Apex Silver Mines Limited announced that it has entered into a non-binding letter of intent with Sumitomo Corporation providing for the sale of Apex Silver’s interest in the San Cristóbal mine to Sumitomo for a cash purchase price of $22.5 million. Apex Silver would continue to manage the mine following the sale.

Sumitomo currently owns a 35% interest in the mine indirectly through Minera San Cristóbal, S.A., a subsidiary of Apex Silver (MSC). Sumitomo also has the right to convert outstanding borrowings under a $100 million line of credit extended to MSC by one of Sumitomo’s subsidiaries into additional MSC equity interests. MSC has borrowed $82 million under this facility. If those borrowings were fully converted, Sumitomo would have an aggregate 53.6% indirect interest in the San Cristóbal mine.

Jeffrey G. Clevenger, President and Chief Executive Officer of Apex Silver, stated, “We are pleased that Apex Silver will continue to partner with Sumitomo at this world-class mine, and we look forward to a comprehensive resolution of the issues that the company has faced as a result of the current volatility in the commodity and financial markets.”

Summary of Key Terms:

* Sumitomo (or an affiliate) will purchase Apex’s and its affiliates’ remaining equity interests in MSC, shareholder loans to MSC and certain other assets for a cash purchase price of $22.5 million, payable at the closing of the sale. Sumitomo (or an affiliate) will assume the liabilities relating to the San Cristóbal mine, including borrowings under the project finance facility for the mine and certain related liabilities under metal derivatives positions, net of the $91 million restricted cash at Apex Silver that has been pledged as collateral for the derivatives positions.

* Apex Silver Mines Corporation (ASMC), a wholly owned subsidiary of Apex Silver, will manage MSC for an annual fee to be determined, but that will be not less than $6 million and sufficient to cover ASMC’s costs. ASMC will also be entitled to an annual incentive fee of up to $1.5 million based on achievement of benchmarks for operating efficiency mutually agreed by the parties. The management agreement will have a minimum term of 12 months, after which Sumitomo may terminate the agreement on six months’ notice and ASMC may terminate on 12 months’ notice. The agreement will also be subject to early termination in certain circumstances. Apex Silver will guarantee ASMC’s performance.

* Apex Silver will receive limited contingent value rights entitling it to participate in the appreciation of the value of the mine in certain circumstances.

* The non-binding letter of intent is subject to significant conditions, including completion by Sumitomo of diligence, the preparation of definitive documentation, the approval by the board of directors of each party and the restructuring of the mine’s project finance facility and metal derivatives positions and Apex Silver’s convertible notes in a voluntary reorganization under chapter 11 of the U.S. Bankruptcy Code.

Apex Silver is a mining, exploration and development company. Its 65%-owned San Cristóbal mine is the world’s largest development in silver and zinc. The ordinary shares of Apex Silver trade on the American Stock Exchange under the symbol “SIL.”

This entry was posted by Gold Mining on Friday, November 14th, 2008 at 11:21 pm and is filed under Silver, Zinc. Tags: Acquisition, Alliance, America, American Stock Exchange, American Stock Exchange LLC, Apex Silver Mines Corporation, Apex Silver Mines Limited, bank, Bankruptcy, Company, Directors, finance, Investment, Jeffrey G. Clevenger, Managem, metal, metal derivatives positions, Mine, Minera San Cristóbal S.A., mining, owned subsidiary, project finance, project finance facility, Reorganization, San Cristobal, San Cristóbal mine, Silver, Stock, Sumitomo, Sumitomo Corporation, Zinc. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.