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As filed with the Securities and Exchange Commission on August 22, 2000
Registration No. 333-33642
================================================================================
Securities and Exchange Commission
Washington, D.C. 20549
____________________________________
AMENDMENT NO. 1 TO FORM S-1
ON
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
__________________________________
APEX SILVER MINES LIMITED
(Exact Name of Registrant as Specified in Its Charter)
Cayman Islands NOT APPLICABLE
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
____________________________________
Caledonian House, Ground Floor
69 Jennette 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)
____________________________________
With a copy to:
PATRICK J. DOOLEY, ESQ. DEBORAH J. FRIEDMAN, ESQ.
JAMES E. KAYE, ESQ. Davis, Graham & Stubbs, LLP
Akin, Gump, Strauss, Hauer & Feld, L.L.P. 370 Seventeenth Street
590 Madison Avenue Denver, Colorado 80202
New York, New York 10022 Telephone: (303) 892-9400
Telephone: (202) 872-1000
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [_]
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, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
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 statement 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. [_]
________________________________
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the registration statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
================================================================================
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+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission, hereafter, the SEC, is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED AUGUST 22, 2000
PROSPECTUS
APEX SILVER MINES LIMITED
DEBT SECURITIES
PREFERENCE SHARES
DEPOSITARY SHARES
ORDINARY SHARES
WARRANTS
ORDINARY SHARE PURCHASE RIGHTS
________________
We will provide specific terms of these securities in supplements to this
prospectus.
You should read this prospectus and any supplement carefully before you
invest.
Our company's ordinary shares are listed on the American Stock Exchange
under the symbol "SIL."
Investing in these securities involves significant risks. See the Risk
Factors section beginning on page 4.
The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not an offer to buy these securities in any
state where the offer or sale is not permitted.
We may sell the securities to or through underwriters or dealers, directly
to other purchasers or through agents. A prospectus supplement will set forth
the names of the underwriters, dealers or agents, if any, and any applicable
commissions or discounts.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is August __, 2000.
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[General Location Map]
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
SUMMARY.................................................................... 1
RISK FACTORS............................................................... 4
FORWARD-LOOKING STATEMENTS................................................. 13
RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS TO COMBINED FIXED
CHARGES AND PREFERENCE SHARE DIVIDENDS..................................... 15
USE OF PROCEEDS............................................................ 15
WHERE YOU CAN FIND MORE INFORMATION........................................ 16
OUR BUSINESS............................................................... 17
REPUBLIC OF BOLIVIA........................................................ 19
DESCRIPTION OF THE DEBT SECURITIES......................................... 23
DESCRIPTION OF THE PREFERENCE SHARES....................................... 34
DESCRIPTION OF THE DEPOSITARY SHARES....................................... 36
DESCRIPTION OF THE ORDINARY SHARES......................................... 39
DESCRIPTION OF WARRANTS.................................................... 40
DESCRIPTION OF THE ORDINARY SHARE PURCHASE RIGHTS.......................... 41
PLAN OF DISTRIBUTION....................................................... 43
LEGAL MATTERS.............................................................. 44
EXPERTS.................................................................... 44
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS.................................. 44
</TABLE>
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SUMMARY
This summary highlights selected information from this document and may not
contain all of the information that is important to you. To understand the
terms of our securities, you should carefully read this document with the
attached prospectus supplement. You should also read the documents to which we
have referred you in "Where You Can Find More Information" below for additional
information on our company and our financial statements.
Our Business
Apex Silver Mines Limited explores and develops silver properties in South
America, Mexico and Central America. We have one of the largest, most
diversified portfolios of privately owned and controlled silver exploration
properties in the world. Our exploration efforts have produced our first
development project, the San Cristobal project located in southern Bolivia. None
of our properties are in production, and, consequently, we have no current
operating income or cash flow.
Our Offices
We maintain our principal executive offices at Caledonian House, 69
Jennette Street, George Town, Grand Cayman, Cayman Islands, British West Indies.
Our telephone number is (345) 949-0050.
The Securities We May Offer
This prospectus is part of a registration statement (File No. 333-33642)
that we filed with the Securities and Exchange Commission utilizing a "shelf"
registration process. Under this shelf registration process, we may offer from
time to time any of the following securities, either separately or in units:
. debt securities;
. preference shares;
. depositary shares;
. ordinary shares;
. warrants; and
. ordinary share purchase rights.
This prospectus provides you with a general description of the securities
which we may offer. Each time we offer securities, we will provide you with a
prospectus supplement that will describe the specific amounts, prices and terms
of the securities being offered. The prospectus supplement may also add, update
or change information contained in this prospectus.
The securities which we may offer may involve a high degree of risk. A
prospectus supplement relating to any security that we offer will describe the
risks relating to each offered security. In addition, a prospectus supplement
may also contain additional risk factors relating to our business.
Debt Securities
We may offer general obligations of our company, which may be senior or
subordinated. The senior debt securities will have the same ranking as all of
our other unsecured, unsubordinated debt. The subordinated debt securities will
be entitled to payment only after payment on our senior indebtedness (as
described below). In addition, we are a holding company that conducts all of
our operations through subsidiaries. As a result, claims of the holders of the
debt securities will generally have a junior position to claims of creditors of
our subsidiaries and preferred shareholders of our subsidiaries, (except to the
extent that our company is recognized as a creditor of those subsidiaries.
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The senior debt securities will be issued under an indenture between our
company and Wilmington Trust Company, as trustee for the senior debt securities.
The subordinated debt securities will be issued under an indenture between our
company and Wilmington Trust FSB, as trustee for the subordinated debt
securities. We have summarized the material features of the debt securities that
will be included in the indentures. We encourage you to read the form of the
indentures and our recent periodic and current reports that we file with the
SEC. The indentures are included as exhibits to this registration statement.
Directions on how you can get copies of these reports are provided under "Where
You Can Find More Information" below.
General Indenture Provisions that Apply to Senior Debt Securities and
Subordinated Debt Securities
. Neither form of indenture limits the amount of debt securities that we
may issue under that indenture.
. If we comply with the requirements of the indentures, we may merge or
consolidate with another company, or to sell all or substantially all of
our assets to another company. If these events occur, the other company
will be required to assume our responsibilities relating to the debt
securities, and we will be released from all liabilities and
obligations. There is no restriction on other companies merging into our
company.
. Generally, the indentures provide that holders of a majority of the
total principal amount of outstanding debt securities of all series
(voting as a class) affected by a proposed change to specified
obligations may vote to change our obligations or your rights concerning
the debt securities of those series. For this purpose, the holders of
debt securities of all series will vote as a class. However, to change
the amount or timing of principal, interest or other payments under a
series of debt securities, every holder in that series must consent.
Events of Default
Each indenture provides that each of the following is an event of default:
. If we do not pay interest for 30 days after its due date.
. If we do not pay principal or premium when due.
. If we do not make any sinking fund payment for 30 days after its due
date.
. If we continue to breach a covenant for 90 days after notice.
. If a bankruptcy or insolvency event set forth in the indenture occurs.
If an event of default occurs with respect to any series of debt
securities, the trustee or holders of 25% of the outstanding principal amount of
that series may declare the principal amount of that series immediately payable
or, in the case of a bankruptcy or insolvency event, the principal amount of all
series under the indenture immediately payable. However, holders of a majority
of the principal amount may rescind this action.
General Indenture Provisions that Apply Only to Senior Debt Securities
The prospectus supplement relating to a series of senior debt securities
will describe any material covenants or any special events of default in respect
of that series of senior debt securities.
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General Indenture Provisions that Apply Only to Subordinated Debt Securities
The subordinated debt securities will be subordinated to all senior
indebtedness, which includes all indebtedness for money borrowed by our company,
except indebtedness that is stated to be not superior to, or to have the same
ranking as, the subordinated debt securities. In addition, claims of our
subsidiaries' creditors and preferred shareholders generally will have priority
with respect to the subsidiaries' assets and earnings over the claims of our
creditors, including holders of the subordinated debt securities, even though
those obligations may not constitute senior indebtedness. The subordinated debt
securities, therefore, will be effectively subordinated to creditors (including
trade creditors) and preferred shareholders of our subsidiaries with regard to
the assets of those subsidiaries.
The prospectus supplement relating to a series of subordinated debt
securities will describe any material covenants or special events of default in
respect of that series of subordinated debt securities.
Preference Shares and Depositary Shares
We may issue our preference shares, par value $0.01 per share, in one or
more classes or series. Our Board of Directors will determine for the preference
shares, the dividend, voting, redemption, sinking fund, conversion, liquidation
preference, relative priority and other rights of the class or series being
offered and the terms and conditions relating to its offering and sale at the
time of the offer and sale. We may also issue fractional shares of preference
shares that will be represented by depositary shares and depositary receipts.
Ordinary Shares
We may issue our ordinary shares, par value $0.01 per share. Holders of
ordinary shares are entitled to receive dividends when declared by the Board of
Directors. The right to receive dividends is also subject to the rights of
holders of preference shares. Each holder of ordinary shares is entitled to one
vote per share. The holders of ordinary shares have no preemptive rights or
cumulative voting rights.
Warrants
We may issue warrants independently or together with other securities. A
prospectus supplement relating to the warrants will describe the terms of the
warrants, including the following: the title, number and offering price of the
warrants; the terms on which they may be issued; and the number, designation
and/or description of the securities or other rights that may be purchased
upon exercise of the warrants and the price at which the securities or other
rights may be purchased.
Ordinary Share Purchase Rights
We may issue rights to purchase ordinary shares. We may issue ordinary
share purchase rights independently or together with other securities. Our Board
of Directors will determine for the ordinary share purchase rights, the number,
the exercise price, the terms on which they may be issued, the extent of
transferability, the date of commencement and the date of expiration.
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RISK FACTOR
Prospective purchasers of our securities should consider carefully, in
addition to the other information contained, or incorporated by reference into,
this prospectus or any prospectus supplement, the following risk factors:
No Production History - we have not mined any silver or other metals.
Our company has no history of producing silver or other metals. The
development of our economically feasible properties will require the
construction or rehabilitation and operation of mines, processing plants and
related infrastructure. As a result, we are subject to all of the risks
associated with establishing new mining operations and business enterprises. We
cannot assure you that we will successfully establish mining operations or
profitably produce silver or other metals at any of our properties.
History of Losses - we expect losses to continue for at least the next three
years.
As an exploration and development company that has no production history,
we have incurred losses since our inception, and we expect to continue to incur
additional losses for at least the next three years. As of December 31, 1999, we
had an accumulated deficit of $47.8 million. We cannot assure you that we will
achieve or sustain profitability in the future.
Potential Inaccuracy of the Reserves and Other Mineralization Estimates
Unless otherwise indicated, reserves and other mineralization figures we
present in our filings with the SEC, press releases and other public statements
that we may make from time to time are based on estimates of contained silver
and other metals made by independent geologists and/or our own personnel. These
estimates are imprecise and depend on geological interpretation and statistical
inferences drawn from drilling and sampling which may prove to be unreliable. We
cannot assure you that:
. these estimates will be accurate;
. reserves and other mineralization figures will be accurate; or
. reserves or mineralization could be mined and processed profitably.
Since we have not commenced production on any of our properties, reserves
and other mineralization estimates for these properties may require adjustments
or downward revisions based on actual production experience. Extended declines
in market prices for silver, zinc and lead may render portions of our reserves
uneconomic and result in reduced reported reserves. Any material reductions in
estimates of our reserves and other mineralization, or of our ability to extract
these reserves or mineralization, could have a material adverse effect on our
results of operations and financial condition.
We have not established the presence of any proven or probable reserves at
any of our mineral properties other than the San Cristobal project. We cannot
assure you that subsequent testing or future feasibility studies will establish
additional reserves at our properties. The failure to establish additional
reserves could restrict our ability to successfully implement our strategies for
long term growth beyond the San Cristobal project.
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San Cristobal Project Risks - the completion of the San Cristobal project is
subject to delays in commencement and completion, our inability to achieve
anticipated production volume and cost increases.
We plan to complete the development of the San Cristobal project around the
end of 2002. However, there can be no assurance that:
. the development of the San Cristobal project will be commenced or
completed on a timely basis, if at all;
. the resulting operations will achieve the anticipated production volume;
or
. the construction costs and ongoing operating costs associated with the
development of the San Cristobal project will not be higher than
anticipated.
If the actual cost to complete the development of the San Cristobal project
is significantly higher than expected, we cannot assure you that we will have
enough funds to cover these costs or that we would be able to obtain alternative
sources of financing to cover these costs. Unexpected cost increases or the
failure to obtain necessary project financing on acceptable terms, to commence
or complete the development of the San Cristobal project on a timely basis, or
to achieve anticipated production capacity, could have a material adverse effect
on our future results of operations and financial condition.
The successful development of the San Cristobal project is subject to the
other risk factors described in this prospectus.
Dependence on a Single Mining Project - our principal asset is the San Cristobal
project.
We anticipate that the majority, if not all, of our revenues for the next
few years and beyond will be derived from the sale of metals mined at the San
Cristobal project. Therefore, if we are unable to complete and successfully mine
the San Cristobal project in a timely manner, our ability to generate revenue
and profits would be materially adversely affected.
Management of Growth - our success will depend on our ability to manage our
growth.
We anticipate that as we bring our mineral properties into production and
as we acquire additional mineral rights, we will experience significant growth
in our operations. We expect this growth to create new positions and
responsibilities for management personnel and increase demands on our operating
and financial systems. We cannot assure you that we will successfully meet these
demands and manage our anticipated growth.
Volatility of Metals Prices - our profitability will be affected by changes
in the prices of metals.
Our profitability and long-term viability depend, in large part, on the
market price of silver, zinc, lead and other metals. The market prices for these
metals are volatile and are affected by numerous factors beyond our control,
including:
. global or regional consumption patterns;
. supply of, and demand for, silver, zinc, lead and other metals;
. speculative activities;
. expectations for inflation; and
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. political and economic conditions.
The aggregate effect of these factors on metals prices is impossible for
our company to predict. A decrease in metals prices could adversely affect our
ability to finance the development of the San Cristobal project and the
exploration and development of our other properties, which would have a material
adverse effect on our financial condition and results of operations.
The following table sets forth (1) the London Silver Market's high and low
spot price of silver in U.S. dollars per troy ounce and (2) the London Metals
Exchange's high and low spot prices of zinc and lead in U.S. dollars per pound,
for the periods indicated.
<TABLE>
<CAPTION>
Silver Zinc Lead
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Year High Low High Low High Low
---- ---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C>
1994.................. 5.75 4.64 0.54 0.41 0.31 0.15
1995.................. 6.04 4.41 0.55 0.43 0.35 0.24
1996.................. 5.83 4.71 0.50 0.44 0.42 0.30
1997.................. 6.27 4.22 0.60 0.47 0.33 0.23
1998.................. 6.83 4.88 0.52 0.42 0.27 0.22
1999.................. 5.75 4.88 0.56 0.41 0.25 0.21
</TABLE>
Hedging and Currency Risks - we may not be successful in hedging against price,
currency and interest rate fluctuations and may lose money through our hedging
programs.
We have engaged in limited metals trading activities to hedge against
silver and base metals price risks, using puts and calls. We anticipate that as
we bring our mineral properties into production and we begin to generate
revenue, we may utilize various price hedging techniques to mitigate some of the
risks associated with fluctuations in the prices of the metals we produce. We
may also engage in activities to hedge the risk of exposure to currency and
interest rate fluctuations related to the development of San Cristobal in
Bolivia or in other countries in which we incur substantial expenditures for
exploration or development. Further, terms of our financing arrangements may
require us to hedge against these risks.
We cannot assure you that we will be able to successfully hedge against
price, currency and interest rate fluctuations. In addition, our ability to
hedge against zinc and lead price risk in a timely manner may be adversely
affected by the smaller volume of transactions in both the zinc and lead markets
than in the silver market. Further, there can be no assurance that the use of
hedging techniques will always be to our benefit. Hedging instruments which
protect against market price volatility may prevent us from realizing the
benefit from subsequent increases in market prices with respect to covered
production. This limitation would limit our revenues and profits. Hedging
contracts are also subject to the risk that the other party may be unable or
unwilling to perform its obligations under these contracts. Any significant
nonperformance could have a material adverse effect on our financial condition
and results of operations.
Uncertainty and Cost of Mineral Exploration and Acquisition - the exploration of
mineral properties is highly speculative in nature, involves substantial
expenditures, and is frequently non-productive.
Our future growth and profitability will depend, in part, on our ability to
identify and acquire additional mineral rights, and on the costs and results of
our continued exploration and development programs. Competition for attractive
mineral exploration properties is intense. See "--Competition." Our strategy
is to expand our reserves through a broad program of exploration. Mineral
exploration is highly speculative in nature and is frequently non-productive.
Substantial expenditures are required to:
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. establish ore reserves through drilling and metallurgical and other
testing techniques ;
. determine metal content and metallurgical recovery processes to extract
metal from the ore; and
. construct, renovate or expand mining and processing facilities.
If we discover ore, it usually takes several years from the initial phases
of exploration until production is possible. During this time, the economic
feasibility of production may change. As a result of these uncertainties, we
cannot assure you that we will successfully acquire additional mineral rights,
that our exploration programs will result in new proven and probable reserves in
sufficient quantities to justify commercial operations in any of our properties,
other than the San Cristobal project.
We consider from time to time the acquisition of operating or formerly
operating mines. Our decisions to acquire these properties are based on a
variety of factors including historical operating results, estimates of and
assumptions about future reserves, cash and other operating costs, metals prices
and projected economic returns, and evaluations of existing or potential
liabilities associated with the property and its operation. Other than
historical operating results, all of these may differ significantly from our
estimates and assumptions. In addition, there is intense competition for
attractive properties. Accordingly, there is no assurance that our acquisition
efforts will result in profitable mining operations.
Development Risks - our profitability depends, in part, on actual economic
returns and actual costs of developing mines, which may differ significantly
from our estimates and involve unexpected problems and delays.
None of our mineral properties, including the San Cristobal project, has an
operating history upon which we can base estimates of future cash operating
costs. Our decision to develop the San Cristobal project is based on
feasibility studies. Decisions about the development of other projects in the
future may also be based on feasibility studies. Feasibility studies provide
the basis for estimates of reserves and operating costs and project economic
returns. Estimates of economic returns are based, in part, on assumptions about
future metals prices. See "--Volatility of Metals Prices." Feasibility
studies provide the basis for estimates of cash operating costs based upon,
among other things:
. anticipated tonnage, grades and metallurgical characteristics of ore to
be mined and processed;
. anticipated recovery rates of silver and other metals from the ore;
. cash operating costs of comparable facilities and equipment; and
. anticipated climatic conditions.
Actual cash operating costs, production and economic returns may differ
significantly from those anticipated by our studies and estimates.
There are a number of uncertainties inherent in the development and
construction of any new mine, including the San Cristobal project. See "--San
Cristobal Project Risks." These uncertainties include:
. the timing and cost, which can be considerable, of the construction of
mining and processing facilities;
. the availability and cost of skilled labor, power, water and
transportation facilities;
. the availability and cost of appropriate smelting and refining
arrangements;
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. the need to obtain necessary environmental and other governmental
permits, and the timing of those permits; and
. the availability of funds to finance construction and development
activities.
The costs, timing and complexities of mine construction and development are
increased by the remoteness of the location of many mining properties, like the
San Cristobal project. It is common in new mining operations to experience
unexpected problems and delays during mine start-up. In addition, delays in the
commencement of mineral production often occur. Accordingly, there is no
assurance that our future development activities will result in profitable
mining operations.
Title to Our Mineral Properties May be Challenged
Our policy is to seek to confirm the validity of our rights to title to, or
contract rights with respect to, each mineral property in which we have a
material interest. However, we cannot guarantee that title to our properties
will not be challenged or impugned. Title insurance generally is not available,
and our ability to ensure that we have obtained secure claim to individual
mineral properties or mining concessions may be severely constrained. We have
not conducted surveys of all of the claims in which we hold direct or indirect
interests and, therefore, the precise area and location of these claims may be
in doubt. Accordingly, our mineral properties may be subject to prior
unregistered agreements, transfers of claims, and title may be affected by,
among other things, undetected defects. In addition, we may be unable to
operate our properties as permitted or to enforce our rights with respect to our
properties.
Property Rights - we may lose rights to properties if we fail to meet payment
requirements or development or production schedules.
We derive the rights to some of our mineral properties, including some of
our principal properties at the San Cristobal project, from leaseholds or
purchase option agreements which require the payment of rent or other
installment fees. If we fail to make these payments when they are due, our
rights to the property may lapse. We cannot assure you that we will always make
payments by the requisite payment dates. In addition, some contracts with
respect to our mineral properties require development or production schedules.
We cannot assure you that we will be able to meet any or all of the development
or production schedules. In addition, our ability to transfer or sell our rights
to some of our mineral properties requires governmental approvals or third party
consents, which may not be granted.
Mining Risks and Limits of Insurance Coverage - we cannot insure against all of
the risks associated with mining.
The business of mining is subject to a number of risks and hazards,
including:
. adverse environmental effects;
. industrial accidents;
. labor disputes;
. technical difficulties due to unusual or unexpected geologic formations;
. failures of pit walls; and
. flooding and periodic interruptions due to inclement or hazardous
weather conditions.
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These risks can result in, among other things:
. damage to, and destruction of, mineral properties or production
facilities;
. personal injury;
. environmental damage;
. delays in mining;
. monetary losses; and
. legal liability.
Although we maintain, and intend to continue to maintain, insurance with
respect to our operations and mineral properties within ranges of coverage
consistent with industry practice, there can be no assurance that insurance will
be available at economically feasible premiums. Insurance against environmental
risks is not generally available. These environmental risks include potential
liability for pollution or other disturbances resulting from mining exploration
and production. In addition, not all risks associated with developing and
producing silver, zinc, lead and other metals are included in coverage and some
covered risks may result in liabilities which exceed policy limits. Further, we
may elect to not seek coverage for all risks. The occurrence of an event that is
not fully covered, or covered at all, by insurance, could have a material
adverse effect on our financial condition and results of operations.
Foreign Operations - we conduct all of our exploration activities in countries
with developing economies and are subject to the risks of political and economic
instability associated with these countries.
We currently conduct exploration activities in countries with developing
economies including Bolivia, Honduras, Mexico and Peru in Latin America. These
countries and other emerging markets in which we may conduct operations have
from time to time experienced economic or political instability. We may be
materially adversely affected by risks associated with conducting operations in
countries with developing economies, including:
. political instability and violence;
. war and civil disturbance;
. expropriation or nationalization;
. changing fiscal regimes;
. fluctuations in currency exchange rates;
. high rates of inflation;
. underdeveloped industrial and economic infrastructure; and
. unenforceability of contractual rights.
Changes in mining or investment policies or shifts in the prevailing
political climate in any of the countries in which we conduct exploration and
development activities could adversely affect our business. Our operations may
be affected in varying degrees by government regulations with respect to, among
other things:
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. production restrictions;
. price controls;
. export controls;
. income and other taxes;
. maintenance of claims;
. environmental legislation;
. foreign ownership restrictions;
. foreign exchange and currency controls;
. labor;
. welfare benefit policies;
. land use;
. land claims of local residents;
. water use; and
. mine safety.
We cannot accurately predict the effect of these factors. In addition,
legislation in the United States regulating foreign trade, investment and
taxation could have a material adverse effect on our financial condition and
results of operations.
Government Regulation of Environmental Matters - our activities are subject to
foreign environmental laws and regulations which may materially adversely affect
our future operations.
We conduct mineral exploration and development activities primarily in
Central America and South America, and are most active in Bolivia, where the San
Cristobal project is located, and Mexico. With the development of San Cristobal,
we also expect to conduct mining operations in Bolivia. These countries have
laws and regulations which control the exploration and mining of mineral
properties and their effects on the environment, including air and water
quality, mine reclamation, waste handling and disposal, the protection of
different species of flora and fauna and the preservation of lands. These laws
and regulations will require our company to acquire permits and other
authorizations for certain activities. In many countries, including Bolivia,
there is relatively new comprehensive environmental legislation, and the
permitting and authorization processes may be less established and less
predictable than they are in the United States. We cannot assure you that we
will be able to acquire necessary permits or authorizations on a timely basis,
if at all. Delays in acquiring any permit or authorization could increase the
development cost of San Cristobal or other projects and could delay the
commencement of production.
Environmental legislation in many countries is evolving in a manner which
will likely require stricter standards and enforcement, increased fines and
penalties for non-compliance, more stringent environmental assessments of
proposed projects and a heightened degree of responsibility for companies and
their officers, directors and employees. In Bolivia, where there is relatively
new environmental legislation, enforcement activities and strategies may be
under development, and thus may be less predictable than in the United States.
We cannot predict what environmental legislation or regulations will be enacted
or adopted in the future or how future laws and regulations will be administered
or interpreted. Compliance with more stringent laws and regulations, as well as
potentially more vigorous
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enforcement policies or regulatory agencies or stricter interpretation of
existing laws, may (1) necessitate significant capital outlays, (2) cause us to
delay, terminate or otherwise change our intended activities with respect to one
or more projects and (3) materially adversely affect our future operations.
Many of our exploration and development properties are located in historic
mining districts where prior owners may have caused environmental damage which
may not be known to us or to the regulators. In most cases, we have not sought
complete environmental analyses of our mineral properties and have not conducted
comprehensive reviews of the environmental laws and regulations in every
jurisdiction in which we own or control mineral properties. To the extent we are
subject to environmental requirements or liabilities, the cost of compliance
with these requirements and satisfaction of these liabilities would reduce our
net cash flow and could have a material adverse effect on our financial
condition and results of operations. If we are unable to fund fully the cost of
remediation of any environmental condition, we may be required to suspend
operations or enter into interim compliance measures pending completion of the
required remediation.
Competition - we compete against larger and more experienced companies.
The mining industry is intensely competitive. Many of the largest mining
companies are primarily producers of base metals, and may become interested in
the types of silver deposits on which we are focused because these deposits
typically are polymetallic, containing significant quantities of base metals
including zinc, lead and copper. Many of these companies have greater financial
resources, operational experience and technical capabilities than we have. We
may encounter increasing competition from other mining companies in our efforts
to acquire mineral properties and hire experienced mining professionals.
Increased competition in our business could adversely affect our ability to
attract necessary capital funding or acquire suitable producing properties or
prospects for mineral exploration in the future.
Holding Company Structure Risks - our ability to obtain dividends or other
distributions from our subsidiaries may be subject to restrictions imposed by
law and foreign currency exchange regulations.
We conduct, and will continue to conduct, all of our operations through
subsidiaries. Our ability to obtain dividends or other distributions from our
subsidiaries may be subject to restrictions on dividends or repatriation of
earnings under applicable local law, monetary transfer restrictions and foreign
currency exchange regulations in the jurisdictions in which the subsidiaries
operate. Our subsidiaries' ability to pay dividends or make other distributions
to us is also subject to their having sufficient funds to do so. If our
subsidiaries are unable to pay dividends or make other distributions, our growth
may be inhibited unless we are able to obtain additional debt or equity
financing on acceptable terms. In the event of a subsidiary's liquidation, we
may lose all or a portion of our investment in that subsidiary.
Requirement of External Financing - we may not be able to raise the funds
necessary to explore and develop our mineral properties.
We will need external financing to develop and construct the San Cristobal
project and to fund the exploration and development of our other mineral
properties. Sources of external financing may include bank borrowings and future
debt and equity offerings. We cannot assure you that financing will be available
on acceptable terms, or at all. The failure to obtain financing could have a
material adverse effect on our growth strategy and our results of operations and
financial condition. The mineral properties that we are likely to develop are
expected to require significant capital expenditures. We cannot assure you that
we will be able to secure the financing necessary to retain our rights to, or to
begin or sustain, production at our mineral properties.
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Dependence on Key Personnel - we depend on the services of key executives.
We are dependent on the services of key executives including our chairman
and our chief operating officer and a small number of highly skilled and
experienced executives and personnel focused on the development of the San
Cristobal project. Due to the relatively small size of our company, the loss of
these persons or our inability to attract and retain additional highly skilled
employees required for the development of the San Cristobal project, may delay
or otherwise adversely affect the development of the San Cristobal project,
which could have a material adverse effect on our business or future operations.
Substantial Control By Directors and Officers, and 5% Shareholders - the
substantial control of our company by our directors and officers, and 5%
shareholders may have a significant effect in delaying, deferring or preventing
a change in control of our company or other events which could be of benefit to
our other shareholders.
As of July 31, 2000, Thomas S. Kaplan and the other directors of our
company and officers of Apex Corporation, together with members of their
families and entities that may be deemed to be affiliates of or related to these
persons or entities, and 5% shareholders beneficially owned approximately
20,600,000 ordinary shares or approximately 60% of the outstanding shares of our
company. This level of ownership by these persons may have a significant effect
in delaying, deferring or preventing a change in control of our company or other
events which could be of benefit to our other shareholders.
There May Be Certain Tax Risks Associated with Investments In Our Company.
Potential investors that are U.S. taxpayers should consider that our
company may be considered to be a "passive foreign investment company" (a
"PFIC") for federal income tax purposes. If our company were deemed to be a
PFIC, then a U.S. taxpayer who disposes or is deemed to dispose of shares of our
company at a gain or who received a so-called "excess distribution" on the
shares generally would be required to treat such gain or excess distribution as
ordinary income and pay an interest charge on a portion of the gain or
distribution unless the taxpayer makes a timely qualified electing fund election
(a "QEF" election). A U.S. taxpayer who makes a QEF election generally must
report on a current basis his or her share of any of our company's ordinary
earnings and net capital gain for any taxable year in which our company is a
PFIC, whether or not we distribute those earnings. Special estate tax rules
could be applicable to the shares of our company if we are classified as a PFIC
for income tax purposes. See "Certain Federal Income Tax Considerations".
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FORWARD-LOOKING STATEMENTS
Some information contained in this prospectus or any prospectus supplement,
or incorporated by reference into this prospectus or any prospectus supplement,
may contain forward-looking statements. These statements include comments
regarding mine development and construction plans, costs, grade, production and
recovery rates, permitting, financing needs, the availability of financing on
acceptable terms, the timing of engineering studies and environmental
permitting, and the markets for silver, zinc and lead. The use of any of the
words "anticipate," "continue," "estimate," "expect," "may," "will," "project,"
"should," "believe" and similar expressions are intended to identify
uncertainties. We believe the expectations reflected in those forward-looking
statements are reasonable. However, we cannot assure you that these expectations
will prove to be correct. You should not unduly rely on forward-looking
statements included in this prospectus or any prospectus supplement or
incorporated by reference into this prospectus or any prospectus supplement.
These statements speak only as of the date of this prospectus or the date of any
prospectus supplement. In particular, this prospectus contains forward looking
statements pertaining to the following:
. projections of future capital costs for construction in connection with
the San Cristobal project;
. expectations regarding the levels or timing of exploration, development
or production of metals;
. potential growth in our operations;
. geographic location or focus of our operations;
. potential investments of the proceeds of this offering pending the
application of the net proceeds;
. expected sources or uses of funds;
. anticipated methods and timing of production and processing of mined
ore;
. the size of any particular deposit, or reserves or recovery rates; and
. treatment under governmental tax and regulatory regimes.
Our actual results could differ materially from those anticipated in these
forward-looking statements as a result of the risk factors set forth below and
other factors set forth in, or incorporated by reference into, this prospectus
or any prospectus supplement:
. worldwide economic and political events affecting the supply of and
demand for silver, zinc and lead;
. volatility in market prices for silver, zinc and lead;
. financial market conditions, and the availability of financing on terms
acceptable to our company;
. uncertainties associated with developing a new mine, including potential
cost overruns and the unreliability of estimates in early stages of mine
development;
. variations in ore grade and other characteristics affecting mining,
crushing, milling and smelting operations and mineral recoveries;
. geological, technical, permitting, mining and processing problems;
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. the availability and timing of acceptable arrangements for power,
transportation, water and smelting;
. uncertainties regarding future changes in tax legislation or
implementation of existing tax legislation;
. variations in smelting operations and capacity;
. the availability of experienced employees; and
. the factors discussed under "Risk Factors."
Many of those factors are beyond our ability to control or predict. Except
as required by law, we are not obligated to publicly release any revisions to
these forward-looking statements to reflect future events or developments. All
subsequent written and oral forward-looking statements attributable to us and
persons acting on our behalf are qualified in their entirety by the cautionary
statements contained in this section and elsewhere in this prospectus and any
prospectus supplement.
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RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS TO COMBINED FIXED
CHARGES AND PREFERENCE SHARE DIVIDENDS
Our company is a mining exploration and development company that holds a
portfolio of silver exploration and development properties in South America and
Central America. None of these properties are in production, and, consequently,
our company has no current operating income or operating cash flow. Accordingly,
no ratios are shown for any of the years ended December 31, 1995, 1996, 1997,
1998 and 1999 and the six-month period ended June 30, 2000 as earnings were not
sufficient to cover fixed charges. As of the date of this prospectus, we have
not issued any preference shares. As a result of the net losses incurred for the
period ended December 31, 1995 and for each of the years ended December 31,
1996, 1997, 1998 and 1999 and the six-month period ended June 30, 2000, earnings
were inadequate to cover fixed charges by $1.9 million, $11.7 million, $15.0
million, $11.0 million, $8.0 million and $2.6 million, respectively.
USE OF PROCEEDS
Unless otherwise specified in a prospectus supplement, the net proceeds we
receive from the sale of the securities offered by this prospectus and the
accompanying prospectus supplement will be used for one or more of the following
purposes:
. constructing and developing the San Cristobal project;
. exploring and developing properties in our portfolio;
. maintaining control or ownership of our properties, including making
ongoing lease and royalty payments and paying other maintenance and
registration fees;
. acquiring additional mining related properties or businesses; and
. financing other general corporate purposes.
Pending the application of the net proceeds, we expect to invest the
proceeds in short-term investment grade marketable securities or money market
obligations.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms at 450 Fifth Street, N.W., Washington, D.C. 20549
and in New York, New York and Chicago, Illinois. Please call the SEC at 1-800-
SEC-0330 for further information on the public reference rooms. Our SEC filings
are also available to the public at the SEC's web site at http://www.sec.gov.
------------------
The SEC allows our company to "incorporate by reference" into this
prospectus the information we file with it, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus, and later information that we file with the SEC will automatically
update and supersede this information. We incorporate by reference the documents
listed below and any future filings made with the SEC under Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until our offering is
completed:
. Annual Report on Form 10-K for the year ended December 31, 1999;
. Annual Report on Form 10-K/A for the year ended December 31, 1999 filed
with the SEC on March 21, 2000;
. Quarterly Report on Form 10-Q for the quarter ended March 31, 2000;
. Quarterly Report on from 10-Q for the quarter ended June 30, 2000;
. The description of our outstanding warrants contained under the caption
"Description of the Warrants" in our registration statement on Form S-3,
as amended (File No. 333-76181), and incorporated by reference into the
registration statement on Form 8-A under the Securities Exchange Act of
1934 of our company filed with the SEC on February 18, 2000 and the
Prospectus Supplement (File No. 333-76181) filed November 8, 1999
pursuant to Rule 424(b)(3) under the Securities Act of 1933 to the
prospectus of our company dated October 7, 1999; and
. The description of the ordinary shares and other classes or series of
shares contained under the caption "Description of Ordinary Shares" in
our registration statement on Form S-1, as amended (File No. 333-34685),
and incorporated by reference into the registration statement on Form 8-
A under the Securities Exchange Act of 1934 of our company filed with
the SEC on November 18, 1997.
You may request a copy of these filings at no cost, by writing to or
telephoning us at the following address:
Linda Wilson
Vice President Investor Relations
Apex Silver Mines Corporation
1700 Lincoln Street, Suite 3050
Denver, Colorado 80203
(303) 839-5060
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. We are not making an
offer of these securities in any state where the offer is not permitted. You
should not assume that the information in this prospectus or any prospectus
supplement is accurate as of any date other than the date on the front of the
document.
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OUR BUSINESS
Apex Silver Mines Limited, organized under the laws of the Cayman Islands
in 1996, is engaged in the exploration and development of silver properties in
South America, Mexico and Central America. Our company has one of the largest,
most diversified portfolios of privately owned and controlled silver exploration
properties in the world. We have rights to or control of approximately 80 non-
producing silver and other mineral properties located in or near the traditional
silver producing regions of Bolivia, Mexico, Peru, Chile and Honduras. Our
exploration efforts have produced our first development property, our 100% owned
San Cristobal project located in southern Bolivia. San Cristobal's proven and
probable reserves total 240 million tonnes of ore grading 2.0 ounces per tonne
of silver, 1.67% zinc and 0.58% lead, and are estimated to contain 470 million
ounces of silver, 8.8 billion pounds of zinc and 3.1 billion pounds of lead.
None of our properties are in production, and consequently we have no operating
income or cash flow.
In December 1997, our company completed an initial public offering of
ordinary shares. In November 1999, we sold equity units comprised of ordinary
shares and warrants exercisable for ordinary shares.
Business Strategy
Our company is one of a limited number of mining companies which focus on
silver exploration, development and production. Our strategy is to capitalize on
our sizeable portfolio of silver exploration properties in order to achieve
long-term profits and growth and to enhance shareholder value.
Although our primary focus is on mining silver, we intend to produce other
metals associated with our silver deposits if economically practicable,
including zinc, lead, copper and gold. We are managed by a team of seasoned
mining professionals with significant experience in the identification and
exploration of mineral properties, as well as the construction, development and
operation of large scale, open pit and underground, precious and base metals
mining operations.
The principal elements of our business strategy are to:
. proceed to develop the San Cristobal project into a large scale
open pit mining operation;
. continue to explore and evaluate the Cobrizos silver property in
southern Bolivia and the Platosa silver and zinc property in
northern Mexico;
. continue to explore and develop other properties which we believe
are most likely to contain significant amounts of silver and
divesting of those properties that are not of continuing interest;
and
. identify and acquire additional mining and mineral properties that
we believe contain significant amounts of silver or have
exploration potential.
History, Principal Office
We conduct substantially all of our operations through Apex Silver Mines,
our wholly owned subsidiary, and its subsidiaries. Our company's material assets
consist exclusively of the shares of Apex Silver Mines.
We have a contract with Apex Silver Mines Corporation, a wholly owned
subsidiary of Apex Silver Mines, pursuant to which Apex Silver Mines Corporation
provides our company with strategic,
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financial, planning and other management services. Apex Corporation maintains
its principal office at 1700 Lincoln Street, Suite 3050, Denver, Colorado 80203
and its telephone number is (303) 839-5060.
Enforceability of Civil Liabilities Under United States Laws
Our company is a Cayman Islands exempted company and some of our directors
reside in jurisdictions outside of the United States. At any one time, all or a
substantial portion of our assets and directors are or may be located in
jurisdictions outside of the United States. Therefore, it could be difficult for
investors to effect within the United States service of process on our company
or any of the directors who reside outside the United States. Further, it could
be difficult to recover against our company or such directors judgments of
courts in the United States, including judgments based upon civil liability
under U.S. federal securities laws and similar state laws. Notwithstanding the
foregoing, our company has irrevocably agreed that it may be served with process
with respect to actions based on offers of the securities offered by this
prospectus in the United States by serving Apex Silver Mines Corporation, 1700
Lincoln Street, Suite 3050, Denver, Colorado 80203, its U.S. agent appointed for
that purpose.
Walkers, our Cayman Islands counsel, has advised our company that there may
be circumstances where the courts of the Cayman Islands would not enforce:
. judgments of U.S. courts obtained in actions against our company or
directors of our company that are not resident within the United States
that are based upon the civil liability provisions of U.S. federal
securities laws and similar state laws; or
. original actions brought in the Cayman Islands against our company or
such persons based solely upon U.S. federal securities laws.
There is no treaty in effect between the United States and the Cayman
Islands providing for such enforcement. There are grounds upon which Cayman
Islands courts may not enforce judgments of U.S. courts. In addition, some
remedies that are available under the laws of U.S. jurisdictions, including
certain remedies under U.S. federal securities laws, may not be allowed in
Cayman Islands courts as being contrary to public policy.
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REPUBLIC OF BOLIVIA
We have compiled the following information 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 approximately 1.1
million square kilometers and a population of approximately 8.1 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 forests dominate. Santa Cruz is the
principal city of the low country with a population of approximately 1,000,000.
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 in 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, transportation and finance, and to foreign direct
investment which has occurred as part of the privatization of formerly
government-owned electricity, telecommunications, railways, aviation and oil and
gas companies. The country's privatization program has involved (1) the sale of
shares in government-owned entities in exchange for capital contributions to the
privatized entities, and (2) the contribution of government-owned shares in
privatized entities to pension trust funds established on behalf of all
Bolivians over the age of 21 at the end of 1995. In connection with this
program, we have entered into joint venture agreements with the government
mining company, Comibol.
Summary information on the Bolivian economy is set forth in the table
below.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
GDP Growth............................ 5.0% 3.7% 4.0% 4.2% 4.7% 0.6%
GDP per Capita........................ $ 756 $ 812 $ 860 $1,005 $1,076 $1,026
Inflation............................. 8.5% 12.6% 7.9% 6.7% 4.4% 3.1%
Pubic Sector Deficit (non-financial)
as % of GDP........................... 3.2% 2.3% 2.1% 3.6% 4.0% 3.8%
Exports FOB (in millions)............. $1,124 $1,181 $1,326 $1,272 $1,206 $1,402
Imports CIF (in millions)............. $1,196 $1,433 $1,635 $1,906 $2,083 $1,854
Current Account Balance (% GDP)....... 3.6% 5.0% 5.2% -8.0% -10.0% -6.7%
Total Investment (in millions)........ $ 794 $ 898 $ 540 $1,578 $1,754 $1,624
Share of GDP (%)...................... 13.3% 13.7% 7.6% 19.8% 20.5% 19.4%
Public Investment (in millions)....... $ 481 $ 505 $ 524 $ 582 $ 539 $ 362
Share of GDP (%)...................... .% .% 7.6% 7.3% 6.3% 4.3%
Private Investment (in millions)...... $ 288 $ 373 $ 632 $ 996 $1,215 $1,262
Share of GDP (%)...................... 4.8% 5.7% 8.9% 12.5% 14.2% 15.1%
</TABLE>
Sources: Latin Finance, Central Bank of Bolivia and National Institute of
Statistics
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The official monetary unit of Bolivia is the boliviano, which was
introduced in January 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,
1999, the exchange rate was 6.00 bolivianos to one U.S. dollar compared to the
exchange rate on December 31, 1998 of 5.65 bolivianos to one U.S. dollar. 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. The remaining material restrictions
applicable to mining in Bolivia are described below. Currently, import levies
stand at ten percent for all items except capital goods, which are subject to a
five percent levy. In March 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.
Under the new Bolivian Mining Code, which came into effect on March 17,
1997, there is a Complementary Mining Tax applicable to mining activities.
Mining activities are defined to include: prospecting and exploration; mining or
extracting minerals or metals; concentrating mine products; smelting and
refining; and 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 indexed to the official U.S.
dollar market price for the relevant metal or mineral. The variable percentage
fluctuates between three percent and seven percent for precious stones and
metals and between one percent and five percent for other metallic minerals.
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. If complementary mining tax payments
in any fiscal year exceed corporate income tax payments, the excess is credited
against corporate income in the following year. Manufacturing or processing
involving minerals is not subject to the Complementary Mining Tax.
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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, as is any of these payments when made to third
parties.
Operating losses are adjusted for inflation and may be carried forward and
deducted from taxable income indefinitely. However, if accrued losses exceed 50
percent of capital, 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. Any portion of the profits
reinvested in Bolivia can be excluded from the taxable basis. Book profits are
deemed remitted 120 days after the end of the fiscal year.
There is a 13 percent value added tax 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
The Bolivian constitution states that 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.
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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 more than 1,000 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. Most of our
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.
Environmental Matters
In 1992, the Bolivian government passed environmental legislation that
established 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.
The new 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 new Mining Code or the date on which the mining concession
was obtained, if the concession was granted at a later date. Upon becoming the
owner of a concession, the concession holder must conduct 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.
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, the frequency of which
have decreased greatly since the early 1980s, are not forbidden. However, before
a strike may be called, all legally mandated alternatives, including
negotiation, mediation and conciliation, must have been exhausted. Collective
bargaining agreements are very rare, as negotiations are generally carried out
between an individual company's union and management.
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DESCRIPTION OF THE DEBT SECURITIES
The following description of the terms of the debt securities sets forth
general terms that may apply to the debt securities. The particular terms of any
debt securities will be described in the prospectus supplement relating to those
debt securities.
The debt securities will be either our senior debt securities or our
subordinated debt securities. The senior debt securities will be issued under an
indenture be entered into between our company and Wilmington Trust Company, as
trustee for the senior debt securities. The subordinated debt securities will be
issued under an indenture to be entered into between our company and Wilmington
Trust FSB, as trustee for the subordinated debt securities.
The following summary of the material provisions of the indentures is not
complete. You should refer to the indentures, copies of which are exhibits to
the registration statement of which this prospectus is a part. Section
references below are to the section in the applicable indenture.
We are a holding company that conducts substantially all of our operations
through subsidiaries. As a result, claims of the holders of the debt securities
will generally have a junior position to claims of creditors of our
subsidiaries, except to the extent that our company may be recognized as a
creditor of those subsidiaries. Claims of creditors of our subsidiaries other
than our company may include substantial amounts of long-term debt, commercial
paper and other short-term borrowings.
General
Neither indenture limits the amount of debt securities that we may issue
under that indenture. Each indenture provides that debt securities may be issued
up to the principal amount authorized by our company from time to time. The
senior debt securities will have the same ranking as all of our other unsecured
and unsubordinated debt. The subordinated debt securities will be unsecured and
will be subordinated and junior to all senior indebtedness.
The debt securities may be issued in one or more separate series of senior
debt securities and/or subordinated debt securities. The prospectus supplement
relating to the particular series of debt securities being offered will specify
the particular amounts, prices and terms of those debt securities. These terms
may include:
. the title of the debt securities;
. any limit upon the aggregate principal amount of the debt securities;
. the date or dates, or the method of determining the dates, on which the
debt securities will mature;
. the interest rate or rates of the debt securities, or the method of
determining those rates, the interest payment dates and, for registered
debt securities, the Regular Record Dates;
. if a debt security is issued with original issue discount, the yield to
maturity;
. the places where payments may be made on the debt securities;
. any mandatory or optional redemption provisions applicable to the debt
securities;
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. any sinking fund or analogous provisions applicable to the debt
securities;
. any conversion or exchange provisions applicable to the debt securities;
. any terms for the attachment to the debt securities of warrants, options
or other rights to purchase or sell our securities;
. the portion of the principal amount of the debt security payable upon the
acceleration of maturity if other than the entire principal amount of the
debt securities;
. any deletions of, or changes or additions to, the events of default or
covenants applicable to the debt securities;
. if other than U.S. dollars, the currency or currencies, including
European Currency Units, the euro and other composite currencies, in
which payments of principal, premium and/or interest on the debt
securities will be payable and whether the holder may elect payment to be
made in a different currency;
. the method of determining the amount of any payments on the debt
securities which are linked to an index;
. whether the debt securities will be issued in fully registered form
without coupons or in bearer form, with or without coupons, or any
combination of these, and whether they will be issued in the form of one
or more global securities in temporary or definitive form;
. any terms relating to the delivery of the debt securities if they are to
be issued upon the exercise of warrants;
. whether and on what terms we will pay additional amounts to holders of
the debt securities that are not U.S. persons in respect of any tax,
. assessment or governmental charge withheld or deducted and, if so,
whether and on what terms we will have the option to redeem the debt
securities rather than pay the additional amounts; and
. any other specific terms of the debt securities.
(Sections 2.2 and 3.1).
Unless otherwise specified in the applicable prospectus supplement, (1) the
debt securities will be registered debt securities and (2) debt securities
denominated in U.S. dollars will be issued, in the case of registered debt
securities, in denominations of $1,000 or an integral multiple of $1,000 and, in
the case of bearer debt securities, in denominations of $5,000. Debt securities
may bear legends required by United States federal tax law and regulations
(Section 4.1).
If any of the debt securities are sold for any foreign currency or currency
unit or if any payments on the debt securities are payable in any foreign
currency or currency unit, the prospectus supplement will contain any
restrictions, elections, tax consequences, specific terms and other information
with respect to the debt securities and the foreign currency or currency unit.
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Some of the debt securities may be issued as original issue discount debt
securities. Original issue discount securities bear no interest during all or a
part of the time that these debt securities are outstanding or bear interest at
below-market rates and will be sold at a discount below their stated principal
amount at maturity. The prospectus supplement will also contain special tax,
accounting or other information relating to original issue discount securities
or relating to other kinds of debt securities that may be offered, including
debt securities linked to an index or payable in currencies other than U.S.
dollars.
Exchange, Registration and Transfer
Debt securities may be transferred or exchanged at the corporate trust
office of the security registrar or at any other office or agency maintained by
our company for these purposes, without the payment of any service charge,
except for any tax or governmental charges (Section 4.4). The senior trustee
initially will be the designated security registrar in the United States for the
senior debt securities. The subordinated trustee initially will be the
designated security registrar in the United States for the subordinated debt
securities.
If debt securities are issuable as both registered debt securities and
bearer debt securities, the bearer debt securities will be exchangeable for
registered debt securities. Except as provided below, bearer debt securities
will have outstanding coupons. If a bearer debt security with related coupons is
surrendered in exchange for a registered debt security between a record date and
the date set for the payment of interest, the bearer debt security will be
surrendered without the coupon relating to that interest payment and that
payment will be made only to the holder of the coupon when due.
In the event of any redemption in part of any class or series of debt
securities, we will not be required to:
. issue, register the transfer of, or exchange, debt securities of any
series between the opening of business 15 days before any selection of
debt securities of that series to be redeemed and the close of business
on:
. if debt securities of the series are issuable only as registered debt
securities, the day of mailing of the relevant notice of redemption, and
if debt securities of the series are issuable as bearer debt securities,
the day of the first publication of the relevant notice of redemption
or, if debt securities of the series are also issuable as registered
debt securities and there is no publication, the day of mailing of the
relevant notice of redemption;
. register the transfer of, or exchange, any registered debt security
selected for redemption, in whole or in part, except the unredeemed
portion of any registered debt security being redeemed in part; or
. exchange any bearer debt security selected for redemption, except to
exchange it for a registered debt security which is simultaneously
surrendered for redemption.
(Section 4.4).
Payment and Paying Agent
We will pay principal, interest and any premium on fully registered
securities in the designated currency or currency unit at the office of a
designated paying agent. Payment of interest on fully registered securities may
be made at our option by check mailed to the persons in whose names the debt
securities are registered on days specified in the indentures or any prospectus
supplement. (Sections 4.6 and 4.10).
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We will pay principal, interest and any premium on bearer securities in the
designated currency or currency unit at the office of a designated paying agent
or agents outside of the United States. Payments will be made at the offices of
the paying agent in the United States only if the designated currency is U.S.
dollars and payment outside of the United States is illegal or effectively
precluded. (Sections 4.10 and 11.2). If any amount payable on any debt security
or coupon remains unclaimed at the end of two years after that amount became due
and payable, the paying agent will release any unclaimed amounts to our company,
and the holder of the debt security or coupon will look only to our company for
payment. (Section 11.3).
The designated paying agent in the United States for the senior debt
securities initially will be the senior trustee located at 1100 North Market
Street, Rodney Square North, Wilmington, Delaware. The designated paying agent
in the United States for the subordinated debt securities initially will be the
subordinated trustee located at 3773 Howard Hughes Parkway, Las Vegas, Nevada.
Global Securities
The debt securities of a series may be issued in whole or in part in the
form of one or more global certificates that will be deposited with a depositary
whom we will identify in a prospectus supplement. Global debt securities may be
issued in either registered or bearer form and in either temporary or definitive
form. All global debt securities in bearer form will be deposited with a
depositary outside of the United States. We will describe the specific terms of
the depositary arrangement with respect to a series of debt securities in the
applicable prospectus supplement.
Other than with respect to payments, we may treat a person having a
beneficial interest in a definitive global debt security as the holder of the
principal amount of outstanding debt securities represented by the definitive
global debt security as specified in a written statement delivered to the
trustee by the holder of the definitive global debt security, or, in the case of
a definitive global debt security in bearer form, by a depositary in London for
Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the
Euroclear System, and Cedel Bank, societe anonyme. (Section 4.11). Neither we,
the trustee nor any of our respective agents will be responsible for any aspect
of the records relating to or payments made on account of beneficial ownership
interests in a global debt security or for maintaining, supervising or reviewing
any records relating to these beneficial ownership interests. (Section 4.11). We
anticipate that the following provisions will apply to all depositary
arrangements with a depositary.
Temporary Global Securities
All or any portion of the debt securities of a series that are issuable as
bearer debt securities initially may be represented by one or more temporary
global debt securities, without interest coupons, to be deposited with
Euroclear, and Cedel Bank for credit to the accounts of the beneficial owners of
the debt securities or to other accounts as they may direct. On and after an
exchange date provided in the applicable prospectus supplement, each temporary
global debt security will be exchangeable for definitive debt securities in
bearer form, registered form, definitive global bearer form or any combination
of these forms, as specified in the prospectus supplement. No bearer debt
security delivered in exchange for a portion of a temporary global debt security
will be mailed or delivered to any location in the United States. (Sections 4.2
and 4.3).
Interest on a temporary global debt security will be paid to Euroclear
and/or Cedel Bank with respect to the portion held for its account only after
they deliver to the trustee a certificate which states that the portion:
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. is not beneficially owned by a United States person;
. has not been acquired by or on behalf of a United States person or for
offer to resell or for resale to a United States person or any person
inside the United States; or
. if a beneficial interest has been acquired by a United States person,
that the person is a financial institution, as defined in the Internal
Revenue Code, purchasing for its own account or has acquired the debt
security through a financial institution and that the debt securities
are held by a financial institution that has agreed in writing to comply
with the requirements of Section 165(j)(3)(A), (B) or (C) of the
Internal Revenue Code and the regulations to the Internal Revenue Code
and that it did not purchase for resale inside the United States.
The certificate must be based on statements provided by the beneficial owners of
interests in the temporary global debt security. Euroclear and Cedel Bank will
credit the interest received by it to the accounts of the beneficial owners of
the debt security or to other accounts as they may direct. (Section 4.3).
"United States person" means a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in or under the
laws of the United States or an estate or trust with income subject to United
States federal income taxation regardless of its source.
Definitive Global Securities
Bearer Securities. The applicable prospectus supplement will describe the
exchange provisions, if any, of debt securities issuable in definitive global
bearer form. We will not deliver any bearer debt securities delivered in
exchange for a portion of a definitive global debt security to any location in
the United States. (Section 4.4).
U.S. Book-Entry Securities. Debt securities of a series represented by a
definitive global registered debt security and deposited with or on behalf of a
depositary in the United States will be represented by a definitive global debt
security registered in the name of the depositary or its nominee. Upon the
issuance of a global debt security and the deposit of the global debt security
with the depositary, the depositary will credit, on its book-entry registration
and transfer system, the respective principal amounts represented by that global
debt security to the accounts of participating institutions that have accounts
with the depositary or its nominee. The accounts to be credited shall be
designated by the underwriters or agents for the sale of U.S. book-entry debt
securities or by our company, if these debt securities are offered and sold
directly by our company.
Ownership of U.S. book-entry debt securities will be limited to
participants or persons that may hold interests through participants. In
addition, ownership of U.S. book-entry debt securities will be evidenced only
by, and the transfer of that ownership will be effected only through, records
maintained by the depositary or its nominee for the definitive global debt
security or by participants or persons that hold through participants.
So long as the depositary or its nominee is the registered owner of a
global debt security, that depositary or nominee, as the case may be, will be
considered the sole owner or holder of the U.S. book-entry debt securities
represented by that global debt security for all purposes under the indenture.
Payment of principal of, and premium and interest, if any, on, U.S. book-entry
debt securities will be made to the depositary or its nominee as the registered
owner or the holder of the global debt security representing the U.S. book-entry
debt securities. Owners of U.S. book-entry debt securities:
. will not be entitled to have the debt securities registered in their
names;
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. will not be entitled to receive physical delivery of the debt securities
in definitive form; and
. will not be considered the owners or holders of the debt securities
under the indenture.
The laws of some jurisdictions require that purchasers of securities take
physical delivery of securities in definitive form. These laws impair the
ability to purchase or transfer U.S. book-entry debt securities.
We expect that the depositary for U.S. book-entry debt securities of a
series, upon receipt of any payment of principal of, or premium or interest, if
any, on, the related definitive global debt security, will immediately credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the global debt
security as shown on the records of the depositary. We also expect that payments
by participants to owners of beneficial interests in a global debt security held
through those participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of those participants.
Covenants of the Company
Limitation on Merger, Consolidation and Sales of Assets. We may, without
the consent of the holders of the debt securities, merge into or consolidate
with any other person, or convey or transfer all or substantially all of our
company's properties and assets to another person provided that:
. the successor assumes on the same terms and conditions all the
obligations under the debt securities and the indentures; and
. immediately after giving effect to the transaction, there is no default
under the applicable indenture.
(Section 9.1).
The remaining or acquiring person will be substituted for our company in
the indentures with the same effect as if it had been an original party to the
indenture. (Section 9.2). A prospectus supplement will describe any other
limitations on the ability of our company to merge into, consolidate with, or
convey or transfer all or substantially all or our properties and assets to,
another person.
Satisfaction and Discharge; Defeasance
We may be discharged from our obligations on the debt securities of any
class or series that have matured or will mature or be redeemed within one year
if we deposit with the trustee enough cash and/or U.S. government obligations or
foreign government securities, as the case may be, to pay all the principal,
interest and any premium due to the stated maturity or redemption date of the
debt securities and comply with the other conditions set forth in the applicable
indenture. The principal conditions that we must satisfy to discharge our
obligations on any debt securities are (1) pay all other sums payable with
respect to the applicable series of debt securities and (2) deliver to the
trustee an officers' certificate and an opinion of counsel which state that the
required conditions have been satisfied. (Section 5.1).
Each indenture contains a provision that permits our company to elect to be
discharged from all of our obligations with respect to any class or series of
debt securities then outstanding. However, even if we effect a legal
defeasance, some of our obligations will continue, including obligations to:
. maintain and apply money in the defeasance trust,
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. register the transfer or exchange of the debt securities,
. replace mutilated, destroyed, lost or stolen debt securities, and
. maintain a registrar and paying agent in respect of the debt securities.
Each indenture also permits our company to elect to be released from our
obligations under specified covenants and from the consequences of an event of
default resulting from a breach of those covenants. To make either of the above
elections, we must deposit in trust with the trustee cash and/or U.S. government
obligations, if the debt securities are denominated in U.S. dollars, and/or
foreign government securities if the debt securities are denominated in a
foreign currency, which through the payment of principal and interest under
their terms will provide sufficient amounts, without reinvestment, to repay in
full those debt securities. As a condition to legal defeasance or covenant
defeasance, we must deliver to the trustee an opinion of counsel that the
holders of the debt securities will not recognize income, gain or loss for U. S.
federal income tax purposes as a result of the deposit and defeasance and will
be subject to U.S. federal income tax in the same amount and in the same manner
and times as would have been the case if the deposit and defeasance had not
occurred. In the case of a legal defeasance only, the opinion of counsel must be
based on a ruling of the U.S. Internal Revenue Service or other change in
applicable U.S. federal income tax law. (Section 5.3).
The indentures specify the types of U.S. government obligations and foreign
government securities that we may deposit.
Events of Default, Notice and Waiver
Each indenture defines an event of default with respect to any class or
series of debt securities as one or more of the following events:
. failure to pay interest on any debt security of the class or series for
30 days when due;
. failure to pay the principal or any premium on any debt securities of
the class or series when due;
. failure to make any sinking fund payment for 30 days when due;
. failure to perform any other covenant in the debt securities of the
series or in the applicable indenture with respect to debt securities of
the series for 90 days after being given notice; and occurrence of an
event of bankruptcy, insolvency or reorganization set forth in the
indenture.
An event of default for a particular class or series of debt securities
does not necessarily constitute an event of default for any other class or
series of debt securities issued under an indenture. (Section 6.1).
In the case of an event of default arising from events of bankruptcy or
insolvency set forth in the indenture, all outstanding debt securities will
become due and payable immediately without further action or notice. If any
other event of default as to a series of debt securities occurs and is
continuing, the trustee or the holders of at least 25% in principal amount of
the then outstanding debt securities of that series may declare all the debt
securities to be due and payable immediately.
The holders of a majority in aggregate principal amount of the debt
securities then outstanding by notice to the trustee may on behalf of the
holders of all of the debt securities of that series waive any existing default
or event of default and its consequences under the applicable indenture except a
continuing default or event of default in the payment of interest on, or the
principal of, the debt securities of that series.
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Each indenture requires the trustee to, within 90 days after the occurrence
of a default known to it with respect to any outstanding series of debt
securities, give the holders of that class or series notice of the default if
uncured or not waived. However, the trustee may withhold this notice if it
determines in good faith that the withholding of this notice is in the interest
of those holders, except that the trustee may not withhold this notice in the
case of a payment default. The term "default" for the purpose of this provision
means any event that is, or after notice or lapse of time or both would become,
an event of default with respect to debt securities of that series. (Section
7.2).
Other than the duty to act with the required standard of care during an
event of default, a trustee is not obligated to exercise any of its rights or
powers under the applicable indenture at the request or direction of any of the
holders of debt securities, unless the holders have offered to the trustee
reasonable security and indemnity. (Section 7.3). Each indenture provides that
the holders of a majority in principal amount of outstanding debt securities of
any series may direct the time, method and place of conducting any proceeding
for any remedy available to the trustee, or exercising any trust or other power
conferred on the trustee if the direction would not conflict with any rule of
law or with the indenture. However, the trustee may take any other action that
it deems proper which is not inconsistent with any direction and may decline to
follow any direction if it in good faith determines that the directed action
would involve it in personal liability. (Section 6.12).
Each indenture includes a covenant that we will file annually with the
trustee a certificate of no default, or specifying any default that exists.
(Section 11.4).
Modification of the Indentures
We and the applicable trustee may modify an indenture without the consent
of the holders for limited purposes, including adding to our covenants or events
of default, establishing forms or terms of debt securities, curing ambiguities
and other purposes which do not adversely affect the holders in any material
respect. (Section 10.1).
We and the applicable trustee may make modifications and amendments to an
indenture with the consent of the holders of a majority in principal amount of
the outstanding debt securities of all affected series. However, without the
consent of each affected holder, no modification may:
. change the stated maturity of any debt security;
. reduce the principal, premium, if any, or rate of interest on any debt
security;
. change any place of payment or the currency in which any debt security
is payable;
. impair the right to enforce any payment after the stated maturity or
redemption date;
. adversely affect the terms of any conversion right;
. reduce the percentage of holders of outstanding debt securities of any
series required to consent to any modification, amendment or waiver
under the indenture;
. change any of our obligations, with respect to outstanding debt
securities of a series, to maintain an office or agency in the places
and for the purposes specified in the indenture for the series; or
. change the provisions in the indenture that relate to its modification
or amendment other than to increase the percentage of outstanding debt
securities of any series required to consent to any modification or
waiver under the indenture.
(Section 10.2).
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Meetings
The indentures contain provisions for convening meetings of the holders of
debt securities of a series. (Section 14.1). A meeting may be called at any time
by the trustee and also, upon request, by our company or the holders of at least
25% in principal amount of the outstanding debt securities of a series, in any
case upon notice given in accordance with "Notices" below. (Section 14.2).
Persons holding a majority in principal amount of the outstanding debt
securities of a series will constitute a quorum at a meeting. A meeting called
by our company or the trustee that does not have a quorum may be adjourned for
not less than 10 days. If there is not a quorum at the adjourned meeting, the
meeting may be further adjourned for not less than 10 days. Any resolution
presented at a meeting at which a quorum is present may be adopted by the
affirmative vote of the holders of a majority in principal amount of the
outstanding debt securities of that series, except for any consent which must be
given by the holders of each debt security affected by the modifications or
amendments of an indenture described above under "Modification of the
Indentures." However, a resolution with respect to any request, demand,
authorization, direction, notice, consent, waiver, or other action which may be
made, given, or taken by the holders of a specified percentage, which is equal
to or less than a majority, in principal amount of outstanding debt securities
of a series may be adopted at a meeting at which a quorum is present by the
affirmative vote of the holders of the specified percentage in principal amount
of the outstanding debt securities of that series. Any resolution passed or
decision taken at any meeting of holders of debt securities of any series duly
held in accordance with an indenture will be binding on all holders of debt
securities of that series and the related coupons. The indentures provide that
specified consents, waivers and other actions may be given by the holders of a
specified percentage of outstanding debt securities of all series affected by
the modification or amendment, acting as one class. For purposes of these
consents, waivers and actions, only the principal amount of outstanding debt
securities of any series represented at a meeting at which a quorum is present
and voting in favor of the action will be counted for purposes of calculating
the aggregate principal amount of outstanding debt securities of all series
affected by the modification or amendment favoring the action. (Section 14.4).
Notices
In most instances, notices to holders of bearer debt securities will be
given by publication at least once in a daily newspaper in New York, New York
and in London, England and in other cities as may be specified in the bearer
debt securities and will be mailed to those persons whose names and addresses
were previously filed with the applicable trustee, within the time prescribed
for the giving of the notice. Notice to holders of registered debt securities
will be given by mail to the addresses of those holders as they appear in the
security register. (Section 1.6).
Title
Title to any bearer debt securities and any related coupons will pass by
delivery. We, the trustee, and any agent of ours or the trustee may treat the
holder of any bearer debt security or related coupon and, prior to due
presentment for registration of transfer, the registered owner of any registered
debt security as the absolute owner of that debt security for the purpose of
making payment and for all other purposes, regardless of whether or not that
debt security or coupon shall be overdue and notwithstanding any notice to the
contrary (Section 4.7).
Replacement of Securities Coupons
Debt securities or coupons that have been mutilated will be replaced by our
company at the expense of the holder upon surrender of the mutilated debt
security or coupon to the security registrar. Debt securities or coupons that
become destroyed, stolen, or lost will be replaced by our company at the expense
of the holder upon delivery to the security registrar of evidence of its
destruction, loss, or theft
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satisfactory to our company and the security registrar. In the case of a
destroyed, lost, or stolen debt security or coupon, the holder of the debt
security or coupon may be required to provide reasonable security or indemnity
to the trustee and our company before a replacement debt security will be
issued. (Section 4.5).
Governing Law
The indentures, the debt securities, and the coupons will be governed by,
and construed under, the laws of the State of New York without regard to the
principles of conflicts of laws.
Concerning the Trustees
We may from time to time maintain lines of credit, and have other customary
banking relationships, with any of the trustees.
Senior Debt Securities
The senior debt securities will rank equally with all of our company's
other unsecured and non-subordinated debt.
Certain Covenants in the Senior Indenture
The prospectus supplement relating to a series of senior debt securities
will describe any material covenants in respect of that series of senior debt
securities.
Subordinated debt securities
The subordinated debt securities will be unsecured. The subordinated debt
securities will be subordinate in right of payment to all senior indebtedness.
(Section 15.1 of subordinated indenture). In addition, claims of creditors and
preferred shareholders of our subsidiaries generally will have priority with
respect to the assets and earnings of our subsidiaries over the claims of our
creditors, including holders of the subordinated debt securities, even though
those obligations may not constitute senior indebtedness. The subordinated debt
securities, therefore, will be effectively subordinated to creditors, including
trade creditors, and preferred shareholders of our subsidiaries with regard to
the assets of our subsidiaries. Creditors of our subsidiaries include trade
creditors, secured creditors and creditors holding guarantees issued by our
subsidiaries.
Unless otherwise specified in a prospectus supplement, senior indebtedness
shall mean the principal of, premium, if any, and interest on, all indebtedness
for money borrowed by our company and any deferrals, renewals, or extensions of
any senior indebtedness. Indebtedness for money borrowed by our company includes
all indebtedness of another person for money borrowed that we guarantee, other
than the subordinated debt securities, whether outstanding on the date of
execution of the subordinated indenture or created, assumed or incurred after
the date of the subordinated indenture. However, senior indebtedness will not
include any indebtedness that expressly states to have the same rank as the
subordinated debt securities or to rank junior to the subordinated debt
securities. Senior indebtedness will also not include:
. any of our obligations to our subsidiaries; and
. any liability for federal, state, local or other taxes owed or owing
by our company.
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The senior debt securities constitute senior indebtedness under the
subordinated indenture. A prospectus supplement will describe the relative
ranking among different series of subordinated debt securities.
Unless otherwise specified in a prospectus supplement, we may not make any
payment on the subordinated debt securities and may not purchase, redeem, or
retire any subordinated debt securities if any senior indebtedness is not paid
when due or the maturity of any senior indebtedness is accelerated as a result
of a default, unless the default has been cured or waived and the acceleration
has been rescinded or the senior indebtedness has been paid in full. We may,
however, pay the subordinated debt securities without regard to these
limitations if the subordinated trustee and our company receive written notice
approving the payment from the representatives of the holders of senior
indebtedness with respect to which either of the events set forth above has
occurred and is continuing. Unless otherwise specified in a prospectus
supplement, during the continuance of any default with respect to any designated
senior indebtedness under which its maturity may be accelerated immediately
without further notice or the expiration of any applicable grace periods, we may
not pay the subordinated debt securities for 90 days after the receipt by the
subordinated trustee of written notice of a default from the representatives of
the holders of designated senior indebtedness. If the holders of designated
senior indebtedness or the representatives of those holders have not accelerated
the maturity of the designated senior indebtedness at the end of the 90 day
period, we may resume payments on the subordinated debt securities. Only one
notice may be given in any consecutive 360-day period, irrespective of the
number of defaults with respect to designated senior indebtedness during that
period. (Section 15.3 of subordinated indenture).
In the event that we pay or distribute our company's assets to creditors
upon a total or partial liquidation, dissolution or reorganization of our
company or our company's property, the holders of senior indebtedness will be
entitled to receive payment in full of the senior indebtedness before the
holders of subordinated debt securities are entitled to receive any payment.
Until the senior indebtedness is paid in full, any payment or distribution to
which holders of subordinated debt securities would be entitled but for the
subordination provisions of the subordinated indenture will be made to holders
of the senior indebtedness as their interests may appear. However, holders of
subordinated debt securities will be permitted to receive distributions of
shares and debt securities subordinated to the senior indebtedness. (Section
15.2 of subordinated indenture). If a distribution is made to holders of
subordinated debt securities that, due to the subordination provisions, should
not have been made to them, the holders of subordinated debt securities are
required to hold it in trust for the holders of senior indebtedness, and pay it
over to them as their interests may appear. (Section 15.5 of subordinated
indenture).
If payment of the subordinated debt securities is accelerated because of an
event of default, either we or the subordinated trustee will promptly notify the
holders of senior indebtedness or the representatives of the holders of the
acceleration. We may not pay the subordinated debt securities until five
business days after the holders or the representatives of the senior
indebtedness receive notice of the acceleration. Afterwards, we may pay the
subordinated debt securities only if the subordination provisions of the
subordinated indenture otherwise permit payment at that time. (Section 15.4 of
subordinated indenture).
As a result of the subordination provisions contained in the subordinated
indenture, in the event of insolvency, our creditors who are holders of senior
indebtedness may recover more, ratably, than the holders of subordinated debt
securities. In addition, our creditors who are not holders of senior
indebtedness may recover less, ratably, than holders of senior indebtedness and
may recover more, ratably, than the holders of subordinated indebtedness.
The prospectus supplement relating to a series of subordinated debt
securities will describe any material covenants in respect of any series of
subordinated debt securities.
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DESCRIPTION OF THE PREFERENCE SHARES
The following is a description of the material general terms and provisions
of the preference shares. The particular terms of any class or series of
preference shares will be described in the applicable prospectus supplement.
The following summary of terms of our preference shares is not complete.
You should refer to the provisions of our Memorandum of Association, the
Articles of Association and the resolutions of the Board of Directors relating
to the approval and terms of each class or series of the preference shares which
will be filed with the SEC at or prior to the time of issuance of a class or
series of the preference shares.
We are authorized to issue up to 75,000,000 shares of our company, par
value $.01 per share. The Board of Directors has the power to designate whether
an issue of shares shall be ordinary shares or preference shares. As of August
7, 2000, 34,471,268 ordinary shares were outstanding and no preference shares
were outstanding. Subject to limitations prescribed by law, the Board of
Directors is authorized at any time to:
. issue one or more classes or series of preference shares;
. determine the designation for any class or series of preference
shares; and
. determine the number of shares in any class or series.
The Board of Directors in approving the issuance of a class or series of
preference shares shall determine, and the applicable prospectus supplement will
set forth with respect to the class or series, the following:
. whether dividends on that class or series of preference shares will be
cumulative or non-cumulative;
. the dividend rate and rights in respect of dividends on the preference
shares of that class or series;
. the liquidation preference per share of that class or series of
preference shares, if any;
. the voting powers, if any, of the preference shares of that class or
series;
. any redemption and sinking fund provisions applicable to that class or
series of preference shares;
. any conversion provisions applicable to that class or series of
preference shares;
. the terms of any other preferences or other rights and limitations, if
any, applicable to that class or series of preference shares.
Dividends
Holders of preference shares will be entitled to receive, when, as and if
declared by the Board of Directors, dividends at the rates and on the dates as
set forth in the prospectus supplement. Except as set forth below, no dividends
will be declared or paid on any class or series of preference shares unless full
dividends for all classes or series of preference shares which have the same
rank as, or rank senior to, that class or series of preference shares, including
any unpaid cumulative dividends, have been or contemporaneously are declared and
paid. When those dividends are not paid in full, dividends will be declared pro
rata so that the amount of dividends declared per share on that class or series
of preference shares and on each other class or series of preference shares
having the same rank as, or ranking senior to,
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that class or series of preference shares will in all cases bear to each other
the same ratio that accrued dividends per share on that class or series of
preference shares and the other preference shares bear to each other. In
addition, generally, unless all dividends on the preference shares have been
paid, no dividends will be declared or paid on the ordinary shares and generally
we may not redeem or purchase any ordinary shares.
Convertibility
No class or series of preference shares will be convertible into, or
exchangeable for, other securities or property except as set forth in the
prospectus supplement.
Redemption and Sinking Fund
No class or series of preference shares will be redeemable or receive the
benefit of a sinking fund except as set forth in the prospectus supplement.
Liquidation
In the event we voluntarily or involuntarily liquidate, dissolve, or wind
up our affairs, the holders of each class or series of preference shares will be
entitled to receive the liquidation preference per share specified in the
prospectus supplement plus an amount equal to accrued and unpaid dividends, if
any, before any distribution to the holders of ordinary shares. If the amounts
payable with respect to preference shares are not paid in full, the holders of
preference shares will share ratably in any distribution of assets based upon
the aggregate liquidation preference for all outstanding shares for each class
or series. After the holders of preference shares are paid in full, they will
have no right or claim to any of our remaining assets.
Voting
Except as indicated below or in the prospectus supplement, the holders of
preference shares will not be entitled to vote. If the equivalent of six
quarterly dividends payable on any class or series of preference shares is in
default, the number of directors constituting our Board of Directors will be
increased by two and the holders of that class or series of preference shares,
voting together as a class with all other classes or series of preference shares
entitled to vote on the election of directors, will be entitled to elect those
additional directors. In the event of a default, the Board of Directors will
call a special meeting for the holders of all affected classes or series within
10 business days of the default for the purpose of electing the additional
directors. Alternatively, the holders of record of a majority of the outstanding
shares of all affected classes or series who are entitled to participate in the
election of directors may elect the additional directors by written consent. If
all accumulated dividends on any class or series of preference shares have been
paid in full, the holders of shares of that class or series will no longer have
the right to vote on directors and the term of office of each director so
elected will terminate and the number of our directors will, without further
action, be reduced by two.
The majority vote of the holders of two-thirds of the outstanding shares of
each class or series of preference shares voting together as a class, is
required to authorize any amendment, alteration or repeal of the Articles of
Association, the Memorandum of Association or the adoption of a special
resolution by the shareholders of our company which would adversely affect the
powers, preferences or special rights of the preference shares, including
authorizing any class or series of shares with superior dividend and liquidation
preferences.
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Miscellaneous
The holders of preference shares will have no preemptive rights. The
preference shares, when issued, will be fully paid and nonassessable. Preference
shares that we redeem or otherwise reacquire will resume the status of
authorized and unissued shares of share capital undesignated as to class or
series, and will be available for subsequent issuance. There are no restrictions
on repurchase or redemption of the preference shares while there is any
arrearage on sinking fund installments except as may be set forth in a
prospectus supplement. Neither the par value nor the liquidation preference is
indicative of the price at which the preference shares will actually trade on or
after the date of issuance. Payment of dividends on any class or series of
preference shares may be restricted by loan agreements, indentures and other
transactions we may enter into.
No Other Rights
The shares of a class or series of preference shares will not have any
preferences, voting powers or relative, participating, optional or other special
rights except as set forth above or in the prospectus supplement, the Memorandum
of Association, the Articles of Association, the Board of Directors' resolution
approving the issuance of preference shares or as otherwise required by law.
Transfer Agent and Registrar
The transfer agent for each class or series of preference shares will be
described in the prospectus supplement.
DESCRIPTION OF THE DEPOSITARY SHARES
We may, at our option, elect to offer fractional shares of preference
shares, rather than full shares of preference shares. If we do, we will issue to
the public receipts for depositary shares and each of these depositary shares
will represent a fraction of a share of a particular class or series of
preference shares. Each owner of a depositary share will be entitled, in
proportion to the applicable fractional interest in shares of preference shares
overlying that depositary share, to all rights and preferences of the preference
shares overlying that depositary share. Those rights include dividend, voting,
redemption and liquidation rights. The particular terms of any depositary shares
will be described in the applicable prospectus supplement.
The shares of preference shares overlying the depositary shares will be
deposited with a bank or trust company selected by our company under a deposit
agreement between our company, the depositary and the holders of the depositary
receipts. A depositary receipt will evidence the depositary shares issued under
the deposit agreement. The depositary will be the transfer agent, registrar, and
dividend disbursing agent for the depositary shares.
Holders of depositary receipts will agree to be bound by the deposit
agreement. Any actions required to be taken by holders of depositary receipts,
including filing proof of residence and paying applicable charges, will be set
forth in the deposit agreement.
The following summary of the material provisions of the depositary shares
contained in this prospectus is not complete. You should refer to the forms of
the deposit agreement, and the Board of Directors' resolutions approving the
issuance of the depositary shares for the applicable class or series of
preference shares that are, or will be, filed with the SEC.
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Dividends
The depositary will distribute all cash dividends or other cash
distributions received in respect of the class or series of preference shares
overlying the depositary shares to the record holders of depositary receipts in
proportion to the number of depositary shares owned by those holders on the
relevant record date, which will be the same date as the record date for the
preference shares.
In the event of a distribution other than in cash, the depositary will
distribute property received by it to the record holders of depositary receipts
that are entitled to receive the distribution, unless the depositary determines
that it is not feasible to make the distribution. If this occurs, the
depositary may, with our approval, adopt another method for the distribution,
including selling the property and distributing the net proceeds to the holders.
Liquidation Preference
In the event of our voluntary or involuntary liquidation, dissolution or
winding up, the holders of each depositary share will be entitled to receive the
fraction of the liquidation preference accorded each share of the applicable
class or series of preference shares, as set forth in the prospectus supplement.
Redemption
If a class or series of preference shares overlying the depositary shares
is subject to redemption, the depositary shares will be redeemed from the
proceeds received by the depositary resulting from the redemption, in whole or
in part, of preference shares held by the depositary. Whenever we redeem any
preference shares held by the depositary, the depositary will redeem, as of the
same redemption date, the number of depositary shares representing the
preference shares so redeemed. The depositary will mail the notice of redemption
to the record holders of the depositary receipts promptly upon receiving the
notice from our company and not less than 35 nor more than 60 days prior to the
date fixed for redemption of the preference shares and the depositary shares.
Voting
Upon receipt of notice of any meeting at which the holders of preference
shares are entitled to vote, the depositary will mail the information contained
in the notice of meeting to the record holders of the depositary receipts
underlying the preference shares. Each record holder of those depositary
receipts on the record date will be entitled to instruct the depositary as to
the exercise of the voting rights pertaining to the amount of preference shares
overlying that holder's depositary shares. The record date for depositary
receipts will be the same date as the record date for the preference shares. The
depositary will try, as far as practicable, to vote the preference shares
overlying the depositary shares in accordance with the provided instructions,
and we will agree to take all action which may be deemed necessary by the
depositary in order to enable the depositary to do so. The depositary will not
vote the preference shares to the extent that it does not receive specific
instructions from the holders of depositary receipts.
Withdrawal of Preference Shares
Owners of depositary shares are entitled, upon surrender of depositary
receipts at the principal office of the depositary and payment of any unpaid
amount due the depositary, to receive the number of whole shares of preference
shares overlying the depositary shares. Partial shares of preference shares will
not be issued. Holders of preference shares will not be entitled to deposit the
shares under the deposit agreement to receive depositary receipts evidencing
depositary shares for the preference shares.
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Amendment and Termination of Deposit Agreement
The form of depositary receipt evidencing the depositary shares and any
provision of the deposit agreement may be amended at any time and from time to
time by agreement between our company and the depositary. However, any
amendment which materially and adversely alters the rights of the holders of
depositary shares, other than any change in fees, will not be effective unless
the amendment has been approved by at least a majority of the depositary shares
then outstanding. The deposit agreement may be terminated by our company or the
depositary only if (1) all outstanding depositary shares have been redeemed or
(2) there has been a final distribution in respect of the preference shares in
connection with our dissolution and the distribution has been made to all the
holders of depositary shares.
Charges of Depositary
We will pay all transfer and other taxes and governmental charges arising
solely from the existence of the depositary arrangements. We will also pay
charges of the depositary in connection with the initial deposit of the
preference shares and the initial issuance of the depositary shares, any
redemption of the preference shares and all withdrawals of preference shares by
owners of depositary shares. Holders of depositary receipts will pay transfer,
income and other taxes and governmental charges and other applicable charges as
provided in the deposit agreement to be for their accounts. The deposit
agreement may list circumstances under which the depositary may refuse to
transfer depositary shares, withhold dividends and distributions, and sell the
depositary shares evidenced by depositary receipt if the charges are not paid.
Miscellaneous
The depositary will forward to the holders of depositary receipts all
reports and communications we deliver to the depositary that we are required to
furnish to the holders of the preference shares. In addition, the depositary
will make available for inspection by holders of depositary receipts at the
principal office of the depositary, and at other places as it may from time to
time deem advisable, any reports and communications we deliver to the depositary
as the holder of preference shares.
Neither we nor the depositary will be liable if either of us are prevented
or delayed by law or any circumstance beyond our control in performing our
respective obligations under the Deposit Agreement. Our obligations and those of
the depositary will be limited to performance in good faith of our respective
duties under the Deposit Agreement. Neither we nor the depositary will be
obligated to prosecute or defend any legal proceeding in respect of any
depositary shares or preference shares unless satisfactory indemnity is
furnished. We and the depositary may rely on written advice of counsel or
accountants, on information provided by holders of depositary receipts or other
persons believed in good faith to be competent to give that information, and on
documents believed to be genuine and to have been signed or presented by the
proper party or parties.
Resignation and Removal of Depositary
The depositary may resign at any time by delivering a notice to our company
of its election to do so. We may remove the depositary at any time. Any
resignation or removal will take effect upon the appointment of a successor
depositary and its acceptance of the appointment. The successor depositary must
be appointed within 60 days after delivery of the notice for resignation or
removal and must be a bank or trust company having its principal office in the
United States of America and having a combined capital and surplus of at least
$50,000,000.
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Federal Income Tax Consequences
Owners of the depositary shares will be treated for federal income tax
purposes as if they were owners of the preference shares overlying the
depositary shares. Accordingly, those owners will be entitled to take into
account for federal income tax purposes income and deductions to which they
would be entitled if they were holders of the overlying preference shares. In
addition:
. no gain or loss will be recognized for federal income tax purposes
upon the withdrawal of preference shares in exchange for depositary
shares,
. the tax basis of each share of preference shares to an exchanging
owner of depositary shares will, upon exchange, be the same as the
aggregate tax basis of the depositary shares exchanged, and
. the holding period for preference shares in the hands of an exchanging
owner of depositary shares will include the period during which that
person owned the depositary shares.
DESCRIPTION OF THE ORDINARY SHARES
As of the date of this prospectus, our authorized share capital consists of
75,000,000 ordinary shares, par value $.01 per share. We are authorized to issue
up to an aggregate of 75,000,000 ordinary shares and preference shares. As of
August 7, 2000, 34,471,268 ordinary shares were outstanding and no preference
shares were outstanding.
The ordinary shares offered by this prospectus are validly issued, fully
paid and nonassessable. There are no provisions of Cayman Islands law, the
Memorandum of Association or the 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 in the Cayman Islands.
Dividends
Holders of ordinary shares are entitled to receive dividends ratably when
and as declared by the Board of Directors. The right to receive dividends is
also subject to the rights of holders of preference shares.
Voting
Holders of ordinary shares are entitled to one vote per share on all
matters submitted to a vote of shareholders at a shareholders' meeting.
Rights Upon Liquidation
In the event of our voluntary or involuntary dissolution, liquidation or
winding-up, the holders of outstanding ordinary shares shall be entitled to
share ratably in our assets available for distribution after payment in full of
all debts and after the holders of preference shares have received their
liquidation preferences in full.
Miscellaneous
Ordinary shares are not redeemable and have no subscription, conversion or
preemptive rights.
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DESCRIPTION OF WARRANTS
Presently Outstanding Warrants
We have issued 4,088,158 warrants for the purchase of ordinary shares, all
of which are outstanding as of August 7, 2000. Each of our outstanding warrants
is exercisable for one ordinary share at an initial exercise price of $18.00 per
share, subject to any adjustments made pursuant to the warrant agreement. Our
outstanding warrants may be exercised at any time until November 4, 2002. Our
outstanding warrants are subject to a warrant agreement that contains terms
that, other than the exercise price and the expiration date, are similar to the
terms of the warrant agreement by which the warrants to be issued under this
prospectus will be governed.
Warrants that May be Issued
General
Warrants may be issued independently or together with preference shares
or ordinary shares and may be attached to or separate from any offered
securities. Each class or series of warrants will be issued under a separate
warrant agreement to be entered into between our company and a bank or trust
company, as warrant agent. The warrant agent will act solely as our agent in
connection with the warrants and will not have any obligation or relationship of
agency or trust for or with any holders or beneficial owners of warrants. This
summary of the material provisions of the warrants is not complete. You should
refer to the provisions of the warrant agreement that will be filed with the SEC
in connection with the offering of warrants for the complete terms of the
warrant agreement.
Warrants
The prospectus supplement relating to a particular issue of warrants to
issue ordinary shares or preference shares will describe the terms of the
warrants, including the following:
. the title of the warrants;
. the offering price for the warrants, if any;
. the aggregate number of the warrants;
. the securities or other rights (including rights to receive payments
in cash or securities based on the value, rate or price of one or more
specified commodities, currencies or indices), purchasable upon
exercise of such warrants;
. if applicable, the designation and terms of the securities that the
warrants are issued with and the number of warrants issued with each
security;
. if applicable, the date from and after which the warrants and any
securities issued with the warrants will be separately transferable;
. the dates on which the right to exercise the warrants shall commence
and expire;
. if applicable, the minimum or maximum amount of the warrants that may
be exercised at any one time;
. the price at which and the currency or currencies, including composite
currencies, in which the securities or other rights purchasable upon
exercise of such warrants may be purchased;
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. if applicable, a discussion of material U.S. federal income tax
considerations;
. the antidilution provisions of the warrants, if any;
. the redemption or call provisions, if any, applicable to the
warrants; and
. any additional terms of the warrants, including terms, procedures and
limitations relating to the exchange and exercise of the warrants.
DESCRIPTION OF THE ORDINARY SHARE PURCHASE RIGHTS
General
We may issue ordinary share purchase rights. The ordinary share purchase
rights may be issued independently or together with any other security and may
or may not be transferable by the purchaser receiving the ordinary share
purchase rights. In connection with an ordinary share purchase rights offering
to our shareholders, certificates evidencing the ordinary share purchase rights
and a prospectus supplement will be distributed to our shareholders on the
record date set by us for receiving ordinary share purchase rights.
The prospectus supplement relating to an ordinary share purchase rights
offering will describe the following terms of the ordinary share purchase rights
in respect of which this prospectus is being delivered:
. the exercise price for the ordinary share purchase rights;
. the number of ordinary share purchase rights issued to each
shareholder;
. the extent to which the ordinary share purchase rights are
transferable;
. if applicable, a discussion of the material U.S. federal income tax
considerations applicable to the issuance or exercise of the ordinary
share purchase rights;
. any other terms of the ordinary share purchase rights, including
terms, procedures and limitations relating to the exchange and
exercise of the ordinary share purchase rights; the date on which the
right to exercise the ordinary share purchase rights shall commence,
and the date on which the right shall expire;
. the extent to which the ordinary share purchase rights includes an
over-subscription privilege with respect to unsubscribed securities;
and
. if applicable, the material terms of any standby underwriting
arrangement entered into by us in connection with the ordinary share
purchase rights offering.
Exercise of the Ordinary Share Purchase Rights
Holders of ordinary share purchase rights will be entitled to purchase for
cash a principal amount of ordinary shares at an exercise price set forth in, or
be determinable as set forth in, the prospectus supplement relating to the
ordinary share purchase rights offering. The ordinary share purchase rights may
be exercised at any time up to the close of business on the expiration date for
the ordinary share purchase rights set forth in the prospectus supplement.
After the close of business on the expiration date, all unexercised ordinary
share purchase rights will become void.
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The ordinary share purchase rights may be exercised as set forth in the
prospectus supplement relating to the ordinary share purchase rights offering.
Upon receipt of payment and the ordinary share purchase rights certificate
properly completed and duly executed at the corporate trust office of the agent
for the ordinary share purchase rights or any other office indicated in the
prospectus supplement, we will, as soon as practicable, forward the ordinary
shares purchasable upon exercise. In the event that not all of the ordinary
share purchase rights issued in any ordinary share purchase rights offering are
exercised, we may decide to offer any unsubscribed ordinary shares directly to
persons other than shareholders, to or through agents, underwriters or dealers
or under standby underwriting arrangements or through a combination of these
methods, as set forth in the applicable prospectus supplement.
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PLAN OF DISTRIBUTION
We may sell the securities to or through underwriters or dealers, directly
to other purchasers or through agents. A prospectus supplement will set forth
the names of the underwriters, dealers or agents, if any, and any applicable
commissions or discounts. In addition, we may from time to time distribute the
ordinary share purchase rights and issue ordinary shares directly to purchasers
or through agents in connection with the exercise of ordinary share purchase
rights. In addition, in connection with any ordinary share purchase rights
offering to our shareholders, we may enter into a standby underwriting
arrangement with one or more underwriters under which the underwriter will
purchase any ordinary shares remaining unsubscribed for after the ordinary share
purchase rights offering. The applicable prospectus supplement will set forth
the terms of the offering of the securities, including the following:
. the name or names of any underwriters;
. the purchase price and the proceeds which we will receive from the
sale;
. any underwriting discounts and other items constituting underwriters'
compensation;
. any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers; and
. any securities exchanges on which the securities of a class or series
may be listed.
If underwriters are used in the sale, the securities will be acquired by
the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. The
securities may be either offered to the public through underwriting syndicates
represented by managing underwriters or by underwriters without a syndicate. The
obligations of the underwriters to purchase securities will be subject to the
conditions precedent agreed to by the parties and the underwriters will be
obligated to purchase all the securities of a class or series if any are
purchased. Any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers may be changed from time to time.
Securities may be sold directly by our company or through agents designated
by our company from time to time. Any agent involved in the offer or sale of the
securities in respect of which this prospectus is delivered will be named, and
any commissions payable by our company to any agent will be set forth, in the
prospectus supplement. Unless otherwise indicated in the prospectus supplement,
any agent will be acting on a best efforts basis for the period of its
appointment.
We may authorize agents or underwriters to solicit offers by eligible
institutions to purchase securities from our company at the public offering
price set forth in the prospectus supplement under delayed delivery contracts
providing for payment and delivery on a specified date in the future. The
conditions to these contracts and the commissions payable for solicitation of
these contracts will be set forth in the applicable prospectus supplement.
Agents and underwriters may be entitled to indemnification by our company
against some civil liabilities, including liabilities under the Securities Act
of 1933, or to contribution with respect to payments which the agents or
underwriters may be required to make relating to these liabilities. Agents
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and underwriters may be customers of, engage in transactions with, or perform
services for, our company in the ordinary course of business.
Each class or series of securities will be a new issue of securities with
no established trading market. Any underwriter may make a market in these
securities, but will not be obligated to do so and may discontinue any market
making at any time without notice. No assurance can be given as to the liquidity
of the trading market for any securities.
LEGAL MATTERS
Some U.S. legal matters, including the validity of the securities offered
by this prospectus, will be passed upon for our company by Akin, Gump, Strauss,
Hauer & Feld, L.L.P., New York, New York, our special legal counsel, and some
Cayman Islands legal matters, including the validity of the securities offered
by this prospectus, will be passed upon for our company by Walkers, Grand
Cayman, Cayman Islands.
EXPERTS
The financial statements incorporated in this Prospectus by reference to
the Annual Report on Form 10-K for the fiscal year ended December 31, 1999, have
been incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
accounting and auditing.
Reserves for the San Cristobal project were calculated by Mine Reserves
Associates, Inc. All reserve figures that we included in this prospectus have
been included in reliance upon the authority of Mine Reserves Associates, Inc.
as experts in these matters.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain Cayman Islands and U.S.
federal income tax consequences of the ownership of ordinary shares and warrants
by an investor that holds the warrants and shares as capital assets. The
discussion is based on the Internal Revenue Code and the tax laws of the Cayman
Islands and the U.S. as in effect on the date of this prospectus, which are
subject to change. The discussion does not address all material tax consequences
of the ownership of the ordinary shares and warrants, and does not consider any
specific facts or circumstances that may apply to a particular investor,
including tax-exempt entities, insurance companies, banks, broker-dealers,
investors liable for alternative minimum tax, investors who hold ordinary shares
and warrants as part of straddles or hedging or conversion transactions or
constructive sales, and investors whose functional currency is not the U.S.
dollar, which may be subject to special rules. In addition, the discussion does
not address special rules that could, in some circumstances, apply to a U.S.
Holder of ordinary shares and warrants that owns directly or by attribution 10%
or more of the ordinary shares.
Because the discussion is not exhaustive of all possible tax considerations
relevant to the ownership of ordinary shares and warrants and individual
circumstances may vary and because the discussion is not based upon an opinion
of counsel, 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 ordinary shares and warrants in their particular circumstances.
44
<PAGE>
Cayman Islands Taxation
There is, at present, no direct income taxation in the Cayman Islands.
Accordingly, income and gains received by our company, and distributions by our
company to our shareholders and gains realized upon the disposition of ordinary
shares and warrants, will be received free of all Cayman Islands income and
withholding taxes. Our company is registered as an exempted company under Cayman
Islands law, and our 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 our company nor shall any tax in the nature of estate duty or
inheritance tax be payable on the shares, debentures or other obligations of our
company.
United States Federal Income Taxation
For purposes of this discussion, a U.S. Holder is any beneficial owner that
owns ordinary shares and/or warrants as capital assets and is:
. a citizen or resident of the U.S.,
. a corporation or partnership that is created or organized in the U.S.
or under the law of the U.S. or any state,
. an estate that is subject to U.S. federal income tax on its income
regardless of source, or
. 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.
U.S. Holders
Ownership and Disposition of Warrants
Sale of a Warrant. Generally, a U.S. Holder of a warrant will recognize
gain or loss upon the sale of a warrant in an amount equal to the difference
between the amount realized on the sale and the U.S. Holder's adjusted tax basis
for the warrant. A U.S. Holder's adjusted tax basis in a warrant generally will
equal its cost, increased by the amount of any constructive distributions to the
U.S. Holder in respect of the warrants as a result of an adjustment to the
conversion ratio. In order to determine the cost of a warrant, the total
purchase price paid for the ordinary share/warrant units offered by this
prospectus must be allocated between the ordinary shares and the warrants
acquired, based upon their relative fair market value. Our company will provide
this information upon request to any holder. Gain or loss attributable to the
sale of an option to buy or sell property is considered gain from the sale of
property that has the same character as the property to which the option
relates. The warrants relate to ordinary shares. Accordingly, subject to the
discussion below regarding the passive foreign investment company status of our
company, gain or losses attributable to the sale of warrants generally will
constitute capital gains and losses if the ordinary shares would be a capital
asset in the hands of the warrant holder and will be long term if the warrants
have been held for more than one year.
Exercise of a Warrant. In general, no gain or loss will be recognized by a
U.S. Holder upon the exercise of a warrant. Upon the exercise of a warrant, the
holder's tax basis in the shares so acquired will be the sum of (1) the holder's
adjusted tax basis in the warrant and (2) the cash paid upon exercise of the
warrant. A U.S. Holder's holding period in the ordinary shares so acquired will
begin on the day
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<PAGE>
following the date the warrants are exercised for purposes of determining
whether gain on the sale of the ordinary shares will be treated as long-term or
short-term capital gain.
Expiration of the Warrants. Upon expiration of an unexercised warrant, the
holder will recognize a loss equal to the adjusted tax basis of the warrant in
the hands of the holder. The character of the loss recognized upon the failure
to exercise an option is determined based on the character of the property to
which the option relates. Because the warrants relate to ordinary shares, a
loss recognized upon expiration of a warrant generally will be capital loss if
the ordinary shares would have been a capital asset in the hands of the warrant
holder and will be long term if the warrant was held for more than one year.
Adjustments Under the Warrants. Pursuant to the terms of the warrants, the
number of ordinary shares that may be purchase upon exercise of the warrants is
subject to adjustment from time to time upon the occurrence of the events
described under "Description of Warrants--Adjustment." In some circumstances, a
change in the conversion ratio or any transaction having a similar effect on the
interest of a warrant holder may be treated as a distribution with respect to
any warrant holder whose proportionate interest in the earnings and profits of
the issuer is increased by that change or transaction. As a result, under some
circumstances which may or may not occur, an adjustment pursuant to the terms of
the warrants may be treated as a taxable distribution to the warrant holders to
the extent of our company's current or accumulated earnings and profits, as
determined for U.S. federal income tax purposes, without regard to whether the
warrant holders receive any cash or other property. If the warrant holders
receive a taxable distribution, their tax bases in the warrants will be
increased by an amount equal to the taxable distribution.
Passive Foreign Investment Company Considerations. As discussed below, our
company may constitute a passive foreign investment company (PFIC) for any
taxable year. If our company were treated as a PFIC during a U.S. Holder's
holding period for the warrants, then such U.S. Holder will be subject to a
special tax regime in respect of gains realized on the sale or other disposition
of warrants. Although not entirely free from doubt, the PFIC rules should not
apply to gain realized in respect of any warrants disposed of during the same
taxable year in which the warrants are acquired.
In general, under the PFIC rules, a U.S. Holder will be required to
allocate any gain realized on the sale of the warrants to each day during the
Holder's holding period for the warrants, and will be taxable at the highest
rate of taxation applicable to ordinary income for the year to which the gain is
allocable, without regard to the U.S. Holder's other items of income and loss
for such taxable year. This deferred tax, other than the tax on amounts
allocable to the year of disposition, then will 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. A U.S. Holder of warrants will not be entitled to
elect to have our company treated as a "qualified electing fund" ("QEF
election") or to a mark to market election, as described below, to alleviate
adverse tax consequences arising from the special tax regime. Holders of
warrants also should note that they may be subject to adverse PFIC consequences
as the result of their possible indirect ownership of certain "lower-tier
PFICs," which are discussed below. The application of the PFIC rules to ordinary
shares received upon an exercise of the warrants also raise complicated tax
issues. The application of the PFIC rules to holders of warrants is complex.
Investors are urged to consult their U.S. tax advisors with respect to the PFIC
consequences of owning and exercising the warrants.
A U.S. Holder who owns warrants during any year that our company is a PFIC
must file an Internal Revenue Service Form 8621 in respect of such warrants and,
under proposed U.S. Treasury Regulations, in respect of interests in any lower-
tier PFICs.
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<PAGE>
Prospective investors are urged to consult their own tax advisors regarding
the possible classification of our 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.
Ownership and Disposition of Ordinary Shares
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 must include in gross income as a
dividend the gross amount of any distribution paid by our 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 ordinary shares, a U.S.
Holder will recognize gain or loss for U.S. federal income 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 the
ordinary shares. This gain or loss will be capital gain or loss and, if the
U.S. Holder's holding period for those ordinary shares exceeds one year, will be
long-term capital gain or loss.
Passive Foreign Investment Company Considerations
Classification as a PFIC. Our 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, our 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 our 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 our 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 our company is a partner,
either directly or through one or more intervening partnerships. U.S. Holders
should be aware that the ordinary shares may be treated as stock of a PFIC for
U.S. federal income tax purposes because our company will earn significant
passive income from investments relative to any non-passive income of our
company prior to the commencement by our company of substantial mining
operations. Further, the Internal Revenue 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, we cannot assure you that our company
would not be treated as a PFIC even after it has begun to earn income from
mining operations. In this regard, prospective investors should note that our
company would likely constitute a PFIC even after it begins to generate
significant income from mining operations in the event our company conducts our
mining operations predominantly through the use of independent contractors
rather than directly through the use of our own employees.
47
<PAGE>
Prospective investors should note that the PFIC classification rules are
complex and may apply in numerous unexpected circumstances. Under these rules,
our company could be classified as a PFIC in various circumstances in addition
to those described in the preceding paragraphs. For example, our 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 our company's securities or the sale of assets of
our company, even in a year in which our company generates significant income
from direct mining operations.
Consequences of PFIC Status. If our company were treated as a PFIC for any
taxable year of a U.S. Holder's holding period for its shares, unless a U.S.
Holder makes a QEF election or mark to market election in respect of our
company, that U.S. Holder will be subject to a special tax regime (1) in respect
of gains realized on the sale or other disposition of ordinary shares, and (2)
in respect of distributions on ordinary 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 ordinary shares disposed of during the same taxable
year in which the ordinary 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 the
sale of the ordinary shares to each day during the Holder's holding period for
the ordinary 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. This deferred tax, other than the tax on amounts
allocable to the year of disposition or receipt of the 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 makes a QEF election in the first taxable year
of the holder's ownership of the ordinary shares during which our company is a
PFIC and our company complies with specified reporting requirements. Our company
intends to comply with all reporting requirements necessary for U.S. Holders to
make a QEF election with respect to our company and will upon request provide to
U.S. Holders the information that may be required to make a QEF election
effective.
A U.S. Holder that makes a QEF election with respect to our company will be
currently taxable on its pro rata share of ordinary earnings and net capital
gain of our company for each taxable year of our company in which our company
qualifies as a PFIC, regardless of whether the holder receives any distribution
from our company. The U.S. Holder's basis in the ordinary shares of our company
will be increased to reflect taxed but undistributed income of our company.
Distributions of income that previously has been taxed will result in a
corresponding reduction of basis in the ordinary shares and will not be taxed
again as a distribution to the U.S. Holder.
During the period in which our company may be a PFIC, our company may be
entitled to deductions under U.S. federal income tax principles that may
substantially offset earnings of our company. As a result, the pro rata share of
the ordinary earnings and net capital gain of our 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 our company, including 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.
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Lower-Tier PFICs. At the present time, none of our company's non-U.S.
subsidiaries is or will be 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 our company is a PFIC and, in the future, our company acquires a non-
U.S. subsidiary that is classified as a corporation for U.S. federal income tax
purposes, 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 our company which themselves constitute PFICs.
These indirect corporate subsidiaries are referred to as "lower-tier PFICs." If
our 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 (1) our company
receives a distribution from, or disposes of all or part of its interest in, a
lower-tier PFIC or (2) the U.S. Holder disposes of all or part of its ordinary
shares. Our 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 ordinary shares, including
the effect of such an election on any lower-tier PFICs that the holder is deemed
to own.
A U.S. Holder who owns ordinary shares during any year that our company is
a PFIC must file an Internal Revenue Service Form 8621 in respect of such
ordinary 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 our 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 of ordinary shares if our company, or any corporate
subsidiary of our company, is characterized as a foreign personal holding
company (FPHC). In particular, if our company, or any corporate subsidiary, is
an FPHC in respect of any taxable year of our 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, our company, or any corporate
subsidiary of our company, will constitute a FPHC during a taxable year if (1) a
specified percentage of its income is passive for purposes of the FPHC rules,
and (2) 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. Our company
does not anticipate that it or any of its subsidiaries will be an FPHC
immediately following this offering or in the future. Our company, however, can
provide no assurance as to this conclusion.
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 ordinary shares unless (1) 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
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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 other specified
conditions are met or (2) the investor is a foreign insurance company that
conducts business in the U.S. and the dividends are attributable to that
business.
An investor who is not a U.S. Holder will not be subject to U.S. federal
income tax on any gain realized on the sale or other disposition of ordinary
shares or warrants unless (1) the investor is engaged in the conduct of a trade
or business in the United States and the gain is effectively connected with that
trade or business or (2) the investor is an individual who is present in the
U.S. for 183 days or more during the taxable year in which the gain is realized
and other specified conditions are met.
United States Information Reporting and Backup Withholding
Under current U.S. federal income tax law, payments of dividends to some
U.S. Holders are subject to information reporting, and a "back up" withholding
tax at a rate of 31 percent if these persons fail to supply correct taxpayer
identification numbers and other information in the required manner. Payments of
dividends to a U.S. Holder (1) made by mail or wire transfer to an address in
the U.S., (2) made by a paying agent, broker or other intermediary in the U.S.
or (3) made by a U.S. broker or by a custodian, nominee or agent that is (a) a
U.S. person, (b) a controlled foreign corporation for U.S. tax purposes, or (c)
a foreign person 50% or more of whose gross income is from a U.S. trade or
business (the persons described in (a), (b) and (c) shall be referred to as a
"U.S. Controlled Person") to that 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 these 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 our
company.
The payment of proceeds of the disposition of ordinary shares or warrants
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 ordinary shares or warrants to or through a non-U.S.
office of a broker generally will 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
ordinary shares or warrants 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 U.S. federal income
tax liability, if any, provided that the required information is furnished to
the U.S. Internal Revenue Service.
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You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement to this prospectus. We have
authorized no one to provide you with different information. We are not making
an offer of these securities in any state where the offer is not permitted. You
should not assume that the information in this prospectus is accurate as of any
date other that the date on the front of this document.
[APEX SILVER MINES LIMITED LOGO]
APEX SILVER MINES LIMITED
DEBT SECURITIES
PREFERENCE SHARES
DEPOSITARY SHARES
ORDINARY SHARES
WARRANTS
ORDINARY SHARE PURCHASE RIGHTS
____________
PROSPECTUS
____________
August __, 2000
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14: 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:
--------------------------------------------------------------------------------
Securities and Exchange Commission Registration Fee* $ 52,800
--------------------------------------------------------------------------------
AMEX Listing Fee* ............................................ $
--------------------------------------------------------------------------------
NASD Filing Fee* ............................................. $
--------------------------------------------------------------------------------
Blue Sky Fees and Expenses* .................................. $
--------------------------------------------------------------------------------
Printing and Engraving Expenses* ............................. $
--------------------------------------------------------------------------------
Legal Fees and Expenses* ..................................... $ 150,000
--------------------------------------------------------------------------------
Accounting Fees and Expenses* ................................ $
--------------------------------------------------------------------------------
Transfer Agent's Fees and Expenses* .......................... $
--------------------------------------------------------------------------------
Trustee Fees* ................................................ $
--------------------------------------------------------------------------------
Miscellaneous* ............................................... $
--------------------------------------------------------------------------------
Total* .................................................. $
--------------------------------------------------------------------------------
* To be supplied in a prospectus supplement.
Item 15. Indemnification of Directors and Officers
Our Articles of Association provide that that we must indemnify our
directors, officers, employees and agents in connection with the defense of any
civil legal proceedings concerning our company or its affairs, except in the
case of willful default or fraud by such person. To the extent that we are
permitted to do so, we intend to give an indemnity to each of our directors and
to arrange for the liabilities under these indemnities to be covered. We have
directors' and officers' insurance for our directors, officers and some
employees for specified liabilities.
The limitation of liability and indemnification provisions in our
certificate of incorporation and bylaws may discourage stockholders from
bringing a lawsuit against directors for breach of their fiduciary duty. They
may also have the effect of reducing the likelihood of derivative litigation
against directors and officers, even though an action of this kind, if
successful, might otherwise benefit us and our stockholders. Furthermore, a
stockholders' investment may be adversely affected to the extent we pay the
costs of settlement and damage awards against directors and officers pursuant to
these indemnification provisions. However, we believe that these indemnification
provisions are necessary to attract and retain qualified directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14 of this registration
statement or otherwise may be permitted, the registrant has been advised that in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been
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settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits. Attached hereto are the following exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------ ----------------------
<S> <C>
1.1 Form of Underwriting Agreement (Equity).*
1.2 Form of Underwriting Agreement (Non-Equity).*
3.1 Form of Amended and Restated Memorandum of Association of the Registrant. (1)
3.2 Form of Amended and Restated Articles of Association of the Registrant. (1)
4.1 Form of Senior Indenture. (2)
4.2 Form of Senior Debt Security (included as part of Exhibit 4.2). (2)
4.3 Form of Subordinated Indenture. (2)
4.4 Form of Subordinated Debt Security (included as part of Exhibit 4.3). (2)
4.5 Form of Ordinary Share Certificate. (3)
4.6 Form of Preference Share Certificate. (2)
4.7 Form of Ordinary Share Warrant Agreement. (4)
4.8 Form of Ordinary Share Warrant Certificate (included as part of Exhibit 4.7). (4)
4.9 Form of Preference Share Warrant Agreement.**
4.10 Form of Preference Share Warrant Certificate (included as part of Exhibit 4.9).**
4.11 Form of Deposit Agreement.**
4.12 Form of Depositary Receipt of Depositary Shares (included as part of Exhibit 4.13).**
4.13 Form of Ordinary Share Purchase Rights.**
5.1 Opinion of Walkers.***
5.2 Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.***
10.1 Summary of the Company's 401(k) Plan.(3)
10.2 Management Services Agreement among Apex Limited and its subsidiaries. (3)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------ ----------------------
<S> <C>
10.3 Non-Employee Directors' Share Plan, as amended. (1)
10.4 Employees' Share Option Plan. (1)
10.5 Form of Option Grant to Non-Employee Directors dated April 10, 1997. (5)
10.6 Employment contract between Apex Limited and Marcel F. DeGuire, dated July 23, 1996. (3)
10.7 Employment contract between Apex Limited and Mark A. Lettes, dated May 19, 1998. (1)
10.8 Employment contract between Apex Limited and Keith R. Hulley, dated August 4, 1996. (3)
10.9 Employment contract between Apex Limited and Douglas M. Smith Jr., dated January 21, 1997. (3)
10.10 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 Apex Limited, as
required by Rule 306 of Regulation S-T. (3)
10.11 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 Apex Limited,
as required by Rule 306 of Regulation S-T. (3)
10.12 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 Apex Limited, as required by Rule 306 of Regulation S-T. (3)
10.13 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 Apex Limited, as required by Rule 306 of Regulation S-T. (3)
10.14 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 Apex Limited, as required by Rule 306 of Regulation S-T. (3)
10.15 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 Apex Limited, as required by Rule 306 of Regulation S-T. (3)
10.16 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 Apex Limited, as required by Rule 306 of Regulation S-T. (3)
10.17 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 Apex Limited, as required by Rule 306 of Regulation S-T. (3)
10.18 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 Apex
Limited, as required by Rule 306 of Regulation S-T. (3)
10.19 Board Designation Agreement, dated October 28, 1997, by and between Apex Limited and Silver
Holdings LDC. (3)
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------ ----------------------
<S> <C>
10.20 Registration Rights and Voting Agreement, dated October 28, 1997, by and among Apex Limited,
Silver Holdings LDC, Consolidated Commodities, Ltd., Argentum LLC, Aurum LLC and Thomas
S. Kaplan. (3)
10.21 Amended and Restated Voting Trust Agreement, dated October 29, 1997, between Thomas Kaplan
and Consolidated Commodities, Ltd. (3)
10.22 Amended and Restated Voting Trust Agreement, dated October 29, 1997, between Thomas Kaplan
and Argentum LLC. (3)
10.23 English translation of the Purchase Agreement between Monica de Prundencio and ASC Bolivia,
regarding the Tesorera and Jayula concessions, dated September 3, 1997, with an attached note
from Keith Hulley as required by Rule 306 of Regulation S-T. (3)
21 Subsidiaries.****
23.1 Consent of Walkers (included as part of Exhibit 5.1).***
23.2 Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (included as part of Exhibit 5.2).***
23.3 Consent of PricewaterhouseCoopers LLP.***
23.4 Consent of Mine Reserves Associates, Inc.****
24 Powers of Attorney of the registrant.****
25.1 Form T-1 for Senior Indenture. (2)
25.2 Form T-1 for Subordinated Indenture. (2)
</TABLE>
-------------
* To be filed by amendment.
** To be filed as an exhibit to a report pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended, and incorporated herein by
reference.
*** Filed herewith.
**** Previously filed.
(1) Incorporated by reference to our Annual Report on Form10-K for the year
ended December 31, 1998, first filed with the SEC on March 26, 1999 (File
No. File No. 333-34685).
(2) Incorporated by reference to our Registration Statement on Form S-3, first
filed with the SEC on April 13, 1999 (File No. 333-76181).
(3) Incorporated by reference to the registrant's Registration Statement on
Form S-1 first filed with the SEC on August 29, 1997 (File No. 333-34685).
(4) Filed as an exhibit to Form 8-K filed with the SEC on November 8, 1999
(File No. 001-13627).
(5) Incorporated by reference to our Registration Statement on Form S-8, filed
with the SEC on May 20, 1998 (File No. 333-53185).
II-4
<PAGE>
Item 17. Undertakings
We hereby undertake that:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement (other than as provided
in the proviso and instructions to Item 512(a) of Regulation S-K) (i) to include
any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii)
to reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement; and (iii) to include
any material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.
(b) For the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(d) For purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(e) To file an application for the purpose of determining the eligibility
of the trustee to act under subsection (a) of Section 310 of the Trust Indenture
Act in accordance with the rules and regulations prescribed by the Commission
under Section 305(b)(2) of the Trust Indenture Act.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Paris, France, on August 21, 2000.
APEX SILVER MINES LIMITED
By: /s/ Thomas S. Kaplan
-----------------------------
Thomas S. Kaplan
Chairman, Board of Directors
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
----------- ----- ----
/s/ Thomas S. Kaplan Director August 21, 2000
--------------------- (Registrant's Authorized
Thomas S. Kaplan Representative in the U.S.)
* Director August 21, 2000
---------------------
Michael Comninos
* Director August 21, 2000
---------------------
Harry M. Conger
* Director August 21, 2000
---------------------
Eduardo S. Elsztain
* Director August 21, 2000
---------------------
David Sean Hanna
* Director August 21, 2000
---------------------
Ove Hoegh
* Director August 21, 2000
---------------------
Keith R. Hulley
* Director August 21, 2000
---------------------
Kevin R. Morano
* Director August 21, 2000
---------------------
Charles B. Smith
II-6
<PAGE>
* Director August 21, 2000
------------
Paul Soros
By: /s/ Mark Lettes
------------------
(Attorney-in-Fact)
II-7
