1. Applying the Supreme Government's Mining Policies and within the framework
of the legal provisions in force, valid for this matter, COMIBOL has
publicly invited national and foreign Mining Companies, interested in the
EXPLORATION with option to the EXPLOITATION and posterior MARKETING of the
non-developed mining deposits, among others, those from the SUD CHICHAS
Province zone in the Department of Potosi, so that they present proposals
to that end, and the Terms of Reference and the legal and administrative
requirements for the Public Tender have been widely advertized. In order to
guarantee the total legality of the public tender's results, as well as the
greatest efficiency in the evaluation of the proposals to be presented,
independent consulting firms of recognized technical experience and company
solvency were equally invited. The
2
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evaluation's result made by BEHRE DOLBEAR & COMPANY INC., the selected
independent consulting firm, as can be seen in the Report dated September
nineteen ninety six, chose ASC BOLIVIA LDC for the awarding of the JOINT
VENURE CONTRACT for the Mining Concessions described later on and that form
part of ANNEX "A" of the Contract, a report that has been approved by
COMIBOL'S Board of Directors through Resolution No. 1105/96 dated February
six, nineteen ninety six and that at the same time authorized the
negotiations for the respective CONTRACT with ASC BOLIVIA LDC.
THIRD.-DEFINITIONS.
The following definitions are established in this Contract. in an enunciative
but not limitative manner:
3.1. AREA GRANTED.- MINING concessions belonging to COMIBOL included in
------------
Contract and whose total surface area is 125 hectares. The concessions of
the AREA GRANTED are individually described in page five of the Technical-
Economical Proposal presented by ASC BOLIVIA LDC and in ANNEX "A" of the
Contract. COMIBOL at the express and written request by ASC BOLIVIA LDC can
formulate petitions or grant complementary areas neighboring with the AREA
GRANTED, in which case ASC BOLIVIA LDC will prepare a specific work plan
and will guarantee a minimum investment in the same conditions as those for
the AREA GRANTED.
3.2. INVESTED CAPITAL.- Are all the expenses and investments made by ASC
----------------
BOLIVIA LDC for the exploration and development of the mineral reserves,
preparation of pre-feasibility and feasibility studies. basic and hi-detail
engineering designs; purchase, transport and import of equipment, machinery
and materials: installation of all the mine equipment and machinery,
mineral concentrating and refinery plants, workshops, laboratories,
warehouses, offices. etc.. building of camps and buildings, tailings and
waste accumulation systems, energy distribution systems, energy plants,
safety systems, water catchment and accumulation systems; etc. and starting
of the production operations, according to generally accepted accounting
principles.
3.3. MINING CONCESSIONS.- Set of mining properties (AD. 33 of the Mining Code),
------------------
in which the activities established in the Contract can be performed.
3.4. MARKETING COMMISSION FEES.- Payment in money for the administration of the
-------------------------
sale of the mineral metals produced by ASC BOLIVIA LDC. These commission
fees do not form part of the marketing costs.
3.5. PRODUCTION COSTS.- Are all the operational expenses made by ASC BOLIVIA LDC
----------------
during the minerals production process up to the obtaining of the saleable
or exportable final products in the mine, either these be mineral
concentrates or metals, according to generally accepted accounting
practices and principles.
3
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3.6. OVERHEADS.- Are all the expenses made by ASC BOLIVIA LDC for the
---------
administration and direction of the Joint Venture Contract, different from
the production costs, according to generally accepted accounting practices
and principles.
3.7. MARKETING COSTS. - Are all those that are done in order to convert the
---------------
minerals in metals, by the smelter or refining company; they include
metallurgical deductions, treatment, smelting and refining expenses,
analysis, assays, arbitrations, penalties and other deductions and
expenses directly related to the conversion process to marketable metals.
3.8. DEPRECIATION. - A deduction made according to Bolivian laws. due to the
------------
reduction, wear and value loss of the capital assets, for their
replacement.
3.9. DELIVERY. - The date on which COMIBOL will deliver physically and
--------
officially the AREA GRANTED to ASC BOLIVIA LDC. The physical delivery will
be documented by the detailed minutes to be drawn up in some place of the
AREA GRANTED. The minutes will be signed by the parties' representatives
appointed for that purpose, with a prior written notice between them. The
delivery will be done not later than thirty (30) days after the CONTRACT
is signed.
3.10. OPERATIONAL CASH FLOW. - It is the gross value of sales' expenses minus
---------------------
the realization expenses, marketing commission fees, marketing costs,
production costs and administrative costs, excluding the financial
expenses, depreciation, deferred expenses and taxes.
3.11. REALIZATION EXPENSES.- Are all those directly related to the transport of
---------------------
concentrates or final products from the mine up to the smelters; they
include losses, road, air and sea transport tees, transport insurance.
handling, port expenses and other related. these realization expenses do
not form part of the Marketing Costs.
3.12. DEFERRED EXPENSES.- Are all the payments or charges made and whose
-----------------
application is deferred until certain terms laid down previously are met
or the application period for the expense has expired.
3.13. FINANCIAL EXPENSES.- Are all the debt services for banking credits or from
------------------
financing entities hired by ASC BOLIVIA LDC for the compliance and
execution of the Joint Venture Contract.
3.14. TAXES.- Are all the national, municipal taxes, or of any other type,
-----
already created or to be created by Law, applied to the mining operations
developed bY ASC BOLIVIA LDC, as a result of this Contract.
3.15. PAY BACK PERIOD.- Any period, either being the initial one or a posterior
---------------
one, including the month starting in which an expense has been made for
capital improvements and prior to the first day of the following month to
that in which ASC BOLIVIA LDC has recovered all the costs and expenses for
capital improvements from the Cash Flow.
4
<PAGE>
3.16. PRODUCT(S).- All the materials, minerals, precipitates from mining
----------
resources, concentrates, core, and any other product or sub-product,
originated in the AREA GRANTED.
3.17. PAY BACK.- Means the date on which ASC BOLIVIA LDC'S shareholders have
--------
received all the costs and expenses for capital improvements from the Cash
Flow, really made and registered according to generally accepted
principles in Bolivia. The calculation will be done ate the end of each
ASC BOLIVIA LDC'S fiscal year. Nonetheless, COMIBOL'S participation,
mentioned in paragraph 11.1.2, will be applied from the moment the pay
back is finished.
3.18. SALE CROSS VALUE.- Are the payments to be received by ASC BOLIVIA LDC,
----------------
from natural or juristic third persons, for the sale of refined metals or
concentrates, produced during the exploitation period, from which all the
expenses and costs established in point 3.7 will be deducted.
3.19. NET SMELTER RETURN.- It is the gross value for the sale of the minerals,
------------------
minus the marketing costs and the realization expenses.
FOURTH.- APPLICABLE LAWS.
4.1. This Contract is subscribed and is regulated by the legal provisions that
in a mere enunciative but not limitative manner are given below:
Arts. 136 and 138 of the Poll Const. of the State, S.D. 3196 (2-10/52), L.
(2910/56), L. 843 (2005/86), S.D. 22407 (11-0 1/901 S.D. 22408 (11-01190),
L. 1182 ( 1 7-09/90), L. 1 297 (27-11/9 1 ), S.D. 23059 (13-02/92), L. 1243
(11-04/92), L. 1333 (29-04/92), its regulations enacted through S.D. 24176
dated 8/12/95, S.D. 23214 (21-07/92), S.D. 23230-A (30-07/92) and other
legal provisions on the matter or to be enacted in the future. This Joint
Venture Contract was approved by COMIBOL'S Board of Directors, through
Resolution No. 1229/96 dated 27-09-96.
FIFTH. - THE JOINT VENTURE CONTRACT, TRADE NAME AND ADDRESS.
5.1. The Joint Venture Contract, constituted by this document. known from now
on as CONTRACT, does not compromise the patrimony of any of the associated
parties nor it affects h1 any way the juristic person of the hiring
parties; it neither constitutes a partnership, nor it establishes an
independent juristic person. It is not established in the CONTRACT, for
the associated parties, a jointly and severally nor limited responsibility
for the acts, contracts and obligations each party could male, celebrate
and assume in the execution and compliance of this CONTRACT.
5.2. As a result from the CONTRACT, ASC BOLIVIA LDC does not acquire any
property rights in the civil regime nor as mining concessionaire in the
mining regime, on the soil nor the underground of the AREA GRANTED, nor on
the water nights, servitudes and uses, access roads, camps, constructions
or any other facilities that could exist.
5
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5.3. In the terms and conditions stated in the CONTRACT, COMIBOL grants ASC
BOLIVIA LDC. in an express manner, the exclusive exploration rights, the
option to enter into a exploitation phase, once the first exploration
phase is completely finished, as well as the marketing of the minerals to
be exploited over a surface are of One Hundred and Twenty Five (135)
hectares of the Mining concession "CHOROMA", located in Tupiza County, Sud
Chichas Province of the Department of Potosi , whose detail is expressed
in ANNEX "A" of the CONTRACT.
5.4. This exclusive right, in the conditions stated in the CONTRACT, is the
sole and total COMIBOL'S contribution to the Joint Venture Contract agreed
upon in this document, and comibol does not acquire any obligation nor
responsibility for the execution and compliance of the CONTRACT. It also
means that COMIBOL, during the time the CONTRACT is in force, will not
reduce, cede, affect nor compromise its rights and interests on the
deposits contributed to the joint venture, in any measure nor for any
motive, guaranteeing ASC BOLIVIA LDC the peaceful possession, the use and
enjoyment of the mining concessions object of the CONTRACT.
5.5. The parties, by mutual agreement, convene in appointing this Joint Venture
Contract with the trade name of COMIBOL-ANDEAN-CHOROMA R.C., with legal
address in La Paz City, Campos Street No. 265, Telephone 433800, Fax
(5912) 433737.
SIXTH.- OBJECT OF THE CONTRACT.
6.1. Based on the background given before, COMIBOL and ASC BOLIVIA LDC, through
this document agree to subscribe a Joint Venture Contract for the
exploration, and option to exploit, concentrate, refine and smelt without
any reserve and the marketing of the mineral products, metals and sub-
products that could be exploited in the deposits located in the AREA
GRANTED, under the technical conditions described in ASC BOLIVIA LDC'S
proposal and accepted by COMIBOL, as laid down in its proposal and that
constitutes annex "b" of this CONTRACT. documents that, without being
registered, are an inseparable and constitutive part of this CONTRACT.
6.2. The activities object of this CONTRACT, comprise the identification and
development of reserves, design of the mining operation, rational and
efficient exploitation of the mineral resources, optimization of the
treatment and metallurgical recovery processes, preparation of the
respective technical and economical feasibility projects and, in general,
the application of modern technology and an efficient management in the
performance of the mining operations, as well as comply with the
environmental obligations established by law, according to clause
seventeenth of the CONTRACT.
SEVENTH.- TERM FOR EXPLORATION
7.1. The maximum term for the Exploration Period will be of Five (5) years
starting from the physical and official delivery of the AREA GRANTED in
this CONTRACT, by
6
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COMIBOL to ASC BOLIVIA LDC, this delivery will be documented through
detailed minutes drawn up in the site or where the parties agree to, and
must be signed by the officials appointed to that effect, with the
presence of a competent authority.
7.2. The said term of five (5 ) years for exploration. is divided in three (3 )
phases as follows:
FIRST PHASE with a duration of twenty four (24) months.
SECOND PHASE with a duration of twenty four (24) months.
THIRD PHASE with a duration of twelve ( 12) months.
TOTAL SIXTY (60) months, equivalent to FIVE (5) YEARS.
7.3. The First Phase is compulsory and thus its strict observance is guaranteed
by ASC BOLIVIA LDC, according to that laid down in Clauses 9.1 and 9.2 of
this CONTRACT.
7.4. During the First Phase. ASC BOLIVIA LDC, will execute the Work Program
appearing in page 6 to page 8 of its accepted and awarded Proposal, a work
plan that will form part of this CONTRACT without the need of its
registration, ASC BOLIVIA LDC con explore the whole of the mining
concessions or part of them at its will, but in any sector, the work plan
will be executed faithfully and fully. COMIBOL, at the written and express
request by ASC BOLIVIA LDC, can formulate mining petitions or grant
complementary areas within the two (2) kilometers neighboring the area
granted, in which case ASC BOLIVIA LDC will formulate a specific work plan
and will guarantee a minimum investment to be made in such complementary
areas that will be subject to the same conditions established for the work
plan as well as the minimum investment for the AREA GRANTED.
7.5. ASC BOLIVIA LDC, during the First Phase, can anticipate the conclusion of
the twenty four (24) months term, under the express condition of having
finished the execution of the Work Program committed for this Phase and,
as a result, can enter into the other Exploration Phases or exercise
immediately its option rights to enter into the Exploitation Phase in the
areas its studies would have determined as positive. In this case, the
Bank Guarantee Certificate for the Compliance of the CONTRACT will be
returned by COMIBOL, within sixty (60) days once the First Exploration
Phase is finished. The observance of the Work Plan, as well as the start
of the Exploitation will be irrevocably verified by COMIBOL, which will
issue the detailed reports of one and other situation, within sixty (60)
days.
7.6. ASC BOLIVIA LDC, at any time during the First Phase, but only after having
complied with the Minimum Work Program and not later than the last day of
the maximum term for the Phase can definitely suspend the Exploration in
the areas object of this CONTRACT and withdraw from the Joint Venture
Contract, in the case that the CONTRACT will be canceled of full right on
the date of ASC BOLIVIA LDC'S notice to COMIBOL of its decision. Should
ASC BOLIVIA LDC hadn't fulfilled with the Minimum Work Program, COMIBOL
will cash the Bank Guarantee Certificate for Contract Compliance, without
any right to recourse, claim nor any exception ASC
7
<PAGE>
BOLIVIA LDC could oppose against COMIBOL, either judicially or outside the
court. The Joint Venture Contract will, thus, become null and without any
legal validity.
7.7. The simple reduction of the surface area of any of the areas, forming part
of the AREA GRANTED according to that recommended by the studies done by
ASC BOLIVIA LDC, will not mean the suspension of the exploration to the
ends expressed in the previous point 7.6 and ASC BOLIVIA LDC is obliged to
continue the execution of the Work Plan committed in its proposal on the
areas selected as attractive, which will be done until the conclusion of
the term established for the First Phase.
EIGHT. - EXPLORATION INITIAL PAYMENTS.
8.1. ASC BOLIVIA LDC, according to the public tender s terms of reference, will
pay COMIBOL the following exploration initial payments scale.
FIRST PHASE three 57/100 American Dollars ($us 3.57) per hectare on the
-----------
whole surface of the AREA GRANTED, that is to say, 125 hectares.
8.2. The payments described and stated in the previous Point (8.1), will
be paid on the 125 hectares or mining properties, within thirty (30) days
after the physical delivery of the concessions by COMIBOL to ASC BOLIVIA
LDC. Any reduction in the surface area of any of the concessions of the
AREA GRANTED, either be during a maximum term of 24 months, or of the
Second or Third Phases, will not give rise to a return or reimbursement of
the Exploration Initial Rates agreed upon in Numbers 8.1, 8.3 and 8.4 of
this CONTRACT, by COMIBOL to ASC BOLIVIA LDC and the amounts paid will be
consolidated in COMIBOL'S favor .
8.3. SECOND PHASE: One Hundred and Nineteen 05/100 American Dollars ($us
119.05), per hectare on the extension of the concessions that at the start
of the Second Phase, decides to explore within the teen of 24 months
established for this Phase. The discontinuity of the exploration
operations is admitted within a same mining concession. The First Phase
area can also be reduced or request COMIBOL, or perform mining petitions
to the State or larger extensions should there be tree land, according to
that explained in the Twenty Sixth Clause of this CONTRACT and according
to that laid down in the last part of Clause 7.4 of the CONTRACT, ASC
BOLIVIA LDC is obliged to notify COMIBOL of any areas' reduction of the
AREA GRANTED with a thirty (30) days notice prior to the ending of the
proceeding Phase Term. It will also notify of any anticipation in the term
due to having entered into the Exploitation Phase under the same
conditions.
8.4. THIRD PHASE: Five Hundred and Ninety Five 24/100 American Dollars ($us
595.24) per hectare as an Exploration Initial Rate on the mining
concessions' extensions, that at the start of the Third Phase decides to
explore within TWELVE ( 12) MONTHS.
In this phase, the exploration operations discontinuity is admitted within
the same concession. The exploration area can also be reduced with
relation to the First and
8
<PAGE>
Second Phases or request COMIBOL or make mining petitions to the state for
a larger extension should there be free land according to that laid down
in Clause Twenty Sixth of this COMIBOL. ASC BOLIVIA LDC is obliged to
notify COMIBOL of any areas reduction in the AREA GRANTED, with no less
than THIRTY (30) DAYS notice before the end of the Second Phase. It will
also notify COMIBOL of the anticipated conclusion of this Phase's term
when it decides to enter into the Exploitation Phase.
8.5. All the Payments for the Exploration Initial Rates established in Points
8.1, 8.2, 8.3 and 8.4 previous, will by done by ASC BOLIVIA LDC before the
start of the corresponding Phase and within a maximum of thirty (30) days,
in COMIBOL'S of flees in La Paz city, receiving the corresponding fiscal
receipts for tax purposes.
NINTH.- MINIMUM GUARANEED INVESTMENT DURING THE FIRST EXPLORATION PHASE.
9.1. According to the Public Tender's Tends of Reference, ASC BOLIVIA LDC
accepts and is compelled to make an guaranteed Minimum Investment during
the First Phase of the Exploration period Of Two Hundred Thirteen Thousand
00/100 American Dollars ($us 213,000.00) pledged in the Budget and
Investment Plan, page 9 of its Proposal.
9.2. As a result, ASC BOLIVIA LDC guarantees the Minimum Total Investment of
the amount established in the previous Point, through the presentation to
COMIBOL of a Bank Guarantee Certificate for Contract Compliance, issued
irrevocably in favor of COMIBOL by BHN MULTIBANCO Bank of LA PAZ CITY,
under No. 10004176 dated 05-02-97 for Forty Two Thousand Six Hundred
00/100 American Dollars ($us 42,600.00), equivalent to twenty percent
(20%) of the amount of the minimum investment pledged.
9.3. Whilst ASC BOLIVIA LDC, during the First Phase, is malting the
corresponding investments, can request COMIBOL the presentation of the
original Guarantee Certificate, substituting it simultaneously with a new
certificate covering the remainder of the guarantee or the investment not
yet made, and/or the corresponding tend until, within twenty four (24)
months. Or before if the First Phase of the exploration term is
anticipated, the minimum investment pledged has teen made according to
Clauses 7.3 and 9.1 of this CONTRACT. The Guarantee Certificates exchange
will be done within maximum 30 days, with a prior COMIBOL'S verification
and acceptance that the investments made by ASC BOLIVIA LDC, through
documented evidence, with attesting and independent auditor's report.
9.4. If once the last day of the twenty four (24) month period for the First
Phase has expired, there would be a balance of investment not made by ASC
BOLIVIA LDC, COMIBOL can cash the Bank Guarantee Certificate valid at that
date, and ASC BOLIVIA LDC won't be able to oppose a recourse nor an
exception of any nature.
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9.5. The Exploitation Phase can only be entered into once the amount for the
minimum investment has been really and totally invested by ASC BOLIVIA
LDC, either this occurs at the end of the term appointed for the First
Phase of prior to any of the terms established for each one of the Phases,
which will be decided by ASC BOLIVIA LDC for having determined a positive
sector in any of the concessions.
9.6. The Three Phases forming part of the Exploration Period. have the purpose
of developing mineralogical reserves. Design of the treatment plants and
the preparation of a rational and mechanized exploitation plan, design and
optimization of the treatment processes and metallurgical recovery, the
preparation of technical economical feasibility projects and the adoption
of appropriate environmental protection measures. pollution control and
soil recovery, objectives that are described in the World; program of ASC
BOLIVIA LDC'S proposal.
9.7. Thus, it is agreed that, if ASC BOLIVIA LDC considers attractive certain
areas to start in them the Exploitation Phase, at any time within the
established periods for any of the Three Phases, but if and when the Work
Program of the Exploration Program of ASC BOLIVIA LDC'S proposal has been
complied with entirely as described in ANNEX "B" of this CONTRACT and the
minimum investment has been totally made, apart from the technical-
economical feasibility study, ASC BOLIVIA LDC can enter into the
exploitation phase, and must notify COMIBOL of this decision or the
purposes of the verification of the compliance of the beforesaid
conditions and the financial-accounting management of the COMIBOL'S share
established in ASC BOLIVIA LDC'S Proposal.
9.8. If ASC BOLIVIA LDC does not exercise its Exploitation option rights at the
end of the Exploration Period, either if it occurs at the expiry of any of
its Phases determined in the contract. or before, by ASC BOLIVIA LDC'S
decision, the latter is obliged to present COMIBOL, without any charge or
reimbursement of any nature, all the technical information, drawings,
maps, designs, calculations and reports.
9.9. The suspension or no performance of the compulsory minimum investment
pledged by ASC BOLIVIA LDC, withal the times and conditions stated in this
CONTRACT, will mean for all legal purposes, the statement by ASC BOLIVIA
LDC of its decision to withdraw from the Joint Venture Contract.
constituted in this contract and COMIBOL, without the need to comply with
a prior special formality, will cash the Bank Guarantee Certificate
presented by ASC BOLIVIA LDC, without any right to recourse, exception or
protest any by the latter, either judicially or out of court.
9.10. As a result, all the extension of the AREA GRANTED, object of this
CONTRACT will be reverted to COMIBOL'S total domain within ninety (90)
days maximum, ASC BOLIVIA LDC must withdraw all the equipment and
machinery employed until then, assuming the costs and risks. The
buildings, access roads and other facilities adhered to the ground that
would have been installed will remain for COMIBOL benefit as
improvements, without the right to a reimbursement nor any type of
compensation and the CONTRACT will be extinguished purely and simply. The
equipment and machinery
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adhered to the ground can also be withdrawn if and when the foundations
nor the wall to which they are adhered to, are not destroyed. This tasks
will be executed under ASC BOLIVIA LDC'S exclusive risk and charge.
9.11. If the exploration areas cover only part of the AREA GRANTED, they must
conform squares parallel to the perimeter of such concessions.
9.12. The areas that in tune are rejected by ASC BOLIVIA LDC' at the end of
each exploration Phase, will be excluded from the CONTRACT and will be
everted to COMIBOL exclusive domain. In turn, the new areas will be
annexed to the CONTRACT, in the conditions stated in Clauses 3. i and
7.4 of the CONTRACT.
TENTH.- TIIE EXPLOITATION PERIOD
10.1. Once all the stated conditions in this CONTRACT are complied with, for
the first and, in its case, for the Second and/or Third Phases of the
Exploration Period by ASC BOLIVIA LDC, without any exception, not later
than the last day of the maximum term for each phase, ASC BOLIVIA LDC
trill notify COMIBOL about the areas it has selected in order to start
the Exploitation period of the deposits contained therein, which will
mean the exercise of its option rights, which will be notified to
COMIBOL through a notarized letter, enclosing the technical-economical
feasibility studies for the exploitation to be done and the marketing of
the products.
10.2. COMIBOL will issue its approval of the feasibility study or its
observations to it, within ninety (90) days. COMIBOL can pose
observations due to technical and economical reasons, the same all be
transmitted to ASC BOLIVIA LDC for their solution. if ASC BOLIVIA LDC
dissents from COMIBOL'S opinion, the dispute will be resolved via the
arbitral procedures established in Clause Twenty Third of this CONTRACT.
10.3. When ASC BOLIVIA LDC exercises its exploitation option rights, the
parties will not be subject to any negotiation, limiting themselves to
the compliance of the provisions in this CONTRACT.
10.4. Before the Exploitation Period is started, ASC BOLIVIA LDC is empowered
to establish the non-attractive areas and that will be rejected, the
same will be reverted of right to COMIBOL'S whole domain and will be
automatically excluded from this Joint Venture Contract.
10.5. COMIBOL will exercise its full and unrestricted right and administrative
powers on the areas rejected.
ELEVENTH. - COMIBOL'S SHARE OF THE EXPLOITATION RESULTS.
11.1. COMIBOL'S share during the exploitation period is established as
follows, according to ASC BOLIVIA LDC'S fourteen pages' Proposal
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11.1.1. During the recovery period of the invested capital by ASC BOLIVIA LDC
in the construction, installation and starting stage of production
operations, ASC BOLIVIA LDC will pay COMIBOL an income equivalent to
Five percent (5%) of the Positive Operational Cash Flow, according to
the definition given in Clause Three, Point 3 10 of this CONTRACT.
11.1.2. After the repayment of the initial investment, ASC BOLIVIA LDC will pay
COMIBOL Fifteen percent ( 1 Who) of the Positive Operation Cash Flow as
defined in Clause Three. Point 3 10 of this CONTRACT.
11.1.3. In case ASC BOLIVIA LDC makes new investments for the expansion of
perations or for the change of method or processes, excluding the
replacement of assets, COMIBOL share will come down again to Five
percent (5%) of the Positive Operational Cash Flow, during the recovery
period for the new investments.
11.1.4. The periodicity of the shares' payments by ASC BOLIVIA LDC to COMIBOL
will be done every three months, with annual settlements or adjustments
11.2. It is expressely agreed that COMIBOL during all the time this CONTRACT
is in force will have the right to supervise, verify and control the
regularity of the financial processes described in the proceeding
points 11 1 1, 11 1 2, 11 1 3, 11 1 4 and 11 1 5, through the
accounting analysis of ASC BOLIVIA LDC'S documents, in order to
establish exactly COMIBOL'S share, and ASC BOLIVIA LDC is obliged to
disclose to COMIBOL the complete and authentic documents so that the
financial and accounting revisions be effective ASC BOLIVIA LDC is also
compelled to employ generally accepted accounting principles, for the
accounting of its financial and marketing operations the supervision,
verification and control for the operations accounting, will be done by
comibol in ASC BOLIVIA LDC'S offices and will be executed periodically,
according to that determined by the Administration Committee in the
Internal Regulations approved by the parties.
TWELVETH. - CONSTRUCTION, INSTALLATION, STARTING AND OPERATION STAGES.
12.1. The Construction. Installation and Starting of the Operations as a
whole, will not exceed Three (3) years starting as of the date ASC
BOLIVIA LDC notifies COMIBOL as stated in point 10.1 of Clause Tenth of
this CONTRACT, unless force majeure defined later on in this CONTRACT.
12.2. During the Exploitation Period, ASC BOLIVIA LDC will hold the exclusive
administration and will run all the risks of the operations, with
absolute autonomy in managerial decision mailing. With the same reaches
and risks will also have the exclusive
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administration and autonomy in the marketing of the minerals it
produces, without any limitation, either be locally or through
exports.
12.3. COMIBOL will not be held responsible at all for the development or the
financial results of the operations, its performance will be limited to
the punctual perception of its share in the Cash Flow and its share in
the coordinating, information and supervision organisms.
12.4. Nonetheless. the hiring parties agree that the administrative expenses
of the joint venture can not exceed Five percent (5%) of the production
direct costs. Equally, it is also stated that the marketing commission
and the realization costs can not exceed' as a whole, Two percent (2%)
of the Net Smelter's Return.
12.5. ASC BOLIVIA LDC will establish and execute a minerals marketing system
that will allow an efficient, transparent management, guaranteeing the
nonexistence of eventual benefits within or outside the country, for
the benefit of one of the parties to the detriment of the other.
12.6. The purchase of equipment, machinery, materials, facilities and raw
materials by ASC BOLIVIA LDC will be done in such manner that the
interests of the parties will not be affected and in particular
COMIBOL'S share.
THIRTEENTH. - TERM OF THE CONTRACT.
13.1. This Joint Venture Contract will have a term of Forty (40) Years,
starting as of the physical and official delivery of the areas stated
in this CONTRACT BY COMIBOL TO ASC BOLIVIA LDC. This term will be
renewed in the same contract conditions for just one more time, with a
prior technical and economical justification, if ASC BOLIVIA LDC
expresses, in writing, its will to do it. The stated term includes the
exploration period, either be in its entirety (5 years) or less, if asc
bolivia ldc enters into the exploitation period beforehand according to
that laid down in Clause 8.4 of the CONTRACT.
FOURTEENTH.- INVESTMENTS AND FINANCING.
14.1. ASC BOLIVIA LDC is empowered to finance on its account and risk the
exploitation operations, either be with its own resources or front
others.-COMIBOL will not acquire at any time any type of obligation
related to such financing, whose service will be exclusively in charge
of ASC BOLIVIA LDC.
14.2. The previous popovers are translated in that ASC BOLIVIA LDC is obliged
and pledges to perform all the necessary investments in order to
implement into the operations modern technology, services, machinery,
equipment, implements, materials, facilities, constructions and such
like, as well as assume the commitments that will allow a rational
exploitation of the mineralogical deposits of the AREA GRANTED, object
of this CONTRACT.
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14.3. The investments' regime, initial as well as future, will respect
invariably and at all times, that stated in Clauses Eleventh of this
CONTRACT, relative to COMIBOL'S share of the results, regime that will
remain unvariable during the whole term of the CONTRACT.
FIFTEENTH.- LABOR RELATIONS.
15.1. The hiring and administration of the workforce, technicians and
employees during the exploration stage, as well as during the
exploitation stage is of the absolute and total responsibility of ASC
BOLIVIA LDC, and it is of its entire responsibility the compliance with
the Labor General Law, its Regulatory Decree and related legal
provisions and complementary in force or to be enacted, as well as
those provisions relative to social security, professional risks,
employer's and employee's contributions, whilst COMIBOL is totally
exempt of responsibility, and can not be demanded in any lawsuit of
labor nature nor in any civil, penal, tax, fiscal coactive, social
coactive nature, nor administrative, as an result of acts or omissions
resulting from the execution of this CONTRACT by ASC BOLIVIA LDC.
15.2. COMIBOL will deliver ASC BOLIVIA LDC the AREA GRANTED, object of this
CONTRACT free from encumbrance or obligations of labor or legal
character.
SIXTEENTH. - FORCE MAJEURE.
16.1. None of the hiring parties can demand of the other the compliance with
the obligations acquired in this CONTRACT, when the compliance has been
delayed, hindered or impeded by causes not blamed on the obliged party.
Such causes will constitute those of force majoure or fortuitous cases,
as earthquakes, flooding, fire, strikes declared illegal, civil
commotion, factors that can affect transport in general, governmental
prohibitions and catastrophes in general, according to that laid down
by articles 379 and 380 of the Civil Code.
It will also be considered as a force majeure a sustained fall for over
six (6) months in the price of minerals to be produced under the
minimum established by the feasibility study, if and when such
situation causes the stoppage of the extraction of the minerals or
production operations. If these operations continue even under such
market conditions, the force majeure cause will disappear.
16.2. The period during which ASC BOLIVIA LDC will be hindered to normally
comply with this CONTRACT, will be added to the term stated in Clause
Thirteenth.
16.3. Should a force majeure cause happens, ASC BOLIVIA LDC is obliged to
notify COMIBOL within the next five days, describing the nature of the
happening and its effects.
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16.4. The omission of this notice will maintain COMIBOL indemnity in the
regularity of its share in the results and h1 the accounting of the
time period.
16.5. When the force majeure causes are of such nature and magnitude that the
objectives of this CONTRACT and the joint venture in general are
substantially and permanently harmed or are affected in a continuous
manner for more than six months. the hiring parties can agree upon the
temptation of the CONTRACT.
SEVENTEENTH.- ENVIRONMENTAL STANDARDS AND ENVIRONMENTAL MANAGEMENT PLAN
17.1. During the performance of the works and during the life of this
CONTRACT, ASC BOLIVIA LDC will be subject to the environmental
requirements, that is to say, the allowable pollution limits in force
in the country, established by Law No. 1333 dated April Twenty Seventh
nineteen ninety two and the regulations enacted by S.D. 24t76 dated
December nineteen ninety five and other provisions in force or to be
enacted in the future.
17.2. ASC BOLIVIA LDC will draw up the environmental management plan,
starting from an initial audit. in order to avoid or mitigate the
environmental impact, as established by the next Clause 17 4, as well
as the work plan for the execution and closure of activities.
17.3. The environmental management mainly comprises the recovery of the
exploited areas, in order to control the erosion, stabilize the ground
and protect the waters and the atmosphere, perform the treatment of
waste materials and eliminate in a safe manner the tailings, mill
tailings and dumps.
17.4. When ASC BOLIVIA LDC starts its activities, it will determine the
environmental liabilities that could exist in the deposits, object of
this CONTRACT, through the performance of the respective environmental
audit, according to that established in Clause 17.8.1.
17.5. ASC BOLIVIA LDC will be held responsible for the environmental
pollution flows originated in its mining works and through the
accumulation of wastes during the performance of its activities. in
turn, COMIBOL will be responsible for the accumulations and flows
coming from mining works, done prior to this CONTRACT, established in
the environmental audit according to the previous Clause 17.4.
17.6. When ASC BOLIVIA LDC does not comply with that determined in Clause
17.4, it will assume the exclusive responsibility for the flows and
accumulations resulting from the old and new mining works.
17.7. ASC BOLIVIA LDC will pay for damages, to those affected by the
environmental pollution generated by the accumulations and flows coming
from its mining works with an absolute exclusion of COMIBOL.
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17.8. The environmental management, particularly in order to establish the
polluting accumulations and flows. will be controlled by ASC BOLIVIA
LDC in the following manner:
17.8.1. Through the drawing up of an initial environmental audit done
by ASC BOLIVIA LDC, to be done during the first six (6) months
of the Exploitation period. Starting from the audit, ASC
BOLIVIA LDC will prepare, in the next to months, the
environmental management plan.
17.8.2. Should COMIBOL has its own audit and ASC BOLIVIA LDC accepts
it, it will be applicable and ASC BOLIVIA LDC must draw up the
environmental management plan within four (4) months, starting
from the date of the affidavit corresponding to this CONTRACT.
17.8.3. Through environmental audits for the compliance of obligations
and the establishment of responsibilities, resulting from the
environmental management plan, to be done every three years by
specialized companies or entities of national or international
prestige, hired and paid by ASC BOLIVIA LDC.
17.8.4. Through annual reports on the environmental management
prepared by ASC BOLIVIA LDC.
17.8.5. COMIBOL can ask ASC BOLIVIA LDC the environmental information
it considers necessary and can perform on its own the audits
it deems necessary.
17.8.6. The environmental management according to that established in
Point 17.4, comprises the recovery of the exploited areas in
order to reduce and control erosion, stabilize the grounds and
protect the waters and the atmosphere, perform the treatment
of waste materials and eliminate in a safe manner the
tailings, mill tailings and dumps.
17.8.7. The joint venture will not be able to be resolved as long as
the terms given in this Clause are not complied with. On the
other hand, ASC BOLIVIA LDC will continue having the
responsibilities corresponding to its environmental
management, according to the law, once the CONTRACT is
dissolved.
17.8.8. In order to avoid controversies ASC BOLIVIA LDC will timely
and sufficiently inform the representatives of the local
populations, on the aspects related to the protection of the
environment and will try to interest them in the environmental
repair works.
Also, ASC BOLIVIA LDC must comply with the legal requirements
regarding the information to third parties and others that
correspond.
EIGHTEENTH.- NON-EXISTENCE OF SOLIDARITY.
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18.1. It is expressly agreed that the hiring parties do not assume a joint
solidarity of any nature with respect to the obligations contracted by
any of them for the compliance of the obligations resulting from this
CONTRACT, unless that eventually and by free will and in an express
manner any of them assumes such obligations, which will be truly
recorded in a notarized document.
18.2. It is also expressly convened that this document contains all the
agreements, specifications and provisions agreed by the hiring parties,
and none of them will be obliged nor related to the other by any
statement, pledge or verbal or written agreement that is not expressly
incorporated in this CONTRACT.
NINETEENTH -QUALITY OF THE CONCESSIONAIRE.
19.1. According to that laid down by Art. 197 of Law No. 1243 for the
Updating of the Mining Code, ASC BOLIVIA LDC does not acquire property
rights nor a mining concession at all on the soil or underground of the
mining concessions forming part of the AREA GRANTED.
19.2. Nonetheless, COMIBOL grants in favor of ASC BOLIVIA LDC the operational
exclusiveness during the exploration phase as well as during the
construction, installation, starting and exploitation and the annexing
of facilities, equipment, machinery and other complementary assets,
such as constructions, access roads, water and right of way servitudes
uses and customs of the said concessions, understanding as
exclusiveness the fact that during the life of this CONTRACT none of
COMIBOL'S rights on such concessions. servitudes, uses and customs will
be affected, reduced nor impaired in any way, guaranteeing the quiet
and peaceful possession, use and enjoyment of the same, protecting all
the investment and development of ASC BOLIVIA LDC'S activities,
defending such rights against incursions, invasions and other
disturbances by third parties, either they be trade unions,
cooperatives, entities or persons, appealing to the means and resources
given by the laws of the Republic.
TWENTIETH.- COORDINATION, INFORMATION AND SUPERVISION OF THE
JOINT VENTURE.
20.1. ASC BOLIVIA LDC will have under its exclusive and autonomous control
and responsibility the management of all the exploration and
exploitation operations, without any exclusion nor limitation, with the
restrictions established in the laws of the Republic.
20.1. Nonetheless, this Joint Venture Contract will have as coordination,
information and follow-up organization, a COMMITTEE constituted at the
signing of the CONTRACT, that will be composed by four (4) members, two
(2) of them appointed by COMIBOL, and the other two (2) by ASC BOLIVIA
LDC, whose emoluments will be paid by the party appointing them.
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20.3. The COMMITTEE will constitute the main relationship means between
COMIBOL AND ASC BOLIVIA LDC during the life of the CONTRACT. The main
responsibility of the COMMITTEE will be to maintain the best managerial
relations between the parties and to contribute so that any
disagreement, that could come up between them, be discussed and
resolved in a concerted manner.
20.4. The COMMITTEE'S attributions, among others that it will determine. will
be:
a) Approve during its first meetings an internal bylaw that will norm
the COMMITTEE'S activities;
b) Verify the proper compliance of the conditions of this CONTRACT;
c) Create a communications system between ASC BOLIVIA LDC'S managerial
organism and the committee in order to ease the flow of the
relations between both organisms;
d) Formulate the recommendations it considers opportune for the better
compliance of the CONTRACT'S objectives, not meaning that such
recommendations are compulsory for the parties;
e) Gather all the technical, administrative and financial information
in order to conserve it within reach for its inspection and study
by the parties;
f) Recommend the execution of technical audits of the performed
operations by virtue of this CONTRACT, taking care that such audits
at no time hinder or interfere with the operations or impairs asc
bolivia ldc's administrative autonomy. These audits will be paid by
the party requiring them;
g) Periodically formulate the recommendations that are considered
necessary, with relation to the development of ASC BOLIVIA LDC's
operational plans.
TWENTY FIRST.- BOARD OF DIRECTORS.
21.1. Within fifteen days of having signed this CONTRACT, the parties will
organize a BOARD OF DIRECTORS.
21.2. This BOARD OF DIRECTORS will be formed by representatives from both
parties, COMIBOL and ASC BOLIVIA LDC, with equal number of members,
whose emoluments will be paid by the party appointing them.
21.3. The BOARD OF DIRECTORS will meet whenever necessary and called by the
president at his/her own initiative or at the request of the parties.
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21.4. The President of the BOARD OF DIRECTORS will be appointed by the
members of the BOARD OF DIRECTORS at the first ordinary meeting of such
organism.
21.5. The responsibilities of the BOARD OF DIRECTORS are, apart from those it
decides:
21.5.1. To determine the general policies of the joint venture;
21.5.2. To approve the financial statements of the joint venture;
21.5.3. To approve the hire of external independent auditors so they
will submit an opinion on the joint venture's annual financial
statements;
21.5.4. To know and approve the recommendations with regards to the
plans, projects and reports put before them by the COMMITTEE;
21.5.5. The joint venture's BOARD OF DIRECTORS will be the relations
organism between COMIBOL'S board of directors and ASC BOLIVIA
LDCA'S executive organisms, for everything concerning to the
running of the joint venture.
21.5.6. To know the audited financial statements done by external and
independent auditors of optimum quality, at the end of each
fiscal year.
21.6. The BOARD OF DIRECTORS' duties will, at no time, interfere nor impair the
administrative autonomy of ASC BOLIVIA LDC, on the joint venture's
operations during the exploitation stage and marketing of the minerals.
21.7. The BOARD OF DIRECTORS will carry a chronological and circumstantial
minutes of every and all their meetings, and the former will be signed by
those present.
TWENTY SECOND.- TAX AND CONTRIBUTIONS REGIME.
22.1. All the taxes and liens applicable to the mining industry, as well as
those applicable to the import of equipment, machinery, raw materials,
materials and other assets, to the marketing of minerals locally and for
export, in force at the date of the signing of this CONTRACT or that will
be enacted in the future will be exclusively paid by ASC BOLIVIA LDC and
its effects on COMIBOL'S corresponding share will be regulated by that
stated in clause eleventh of this CONTRACT.
22.2. Those taxes applicable to profits each party will obtain from the mining
operation, object of this CONTRACT will be the entire responsibility of
each of them, without any other responsibility for the other party.
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22.3. The contributions to entities of Social Security and Complementary
Funds or similar other ones existing or to be created, are of the
exclusive responsibility and charge of ASC BOLIVIA LDC, with COMIBOL'S
ABSOLUTE EXCLUSION.
TWENTY THIRD.- RESOLVING OF CONFLICTS BETWEEN PARTIES AND
ARBITRATION
23.1. All controversies and claims that could arise between parties with
regards the interpretation or execution of this CONTRACT, will be tried
to resolve them amicably and fast between such parties. in case that
they can not resolve them through mutual negotiations within sixty (60)
days, any of the hiring parties can request the matter under conflict
to be put before an arbitrer.
23.2. In such circumstances, the controversy or interpretation will be
resolved through settlement and/or arbitration according to the
Regulations given by the National Chamber of Commerce's Settlement and
Arbritation Center in La Paz (Bolivia) that, forming part of this
Clause, the parties declare to know and accept. The Center will appoint
the arbitrer from among the members of the Arbitral Body of such
Settlement and Arbitration Center belonging to the aforementioned
Chamber.
23.3. No recourse will proceed against the Arbitrer's resolutions, thus the
parties expressly resign to put it forward.
23.4. The arbitration costs will be paid by the loser in the Arbitral
Decision.
TWENTY FOURTH.- CONTRACT TRANSFERRAL TO A THIRD PARTY.
24.1. This Joint Venture Contract is a result of the award to a proposal
formulated by ASC BOLIVIA LDC to COMIBOL involving the evaluation of
certain technical, financial conditions and of the industrial
capability and competence of the bidder. Nonetheless, ASC BOLIVIA LDC
is empowered to incorporate into the contract's execution one or more
members of known prestige and capability in the mining industry, or in
the investments and financial branch, as well as transfer or subrogate
but only partially their share in the CONTRACT to third parties, but
without this meaning nor representing the total of their rights, share
or obligations resulting from this CONTRACT. To that effect, the
previous conditions stated as follows must be complied with:
24.2. To this effect, it will request the prior and written authorization
from COMIBOL, providing all the details demonstrating the suitability
of the collective or individual persons that are pretended to be
incorporated or those that will partially substitute ASC BOLIVIA LDC'S
participation.
24.3. COMIBOL reserves itself the right to assess the industrial and or
financial sufficiency of the entity or person acquiring or is
subrogated the partial share of ASC BOLIVIA LDC in the CONTRACT, with
the right to veto if that or this does not have the required
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conditions to the effect, with the sole obligation to give the concrete
and reasonable motives restricting its acceptance. the third parties
that could be incorporated to the joint venture contract, will assume
the obligations, that as members, are stated in this CONTRACT.
24.4. Any modification to the partial participation or share of ASC
BOLIVIA LDC in this contract, by virtue of having obtained it through a
public tender under special conditions, either be the incorporation of
new members, transfer of rights, subrogation of rights or other
contractual forms, the rights and shares corresponding to COMIBOL
stated in this CONTRACT won't be able to be altered, modified, reduced
nor affected.
TWENTY FIFTH.- RESCISSION OF CONTRACT
25.1. During the exploration phases, COMIBOL will be able to rescind the
CONTRACT unilaterally, in the following cases:
25.1.1. Nonfulfillment of the initial payments by ASC BOLIVIA LDC for
each phase, which should be done within the first thirty (30)
days;
25.1.2. Nonfulfillment in executing the work program and minimum
investment pledged by ASC BOLIVIA LDC for the first
exploration phase, in which case the bank guarantee
certificate presented by ASC BOLIVIA LDC to COMIBOL will be
cashed in. and COMIBOL will give notice to ASC BOLIVIA LDC
furnishing the motives.
25.2. In case the contract is terminated for any reason, during the
Exploration Phase, all the improvements made by ASC BOLIVIA LDC in the
areas of the CONTRACT, will stay behind for the benefit of the
concessions, object of the former, without any charge for COMIBOL, with
the exception of the tools, equipment, vehicles, materials and those
facilities liable to be withdrawn that have not been adhered to the
ground, all of which will be able to be freely withdrawn by ASC BOLIVIA
LDC.
All the technical information related to the explored areas, together
with the charts, studies, calculations and complementary details, will
also go as COMIBOL'S property, without any charge to it.
25.3. The CONTRACT can also be terminated due to the following causes:
25.3.1. If the CONTRACT has expired, if it hadn't been extended
according to that laid down in Clause Thirteenth;
25.3.2. By mutual agreement of the hiring parties;
25.3.3. By ASC BOLIVIA LDC'S unilateral decision, when certain
circumstances appear that make unviable the exploitation in
rentable economical conditions.
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25.3.4. When the construction, installation and starting of the
operations exceed Three (3) years since the notification by
ASC BOLIVIA LDC to COMIBOL announcing its exercise of right to
option, unless there are force majeure causes.
25.3.5. When the force majeure causes are produced, such as defined in
Clause Sixteenth of this CONTRACT.
25.4. In case or termination of this CONTRACT for any of the motives stated
in this CONTRACT, either be during the exploration period or in the
exploitation phase, ASC BOLIVIA LDC will be obliged to comply with the
delivery of the studies and other information in the next ninety (90)
days.
TWENTY SIXTH. - EXCLUSION AREA.
26.1. ASC BOLIVIA LDC can not formulate petitions nor perform mining
activities, either by itself or through and intermediary, in an area of
two (2) kilometers from the perimeter of the concession object of this
CONTRACT, unless there is an express authorization from COMIBOL. In any
case, the petition made infringing this prohibition, will be considered
as done for and for COMIBOL'S benefit.
26.2. COMIBOL also won't be able to perform mining activities, either by
itself or through an intermediary, in an exclusion area of one
kilometer from the perimeter of the concessions object of this
CONTRACT, unless the parties agree to the contrary.
TWENTY SEVENTH.- OPTION TO PURCHASE.
27.1. At the definitive closure of operations due to the CONTRACT'S expiry,
ASC BOLIVIA LDC grants COMIBOL the option rights, for a period of
ninety (90) days, for the purchase of its rights and tangible assets of
the joint venture, in equal opportunities as other interested parties.
27.2. COMIBOL and ASC BOLIVIA LDC will appoint an expert appraiser in charge
of establishing the price of the assets, using as basis for the
appraisal, the market value.
27.3. If COMIBOL decides to exercise its option rights, it must notify so of
its decision to ASC BOLIVIA LDC through a notarized letter, within the
term established in Point 27.1.
27.4. The payment of the price will be done within the following sixty (60)
days after the notice provided in the previous point, is given.
TWENTY EIGHT.-CONTRACT'S CONSTITUTIVE DOCUMENTS.
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28.1. Are part of this CONTRACT and will be inserted in the corresponding
Public Deed the following documents.
a) Supreme Decree No. 213601 dated February sixteenth nineteen ninety
four.
b) COMIBOL'S board of directors resolution no. 1105 dated February six
nineteen
c) General Administration Power of Attorney conferred to Dr. Alberto
Alandia Barron No. 1-10 awarded in the Notary of Mines in La Paz on
May seventeenth nineteen ninety four.
d) Special Power of Attorney conferred to Lic. Luis Arnal Velasco,
registered in the Notary of Mines in La Paz, under No. 205 on July
twenty eight nineteen ninety four.
e) Special Power of Attorney conferred to Mr. Johnny Delgado Achaval,
registered in the Notary of Mines in La Paz, under No. 105 on April
first nineteen ninety six, registered in the Commerce General
Register, Entry 728, Book 07-0, the same month and year.
f) COMIBOL'S board of directors resolution no. 1229 dated September
twenty seven nineteen ninety six.
g) Pages 5, 9 10 and 11 of ASC BOLIVIA LDC'S proposal.
TWENTY NINTH.-MINING LICENSES.
29.1. During the Exploration Phase, the mining licenses on all the areas
forming part of the mining concessions of the AREA GRANTED will be in
charge of COMIBOL.
29.2. Starting from the date ASC BOLIVIA LDC notifies COMIBOL that it will
make use of its option right, the mining licenses on the areas declared
as positive by ASC BOLIVIA LDC and in which the Exploitation Phase will
be developed, will be paid by ASC BOLIVIA LDC on behalf of COMIBOL and
the receipts will be presented by ASC BOLIVIA LDC to COMIBOL since they
are documents representative of its concessionaire right. this payment
won't be compensated nor reimbursed by COMIBOL nor by the joint venture
and will be done exclusively by ASC BOLIVIA LDC.
THIRTIETH.- OFFICIAL REGISTRATION OF THE CONTRACT.
30.1. The official registration's expenses for this CONTRACT, together with
the ANNEXES and corresponding documents, will be paid by ASC BOLIVIA
LDC, at the Special Notary of Mines in La Paz City
23
<PAGE>
30.2. ASC BOLIVIA LDC is obliged to present COMIBOL Three (3) Affidavits of
the officially registered CONTRACT, without any charge for COMIBOL,
within sixty (60) days after the writ is signed.
THIRTY FIRST.- CONSENT AND ACCEPTANCE.
31.1. We, DR. ALBERTO ALANDIA BARRON, PRESIDENT OF THE CORPORACION
MINERA DE BOLIVIA (COMIBOL) and LIC. LUIS ARNAL VELASCO, MANAGER
OF THE CONTRACTS AND FINANCE UNIT OF THE CORPORACION MINERA DE
BOLIVIA (COMIBOL), both of full age, neighbors of this city,
with i.d. no. 1191230 pt. and no. 332387 l.p., respectively,
able by right, on one side, and MR. JOHNNY DELGADO ACHAVAL, in
representation of ASC BOLIVIA LDC, of full age, neighbor if this
city, with i.d. no. 39745 l.p., ably: by right, give our full
consent and accept every and each of the clauses, terms and
conditions of this CONTRACT, to which we give full validity as
Private Document between parties, whilst it is converted into a
public deed, pledging to a faithful and strict compliance,
subscribing it in La Paz City, on the Twenty first of November
nineteen ninety six.- And you, Special Notary of Mines will add
all the rest of safety and style clauses.
Signed FOR CORPORACION MINERA DE BOLIVIA: Lic. Luis Arnal Velasco MANAGER
OF CONTRACTS AND FINANCES. Dr. Alberto Alandia Barron.-
PRESIDENTE.
Signed FOR ASC BOLIVIA LDC: Mr. Johnny Delgado Achaval AGENT AND PROXY.
Signed.- Dr. Jorge Eyzaguirre Duran.- RUC 02199106.- C. Ab. 0157.- LEGAL
ADVISOR COMIBOL. -
24
<PAGE>
Exhibit 10.22
- --------------------------------------------------------------------------------
MINING AGREEMENT
- --------------------------------------------------------------------------------
between
COMPANIA MINERA OCOTE, S. de R. L.
AND
KERRY A. McDONALD
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
<S> <C> <C>
RECITALS........................................................... 1
SECTION ONE - Exploration License and Mining Agreement............. 1
1.1 Exploration License......................................... 1
1.2 Work Obligation............................................. 2
1.3 Advance Royalties........................................... 3
1.4 Production Royalties........................................ 3
1.5 Transfer of Title........................................... 4
1.6 Delivery of Data............................................ 5
SECTION TWO - Mining Operations.................................... 5
2.1 Rights to Explore, Develop and Mine......................... 5
2.2 Conduct of Work............................................. 5
2.3 Liability and Insurance..................................... 5
2.4 Liens....................................................... 6
2.5 Installation of Equipment................................... 6
2.6 Acquisition of Permits...................................... 6
2.7 Drill Logs, Assays, and Maps................................ 6
SECTION THREE - Inspection by Minera Ocote......................... 7
3.1 Inspection of Property...................................... 7
3.2 Inspection of Accounts...................................... 7
SECTION FOUR - Taxes............................................... 7
SECTION FIVE - Termination and Default............................. 8
5.1 Termination................................................. 8
5.2 Default..................................................... 8
SECTION SIX - Notices.............................................. 9
6.1 Notices..................................................... 9
6.2 Payments.................................................... 9
SECTION SEVEN - Assignment......................................... 9
SECTION EIGHT - Warranty of Title................................. 10
SECTION NINE - Force Majeure...................................... 10
9.1 Suspension of Obligations.................................. 10
9.2 Definition of Force Majeure................................ 10
9.3 Economic Force Majeure..................................... 11
i
<PAGE>
SECTION TEN - Miscellaneous Provisions............................ 11
10.1 Binding Effect............................................. 11
10.2 Applicable Law............................................. 11
10.3 Entire Agreement........................................... 11
10.4 Void or Invalid Provisions................................. 11
10.5 Time of the Essence ....................................... 12
10.6 Area of Interest........................................... 12
EXHIBIT A - Property Description................................. 14
EXHIBIT B - Map.................................................. 15
</TABLE>
ii
<PAGE>
MINING AGREEMENT
----------------
THIS MINING AGREEMENT is made this 24/th/ day of June, 1994 by and
between COMPANIA MINERA OCOTE, S. de R. L., a Honduran company ("Minera Ocote");
and KERRY A. MCDONALD, ("McDonald").
RECITALS
--------
A. Minera Ocote has acquired the El Ocote #1 mining exploitation
concession affecting 400 hectares, more or less, in the municipality of La
Labor, Department of Ocotepeque, Honduras. The concession will be referred to
as the "Property." The Property is described on Exhibit A attached hereto and
depicted on the map attached as Exhibit B.
B. McDonald wishes to explore, develop, and mine the Property on the terms
and conditions set forth below.
THEREFORE, the parties have agreed as follows:
SECTION ONE
Exploration License and Mining Agreement
----------------------------------------
1.1 Exploration License. Minera Ocote hereby grants to McDonald the
-------------------
exclusive right and license to explore the Property. The license shall have an
initial term of five (5) years, commencing on execution of this Agreement. At
the end of the five-year term, provided that McDonald is then engaged in mining
operations on the Property, Minera Ocote shall assign the concession to
McDonald, together with any other contracts, rights-of-way, permits, or other
rights associated with the Property.
1
<PAGE>
1.2 Work Obligation. During the term of the exploration license, McDonald
---------------
shall expend the following sums on exploration, development, permitting,
testing, and other work on the Property:
a. During the first year of this Agreement, McDonald shall spend a
minimum of ONE HUNDRED THOUSAND DOLLARS ($100,000.00) on the
Property. This shall be a firm commitment, and McDonald shall not
be relieved of this requirement if he terminates the Agreement
during the first year. If McDonald spends less than $100,000.00
on exploration of the Property during the first year, he shall
pay the difference between his actual expenditures and
$100,000.00 to Minera Ocote .
b. During the second, third, fourth, and fifth years of the
exploration license, McDonald shall make the following
expenditures on the Property:
<TABLE>
<CAPTION>
Contract Year Expenditures
--------------- ------------
<S> <C>
2 $150,000.00
3 $200,000.00
4 $250,000.00
5 $300,000.00
</TABLE>
Any expenditures in excess of the yearly minimum obligation may be applied
as a credit to the following year's obligation.
The costs of maintaining the concession in good standing shall be included
in the work obligation.
2
<PAGE>
Within thirty (30) days following the end of each contract year, McDonald
shall prepare a detailed report to Minera Ocote describing the work performed
during the previous year, the cost of such work, and the general results of the
exploration program.
1.3 Advance Royalties. McDonald shall not be obliged to pay any advance
-----------------
royalties to Minera Ocote during the first three years of this Agreement. At
the beginning of the fourth contract year, McDonald shall pay an advance royalty
of FIFTY THOUSAND DOLLARS ($50,000.00) to Minera Ocote. On the fifth
anniversary of this Agreement, and on each anniversary thereafter, McDonald
shall pay an advance royalty of SEVENTY FIVE THOUSAND DOLLARS ($75,000.00) to
Minera Ocote. Each advance royalty payment may be offset against production
royalties generated during the ensuing contract year, but the advance royalties
shall not accrue from year to year as a credit against production royalties.
For example, if McDonald pays $75,000.00 to Minera Ocote on the fifth
anniversary of the Agreement, and operations on the Property generate
$100,000.00 in production royalties during the 12 months following the fifth
anniversary, McDonald shall pay the additional sum of $25,000.00 to Minera
Ocote.
1.4 Production Royalties. Upon commencing production of valuable minerals
--------------------
from the Property, McDonald shall pay to Minera Ocote a royalty on production
equal to five percent (5%) of net smelter returns. The term "net smelter
returns" shall mean the gross value of ores or concentrates shipped to a smelter
or other processor (as reported on the smelter settlement sheet) less the
following expenses actually incurred and borne by McDonald:
a. Sales, use, gross receipts, severance, and other taxes, if any,
payable with respect to severance, removal, sale on disposition
of the
3
<PAGE>
minerals from the Property, but excluding any taxes on production
or net income;
b. Charges and costs, if any, for transportation from the mine or
mill to places where the minerals are smelted, refined and/or
sold; and
c. Charges, costs, including assaying and sampling costs
specifically related to smelting and/or refining, and all
penalties, if any, for smelting and/or refining.
In the event smelting or refining are carried out in facilities owned or
controlled in whole or in part, by McDonald, charges, costs and penalties for
such operations shall mean the amount McDonald would have incurred if such
operations were carried out at facilities not owned or controlled by McDonald
then offering comparable services for comparable products on prevailing terms.
Payment of production royalties shall be made not later than thirty (30)
days after receipt of payment from the smelter. All payments shall be
accompanied by a statement explaining the manner in which the payment was
calculated.
1.5 Transfer of Title. Following execution of this Agreement, McDonald
-----------------
shall undertake all steps necessary to maintain the concession to the Property
in good standing, including payment in full of all sums required by the
government of Honduras. At such time as McDonald begins production of valuable
minerals from the Property, McDonald shall give written notice to Minera Ocote
requesting transfer of the concession and other property interests. Minera
Ocote shall then assign the concession and related property interests to
McDonald by suitable instruments, subject to any approvals required by the
government of Honduras.
4
<PAGE>
1.6 Delivery of Data. Upon execution of this Agreement, Minera Ocote
----------------
shall deliver to McDonald copies of all maps, deeds, and other documents in its
possession which pertain to the concession, prior workings, production history,
and so forth.
SECTION TWO
Mining Operations
-----------------
2.1 Rights to Explore, Develop and Mine. Upon execution of this
-----------------------------------
Agreement, McDonald shall have the right to make geological investigations and
surveys, to drill on the Property by any means, and to have all the rights and
privileges incident to ownership and possession of the Property, including
without limitation the right to mine underground or on the surface, extract by
leaching in place or any other means, remove, save, mill, concentrate, treat,
and sell or otherwise dispose of ores, concentrates, mineral-bearing earth and
rock and other products therefrom.
2.2 Conduct of Work. McDonald shall perform his mining activities on the
---------------
Property in accordance with good mining practice, and shall comply with the
applicable laws and regulations relating to the performance of mining operations
on the Property.
2.3 Liability and Insurance. During the term of the Agreement, McDonald
-----------------------
shall indemnify and hold Minera Ocote harmless from any claims, demands,
liabilities or liens arising out of McDonald's activities on the Property. To
that end, McDonald shall immediately obtain and carry a policy of public
liability insurance in the amount of $500,000.00 ($1,000,000.00 for mining) or
more for personal injury and $100,000.00 for property damage, protecting Minera
Ocote against any claims for injury to persons or damage to property resulting
from McDonald's operations. The insurance policy shall name Minera Ocote as a
co-insured.
5
<PAGE>
2.4 Liens. McDonald shall keep the Property free and clear from any and
-----
all mechanics' or laborers' liens arising from labor performed on or material
furnished to the Property at McDonald's request. However, a lien on the
Property shall not constitute a default if McDonald, in good faith, disputes the
validity of the claim, in which event the existence of the lien shall constitute
a default thirty (30) days after the validity of the lien has been adjudicated
adversely to McDonald.
2.5 Installation of Equipment. McDonald may install, maintain, replace,
-------------------------
and remove during the term of this Agreement any and all mining machinery,
equipment, tools, and facilities which it may desire to use in connection with
its mining activities on the Property. Upon termination of this Agreement for
any reason, McDonald shall have a period of one hundred eighty (180) days
following such termination during which it may remove all or part of the above
items at its sole cost and expense. Any equipment remaining on the Property
after one hundred eighty (180) days shall become the property of Minera Ocote.
2.6 Acquisition of Permits. McDonald shall acquire all permits required
----------------------
for its operations by the government of Honduras. Following termination of this
Agreement, McDonald shall reclaim and restore the Property in accordance with
Honduran laws and regulations.
2.7 Drill Logs, Assays, and Maps. Copies of all drill logs, exploration
----------------------------
information, assays, maps metallurgical studies, and other information shall be
furnished by McDonald to Minera Ocote annually and upon the expiration or
termination of this Agreement.
6
<PAGE>
SECTION THREE
Inspection by Minera Ocote
--------------------------
3.1 Inspection of Property. Minera Ocote, or its authorized agents or
----------------------
representatives, shall be permitted to enter upon the Property with one day's
advance notice for the purpose of inspection, but shall enter upon the Property
at its own risk and so as not to hinder unreasonably the operations of McDonald.
Minera Ocote shall indemnify and hold McDonald harmless from any damage, claim,
or demand by reason of injury to Minera Ocote or its agents or representatives
on the Property or the approaches thereto.
3.2 Inspection of Accounts. McDonald agrees to keep accurate books of
----------------------
account reflecting the mining operations, and Minera Ocote shall have the right,
either personally or through a qualified accountant of its choice and at its
cost, and upon seven days' advance notice, to examine and inspect the books and
records of McDonald pertaining to the mining, milling and shipping operations of
McDonald.
SECTION FOUR
Taxes
-----
McDonald shall pay all taxes levied or assessed upon any improvements
placed on the Property by McDonald. Upon termination of this Agreement for any
reason, taxes shall be apportioned between the parties on a calendar year basis
for the remaining portion of the calendar year. However, Minera Ocote shall not
be liable for taxes on any tools, equipment, machinery, facilities, or
improvements placed upon the Property unless McDonald fails to remove them
within the time provided by this Agreement.
7
<PAGE>
SECTION FIVE
Termination and Default
-----------------------
5.1 Termination. McDonald shall have the right to terminate this
-----------
Agreement at its sole discretion at any time upon thirty (30) days' written
notice to Minera Ocote. Upon termination, Minera Ocote shall retain all
payments previously made as liquidated damages and this Agreement shall cease
and terminate. McDonald will provide Minera Ocote with all data, maps, assays,
and reports pertaining to the Property. McDonald will also deliver a Quitclaim
Deed to Minera Ocote.
In the event of termination, McDonald shall surrender possession of the
Property to Minera Ocote and shall have no further liability or obligation
under this Agreement except for its obligation (1) to pay its apportioned share
of taxes, as provided for in Section Four; (2) to pay any monies or production
royalties then owned to Minera Ocote; (3) to pay the cost of removal of all
equipment as stated in Section 2.4; (4) to fulfill its reclamation
responsibilities as stated in Section 2.5; (5) to deliver final reports and
data; and (6) to satisfy any accrued obligations or liabilities.
5.2 Default. If McDonald fails to perform its obligation under this
-------
Agreement, and in particular fails to make any payment due to Minera Ocote
hereunder, Minera Ocote may declare McDonald in default by giving McDonald
written notice of default which specifies the obligation(s) which McDonald has
failed to perform. If McDonald fails to remedy a default in payment within
fifteen days (15) of receiving the notice of default, and to remedy or commence
to remedy any other default within thirty (30) days of receiving the notice of
default, Minera Ocote may terminate this Agreement
8
<PAGE>
and McDonald shall peaceably surrender possession of the Property to Minera
Ocote. Notice of termination shall be in writing and served in accordance with
this Agreement.
SECTION SIX
Notices and Payments
--------------------
6.1 Notices. All notices to McDonald or Minera Ocote shall be in writing
-------
and shall be sent certified or registered mail, return receipt requested, to the
addresses below. Notice of any change in address shall be given in the same
manner.
TO MINERA OCOTE: Mr. Bruce Wallis
Compania Minera Ocote
225 Baronne Street, Suite 1418
New Orleans, Louisiana 70112
Telephone: (504) 525-1152
Telecopier: (504) 525-1153
TO MCDONALD: Mr. Kerry McDonald
6821 North Montezuma Drive
Tuscon, Arizona 85718
Telephone: (602) 529-3329
Telecopier: (602) 529-6698
6.2 Payments. All payments shall be in U.S. Currency payable to Minera
--------
Ocote at the address above, or to such other address as Minera Ocote may
designate.
SECTION SEVEN
Assignment
----------
McDonald may assign this Agreement to any responsible party with the prior
written consent of Minera Ocote, which shall not be unreasonably withheld.
9
<PAGE>
SECTION EIGHT
Warranty of Title
-----------------
Minera Ocote warrants that the concession to the Property is in good
standing; that Minera Ocote has not created any liens, encumbrances, or first
rights of refusal affecting the property; and that Minera Ocote is a Honduran
corporation in good standing with the authority to enter into this Agreement.
SECTION NINE
Force Majeure
-------------
9.1 Suspension of Obligations. If McDonald is prevented by Force Majeure
-------------------------
from timely performance of any of its obligations hereunder, except the payment
of money, the failure of performance shall be excused and the period for
performance shall be extended for an additional period equal to the duration of
Force Majeure. Upon the occurrence and upon the termination of Force Majeure,
McDonald shall promptly notify Minera Ocote in writing. McDonald shall use
reasonable diligence to remedy Force Majeure, but shall not be required to
contest the validity of any law or regulation or any action or inaction of civil
or military authority.
9.2 Definition of Force Majeure. "Force Majeure" means cause beyond a
---------------------------
party's reasonable control, including but not limited to law or regulation;
action or inaction of civil or military authority; inability to obtain any
license, permit, or other authorization that may be required to conduct
operations on or in connection with the Property; unusually severe weather;
mining casualty; unavoidable mill shutdown; damage to or destruction of mine
plant or facility; fire; explosion; flood; insurrection; riot; labor
10
<PAGE>
disputes; inability after diligent effort to obtain workmen or material; delay
in transportation; and acts of God (but except any obligation to pay money).
9.3 Economic Force Majeure. During the extended term of this Agreement,
----------------------
McDonald shall have the right to suspend operations and hold the Property during
periods of Economic Force Majeure. "Economic Force Majeure" shall mean periods
during which the price of gold or other mineral commodities is too low to allow
economic recovery and sale of ore from the Property. However, McDonald shall
continue to pay advance royalties during conditions of Economic Force Majeure.
SECTION TEN
Miscellaneous Provisions
------------------------
10.1 Binding Effect. This Agreement shall inure to the benefit of and be
---------------
binding upon the parties hereto, their respective heirs, executors,
administrators, successors, and assigns.
10.2 Applicable Law. This Agreement shall initially be governed by the
--------------
laws of the State of Arizona. Following assignment of the concession to
McDonald, and once this Agreement has been translated into Spanish and duly
registered with the appropriate authorities, the Agreement shall be governed by
the laws of Honduras.
10.3 Entire Agreement. This Agreement terminates and replaces all prior
----------------
agreements, either written, oral or implied, between the parties hereto, and
constitutes the entire agreement between the parties.
10.4 Void or Invalid Provisions. If any term, provision, covenant or
--------------------------
condition of this Agreement, or any application thereof, should be held by a
court of competent jurisdiction to be invalid, void or unenforceable, all
provisions, covenants and
11
<PAGE>
conditions of this Agreement, and all applications thereof not held invalid,
void or unenforceable, shall continue in full force and effect and shall in no
way be affected, impaired, or invalidated thereby.
10.5 Time of the Essence. Time is of the essence of this Agreement and
-------------------
each and every part thereof.
10.6 Area of Interest. Any property interests acquired by either
----------------
party within two (2) kilometers of the exterior boundaries of the Property shall
be subject to this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first written above.
COMPANIA MINERA OCOTE
A. de R. L., a Honduran company
By: /s/ R. Bruce Wallis
-------------------
R. BRUCE WALLIS
President
/s/ Kerry McDonald
------------------
KERRY A. MCDONALD
STATE OF LOUISIANA )
) ss.
PARISH OF ORLEANS )
On this 24/th/ day of June in the year 1994, before me, a Notary Public
----- ----
in and for said state, personally appeared R. BRUCE WALLIS, who is President of
COMPANIA MINERA OCOTE, S. de R. L., a Honduran company, personally known (or
proved) to me to be the person who executed the above instrument, and
acknowledged to me that he executed the same for purposes stated therein.
/s/ Phillip K. Riegel
---------------------
Notary Public
12
<PAGE>
STATE OF ARIZONA )
) ss.
COUNTY OF Pima )
On this 24/th/ day of June in the year 1994, before me, a Notary Public
----- ----
in and for said state, personally appeared KERRY A. McDONALD, personally known
(or proved) to me to be the person who executed the above instrument, and
acknowledged to me that he executed the same for purposes stated therein.
/s/ Pamela Dewey
----------------
Notary Public
13
<PAGE>
EXHIBIT A
EL OCOTE NO. 1 EXPLOITATION CONCESSION
--------------------------------------
Location: Municipality of La Labor, Department of Ocotepeque, Honduras
Surface Area: (+)(-)339.13 Hectares
Description: Starting from the northwest corner of the dam located on Los
Jutes creek, go North 11.00 East for a distance of 740 meters
and arrive at point No.1; from this point go due south for a
distance of 2,000 meters and arrive at point No.2; from this
point go due West for a distance of 2,000 meters and arrive at
point No.3; from this point go due North for a distance of 2,000
meters and arrive at point No.4; from this point go due East for
a distance of 1,998.32 meters and arrive at point No.1, thus
closing the perimeter.
14
<PAGE>
[MAP THIS PAGE]
15
<PAGE>
EXHIBIT 10.23
ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of September 27, 1994, by
and between Kerry A. McDonald (the "Assignor") and Cordilleras Silver Mines
Ltd., a Bahamian corporation (the "Assignee").
W I T N E S S E T H:
WHEREAS, pursuant to the provisions of the Cordilleras Shareholders
Agreement, dated as of July 20, 1994, by and between the Assignor, the Assignee,
and Thomas S. Kaplan, the Assignor (i) desires to assign, transfer, convey and
deliver to the Assignee, all of the rights, licenses, title and interest in and
to the mining exploitation concession named "El Ocote #1" (the "El Ocote
Assets"), which the Assignor acquired under a mining agreement between the
Assignor and Compania Minera El Ocote, E. de R.L., dated June 24, 1994 (the "El
Ocote Agreement"), and (ii) desires to be released from any and all further
obligations under the El Ocote Agreement; and
WHEREAS, the Assignee (i) seeks to acquire and accept all of the
Assignor's right, license, title and interest in and to the El Ocote Assets, and
(ii) seeks to assume the Assignor's obligations under the El Ocote Agreement;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration had and received, the sufficiency of which is hereby
acknowledged, the parties hereby agree as follows:
1. The Assignor hereby assigns, transfers, conveys and delivers all of
his right, title and interest in and to the El Ocote Assets to the Assignee.
2. The Assignor hereby convenants and agrees for himself and his legal
representatives that he or they, as the case may be, shall execute and deliver
such further or other documents, deeds, or other instruments as shall be
necessary to give effect to the terms and intent expressed herein without
further or other consideration, but at the expense of the Assignee, its
successors and assigns.
3. The Assignee hereby assumes, and agrees to pay, perform and
discharge as and when they become due, the Assignor's obligations under the El
Ocote Agreement.
<PAGE>
4. This Assignment and Assumption Agreement is in accordance with and
is subject to all of the representations, warranties, covenants, exclusions and
indemnities set forth in the El Ocote Agreement, all of which are incorporated
herein by reference.
5. This Assignment and Assumption Agreement shall be of no force or
effect unless signed, in original or in counterpart copies, by each of the
Assignor and the Assignee.
6. This Assignment and Assumption Agreement shall be binding on and
inure to the benefit of the Assignor and the Assignee and their respective
successors and assigns.
7. This Assignment and Assumption Agreement shall be governed by and
construed in accordance with the internal substantive laws of the State of New
York without giving effect to conflict of laws principles thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Assumption Agreement to the duly executed as of the date and year first above
written.
KERRY A. MCDONALD
/s/ Kerry A. McDonald
--------------------------------
CORDILLERAS SILVER MINES LTD.
By: /s/ David Sean Hanna
-----------------------------
Name: D.S. Hanna
Title: Director
2
<PAGE>
Exhibit 10.24
Cordilleras Silver Mines (Cayman)LDC
July 10, 1995
Mr. R. Bruce Wallis
President
Compania Minera Ocote 5, de R.I.
225 Baronne Street, Suite 1418
New Orleans, Louisiana 70112
Dear Bruce:
This is to confirm our conversation today in which the following representations
were made.
1. Compania Minera Ocote warrants that it has not created any debts, liens,
encumbrances, first rights of refusal or other agreements affecting the rights
to the El Ocote property other than that which was signed by Kerry A. McDonald
(on 24 June 1994) and which has been assigned, with your consent, to Cordilleras
Silver Mines (Cayman) LDC ("Cordilleras").
2. Compania Minera Ocote warrants that, during the life of its agreement with
Cordilleras, Compania Minera Ocote will not create any debts, liens or
encumbrances on the El Ocote property nor will it enter into any agreement with
third parties which in any way could affect those rights conferred on
Cordilleras.
3. Compania Minera Ocote warrants that, should Cordilleras begin production of
valuable minerals from the El Ocote property and request transfer of the
concession and related property interests to itself, the concession to the El
Ocote property will be transferred to Cordilleras free of any debts, liens, or
encumbrances.
Most Sincerely,
/s/ Thomas S. Kaplan
- --------------------
Thomas S. Kaplan Acknowledged and Agreed:
Director
/s/ R. Bruce Wallis
-------------------
R. Bruce Wallis
President
Compania Minera Ocote S. de R.I.
<PAGE>
Attached hereto is an English translation of the original Spanish
version of contracts dated January 12, 1995 between Andean Silver Corporation
LDC and 190 of the co-owners of the assets which previously belonged to Empresa
Minera San Juan de Lucanas, S.A. The Company employed translators to translate
the above referenced agreement and based on this the undersigned believes that
the attached is a fair and accurate English translation of the above reference
agreement.
/s/ Keith R. Hulley
------------------------
Keith R. Hulley
Director
Apex Silver Mines Limited
Date: August 28, 1997
<PAGE>
Exhibit 10.25
Mr. Notary
Please draw up in your registry of public deeds one of transfer of mining
goods, being celebrated on the one part by Andean Silver Corporation, a foreign-
constituted and domiciled company having domicile for the purposes of this
contract at Las Camelias 755-301, Lima 27, Peru, who shall henceforth be called
the Buyer, represented by its agent Ing. Felipe De Lucio Pezet; and on the other
part by the co-owners of the assets which belonged to the Empresa Minera San
Juan de Lucanas, S.A., a list of whom is detailed in Annex IA, with domicile at
Av. Chiclayo 779-201, Lima 18, Peru, and who shall henceforth be called the
Titleholders, who act now represented by powers inscribed in Public Deed, by
Messrs. Juan de Dios Mejia Sulca, Roberto Romulo Salcedo Vargas, Aparicio Silva
Oropesa, Edwin Marcial Silva Velarde, Carlos Sucantaype Barba and Victo Velarde
Moran, under the following terms and conditions:
First The ex-workers of San Juan de Lucanas, S.A. described in Annex IB, among
- -----
whom are included the Titleholders, are co-owners of the entirety of the assets
which belonged to the Empresa Minera San Juan de Lucanas, S.A., and thus, are
co-owners of the San Juan de Lucanas mining complex, comprised of the mining
rights, milling plant, hydroelectric plants, workshops, camp, equipment,
machinery and other goods of mining activity integrated in the "Unidad Economica
Administrativa Dorita", located in the District of San Juan, Province of
Lucanas, Department of Ayacucho, Peru, as well as other assets, all of which are
described in Annex II.
This mining complex belonged to its former owner, the Empresa Minera San
Juan de Lucanas, S.A., which has been sued by the Titleholders in a judicial
proceeding of Judgement of Executive Resolution before the First Labor Court of
Lima, Clerk Dr. Otto Heimann. In said proceeding the Empresa Minera San Juan de
Lucanas, S.A. has suffered the embargo of its goods and in the file there is the
private contract celebrated between the parties to said litigation, dated June
16, 1993, approved by the Court which knows cause via resolution of June 23,
1993, by way of which the assets of the company have been delivered in property
to the workers in payment of their social benefits.
Equally resolved and filed is the appraiser's report valuing the mining
complex, there being lacking only the verdict to dispose the formalization of
the transfer of title to said goods.
Second By way of the present Contract of Transfer, the Titleholders sell and
- ------
the Buyer buys, the mining rights and other goods of Annex II, as well all of
the rights and easements inherent in same, in the following terms and under the
suspensive conditions and periods signalled below.
It is agreed that in the event that the transfer of property of the assets
of Empresa Minera San Juan de Lucanas S.A. to its ex-workers, for any reason,
remains null or is questioned or not approved by the Labor Court - and, as a
consequence, the property reverts to the aforementioned Empresa - the
dispositions of the Civil Code referring to these types of sales shall apply.
Third The total price to be paid for the transfer of the total of the mining
- -----
rights and goods of Annex II is US$2,100,000.00, which will be paid according to
the following schedule:
<PAGE>
a) On signature of the Public Deed brought about by this document, which shall
be no sooner than 120 calendar days from signature of this document, the
Buyer will pay the amount of US$50,000.00;
b) At the end of the first month from the signature of Public Deed US$50,000.00
will be paid;
c) At the end of the second month from the signature of Public Deed US$50,000.00
will be paid;
d) At the end of the third month from the signature of Public Deed US$100,000.00
will be paid;
e) At the end of the fourth month from the signature of Public Deed
US$150,000.00 will be paid;
f) At the end of the fifth month from the signature of Public Deed US$150,000.00
will be paid;
g) At the end of the sixth month from the signature of Public Deed US$150,000.00
will be paid;
h) At the end of the seventh month from the signature of Public Deed
US$150,000.00 will be paid;
i) At the end of the eighth month from the signature of Public Deed
US$150,000.00 will be paid;
j) At the end of the ninth month from the signature of Public Deed US$150,000.00
will be paid;
k) At the end of the tenth month from the signature of Public Deed US$150,000.00
will be paid;
l) At the end of the eleventh month from the signature of Public Deed
US$150,000.00 will be paid;
m) At the end of the twelfth month from the signature of Public Deed
US$200,000.00 will be paid;
n) At the end of the thirteenth month from the signature of Public Deed
US$200,000.00 will be paid;
n) At the end of the fourteenth month from the signature of Public Deed
US$250,000.00 will be paid.
2
<PAGE>
All of the payments will begin to be counted from the signature of the Public
Deed of Transfer originated by this contract and understood as calendar months
such that the payments coincide on the same day of each month. The Titleholders
declare their agreement that this price is the sole and total [one] for 100% of
the rights on the entirety of the assets material to this contract, by which
[they agree] there will remain a balance of the price for alicuots which belong
to workers included in Annex IB who do not transfer their participation via the
present document.
The lack of compliance with the schedule of payments will give rise to the
measures contemplated in the Civil Code.
Fourth The schedule of payments detailed in the foregoing clause are subject to
- ------
the suspensive condition of formalization of the transfer of title material to
the present contract, which will have occurred when in the Public Mining
Registry either the ex-workers of San Juan de Lucanas or the legal or
conventional company constituted by them appear as owners of the mining rights
and accessories contained in Annex II.
Fifth If after 120 days have transpired from the date of signature of the
- -----
present contract the workers have not complied with the formalization of the
transfer of assets to their name up to and including inscription in the Public
Mining Registry, that is, if they have not complied with the suspensive
condition during this period, the Buyer will have the right to annul the
contract of transfer, by which he will be automatically exempt from compliance
with the obligations he will have assumed in the present contract. This right
may be exercised by the Buyer by way of written communication remitted to the
domicile signalled by the Titleholders in the introduction to this contract,
which may be done at any time once the period for compliance with the suspensive
condition has expired. In the event that the Buyer chooses to not annul the
contract for this non-compliance and the obligation of the Titleholders to
proceed with inscription is in force, all of the payments and other obligations
of the Buyer will remain in suspense until the complete formalization of the
transfer of assets to the Titleholders.
Sixth While the suspensive condition has not been met, the rights of the Buyer
- -----
will be in force, [so that] he may act as owner of the assets. Consequently,
the Buyer may study the mine, its installations and equipments, as well as
review the technical, accounting and legal archives. Nonetheless, the
Titleholders will have the right of usufruct of the mining complex for 120 days
counted from the signature of this document, including the mining rights, the
milling plant and other goods of mining activity material to this contract.
This period may be amplified by the Buyer.
Seventh Notwithstanding the expiration of the period for compliance with the
- -------
agreed suspensive condition, the obligations assumed by the Titleholders in the
prevent contract will remain in force, and they will be obliged to transfer to
the Buyer all of the assets contained in Annex II once they obtain title to
same, unless the Buyer will have exercised his right to annul the contract.
Eighth In view of the fact that on inscription in the Public Mining Registry of
- ------
the contract of transfer described in the first clause, there will be more than
one holder of title to the mining
3
<PAGE>
rights included in Annex II and the registrar must, by legal mandate,
automatically constitute a Limited Mining Partnership, unless the ex-workers
decide to constitute a conventional corporation, it could be that the owner of
the goods specified in Annex II will not be the titleholders, but rather a legal
or conventionel corporation in which the Titleholders and other ex-workers are
shareholders or participationists [sic]. Therefore, should this be the case,
automatically and without any additional economic burden or obligation for the
Buyer, he may opt that the transfer material to this contract will not be made
on alicuots of assets but rather on participations or shares of the corporate
titleholder. For the exercise of the alternative given to the Buyer to change
the object of the transfer, it will be enough to remit a written communication
to the domicile of the Titleholders signalled in the introduction to this
contract, and will not require any other additional document nor celebration of
a new contract.
Ninth During the life of the present commitment, the Titleholders commit
- -----
themselves to not alienate, pledge, mortgage, cede, give in concession, lease
nor affect in any way, any of the goods material to this contract without the
written consent of the Buyer, as well as to do all possible [to ensure] that
third parties or previous owners do not celebrate any of the acts detailed in
this clause or any contract that would limit, restrict or prejudice their right
of ownership of the assets material to this contract, with the sole exception of
the formalization of the agreement of transfer to the Titleholders. Likewise,
the Titleholders oblige themselves to not sign any document of option of
transfer, nor letters of intent, nor any offer of any kind, on the goods
material to this contract or on the participations or shares of the legal or
conventional corporation which may be constituted [and] which may be holder of
title to such assets.
Tenth The Titleholders declare that the assets material to the present contract
- -----
are found with title in order, that they have complied with all of the
substantive and formal obligations required by mining and commercial law, and
that there is no cause of extinction on them. They also declare that on these
[assets] there does not weigh any charge, tariff, judicial or extra-judicial
measure which could restrict or put at risk the rights of the owner. The only
judicial measure pending as of today is the embargo placed by the same workers
before the First Labor Court in the file mentioned in the first clause, which
the Titleholders commit themselves to lifting since the labor credit has been
satisfied with the adjudication of the assets of their ex-employer.
Eleventh On signing the public deed given rise to by this document, and
- --------
beginning to make the payments assumed by the Buyer, each of the payments will
be channeled through a Bank chosen and contracted by the Buyer, which will act
as Trust Bank. The Buyer will make the deposits in the Trust Bank in the amounts
and times agreed in the third clause and will distribute them among the
Titleholders shown in Annex IA in accordance with the share which each has in
the title of the assets or the participations or shares in the legal or
conventional corporation which may be constituted, share which is clearly
expressed in Annex IB.
Nonetheless, in the event that the assets material to this contract are
contributed to a legal or conventional corporation, by virtue of that described
in the eighth clause, and the Buyer opts for the purchase of shares and
participations and not for alicuots of assets, the Trust Bank will make the
payments corresponding to such a corporate owner of said assets, if and when the
mentioned corporation ratifies via its relevant organs the transfer witnessed in
the present
4
<PAGE>
document. Should it be the case that it is a conventional corporation in which
not all of the ex-workers included in Annex IB participate, the payments which
correspond to this corporation will only reach the amount which corresponds to
the partners or shareholders.
It remains understood that the ratification mentioned in the foregoing
paragraph is only for effect of charging the price and giving assurances to the
Trust Bank, and its non-observance or non-application in no way will affect the
transfer to the Buyer.
The deposit in the Trust Bank will be considered as payment of the valid
price and shall be sufficient proof of compliance with the obligation assumed by
the Buyer in the third clause.
The distribution of the funds deposited by the Buyer shall be the exclusive
province of the ex-workers of San Juan de Lucanas and any conflict generated by
the distribution of the agreed price or by the charging of the price shall be
resolved internally among them.
Twelfth Without prejudice to the right contained in the fifth clause, the Buyer
- -------
may annul the present contract at any time and without need for expression of
cause, for which it will be enough to remit a written communication to the
domicile signalled by the Titleholders in the introduction to this contract.
Should the Buyer choose to annul the present contract, be it by virtue of
this clause or by the right conferred on him in the fifth clause, he will have
no monetary obligation before the Titleholders nor before third parties, nor
shall any investment commitments which may have been agreed remain in force, nor
shall he have any responsibility for exploration and similar works which may
have been made. On annulment of the contract by the Buyer, the payments which
may have already been made in accordance with the schedule of payments contained
in the third clause shall remain in the hands of the Titleholders, and future
payments shall be automatically voided along with annulment of the contract,
remaining no obligation whatsoever between the Buyer and the Titleholders. It is
understood that on annulment of the contract of transfer the title to the assets
material to this contract will revert to the Titleholders.
Thirteenth As a guaranty of payment of the pending payments being charged,
- ----------
amounting to US$2,050,000.00, the Buyer constitutes in favor of all of the
sellers listed in Annex IA, a mortgage on the mining rights detailed in Annex
II, which shall be reduced as the agreed monthly payments are complied with.
Fourteenth Any conflict which may arise in relation to the transfer of the
- ----------
assets or of the shares or participations, be it in relation to issues or
discrepancies relative to its celebration or execution, shall be submitted to
legal arbitration, which shall unfold in the city of Lima in conformity with the
rules and procedures of the Chamber of Commerce of Lima.
Incorporate, Sir, the legal introduction and conclusion, as well as the
annexes and other inserts which may be necessary, and proceed to dispatch the
corresponding parts to the Public Mining Registry.
Lima, January 12, 1995
5
<PAGE>
Attached hereto is an English translation of the original Spanish
version of contracts dated January 12, 1995 between Andean Silver Corporation
LDC and 133 of the co-owners of the assets which previously belonged to Empresa
Minera San Juan de Lucanas, S.A. The Company employed translators to translate
the above referenced agreement and based on this the undersigned believes that
the attached is a fair and accurate English translation of the above reference
agreement.
/s/ Keith R. Hulley
- ------------------------
Keith R. Hulley
Director
Apex Silver Mines Limited
Date: August 28, 1997
<PAGE>
Exhibit 10.26
Mr. Notary
Please draw up in your registry of public deeds one of transfer of mining
goods, being celebrated on the one part by Andean Silver Corporation, a foreign-
constituted and domiciled company having domicile for the purposes of this
contract at Las Camelias 755-301, Lima 27, Peru, who shall henceforth be called
the Buyer, represented by its agent Ing. Felipe De Lucio Pezet; and on the other
part by the co-owners of the assets which belonged to the Empresa Minera San
Juan de Lucanas, S.A., a list of whom is detailed in Annex IA, with domicile at
Av. Chiclayo 779-201, Lima 18, Peru, and who shall henceforth be called the
Titleholders, who act now represented by powers inscribed in Public Deed, by
Messrs. Juan de Dios Mejia Sulca, Roberto Romulo Salcedo Vargas, Aparicio Silva
Oropesa, Edwin Marcial Silva Velarde, Carlos Sucantaype Barba and Victo Velarde
Moran, under the following terms and conditions:
First The ex-workers of San Juan de Lucanas, S.A. described in Annex IB, among
- -----
whom are included the Titleholders, are co-owners of the entirety of the assets
which belonged to the Empresa Minera San Juan de Lucanas, S.A., and thus, are
co-owners of the San Juan de Lucanas mining complex, comprised of the mining
rights, milling plant, hydroelectric plants, workshops, camp, equipment,
machinery and other goods of mining activity integrated in the "Unidad Economica
Administrativa Dorita", located in the District of San Juan, Province of
Lucanas, Department of Ayacucho, Peru, as well as other assets, all of which are
described in Annex II.
This mining complex belonged to its former owner, the Empresa Minera San
Juan de Lucanas, S.A., which has been sued by the Titleholders in a judicial
proceeding of Judgement of Executive Resolution before the First Labor Court of
Lima, Clerk Dr. Otto Heimann. In said proceeding the Empresa Minera San Juan de
Lucanas, S.A. has suffered the embargo of its goods and in the file there is the
private contract celebrated between the parties to said litigation, dated June
16, 1993, approved by the Court which knows cause via resolution of June 23,
1993, by way of which the assets of the company have been delivered in property
to the workers in payment of their social benefits.
Equally resolved and filed is the appraiser's report valuing the mining
complex, there being lacking only the verdict to dispose the formalization of
the transfer of title to said goods.
Second By way of the present Contract of Transfer, the Titleholders sell and
- ------
the Buyer buys, the mining rights and other goods of Annex II, as well all of
the rights and easements inherent in same, in the following terms and under the
suspensive conditions and periods signalled below.
It is agreed that in the event that the transfer of property of the assets
of Empresa Minera San Juan de Lucanas S.A. to its ex-workers, for any reason,
remains null or is questioned or not approved by the Labor Court - and, as a
consequence, the property reverts to the aforementioned Empresa - the
dispositions of the Civil Code referring to these types of sales shall apply.
Third The total price to be paid for the transfer of the total of the mining
- -----
rights and goods of Annex II is US$2,100,000.00, which will be paid according to
the following schedule:
<PAGE>
a) On signature of the Public Deed brought about by this document, which shall
be no sooner than 120 calendar days from signature of this document, the
Buyer will pay the amount of US$50,000.00;
b) At the end of the first month from the signature of Public Deed US$50,000.00
will be paid;
c) At the end of the second month from the signature of Public Deed US$50,000.00
will be paid;
d) At the end of the third month from the signature of Public Deed US$100,000.00
will be paid;
e) At the end of the fourth month from the signature of Public Deed
US$150,000.00 will be paid;
f) At the end of the fifth month from the signature of Public Deed US$150,000.00
will be paid;
g) At the end of the sixth month from the signature of Public Deed US$150,000.00
will be paid;
h) At the end of the seventh month from the signature of Public Deed
US$150,000.00 will be paid;
i) At the end of the eighth month from the signature of Public Deed
US$150,000.00 will be paid;
j) At the end of the ninth month from the signature of Public Deed US$150,000.00
will be paid;
k) At the end of the tenth month from the signature of Public Deed US$150,000.00
will be paid;
l) At the end of the eleventh month from the signature of Public Deed
US$150,000.00 will be paid;
m) At the end of the twelfth month from the signature of Public Deed
US$200,000.00 will be paid;
n) At the end of the thirteenth month from the signature of Public Deed
US$200,000.00 will be paid;
n) At the end of the fourteenth month from the signature of Public Deed
US$250,000.00 will be paid.
2
<PAGE>
All of the payments will begin to be counted from the signature of the Public
Deed of Transfer originated by this contract and understood as calendar months
such that the payments coincide on the same day of each month. The Titleholders
declare their agreement that this price is the sole and total [one] for 100% of
the rights on the entirety of the assets material to this contract, by which
[they agree] there will remain a balance of the price for alicuots which belong
to workers included in Annex IB who do not transfer their participation via the
present document.
The lack of compliance with the schedule of payments will give rise to the
measures contemplated in the Civil Code.
Fourth The schedule of payments detailed in the foregoing clause are subject to
- ------
the suspensive condition of formalization of the transfer of title material to
the present contract, which will have occurred when in the Public Mining
Registry either the ex-workers of San Juan de Lucanas or the legal or
conventional company constituted by them appear as owners of the mining rights
and accessories contained in Annex II.
Fifth If after 120 days have transpired from the date of signature of the
- -----
present contract the workers have not complied with the formalization of the
transfer of assets to their name up to and including inscription in the Public
Mining Registry, that is, if they have not complied with the suspensive
condition during this period, the Buyer will have the right to annul the
contract of transfer, by which he will be automatically exempt from compliance
with the obligations he will have assumed in the present contract. This right
may be exercised by the Buyer by way of written communication remitted to the
domicile signalled by the Titleholders in the introduction to this contract,
which may be done at any time once the period for compliance with the suspensive
condition has expired. In the event that the Buyer chooses to not annul the
contract for this non-compliance and the obligation of the Titleholders to
proceed with inscription is in force, all of the payments and other obligations
of the Buyer will remain in suspense until the complete formalization of the
transfer of assets to the Titleholders.
Sixth While the suspensive condition has not been met, the rights of the Buyer
- -----
will be in force, [so that] he may act as owner of the assets. Consequently,
the Buyer may study the mine, its installations and equipments, as well as
review the technical, accounting and legal archives. Nonetheless, the
Titleholders will have the right of usufruct of the mining complex for 120 days
counted from the signature of this document, including the mining rights, the
milling plant and other goods of mining activity material to this contract.
This period may be amplified by the Buyer.
Seventh Notwithstanding the expiration of the period for compliance with the
- -------
agreed suspensive condition, the obligations assumed by the Titleholders in the
prevent contract will remain in force, and they will be obliged to transfer to
the Buyer all of the assets contained in Annex II once they obtain title to
same, unless the Buyer will have exercised his right to annul the contract.
Eighth In view of the fact that on inscription in the Public Mining Registry of
- ------
the contract of transfer described in the first clause, there will be more than
one holder of title to the mining
3
<PAGE>
rights included in Annex II and the registrar must, by legal mandate,
automatically constitute a Limited Mining Partnership, unless the ex-workers
decide to constitute a conventional corporation, it could be that the owner of
the goods specified in Annex II will not be the titleholders, but rather a legal
or conventionel corporation in which the Titleholders and other ex-workers are
shareholders or participationists [sic]. Therefore, should this be the case,
automatically and without any additional economic burden or obligation for the
Buyer, he may opt that the transfer material to this contract will not be made
on alicuots of assets but rather on participations or shares of the corporate
titleholder. For the exercise of the alternative given to the Buyer to change
the object of the transfer, it will be enough to remit a written communication
to the domicile of the Titleholders signalled in the introduction to this
contract, and will not require any other additional document nor celebration of
a new contract.
Ninth During the life of the present commitment, the Titleholders commit
- -----
themselves to not alienate, pledge, mortgage, cede, give in concession, lease
nor affect in any way, any of the goods material to this contract without the
written consent of the Buyer, as well as to do all possible [to ensure] that
third parties or previous owners do not celebrate any of the acts detailed in
this clause or any contract that would limit, restrict or prejudice their right
of ownership of the assets material to this contract, with the sole exception of
the formalization of the agreement of transfer to the Titleholders. Likewise,
the Titleholders oblige themselves to not sign any document of option of
transfer, nor letters of intent, nor any offer of any kind, on the goods
material to this contract or on the participations or shares of the legal or
conventional corporation which may be constituted [and] which may be holder of
title to such assets.
Tenth The Titleholders declare that the assets material to the present contract
- -----
are found with title in order, that they have complied with all of the
substantive and formal obligations required by mining and commercial law, and
that there is no cause of extinction on them. They also declare that on these
[assets] there does not weigh any charge, tariff, judicial or extra-judicial
measure which could restrict or put at risk the rights of the owner. The only
judicial measure pending as of today is the embargo placed by the same workers
before the First Labor Court in the file mentioned in the first clause, which
the Titleholders commit themselves to lifting since the labor credit has been
satisfied with the adjudication of the assets of their ex-employer.
Eleventh On signing the public deed given rise to by this document, and
- --------
beginning to make the payments assumed by the Buyer, each of the payments will
be channeled through a Bank chosen and contracted by the Buyer, which will act
as Trust Bank. The Buyer will make the deposits in the Trust Bank in the amounts
and times agreed in the third clause and will distribute them among the
Titleholders shown in Annex IA in accordance with the share which each has in
the title of the assets or the participations or shares in the legal or
conventional corporation which may be constituted, share which is clearly
expressed in Annex IB.
Nonetheless, in the event that the assets material to this contract are
contributed to a legal or conventional corporation, by virtue of that described
in the eighth clause, and the Buyer opts for the purchase of shares and
participations and not for alicuots of assets, the Trust Bank will make the
payments corresponding to such a corporate owner of said assets, if and when the
mentioned corporation ratifies via its relevant organs the transfer witnessed in
the present
4
<PAGE>
document. Should it be the case that it is a conventional corporation in which
not all of the ex-workers included in Annex IB participate, the payments which
correspond to this corporation will only reach the amount which corresponds to
the partners or shareholders.
It remains understood that the ratification mentioned in the foregoing
paragraph is only for effect of charging the price and giving assurances to the
Trust Bank, and its non-observance or non-application in no way will affect the
transfer to the Buyer.
The deposit in the Trust Bank will be considered as payment of the valid
price and shall be sufficient proof of compliance with the obligation assumed by
the Buyer in the third clause.
The distribution of the funds deposited by the Buyer shall be the exclusive
province of the ex-workers of San Juan de Lucanas and any conflict generated by
the distribution of the agreed price or by the charging of the price shall be
resolved internally among them.
Twelfth Without prejudice to the right contained in the fifth clause, the Buyer
- -------
may annul the present contract at any time and without need for expression of
cause, for which it will be enough to remit a written communication to the
domicile signalled by the Titleholders in the introduction to this contract.
Should the Buyer choose to annul the present contract, be it by virtue of
this clause or by the right conferred on him in the fifth clause, he will have
no monetary obligation before the Titleholders nor before third parties, nor
shall any investment commitments which may have been agreed remain in force, nor
shall he have any responsibility for exploration and similar works which may
have been made. On annulment of the contract by the Buyer, the payments which
may have already been made in accordance with the schedule of payments contained
in the third clause shall remain in the hands of the Titleholders, and future
payments shall be automatically voided along with annulment of the contract,
remaining no obligation whatsoever between the Buyer and the Titleholders. It is
understood that on annulment of the contract of transfer the title to the assets
material to this contract will revert to the Titleholders.
Thirteenth As a guaranty of payment of the pending payments being charged,
- ----------
amounting to US$2,050,000.00, the Buyer constitutes in favor of all of the
sellers listed in Annex IA, a mortgage on the mining rights detailed in Annex
II, which shall be reduced as the agreed monthly payments are complied with.
Fourteenth Any conflict which may arise in relation to the transfer of the
- ----------
assets or of the shares or participations, be it in relation to issues or
discrepancies relative to its celebration or execution, shall be submitted to
legal arbitration, which shall unfold in the city of Lima in conformity with the
rules and procedures of the Chamber of Commerce of Lima.
Incorporate, Sir, the legal introduction and conclusion, as well as the
annexes and other inserts which may be necessary, and proceed to dispatch the
corresponding parts to the Public Mining Registry.
Lima, January 12, 1995
5
<PAGE>
EXHIBIT 10.27
MR. NOTARY:
Kindly enter in your registry of public deeds one registering the
transferring of mining rights and other assets entered into by and between ASC
PERU LDC (Sucursal del Peru), with offices at Las Camelias 755-301, Lima 27
Peru, hereinafter referred to as the PURCHASER, acting by and through its
attorney in fact, Felipe de Lucio Pezet, Eng., as party of the first park; and,
as party of the second part, [Seller], joint owner of the assets which formerly
belonged to Empresa Minera San Juan de Lucanas, S.A., identified by
Registration Card No. [________], married to [__________], identified by Voter's
Registration Card No. [__________], with usual residence at [_________], Peru,
hereinafter referred to as the TITLEHOLDER, under the following terms and
conditions:
ONE. - The TITLEHOLDER was a worker for Empresa Minera San Juan de Lucanas S.A.
- ---
and is the joint owner of the whole assets which formerly belonged to the said
company; therefore, he is the joint owner of the San Juan de Lucanas mining
complex, consisting, of the mining rights, beneficiation plant, power stations,
workshops, camps, equipment, machinery and other goods related to the mining
activity integrated into the "Dorita Economic and Adminis Unit", located
in the District of San Juan, Province of Lucanas, Department of Ayacucho, Peru
as well as other goods, all of them described in Annex 1 hereto.
The above-referred mining complex belonged to its former owner, Empresa
Minera San Juan de Lucanas S.A., which, at present, is the defendant in a
lawsuit filed by the TITLEHOLDER, before the First Labor Court in and for Lima,
with Otto Heimann acting as Clerk, whereby the TITLEHOLDER Requests the
Execution of an Administrative Resolution. in the course of such proceedings,
an attachment was imposed on the assets of Empresa Minera San Juan de Lucanas
S.A. and the docket of the case contains the private agreement which was entered
into by the parties thereto on june 16, 1993, whereby the assets of the
companies were transferred to the workers as payment for social benefits.
Although the perfection of such transfer has not been completed yet, in
practice, the TITLEHOLDER has been acting as owner of the assets and at present
he declares that he is in condition of offering for sale his aliquot part on the
assets which he co-owns and the award of which will be perfected by the judgment
approving the private agreement.
TWO.- The TITLEHOLDER does hereby sell and the PURCHASER does hereby purchase
- ---
the mining rights and other assets listed in Annex I, as well as all the rights
and other assets listed in Annex i, as well as all the rights and easements
inherent thereto, under the following terms and provided the conditions
precedent and the terms stipulated hereinafter are fully complied with.
It is hereby understood that should the transfer of the assets of Empresa
Minera San Juan de Lucanas S.A. to its former workers, for any reason
whatsoever, remain
<PAGE>
without effect or were objected or denied approval by the Labor Court and,
consequently, the property would return to the aforesaid Company, the provisions
of the Civil Code regarding the sale of property belonging to another shall
apply, specifically the stipulations contained in Articles 1537 and 1538 of the
said Code.
THREE.- The price for the transfer of all the mining rights and assets listed in
- -----
annex 1 hereto is US$2,100,000.00 which payment shall be made according to the
schedule contained in Annex 11. Payment deadlines shall be counted as from the
date of execution of the Public Deed evidencing the Transfer resulting from the
preliminary deed dated [______], executed by the PURCHASER and a group of former
workers of Empresa Minera San Juan de Jucanas, acting by and through Mr. Cirilo
Paredes Tapia, identified by Voter's Registration Card No. [______]. The
TITLEHOLDER acknowledges that this is the sole and total price for 100% of the
rights over the whole assets transferred hereunder and that there will remain a
price balance corresponding to the aliquots of workers who have not transferred
their interest in such assets to the said PURCHASER.
FOUR.- The schedule of payments appearing in Annex II hereto is subject to the
- ----
condition precedent of perfecting the transfer of ownership hereunder, which
shall take place when in the records of the Public Register of Mines appears the
name of the PURCHASER or the person designated as the owner of the mining rights
and the ancillary parts thereof, as listed in Annex 1.
FIVE.- The PURCHASER may authorize the TITLEHOLDER in writing, to exploit the
- ----
mining rights subject matter hereof in the volumes, terms and areas as may be
deemed convenient.
SIX.- Until the condition precedent has been performed as regards to payments,
- ---
the rights of the PURCHASER shall remain in force, and the PURCHASER may act as
the owner of the assets.
Therefore, the PURCHASER may study the mine, its facilities and equipment and
examine its technical, accounting and legal files.
SEVEN. - Notwithstanding the expiry of the term for performing the condition
- -----
precedent agreed by the parties, the obligations assumed hereunder by the
TITLEHOLDER shall remain in force and the TITLEHOLDER shall be bound to transfer
to the PURCHASER any and all assets listed in annex 1 as soon as the title to
same is obtained, unless the PURCHASER has exercised its right to terminate the
agreement.
EIGHT.- Since upon registration of the transfer agreement described in Clause
- -----
One, above, in the Public Register of Mines, there will be more than one
titleholder of the mining rights listed in Annex 1, and pursuant to law, the
registrar will be compelled to organize a Limited Liability Mining Company,
unless the former workers decide to organize a conventional company, it might
happen that the joint owner of the assets listed in Annex I is not the
TITLEHOLDER but a registered or conventional company of
2
<PAGE>
which the TITLEHOLDER and the other former workers are shareholders or
Participants. Therefore, in such case, the PURCHASER may automatically and
without this representing any economic charge or additional obligation for it,
decide that the transfer hereunder is not understood as referred to aliquot
parts of the assets but to interests or shares of the titleholdering company. to
exercise this option to trade by barter the assets being transferred to the
PURCHASER, a written notice sent to the domicile of the TITLEHOLDER appearing in
the introduction hereof shall suffice, without it being necessary to provide any
additional document nor to enter into a new agreement.
NINE. - As from the date of execution hereof, the TITLEHOLDER will have
- ----
transferred his right to the joint ownership of the mining rights and the
ancillaries thereof, as well as other assets listed in Annex I for which reason
he will neither alienate, pledge, mortgage, assign, convey, lease nor encumber
in any manner whatsoever, none of the assets subject matter hereof and shall use
its best efforts to prevent Empresa Minera San Juan de Lucanas S.A., which is no
longer the titleholder of said assets, to enter into any of the acts listed
above or enter into a contract that may limit, restrict or damage the property
rights of the PURCHASER over the assets subject matter hereof, with the sole
exception of perfecting the transfer agreement in favor of the TITLEHOLDER.
Likewise, the TITLEHOLDER undertakes not to sign any option contract, letter of
intention, or offer of any nature whatsoever concerning the assets subject
matter hereof nor the interest or shares of the registered or conventional
company that will eventually be organized with the purpose of becoming the
titleholder of such assets.
TEN. - Upon execution of the public deed mentioned in Clause Three hereof and as
- ---
soon as the payments scheduled in Annex II to be made by the PURCHASER become
due, each of the said payments shall be channeled through a bank to be
designated and contracted by the PURCHASER which shall act as trustee thereof.
The PURCHASER shall make the deposits in the trust bank in the amounts and on
the dates set forth in Annex II, which sums shall be delivered by the bank to
the TITLEHOLDER in each case according to his share in the title to the assets
or the interests or shares of the registered or conventional company that may be
organized. The share of the TITLEHOLDER in the total price in respect of which
distributions shall be made is explained in Annex III hereto.
The deposit in the trust bank shall be deemed as payment of the valid price
and shall be sufficient evidence of performance of the obligation assumed by the
purchaser under Clause Three hereof.
The PURCHASER shall not be held liable for any withdrawal of funds from the
account(s) to be opened by the trust bank by the TITLEHOLDER, or for any refusal
to withdraw funds or any failure to collect same. The PURCHASER shall neither be
held responsible for any disputes that may arise as regards to the amounts
corresponding to each former worker or any conflicts in relation to the
collection or distribution of the price paid since the interest of each former
worker is clearly defined in Annex III which has been granted final approval by
the titleholders.
3
<PAGE>
This instrument is signed by the spouse of the TITLEHOLDER, Gloria Lourdes
Florencia Gomez Wagner, identified by Voter's Registration Card No. [_____], to
show her agreement to the contents hereof.
ELEVEN. - Should any conflict arise in relation to the transfer of assets or of
- ------
the shares or interests, both as regards to doubts or discrepancies related to
the entering of this agreement or the execution thereof, the issue shall be
submitted to arbitration to be held in the City of Lima in compliance with the
rules and procedures set forth by the Lima Chamber of Commerce.
Kindly add, Mr. Notary, the introduction and conclusion required by law as
well as any annexes and other inserts that may be necessary and forward notices
thereof to the Public Register of Mines.
Lima, [______], 1995
4
<PAGE>
ANNEX II
SCHEDULE OF PAYMENTS
The total price for the transfer of the mining rights and assets listed in Annex
I is US$2,100,000.00 which shall be paid as follows:
a) US$50,000.00 to be paid by the PURCHASER on the date of signing the Public
Deed.
b) US$50,000.00 on completion of one month following the date of signing the
Publhic Deed.
c) US$50,000.00 on completion of two months following the date of signing the
Public Deed.
d) US$150,000.00 on completion of three months following the date of signing
the Public Deed.
e) US$150,000.00 on completion of four months following the date of signing the
Public Deed.
f) US$150,000.00 on completion of five months following the
date of signing the Public Deed.
g) US$150,000.00 on completion of six months following the date of signing the
Public Deed.
h) US$150,000.00 on completion of seven months following the date of signing
the Public Deed.
i) US$150,000.00 on completion of eight months following the date of signing
the Public Deed.
j) US$150,000.00 on completion of nine months following the date of signing the
Public Deed.
k) US$150,000.00 on completion of ten months following the date of signing the
Public Deed.
l) US$150,000.00 on completion of eleven months following the date of signing
the Public Deed.
m) US$200,000.00 on completion of twelve months following the date of signing
the Public Deed.
n) US$200,000.00 on completion of thirteen months following the date of signing
the Public Deed.
o) US$250,000.00 on completion of fourteen months following the date of signing
the Public Deed.
5
<PAGE>
Payment deadlines shall be counted as from the date of execution of the Public
Deed of Transfer arising herefrom and shall be understood to refer to calendar
months so that payments shall be made each month on the same day.
6
<PAGE>
EXHIBIT 21
<TABLE>
<CAPTION>
Name Jurisdiction
- ---- ------------
<S> <C>
1. Apex Silver Mines LDC Cayman Islands
2. ASM Holdings Limited Cayman Islands
3. Apex Silver Mines Corporation Delaware, USA
4. Apex Partners LDC Cayman Islands
5. Andean Silver Corporation Cayman Islands
6. ASC Peru LDC Cayman Islands
7. ASC Partners LDC Cayman Islands
8. ASC Boliver LDC Cayman Islands
9. Apex Asia LDC Cayman Islands
10. 'JSC' Kumushtak Kyrghyzstan
11. Kumushtak Management Company Kyrghyzstan
12. 'Asgadmongu' COMPANY Ltd. Mongolia
13. Kanimansur LTD Mining Joint Venture
(Formation Pending) Tajikistan
14. Minera de Cordilleras (Honduras), S. de R.L. Honduras
15. Cordilleras Silver Mines Ltd. Bahamas
16. Cordilleras Silver Mines (Cayman) LDC Cayman Islands
17. Minera de Cordilleras, S. de R.L. de C.V. Mexico
18. Compania Minerales de Zacatecas,
S. de R.L. de C.V. Mexico
19. Compania Metalurgica Baronse,
S. de R.L. de C.V. Mexico
20. Compania Metalurgica Largo,
S. de R.L. de C.V. Mexico
21. SMRL Dorita I de Ica (Formation Pending) Peru
</TABLE>
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated August 29, 1997,
relating to the financial statements of Apex Silver Mines Limited, which
appears in such Prospectus. We also consent to the reference to us under the
heading "Experts" in such Prospectus.
PRICE WATERHOUSE LLP
Denver, Colorado
August 29, 1997
<PAGE>
EXHIBIT 23.4
CONSENT OF CPM GROUP
We hereby consent to references to our name and to any analyses performed by
us in our capacity as an independent [Advisor] to Apex Silver Mines Limited the
("Company") which are set forth in the Registration Statement on Form S-1 filed
by the Company with the Securities Exchange Commission ("Commission") on
August 29, 1997 or in any related, abbreviated registration statement
filed by the Company with the Commission pursuant to Rule 462(b) under the
Securities Act of 1933, as amended.
/s/ Jeffrey M. Christian
--------------------------
CPM Group
New York, NY
August 19, 1997.
<PAGE>
EXHIBIT 23.5
Consent of Mineral Resource Development Inc.
We hereby consent to references to our name and to any analyses performed by us
in our capacity as an independent consultant to Apex Silver Mines Limited the
("Company") which are set forth in the Registration Statement on Form S-1 filed
by the Company with the Securities Exchange Commission ("Commission") on
August 29, 1997 or in any related, abbreviated registration statement
filed by the Company with the Commission pursuant to Rule 462(b) under the
Securities Act of 1933, as amended.
/s/ DEEPAK MULHOTRA
---------------------------------
Mineral Resource Development Inc.
[city],[state]
August [19], 1997.
<PAGE>
EXHIBIT 23.6
[Logo of Knight Piesold]
CONSENT OF KNIGHT PIESOLD LLC
We hereby consent to references to our name, Knight Piesold LLC, and to any
analyses performed by us in our capacity as an independent consultant to Apex
Silver Mines Limited (the "Company") which are set forth in the Registration
Statement on Form S-1 filed by the Company with the Securities Exchange
Commission ("Commission") on August 29, 1997 or in any related, abbreviated
registration statement filed by the company with the Commission pursuant to Rule
462(b) under the Securities Act of 1933, as amended.
KNIGHT PIESOLD LLC
By: Knight Piesold Management Corp.
its manager
/s/ DONALD R. EAST
------------------------------------
Donald R. East, President
Denver, Colorado
August 19, 1997
<PAGE>
Exhibit 23.7
[Pincock, Allen & Holt Letterhead]
August 22, 1997
Mr. Marcel F. DeGuire
Vice President Project Development
Apex Silver Mines Corporation
1700 Lincoln Street, Suite 3050
Denver, CO 80203
RE: CONSENT OF PINCOCK, ALLEN & HOLT
Dear Mr. DeGuire:
We hereby consent to references to our name and to any analyses performed by us
in our capacity as an independent consultant to Apex Silver Mines Limited the
("Company") which are set forth in the Registration Statement on Form S-1 filed
by the Company with the Securities Exchange Commission ("Commission") on August
22, 1997 or in any related, abbreviated registration statement filed by the
Company with the Commission pursuant to Rule 462(b) under the Securities Act of
1933, as amended.
Sincerely,
PINCOCK, ALLEN & HOLT
/s/ John W. Rozelle
John W. Rozelle
Principal Geologist
JWR/sp
<PAGE>
EXHIBIT 23.8
CONSENT OF MINE RESERVES ASSOCIATES, INC.
We hereby consent to references to our name and to any analyses performed by
us in our capacity as an independent consultant to Apex Silver Mines Limited
(the "Company") which are set forth in the registration statement on Form S-1
filed by the Company with the Securities Exchange Commission ("Commission") on
August 29, 1997 or in any related abbreviated registration statement filed by
the Company with the Commission pursuant to Rule 462(b) under the Securities
Act of 1933, as amended.
/s/ Donald C. Elkin
-------------------------
Donald C. Elkin
Principal Geological Engineer
Mine Reserves Associates, Inc.
Wheat Ridge, Colorado
August 27, 1997
<PAGE>
EXHIBIT 23.9
[LOGO OF KVAERNER METALS]
CONSENT OF KVAERNER METALS
We hereby consent to references to our name and to any analyses performed by
us in our capacity as an independent engineer to Apex Silver Mines Limited
(the "Company") which are set forth in the Registration Statement on Form S-1
filed by the Company with the Securities Exchange Commission ("Commission") on
August 29, 1997, or in any related, abbreviated registration statement filed
by the Company with the Commission pursuant to Rule 462(b) under the
Securities Act of 1933, as amended, each subject to prior review and approval
by Kvaener Metals.
/s/ Boyd L. Cox
-----------------------------
Kvaerner Metals
San Ramon, California
August 28, 1997
<PAGE>
EXHIBIT 23.10
[LETTERHEAD OF BEHRE DOLBEAR & COMPANY, INC.]
CONSENT OF BEHRE DOLBEAR & COMPANY, INC.
We hereby consent to references to our name and to any analyses performed by us
in our capacity as an independent consultant to Apex Silver Mines Limited the
("Company") which are set forth in the Registration Statement on Form S-1 filed
by the Company with the Securities Exchange Commission ("Commission") this
August 29, 1997.
/s/ Bernard Guarnera
-----------------------------
For Behre Dolbear & Company, Inc.
Denver, Colorado
August 29, 1997.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at June 30, 1997 (unaudited) and Consolidated
Statement of Operations for the year ended December 31, 1996 of Apex Silver
Mines Limited.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> JUN-30-1997 DEC-31-1996
<CASH> 13,088,342 25,949,771
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 13,587,522<F1> 26,103,996<F1>
<PP&E> 575,657 524,335
<DEPRECIATION> (13,704) (801)
<TOTAL-ASSETS> 14,290,954<F2> 26,797,304<F2>
<CURRENT-LIABILITIES> 985,480 2,485,994
<BONDS> 0 0
0 0
0 0
<COMMON> 131,944 130,792
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 14,290,954 26,797,304
<SALES> 0 0
<TOTAL-REVENUES> 475,298 574,470
<CGS> 0 0
<TOTAL-COSTS> 11,652,793 15,173,710
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (11,177,495) (14,599,240)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 2,875,927<F3>
<NET-INCOME> (11,177,495) (11,723,313)
<EPS-PRIMARY> (.85) (1.11)
<EPS-DILUTED> (.85) (1.11)
<FN>
<F1> Total Current Assets include "prepaid expenses" of $499,180 in 1997 and
$154,225 in 1996.
<F2> Total Assets include "deferred organizational costs" (net) of $141,479 for
1997 and $169,774 for 1996.
<F3> Changes equals a "minority interest" of 2,875,927
</FN>
</TABLE>
