SILVER NEWS

Apex Silver assures analysts Bolivia will not nationalize San Cristobal

Apex Silver CEO has updated analysts on the Bolivian tax and political situation which could impact earnings potential, while the company insisted that there was no likelihood of operations being nationalized by the Morales government.

RENO, NV - 

Apex Silver officials assured analysts Tuesday that Bolivia has no intention of nationalizing mining companies, stressing that the nation's Mining Ministry specifically mentioned it would not nationalize Apex's new San Cristobal silver mine.

However, analysts expressed concern about San Cristobal's funding requirements including $82.1 million contributed during the first quarter of this year and a possible $90 million tax payment that may have to be paid to the Bolivian government on January 1, 2009.

Jeff Clevenger, Apex President and CEO, briefed analysts on Bolivia's current political situation including a vote by 85% of the voters in the Santa Cruz Province in favor of autonomy. Currently Bolivia's appointed governors report to President Evo Morales. Several provinces want to elect their own governors and legislatures independent from the central government with the ability to tax, manage their own natural resources and land, and to hire their own police forces.

On May 8, a bill passed Bolivia's Senate, which calls for a referendum vote on President Morales and the governors of the country's nine department. Morales has signed the bill, which is scheduled for a public hearing on August 10. Clevenger explained that if more votes are cast in the referendum against the President and the governors than when they were originally elected in 2005, an early election could be scheduled in Bolivia.

The Bolivian government has recently enacted various changes to applicable mining taxes, including increasing the income tax rate from 25% to 37.5% when metals prices are above specified thresholds, eliminating the creditability of the complementary mining tax (CMT) against the income tax, again when metals prices are above specified thresholds. These changes will result in a higher income tax burden for the company.

Apex Senior Vice President, Corporate Affairs Jerry Danni told analysts that Bolivia is also writing regarding regulations pertaining to the transfer or mortgage of mining and exploration concessions. Danni said Apex believes that the changes would not be applied to San Cristobal, but would be applied to any new concessions.

Meanwhile, Apex and its partner Sumitomo are in continuing discussions with government representatives regarding various government proposals and their potential impacts on San Cristobal. The company is unable to predict which additional changes, if any, will be made to current mining tax legislation and the Mining Code," Apex said in a 10-Q form filed Tuesday with the SEC.

During the first quarter of this year, Apex and Sumitomo contributed $82.1 million to San Cristobal to fund operating costs, income and other taxes, capital costs, financing costs, and settlement of metal derivative positions. Apex funded $48.8 million and the remaining $33.3 million was paid by Sumitomo. Although San Cristobal is still being ramped up, Apex told the SEC that they do not believe that the two companies will have to contribute any additional amounts to fund San Cristobal operations through the end of the year and that cash flows from concentrate sales will cover remaining costs.

Nevertheless, Apex warned that the joint venture may not be able to use its cash balances to fund both the operating and debt service amounts required by a credit facility and almost make a possible $90 million tax payment. Apex explained to analysts that it is exploring alternatives for increasing liquidity in the event that its current unrestricted cash balances and investments fall below acceptable levels. Analysts expressed concerns Tuesday that Apex may be required to issue more equity.

FINANCIALS

Apex reported a net loss of $9.3 million or negative 16-cents per share for the first quarter of 2008, compared to a net income of $112 million ($1.91/sh) for the same quarter of 2007.

The company reported production of 2.9 million ounces of payable silver, 29,300 tonnes of payable zinc and 12,300 tonnes of payable lead for the first quarter-2008. Apex projects full year 2008 production of 15 million ounces of payable silver, 215,000 tonnes of payable zinc and 75,000 tonnes of payable lead.

Average operating costs were raised to a range of negative $1.75 to negative $2.25 per payable ounce of silver (net of lead by-product credits) and a range of 70-cents to 80-cents per payable pound of zinc.

Meanwhile, Apex is working on improving the reliability of process water and plant availability on optimizing ore blends and recovery rate. Throughput during the first quarter 2008 was constrained primarily because of a shortage of process water.