Apex Silver Mines Announces the Sale of the Rights to Deferred Payments to Sumitomo for $70 Million

DENVER--(BUSINESS WIRE)--Apex Silver Mines Limited (AMEX:SIL) announced today that it had reached an agreement in principle with Sumitomo Corporation in which Sumitomo will purchase from Apex for $70 million Apex’s rights pursuant to a Deferred Payment Agreement dated September 25, 2006. The Deferred Payment Agreement requires Sumitomo to make deferred purchase price payments to Apex in respect to the 2006 acquisition of 35% of the San Cristóbal mine, consisting of: (i) quarterly payments equal to 22.86% of Sumitomo’s share of payable silver production from the San Cristóbal mine, or approximately 8% of total payable silver production, payable in cash or silver at Sumitomo’s option, and (ii) quarterly cash payments equal to 20% of Sumitomo’s share of payable zinc production from the San Cristóbal mine, or approximately 7% of total payable zinc production, multiplied by the zinc price in excess of $1,800 per tonne. The transaction is subject to the approval of the company and Sumitomo Boards of Directors and is expected to close in June 2008.

“We are pleased with the support shown by our partner Sumitomo with this initial action to improve the company’s financial condition, and for their willingness to discuss additional liquidity support if necessary. We are proud to stand with our partner as we strengthen our alliance and commitment to San Cristóbal.”

At March 31, 2008 Apex’s aggregate cash, restricted cash, short and long-term investments totaled $198.9 million. The company’s aggregate unrestricted cash and investments totaled $40.2 million. Following closing of the transaction with Sumitomo, the company’s unrestricted cash position would increase by $70 million.

During the first week of June, the company and Sumitomo plan to contribute an additional $10 million to San Cristóbal. The company will fund $6.5 million of this amount and the remaining $3.5 million will be funded by Sumitomo. As previously noted, the amount of funding, if any, that San Cristóbal requires depends on the relative amounts and timing of concentrate production, revenues and expenditures, which are difficult to predict while the mine continues to ramp up.

In addition, the company is continuing to explore with Sumitomo other opportunities to further improve the financial position of Minera San Cristóbal. Apex and Sumitomo are also continuing to work with the lenders to increase flexibility under the San Cristóbal finance agreements.

San Cristóbal Operations Update

The ramp up to full production at San Cristóbal continues to proceed favorably, with design throughput rates expected to be consistently achieved by mid-year. The water well field is now producing sufficient water to allow the plant to operate at design capacity. Failed wells and pumps caused by excess salinity in the water are being systematically replaced as necessary. Installation in the third quarter 2008 of larger stainless steel casings and pumps should provide a long-term solution. Improvements have been made in the tailings density and the reclamation of water from the tailings impoundment should result in additional water availability.

During May, San Cristóbal completed the 14 day throughput test provided for in the Engineering, Procurement and Construction Management Contract. During the test the plant achieved an average throughput of 43,000 tonnes per day over 14 consecutive days, with several days achieving rates of 50,000 tonnes per day, while confirming the functionality of plant components.

Jeffrey Clevenger, Apex’s President and Chief Executive Officer commented, “We are pleased with the support shown by our partner Sumitomo with this initial action to improve the company’s financial condition, and for their willingness to discuss additional liquidity support if necessary. We are proud to stand with our partner as we strengthen our alliance and commitment to San Cristóbal.”

Forward-Looking Statements

This press release contains forward-looking statements regarding the company, within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, including statements regarding the transaction pursuant to which Apex will receive $70 million from Sumitomo in exchange for its rights to receive deferred purchase price payments and the timing of the same, the resulting increase in the company’s unrestricted cash, the planned funding by the company of $6.5 million and Sumitomo of $3.5 million to San Cristobal, potential future funding requirements of San Cristobal, San Cristóbal ramp-up and the timing of achieving consistent throughput at designed capacity, production of sufficient water for plant operation at design capacity, the functionality of plant components and exploration of opportunities to improve the financial position of Minera San Cristobal and increase flexibility under the San Cristobal finance agreements. Actual results relating to any and all of these subjects may differ materially from those presented. Factors that could cause results to differ materially include refusal of the board of directors of the company or Sumitomo to approve the deferred payments transaction or the failure to satisfy other customary conditions to closing of the transaction, delay in closing of the deferred payments transaction, additional funding requirements of San Cristobal, problems or delays in achieving full mill throughput rates and anticipated metals production and recovery rates at San Cristóbal, including shortages and other problems with reliability of process water, material handling problems in the stockpile reclaim system, difficulties in blending ore types and variations in ore grade, inability to improve recoveries without affecting throughput, plant availability and delivery of operating supplies to the site, operating or maintenance problems or delays, continued training needs of the plant workforce, labor disputes or strikes; higher than anticipated mine or concentrator costs; inability, without reducing unrestricted cash and investments to unacceptable levels, to contribute funds to San Cristóbal if required; lack of success in increasing flexibility under the San Cristobal financing agreements or improving the financial position of Minera San Cristobal, problems in emerging financial markets; inability to obtain debt or equity financing on acceptable terms or at all, and political unrest and uncertainty in Bolivia. The company assumes no obligation to update this information. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements can be found in the company’s Form 10-K filed with the SEC for the year ended December 31, 2007.