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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM 10-K

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to

Commission file number 1-13627

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APEX SILVER MINES LIMITED
(Exact Name of Registrant as Specified in its Charter)

Cayman Islands, British West Indies Not Applicable
(State of Incorporation or (I.R.S. Employer
Organization) Identification No.)


Caledonian House Not Applicable
Jennett Street (Zip Code)
George Town, Grand Cayman
Cayman Islands, British West Indies
(Address of principal executive
office)

(345) 949-0050
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Name of each exchange on which
Ordinary Shares, $0.01 par value registered
Ordinary Shares Subscription American Stock Exchange
Warrants American Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]

The aggregate market value of the voting stock held by non-affiliates of the
registrant was approximately $145,500,000 as of March 3, 2000.

The number of Ordinary Shares outstanding as of March 3, 2000 was
34,471,268.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Definitive Proxy Statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A in connection
with the 2000 Annual Meeting of Shareholders are incorporated by reference in
Part III of this Report on Form 10-K.

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PART I

ITEMS 1 AND 2: BUSINESS AND PROPERTIES

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,
containing 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 into Ordinary Shares.

As used herein, Apex Limited, our company, we and our refer collectively to
Apex Silver Mines Limited, its predecessors, subsidiaries and affiliates or to
one or more of them as the context may require.

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 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.

SAN CRISTOBAL PROJECT

Our 100% owned San Cristobal project is located in the San Cristobal mining
district of the Potosi Department in southern Bolivia, a region that has
historically produced a significant portion of the world's silver supply. San
Cristobal is located in the Bolivian Altiplano in the Andes mountains,
approximately 500 kilometers south of the capital city of La Paz. The project
is accessible by a gravel road from the international railroad at Rio Grande,
approximately 50 kilometers to the north, and from the town of Uyuni, a former
railroad maintenance town, approximately 80 kilometers to the northeast. The
railroad begins at the Chilean port of Antafogasta, approximately 460
kilometers southwest of San Cristobal, and continues approximately 500
kilometers north to La Paz.


The San Cristobal property is comprised of certain mining concessions in a
large block of concessions owned or controlled by the Company covering
approximately 460,000 acres. Under these mining concessions, our company has
the right to carry out exploration, mining, processing and marketing of all
mineral substances located within the concessions, and to use the water found
on the concessions. In order to maintain our rights to these concessions, we
must make annual mining patent payments to the Bolivian government.

Our San Cristobal property is largely unexploited. The relatively small, shut
down Toldos mine, located approximately 1.5 kilometers from San Cristobal, was
mined by underground block caving and open pit mining between 1985 and 1995. At
present, there is no significant plant or equipment on the San Cristobal
property.

We believe that our San Cristobal property contains one of the largest known
open pit silver, zinc and lead deposits in the world. Additional drilling in
1998 doubled proven and probable reserves at San Cristobal, which total 240
million tonnes of ore grading 2.0 ounces per tonne of silver, 1.67% zinc and
0.58% lead. These reserves contain 470 million ounces of silver, 8.8 billion
pounds of zinc and 3.1 billion pounds of lead. The full dimensions of the San
Cristobal deposit have not yet been determined; mineralized material extends
outward from the identified ore body in most directions as well as to depths
below 260 meters.

In September 1999, we completed a detailed feasibility study on San
Cristobal. The feasibility study was prepared by Kvaerner, E&C Metals Division,
an independent engineering firm. Based on the feasibility study, we anticipate
developing a low cost, open pit silver-zinc mine at San Cristobal with a low
strip ratio of approximately 1.8:1 (tonnes of waste per tonne of ore),
including pre-stripping. Under the study's mine plan, we would mine the deposit
at a rate of approximately 40,000 tonnes of ore per day and process the ore by
conventional means. We would transport mined ore to the primary crusher by
truck and then convey the crushed ore to a mill and flotation complex. The ore
would be ground in semi-autogenous (SAG) and ball mill circuits, and then
processed by selective flotation to produce separate silver-lead and silver-
zinc concentrates. We expect to transport the filtered concentrates by road to
a port in Chile, and then by ocean vessel to smelters and refineries in Asia,
the Americas and Europe.

Based on existing reserves and production rates from the feasibility study,
we believe the operation should produce, once commercial production is
attained, an annual average of approximately 19 million contained ounces of
silver, 473 million contained pounds of zinc and 133 million contained pounds
of lead over a mine life of approximately 17 years, with higher production
anticipated in the first five years. Based on the geology of San Cristobal, and
the drilling, analysis and proven and probable reserves identified to date, we
believe that the San Cristobal project could be extended in life and/or
increased in scale.

Future capital costs for San Cristobal construction as projected in the
feasibility study total approximately $413 million, net of approximately $60
million in expected tax credits, and assume contract mining for the first five
years. These capital figures do not include an additional $15 million of
assumed working capital. The capital figures also exclude value-added taxes and
duties which the feasibility study assumes will be recovered by our company
following commencement of production. Thus, the feasibility study assumes that
up to approximately $20 million in Bolivian value-added tax to be paid during
construction will be recovered as credits against future income taxes. Under a
Supreme Decree recently enacted by the government of Bolivia, in exchange for
costs incurred in constructing a road from the San Cristobal site to the
Chilean border connecting with the Chilean road to the port, the Bolivian
government has agreed to provide tax credits which we believe will total
approximately $40 million to offset an equivalent amount of additional value-
added taxes and duties. We believe this can reduce our initial funding
requirements during pre-production project development by approximately $40
million. The estimate of capital costs in the feasibility study assumes that
this reduction is achieved.

Since completion of the feasibility study, we have continued detailed
engineering and are working towards selection of a contractor to provide
engineering, procurement and construction management services. We are in the
process of arranging financing for the project and expect construction of the
San Cristobal mine and processing facilities to begin mid-year, if necessary
financing is obtained. Based on this schedule, the Company anticipates that
start-up could begin in late 2002.

2


Geology

The San Cristobal project occupies the central portion of a depression
associated with volcanism of Miocene age. The 4 kilometer diameter depression
is filled with fine to coarse grained volcanoclastic sedimentary rocks
(including shale, conglomerate, sandstone, landslide debris and talus). During
the late Miocene Period, after sedimentation had nearly filled the depression,
a series of dacite and andesite porphyry sills and domes intruded the
volcanoclastic rocks. Disseminated and stockwork silver-lead-zinc
mineralization formed locally both within the volcanoclastic sediments and in
the intrusions themselves. The disseminated mineralization was not mined in the
past except at the nearby Toldos mine. Historic production on the San Cristobal
property was from veins.

The two largest areas of mineralization, the Jayula and Tesorera deposits,
initially were drilled separately. Our additional drilling in 1998, which more
than doubled proven and probable reserves, merged the Jayula and Tesorera
deposits into one large deposit, now called the San Cristobal orebody.

Mineralization at the Jayula portion of the San Cristobal orebody is
dominated by stockwork consisting of iron oxides, clays, galena, barite,
sphalerite, pyrite, tetrahedrite, and acanthite. The veins of the stockwork are
most abundant in the dacite sill, near its contact with the volcanoclastic
sedimentary rocks. At the Tesorera portion of the orebody, mineralization is
characterized by galena, sphalerite, and acanthite, disseminated in the
volcanoclastic sedimentary rocks. This mineralization is most prevalent in the
coarser grained beds, usually conglomerates and coarse sandstones. To the
extent that ore grade mineralization is confined to the sedimentary beds, the
mineral zones are both stratiform and strata-bound, forming tabular bodies.

Oxidation of the mineralized zone at San Cristobal has occurred to depths
averaging 40 to 75 meters and affects approximately 4% of the reserves. In this
oxide zone, zinc has been almost completely leached out by groundwater; silver
values, however, are locally enhanced due to secondary enrichment processes. In
the oxide zone, the dominant minerals are iron oxides, galena, clays, native
silver, and secondary acanthite.

Reserves

We have completed approximately 169,400 meters of reverse circulation and
approximately 20,100 meters of diamond drilling at San Cristobal. This drilling
indicates that the mineralization is present over an area of 1,500 meters by
1,500 meters. The ore deposit defined by this drilling is open at depth and in
several lateral directions.

Proven and probable reserves were calculated in August 1999 using a $4.65 net
smelter return per tonne cutoff value and market price assumptions of $5.00 per
ounce of silver, $0.50 per pound of zinc and $0.28 per pound of lead. The
following tables show our company's proven and probable reserves of silver,
zinc and lead for sulfide ore and oxide ore at the San Cristobal project, which
were calculated by Mine Reserve Associates, Inc.

Proven and Probable Reserves--San Cristobal Project



Average Grade Contained Metals(1)
----------------------- ---------------------
Tonnes Silver Zinc Lead Silver Zinc Lead
of ore Grade Grade Grade Ounces Tonnes Tonnes
(000s) (oz./tonne) (%) (%) (000s) (000s) (000s)
------ ----------- ----- ----- ------- ------ ------

Sulfide Ore.......... 230,700 1.90 1.73 0.58 430,300 3,990 1,338
Oxide Ore............ 9,600 4.20 0.10 0.61 39,700 10 58

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(1) Amounts are shown as contained metals in ore and therefore do not reflect
losses in the recovery process. Sulfide ore reserves are expected to have
an average recovery of 68.75% for silver, 91.22% for zinc and 75.43% for
lead. Oxide ore reserves are expected to have an average recovery of 60%
for silver and 50% for lead.

In addition to proven and probable reserves, Mine Reserve Associates, Inc.
has estimated 46 million tonnes of mineralized material at an average grade of
2.90 ounces of silver per tonne, 1.04% zinc, and 0.58% lead.

3


EXPLORATION

Other than San Cristobal and nearby exploration projects in the San Cristobal
district, we have a portfolio of silver properties in Bolivia, Mexico, Peru,
Chile, Honduras and Central Asia totaling in excess of 1.0 million acres which
contain potential for silver mineralization or other significant exploration
potential. These mineral properties consist of:

. mining concessions which we have acquired, or applied for directly;

. mining concessions which we have leased, typically with an option to
purchase; and

. mining concessions which we have agreed to explore and develop and, if
feasible, bring into production, in concert with joint venture partners.

We generally seek to structure our acquisitions of mineral rights so that
individual properties can be optioned for exploration and subsequently acquired
at reasonable cost if justified by exploration results. Properties which we
determine do not warrant further exploration or development expenditures are
divested, typically without further financial obligation to our Company.
Although we believe that our exploration properties may contain significant
silver or other mineralization, our analysis of most of these properties is at
a preliminary stage. The activities performed to date at these properties often
have involved the analysis of data from previous exploration efforts by others,
supplemented by our own exploration programs.

Our development activities are currently focused on the San Cristobal
project, while exploration is concentrated on the Cobrizos property in southern
Bolivia and the Platosa property in northern Mexico. In 2000, we expect to
complete additional metallurgical testing at Cobrizos followed by more drilling
at Platosa. Although the San Cristobal project remains our top development
priority, the initial work at the Cobrizos and Platosa properties has been
promising, and we believe that these properties eventually may become
candidates for development.

Cobrizos

The Cobrizos property is located on level terrain 12 kilometers north of the
San Cristobal project in southern Bolivia. Its proximity to San Cristobal could
afford significant potential operating and administrative efficiencies.

During pre-Columbian times, green and blue supergene copper carbonate
minerals were produced from the deposit at Cobrizos for use as pigment. Spanish
miners subsequently engaged in small scale native copper and copper sulfate
mining. Between 1892 and 1906 Compania Arenal sank shafts as deep as 60 meters
and produced copper from approximately 100,000 tonnes of material extracted
from shallow underground and open cast workings. A combination of flooding and
carbon dioxide build-up in the workings ultimately forced a cessation of
operations.

Our company is party to a joint venture agreement with Corporacion Minera de
Bolivia S.A., or Comibol, a Bolivian government mining company, on its
approximately 2,600 acres of mining rights at the Cobrizos property. Under the
agreement, we must make certain payments to Comibol and complete certain work
commitments on the property in order to acquire an 85% interest in the joint
venture. Under the joint venture, Comibol would receive five percent of the
operating cash flow (as defined in the agreement) from production at the
Cobrizos property until we have recovered our entire capital investment;
thereafter, Comibol would receive 15% of operating cash flow. Our company would
be the operator of the joint venture.

Geology

Cobrizos is a partially oxidized copper-silver deposit of possible roll front
or red bed type in shale and sandstone of the Jurassic Potoco Formation.

4


Exploration and Mineralized Material

We focused our drilling program in 1997 and 1998 on a silver and copper rich
zone we had previously identified. Twelve holes were drilled over a strike
length of 850 meters which, together with the four earlier holes, resulted in
the holes being spaced approximately 75 meters apart. The results indicate a
steeply dipping mineralized zone with an average width of 55 meters over the
855 meters of strike length, open at both ends. The indicated depth from
surface or near surface is at least 100 meters. Mine Reserve Associates
calculates that the Cobrizos property contains mineralized material of 11
million tonnes at grades averaging between 2.5 and 3 ounces of silver per
tonne. Further drilling is required to determine the limits of the Cobrizos
mineralization, and whether there are proven and probable reserves. We
conducted metallurgical tests on Cobrizos ore in 1999 and plan to perform
additional metallurgical testing in 2000.

Platosa

In February 1999, we announced completion of our first drill program on the
approximately 9,000 acre Platosa property which is located 5 kilometers
northwest of the town of Bermejillo in the Durango State in northern Mexico.
The Platosa property contains water and is located within approximately 1.5
kilometers of a major paved highway, railroad, and natural gas and power
lines. Under the terms of our exploration and development agreement, we have
the right to earn up to a 65% direct ownership interest in the property. Upon
completion of earn-in requirements, a joint venture company would be formed
with our company as operator.

Twenty-one diamond drill holes totaling approximately 2,605 meters have been
completed. Nine holes encountered an average of 4.5 meters of massive and
sanded sulfides averaging 49.7 ounces per tonne silver, 28.5% zinc and 16.5%
lead in the mineralized zone we refer to as Manto No. 4. Five holes in the
mineralized zone 1.8 meters thick on average and referred to as Manto No. 5,
located from 10 to 20 meters below Manto No. 4, averaged 30.1 ounces of silver
and 5.1% lead and 3.1% zinc. Overall core recovery averaged 59% in Manto No. 4
and 81% in Manto No. 5. Our geologists believe that the material not recovered
was sulfide sand. We also have conducted mercury and geophysical soil-gas
surveys, which will aid geologists designing a follow-up drill program.


5


Other Mineral Properties

In addition to the San Cristobal project and the Cobrizos and Platosa
exploration properties, the Company has a portfolio of more than 1.0 million
acres of exploration properties located in the traditional and emerging silver
producing regions of the world. Our holdings consist primarily of ownership
interests, leases, options and joint venture interests, in varying
percentages. The distribution of these holdings other than the San Cristobal,
Cobrizos and Platosa properties is summarized in the table below. These three
properties consist of claims and concessions comprising approximately 460,000
acres, 2,600 acres, and 9,000 acres, respectively.

Location and Distribution of Major Groups of Exploration Properties



Number of
Country Properties Acreage
------- ---------- ---------

South America
Bolivia........................................... 3 118,800
Peru.............................................. 3 94,300
--- ---------
Subtotal........................................ 6 213,100
--- ---------
Mexico and Central America
Mexico............................................ 6 98,800
Honduras.......................................... 1 1,100
--- ---------
Subtotal........................................ 7 99,900
--- ---------
Central Asia........................................ 3 716,200
--- ---------
Total........................................... 16 1,029,200
=== =========


Our exploration activities in certain countries are described below. Due to
the preliminary nature of the available information regarding these
properties, the exploration portfolio is discussed in general terms.

Bolivia

Our holdings and joint ventures in Bolivia, other than the Cobrizos property
and the San Cristobal project, now total approximately 118,800 acres,
including our joint venture interests in the historic Pulacayo mine and
options on several properties currently under evaluation. We are aggressively
pursuing exploration in Bolivia.

Peru

We have an exploration office in Lima and are actively exploring for silver
in Peru, the world's second largest silver producing country. In addition to
our Otuzco copper-gold porphyry property, we are evaluating several other
exploration property acquisition opportunities.

Mexico

Mexico is the largest producer of silver in the world. We have an
exploration office at Zacatecas, Zacatecas State in northern Mexico, the heart
of the silver belt. We hold approximately 13,300 acres of mineral rights in
the Zacatecas mining district that we continue to evaluate for vein and
volcanogenic massive sulfide exploration targets. Excluding Platosa, the
Company controls approximately 98,800 acres of mineral rights in Mexico that
it is evaluating for silver and other metals in combination with silver.

Central Asia

Our properties in Central Asia are held primarily under joint venture
arrangements and are operated by other companies.

6


RISK FACTORS

Investors in our company should consider carefully, in addition to the other
information contained in, or incorporated by reference into, this report, 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.
There can be no assurance 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. There can be no assurance 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
presented in our filings with the Securities and Exchange Commission, press
releases and other public statements that may be made 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. There can be no assurance 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. There can
be no assurance 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.

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 and commence
production operations in late 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

7


. 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, there can be no assurance 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 herein.

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. There can be no assurance 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

. 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.

8


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.



Silver Zinc Lead
--------- --------- ---------
Year High Low High Low High Low
---- ---- ---- ---- ---- ---- ----

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


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
commodity 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.

There can be no assurance 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. 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:

. 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, there
can be no assurance 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 company's properties, other than the San Cristobal project.

9


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 derive
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 derive
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;

. 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 remote 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.

10


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 or 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. There can be no assurance 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. There can be no
assurance 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.

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.

11


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:

. 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

12


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.
There can be no assurance 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 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 our company is also subject to their having sufficient funds to do so. If
our subsidiaries are unable

13


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. There can be no assurance 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. There can
be no assurance 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.

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, Officers and 5% Shareholders--the substantial
control of our company by our directors, 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 February 1, 2000, Thomas S. Kaplan and the other directors of our
company and officers of Apex Silver Mines 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 shares, or 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 "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.

14


METALS MARKET OVERVIEW

Silver Market

Silver has traditionally served as a medium of exchange, much like gold.
While silver continues to be used for currency, the principal uses of silver
are for industrial uses, primarily for electrical and electronic components,
photography, jewelry and silverware. The CPM Group forecast in reports
generally available in the industry that in 1999 approximately 816 million
ounces of silver would be consumed for these and other industrial purposes, a
decrease of 0.7% from 1998. CPM projected that an additional 29.5 million
ounces of silver would be used to satisfy the coinage demand in 1999, an
increase of 18% from the 25 million ounces used in 1998.

Silver's strength, malleability, ductility, thermal and electrical
conductivity, sensitivity to light and ability to endure extreme changes in
temperature combine to make silver a widely used industrial metal.
Specifically, it is used in photography, batteries, computer chips, electrical
contacts, and high technology printing. Silver's anti-bacterial properties also
make it valuable for use in medicine and in water purification.

Most silver production is obtained from mining operations in which silver is
not the principal or primary product. Approximately 76% of mined silver is
produced as a by-product of mining lead, zinc, gold, nickel or copper deposits.
CPM estimates that in 1999 recycled or secondary supply of silver increased to
208 million ounces, representing a 10.9% increase over 1998 levels. CPM further
estimates that total silver supply from mine production, recycling and
estimated dishoarding and government stockpile sales has been insufficient to
meet industrial demand since 1990, and that stockpiles are continuing to
diminish. CPM studies indicate that approximately 696 million ounces of silver
were supplied from all sources in 1999, an increase of 8.3% from 1998. Mine
production of silver rose 6.4% to 478 million ounces.

The following table sets forth the London Silver Market's annual average,
high and low spot price of silver in U.S. dollars per troy ounce since 1978.



Year Average High Low
---- --------------------- ---------
(U.S. dollars per troy ounce)

1978....................................... 5.42 6.26 4.82
1979....................................... 11.06 32.20 5.94
1980....................................... 20.98 49.45 10.89
1981....................................... 10.49 16.30 8.03
1982....................................... 7.92 11.11 4.90
1983....................................... 11.43 14.67 8.37
1984....................................... 8.14 10.11 6.22
1985....................................... 6.13 6.75 5.45
1986....................................... 5.46 6.31 4.85
1987....................................... 7.01 10.93 5.36
1988....................................... 6.53 7.82 6.05
1989....................................... 5.50 6.21 5.04
1990....................................... 4.83 5.36 3.95
1991....................................... 4.06 4.57 3.55
1992....................................... 3.95 4.34 3.65
1993....................................... 4.31 5.42 3.56
1994....................................... 5.28 5.75 4.64
1995....................................... 5.19 6.04 4.41
1996....................................... 5.19 5.83 4.71
1997....................................... 5.17 6.27 4.22
1998....................................... 5.54 6.83 4.88
1999....................................... 5.22 5.75 4.88

- --------
Source: Silver Institute and Kitco

15


Zinc and Lead Markets

We anticipate that our San Cristobal project will, and that our future
projects may, involve the production of economically significant quantities of
metals other than silver. We expect production from San Cristobal to include
the extraction, processing and sale of significant quantities of zinc and lead
contained in sulfide concentrates.

Due to the corrosion resisting property of zinc, zinc is used primarily as
the coating in galvanized steel. Galvanized steel is widely used in
construction of infrastructure, housing and office buildings. In the automotive
industry, zinc is used for galvanizing and die-casting, and in the
vulcanization of tires. Smaller quantities of various forms of zinc are used in
the chemical and pharmaceutical industries, including fertilizers, food
supplements and cosmetics, and in specialty electronic applications such as
satellite receivers. The western world industrial consumption of zinc in 1999
was estimated in generally available industry publications of the International
Lead Zinc Study Group ("ILZSG") and Brook Hunt at approximately 6.73 million
tonnes compared to an estimated available supply of 6.60 million tonnes. The
implied deficit resulted in a decrease in zinc metal stocks to approximately
0.85 million tonnes. Recycled zinc accounts for about 8% of the zinc consumed
annually.

The primary use of lead is in motor vehicle batteries, but it is also used in
cable sheathing, shot for ammunition and alloying. Lead in chemical form is
used in alloys, glass and plastics. Western world industrial consumption of
lead in 1999 is estimated by ILZSG and Brook Hunt at 5.46 million tonnes. Lead
is widely recycled with secondary production, accounting in recent years for
approximately 55% to 60% of total supply. According to ILZSG, 5.55 million
tonnes of lead were produced in 1999.

The following table sets forth the annual average spot prices for zinc and
lead on the London Metals Exchange since 1978.



Year Zinc Lead
---- ----------- -----------
(U.S. cents per pound)

1978............................................... 31.0 33.7
1979............................................... 33.5 52.6
1980............................................... 34.4 41.4
1981............................................... 38.3 33.5
1982............................................... 33.7 24.7
1983............................................... 34.6 19.3
1984............................................... 41.7 20.1
1985............................................... 35.5 17.7
1986............................................... 34.1 18.4
1987............................................... 36.2 27.0
1988............................................... 56.3 29.7
1989............................................... 77.6 30.5
1990............................................... 68.9 36.7
1991............................................... 50.7 25.3
1992............................................... 56.2 24.6
1993............................................... 43.6 18.4
1994............................................... 45.3 24.9
1995............................................... 46.8 28.6
1996............................................... 46.5 35.1
1997............................................... 59.7 28.3
1998............................................... 46.4 24.0
1999............................................... 48.9 22.8

- --------
Source: Fleming Global Mining Group and ILZSG


16


MANAGEMENT

Executive Officers and Certain Personnel

Apex Limited has no executive officers. Under the Companies Law (1995
Revision) of the Cayman Islands, directors are authorized to bind the
corporation that they represent. Apex Limited has entered into a Management
Services Agreement pursuant to which it has engaged Apex Silver Mines
Corporation, our wholly owned subsidiary, referred to as Apex Corporation, to
provide a broad range of corporate management and advisory services. Set forth
below are certain personnel of Apex Limited and its subsidiaries.



Name Age Position
---- --- --------

Thomas S. Kaplan.......... 37 Chairman of Apex Limited, and Chief Executive
Officer of Apex Corporation
Keith R. Hulley........... 60 President and Chief Operating Officer, Apex
Corporation
Marcel F. DeGuire......... 50 Vice President of Corporate Development, Apex
Corporation
Mark A. Lettes............ 50 Vice President, Finance and Chief Financial
Officer, Apex Corporation
Larry J. Buchanan......... 55 Chief Geologist, Apex Corporation
Edmond R. LeBlanc......... 41 Vice President, Marketing, Apex Corporation
Douglas M. Smith, Jr. .... 56 Vice President, Exploration, Apex Corporation
Linda Good Wilson......... 42 Vice President, Investor Relations, Apex
Corporation
Johnny Delgado Achaval.... 60 President and Chief Executive Officer,
Andean Silver Corporation LDC
Michael F. Shaw........... 53 Project Manager, San Cristobal, Apex Corporation


Thomas S. Kaplan. Mr. Kaplan has been the chairman of the board of directors
of our Company since its inception in March 1996 and is a director and was the
founder of companies we acquired in 1996 through 1998. Mr. Kaplan is a
principal shareholder in Consolidated Commodities Ltd., a shareholder of Apex
Limited. For the past ten years, Mr. Kaplan has served as an advisor to private
clients, trusts and fund managers in the field of strategic forecasting, an
analytical method which seeks to identify and assess global trends in politics
and economics and the way in which such trends relate to international
financial markets, particularly in the developing markets of Asia, Latin
America, the Middle East and Africa. Mr. Kaplan has managed numerous venture
capital investments and portfolio investment accounts, and is a principal of
several entities specializing in direct and portfolio investments, including
Feder Information Services Corporation, Tigris Financial Group Ltd., and FMS
Partners L.P. Mr. Kaplan also serves as a director of African Plantations
Corporation LDC, a Cayman Islands limited duration company which owns and
operates coffee and tea plantations in eastern and southern Africa. Mr. Kaplan
was educated in Switzerland and England and holds B.A., M.A., and D. Phil.
degrees in history from the University of Oxford.

Keith R. Hulley. Mr. Hulley has been a director of our Company since April
1997. A mining engineer with more than 30 years experience, Mr. Hulley serves
as the President and Chief Operating Officer of Apex Corporation and has served
as an executive officer of Apex Corporation since its formation in October
1996. From early 1991 until he joined the Company, he served as a member of the
board of directors and the Director of Operations at Western Mining Holdings
Limited Corporation, a publicly traded international nickel, gold and copper
producer. At Western Mining, Mr. Hulley's responsibilities included supervising
on a global basis strategic planning, mine production, concentrating, smelting,
refining and sales. During this period, Western Mining produced on an annual
basis approximately 90,000 tonnes of nickel, 700,000 ounces of gold, 80,000
tonnes of refined copper and 1,500 tonnes of uranium oxide. Mr. Hulley also
supervised the development and operation of Western Mining's Mount Keith open-
pit nickel mine, an A$450 million mining project. Prior to joining Western
Mining, Mr. Hulley was the President, Chief Executive Officer and Chairman of
the board of directors of USMX Inc., a publicly traded precious-metals
exploration company. Mr. Hulley has also served as the President of the
minerals division and Senior Vice President for Operations of Atlas
Corporation, where he was in charge of mining exploration, development and
production. Previously he was Vice President of Mining

17


and Development of the U.S. division of BP Minerals, Inc. Over the course of
his career, Mr. Hulley has worked as a miner and shift supervisor in the gold
mines of South Africa, as Mine Operation Superintendent of Kennecott
Corporation's Bingham Canyon mine which processed 100,000 tonnes of ore per
day, and as project manager of the early phase of the Ok Tedi exploration and
development projects in Papua New Guinea. A member of the American Institute of
Mining and Metallurgical Engineers and a Fellow of the Australian Institute of
Mining and Metallurgy, Mr. Hulley holds a B.S. in mining engineering from the
University of Witwatersrand and an M.S. in mineral economics from Stanford
University.

Marcel F. DeGuire. Mr. DeGuire serves as Vice President of Corporate
Development of Apex Corporation. Prior to joining Apex Corporation in August
1996, he served as Vice President of Project Development and Regional Director
for those jurisdictions which were formerly part of the Soviet Union for
Newmont Gold Company, a subsidiary of Newmont Mining Corporation. During this
period, Mr. DeGuire acted as Project Leader of Newmont's Muruntau large scale
open pit heap leach gold project in Uzbekistan. This facility processes 37,800
tonnes of ore per day and was built at a cost of $225 million. Mr. DeGuire was
directly involved in the joint venture negotiations leading up to the project,
the subsequent feasibility studies, completion of construction and the
commencement of mining operations. In addition to his work in Central Asia, Mr.
DeGuire has been responsible for various feasibility analyses, including
Newmont's Yanacocha gold project in Peru. During his almost 20 years with
Newmont, Mr. DeGuire worked as resident manager of a uranium mine and rose to
President of several of Newmont's subsidiaries and became a leading expert in
environmental management and mine reclamation, serving as Newmont's Vice
President of Environmental Affairs and Research and Development as well as in
other senior executive positions. Mr. DeGuire is a member of the American
Institute of Mining, Metallurgical and Petroleum Engineers, the Canadian
Institute of Metallurgy, the Mining and Metallurgical Society of America and
has published various articles on mineral processing and environmental matters.
Mr. DeGuire holds a B.S. in metallurgical engineering from Michigan
Technological University and an M.S. in metallurgical engineering from the
University of Nevada, Reno.

Mark A. Lettes. Mr. Lettes has served as Vice President, Finance and Chief
Financial Officer of Apex Corporation since June 1998. Prior to joining Apex
Corporation, Mr. Lettes served from late 1996 to 1998 as Vice President Trading
for Amax Gold Inc. and Director of Treasury for Cyprus Amax Minerals Company,
where he was responsible for all Amax Gold hedging activities. A financial
professional with 25 years experience, Mr. Lettes served as Vice President and
Chief Financial Officer for Amax Gold from 1994 until 1996 where he was
responsible for numerous financings including project financings for the Fort
Knox mine in Alaska and the Refugio mine in Chile, parent-subsidiary financing
arrangements with Cyprus Amax and a convertible preferred issue. Mr. Lettes
started the gold hedging program at Amax Gold and was responsible for all
hedging activities of Amax Gold from 1987 through June 1998, when Amax Gold
merged with Kinross Gold Corporation. From 1979 through 1986, Mr. Lettes held
several positions at AMAX Inc. including Manager of Corporate Development,
Manager Futures Analysis and Group Planning Administration. In those positions,
Mr. Lettes was responsible for planning and economic analysis activities for
AMAX and for business development and acquisition functions. Transactions on
which Mr. Lettes worked at AMAX included the acquisition of the remaining 50%
of Alumax, AMAX's aluminum subsidiary. Prior to his service at AMAX and Amax
Gold, Mr. Lettes held professional positions in the financial departments of
United Technologies and Rockwell International from 1974 until 1979. Mr. Lettes
holds a B.S. in marketing from the University of Connecticut and an M.B.A. from
Ohio State University.

Dr. Larry J. Buchanan. Dr. Buchanan serves as Chief Geologist to Apex
Corporation and is a principal advisor to the Company's international
operations. He joined Apex Corporation in 1995, following five years as an
independent consultant from 1990 through 1994. Dr. Buchanan is a noted
exploration geologist with a reputation as one of the industry's leading
experts on epithermal deposits, on which he has written several definitive
texts. His analysis of such deposits has given rise to the industry paradigm
known as "The Buchanan Model". Dr. Buchanan has published eight geological
texts, played a key role in identifying several multi-million ounce gold
deposits, and developed implementation programs for numerous currently
producing mines. His consulting clients have included Cyprus Minerals Company,
FMC Corporation, Total Resources, Inc. and

18


Fischer-Watt Gold Co. Inc. Dr. Buchanan is a shareholder and director of
Begeyge Minera Ltda. Dr. Buchanan holds a B.Sc. and an M.Sc. in geological
engineering and a Ph.D in economic geology from the Colorado School of Mines.

Edmond R. LeBlanc. Mr. LeBlanc has served as Vice President, Marketing of
Apex Corporation since April 1998. Prior to joining us, Mr. LeBlanc served as
Director of Marketing for Westmin Resources Limited from 1995 through March
1998, where he was responsible for sales, transportation and hedging for all of
the company's mineral production. Westmin sold a wide variety of products
including copper, zinc, precious metals and molybdenum concentrates, as well as
precious metal dore and copper cathodes. As a member of Westmin's senior
management, Mr. LeBlanc was instrumental in assessing marketing issues for the
company's five-year strategic plans. From 1990 to 1995, he served as Manager of
Special Projects and Manager of Marketing for Westmin. Mr. LeBlanc commenced
his career in the mining industry as an exploration geologist before
specializing in the marketing of nonferrous concentates and precious metals. He
earned a B.S. in geology from Saint Xavier University.

Douglas M. Smith, Jr. Mr. Smith has served as Vice President, Exploration for
Apex Corporation since early 1997. Mr. Smith began his career with Minas de San
Luis, S.A., where he was District Geologist at the Taylotita mine in Mexico,
one of the largest epithermal silver-gold deposits in the world, and
subsequently became Chief Geologist. Prior to joining Apex Corporation, Mr.
Smith was employed for almost 20 years by ASARCO Incorporated, which he joined
in 1977. During his tenure at ASARCO, he held numerous positions including
Manager of the Rocky Mountain Exploration Division and, most recently, Chief
Geologist of the Latin American Exploration Division, where he was responsible
for overseeing all aspects of exploration and project evaluation in Spanish-
speaking countries of the Americas, including Bolivia, Peru, Chile and Mexico.
Mr. Smith holds a B.S. in geology from the University of New Mexico.

Linda Good Wilson. Ms. Wilson joined Apex Corporation as Vice President,
Investor Relations in October 1997. Prior to joining Apex Corporation, Ms.
Wilson served from March through October 1997 as Director of Investor Relations
for Addwest Minerals, a newly listed Canadian junior gold producer. With 14
years of mining experience, Ms. Wilson spent the 10 years prior to March 1997
at Cyprus Amax in numerous positions, including Director in the Investor
Relations and Treasury Department. Ms. Wilson began her career as a Geologist
at AMAX Inc.'s Mount Tolman Project, a large copper-molybdenum deposit in
eastern Washington. Ms. Wilson holds a B.A. in geology from Colby College and a
M.S. in mineral economics from the Colorado School of Mines.

Johnny Delgado Achaval. Mr. Delgado serves as the Chief Executive Officer of
Andean Silver Corporation LDC, a wholly owned subsidiary of our company. Mr.
Delgado has over 30 years experience in the South American mining industry,
including 15 years as President and principal shareholder of Mineria Tecnica
Consultores Asociados S.A. ("Mintec"), which was one of Bolivia's leading
mining consulting firms and the agent for Andean Silver Corporation LDC from
the formation of its Bolivian branch in 1994 until Mintec's acquisition by the
Company in 1998. Mr. Delgado founded Mintec in 1981. Prior to the formation of
Mintec, Mr. Delgado worked with International Mining Company from 1966 to 1981,
where he served initially as Chief of Exploration and Project Manager and then
as Technical Vice President of its tungsten mining holding company, Estalsa
Boliviana S.A. Both before and during his tenure at Mintec, Mr. Delgado was
involved in all aspects of international mining, including the direction of
major exploration efforts in Bolivia, Peru, Brazil, Ecuador, Argentina and
Chile, as well as management of mining operations in Bolivia. Mr. Delgado has
taught mining engineering, mining finance and mine geology. He is a member of
the Geological Society of Bolivia, the Society of Bolivian Engineers and the
Mining Club.

Michael F. Shaw. Mr. Shaw has served as Project Manager for the San Cristobal
project since January 1999. Prior to joining Apex Corporation, Mr. Shaw served
from 1996 through 1998 as a Vice President of Tiomin Resources and as Vice
President, General Manager and a director of Panama Cobre, S.A., a subsidiary
of Tiomin. At Tiomin, he was responsible for development activity at the Cerro
Colorado copper deposit in Panama. Mr. Shaw previously served from 1994 to 1996
as Project Director for Cyprus Amax Minerals Company on its solvent extraction-
electrowinning expansion of the Cerro Verde copper mine in Peru. Under Mr.
Shaw's

19


management, Cerro Verde's expansion was completed on schedule and under budget.
In addition, Mr. Shaw has held numerous project management positions for
Bechtel Corporation and Kvaerner Metals (Davy McKee). Over the course of his
career, he helped build the Andacollo gold mine in Chile, the El Abra copper
mine in Chile, the Jerritt Canyon gold mine in Nevada and Magma Copper
Company's flash copper smelter in Arizona. A metallurgical engineer with nearly
30 years experience, Mr. Shaw began his career as metallurgist for Phelps Dodge
Corporation before specializing in project management. He earned a B.S. in
chemistry and an M.S. in metallurgical engineering from the University of Texas
at El Paso.

As of December 31, 1999, the Company had approximately 85 full-time
employees.

Our subsidiary, Apex Corporation, provides management, advisory and
administrative services for our company under a Management Services Agreement
dated October 22, 1996. The services provided by Apex Corporation include:

. identifying and evaluating investment opportunities;

. making recommendations to our board of directors with respect to our
exploration and development activities;

. providing staffing, employees and the necessary expertise to manage our
company's business and monitor its exploration and development
activities; and

. advising the Company with respect to investments, contractual and
financing activities and providing financial services.

We pay Apex Corporation a service fee in an amount equal to the direct and
indirect costs incurred by Apex Corporation in providing its services, plus 7%
of those costs.

CONVERSION TABLE

In this report, figures are presented in both United States standard and
metric measurements. Conversion rates from United States standard to metric and
metric to United States standard measurement systems are provided in the table
below.



U.S. Measure Metric Unit
- ------------ -----------

2.47 acres.............. 1 hectare
3.28 feet............... 1 meter
0.62 miles.............. 1 kilometer
0.032 ounces (troy)..... 1 gram
1.102 tons.............. 1 tonne



Metric Measure U.S. Unit
- -------------- ---------

0.4047 hectares......... 1 acre
0.3048 meters........... 1 foot
1.609 kilometer......... 1 mile
31.103 grams............ 1 ounce (troy)
0.907 tonne............. 1 ton


ITEM 3: LEGAL PROCEEDINGS

None.

ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders in the fourth quarter
of 1999.

20


PART II

ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

Our company's Ordinary Shares are listed on the American Stock Exchange under
the symbol "SIL." Our warrants are listed on the American Stock Exchange under
the symbol "SIL.WS", and began trading on February 25, 2000. As of March 3,
2000, we had approximately 140 shareholders of record and an estimated 2,000
additional beneficial holders whose Ordinary Shares were held in street name by
brokerage houses.

Our company has never paid any dividends on its Ordinary Shares and expects
for the foreseeable future to retain all of its earnings from operations for
use in expanding and developing its business. Any future decision as to the
payment of dividends will be at the discretion of our board of directors and
will depend upon our earnings, receipt of dividends from our subsidiaries,
financial position, capital requirements, plans for expansion and such other
factors as our board of directors deems relevant.

The following table sets forth for the periods indicated the high and the low
sale prices per share of our Ordinary Shares for the periods indicated. The
closing price of the Ordinary Shares on March 3, 2000 was $10.50.



Ordinary Shares
---------------------------------
1999 1998
---------------- ----------------
Period High Low High Low
------ ------- -------- -------- -------

1st Quarter............................ $10 3/4 $ 7 3/8 $14 1/8 $10 5/8
2nd Quarter............................ $13 1/4 $10 1/16 $12 3/4 $ 9 3/8
3rd Quarter............................ $15 1/4 $10 3/4 $10 5/16 $ 6 3/4
4th Quarter............................ $15 $11 $ 9 5/8 $ 7 1/2


21


ITEM 6: SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data for the Company for the years ended
December 31, 1999, 1998, 1997, 1996 and 1995, and the period from December 22,
1994 (inception) through December 31, 1999, are derived from the audited
consolidated financial statements of the Company. The selected financial data
that has not been presented herein is immaterial. This table should be read in
conjunction with the Consolidated Financial Statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations.



December 22,
1994
(inception)
Year ended December 31, through
----------------------------------------------- December 31,
1999 1998 1997 1996 1995 1999
-------- -------- -------- -------- ------- ------------
(dollars in thousands, except per share amounts)

Statement of Operations:
Interest and other
income................. $ 1,114 $ 2,444 $ 962 $ 575 $ 462 $ 5,572
-------- -------- -------- -------- ------- --------
Total income............ 1,114 2,444 962 575 462 5,572
-------- -------- -------- -------- ------- --------
Expenses
Exploration........... 6,014 9,966 13,358 14,852 3,559 48,167
Administrative........ 2,846 3,339 2,440 265 200 9,090
Amortization and
depreciation......... 233 169 149 57 57 666
-------- -------- -------- -------- ------- --------
Total expenses.......... 9,093 13,474 15,947 15,174 3,816 57,922
-------- -------- -------- -------- ------- --------
Loss before minority
interest............... (7,979) (11,030) (14,985) (14,599) (3,354) (52,350)
Minority interest....... -- -- -- 2,876 1,493 4,559
-------- -------- -------- -------- ------- --------
Net loss for the
period................. $ (7,979) $(11,030) $(14,985) $(11,723) $(1,861) $(47,791)
======== ======== ======== ======== ======= ========
Net loss per Ordinary
Share.................. $ (0.29) $ (0.42) $ (0.72) $ (0.66) $ (0.12) $ (2.19)
======== ======== ======== ======== ======= ========
Weighted average number
of Ordinary Shares
outstanding............ 27,601 26,212 20,930 17,672 15,900 21,791
Cash Flow Data:
Net cash provided by
(used in) financing
activities............. $ 94,073 $ (267) $ 55,008 $ 35,269 $ 6,430 $191,199
Net cash used in
operating activities... (7,256) (10,641) (17,776) (12,092) (3,491) (51,585)
Net cash used in
investing activities... (16,738) (19,908) (6,148) (524) -- (43,317)
-------- -------- -------- -------- ------- --------
Net increase (decrease)
in cash................ $ 70,079 $(30,816) $ 31,084 $ 22,653 $ 2,939 $ 96,297
======== ======== ======== ======== ======= ========




December 31,
---------------------------------------
1999 1998 1997 1996 1995
-------- ------- ------- ------- ------
(dollars in thousands)

Balance Sheet Data:
Total assets............................ $151,077 $62,347 $73,329 $26,797 $6,820
Total liabilities....................... 6,249 3,950 4,100 2,486 359
Minority interest....................... -- -- -- -- 2,876
Shareholders' equity.................... 144,828 58,397 69,229 24,311 3,585


22


ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

GENERAL

You should read the following discussion and analysis together with the
consolidated financial statements of Apex Silver Mines Limited and the selected
financial data and related notes thereto included elsewhere in this report on
form 10-K.

Apex Limited is a mining exploration and development company that holds a
portfolio of silver exploration and development properties primarily in South
America and Central America. None of these properties are in production and,
consequently, we have no current operating income or cash flow.

We currently focus our resources on the development of our San Cristobal
Project in Bolivia as well as continued evaluation of our Cobrizos property in
Bolivia and Platosa property in Mexico.

Our company completed an initial public offering of Ordinary Shares on
December 1, 1997. We completed a subsequent offering of Ordinary Shares and
warrants during November 1999.

As used herein, Apex Limited, our company, we and our refer collectively to
Apex Silver Mines Limited, its predecessors, subsidiaries and affiliates as to
one or more of them as the context may require.

Results of Operations

Interest Income. Our company does not yet produce silver or any other mineral
products and has no revenues from product sales. Our primary source of revenue
is interest income. Our policy is to invest all excess cash in liquid, high
credit quality, short-term financial instruments. Our interest income for the
year ended December 31, 1999 was $1.1 million compared to $2.4 million and $1.0
million for the years ended December 31, 1998 and 1997, respectively. The 1999
decrease in interest income compared to 1998 is the result of declining average
cash balances during 1999 prior to receipt of the net proceeds of our November
1999 offering of Ordinary Shares and warrants. The increase in our interest
income for 1998 compared to 1997 was due to the additional cash raised in our
initial public offering of Ordinary Shares in 1997.

Exploration. Our company expenses mineral exploration expenditures as
incurred on each property until we determine that mining operations on that
property are feasible. Once we have determined that a mineral property has
proven and probable ore reserves, we capitalize all development costs. Through
December 31, 1999, we have expensed all acquisition and exploration costs as
incurred, except those pertaining to the San Cristobal Project. Since September
1, 1997, we have capitalized development costs associated with the San
Cristobal Project and will continue to do so in the future.

Our exploration expenses were $6.0 million for the year ended December 31,
1999 compared to $10.0 million and $13.4 million for the years ended December
31, 1998 and 1997, respectively. The decreases in our exploration expenses for
these periods is due primarily to the reduced emphasis on exploration as we
concentrate our resources on the development of the San Cristobal Project.

Administrative. Our administrative expenses were $2.8 million for the year
ended December 31, 1999, compared to $3.3 million and $2.4 million for the
years ended December 31, 1998 and 1997, respectively. The decrease in our
administrative expenses in 1999 as compared to 1998 is primarily due to the
refocusing of our efforts on development activities at the San Cristobal
Project. The increase in our administrative expenses for 1998 compared to 1997
is primarily the result of our increased activity and our hiring of additional
personnel associated with the anticipated development and financing of the San
Cristobal Project.

Income Taxes. Apex Silver Mines Corporation, our U.S. management services
company, is subject to U.S. income taxes. Otherwise our company pays no income
tax in the U.S. since we are incorporated in the Cayman

23


Islands and conduct no business that currently generates U.S. taxable income.
The Cayman Islands currently impose no corporate taxation. Our company has been
granted exemption until January 16, 2015 from any form of corporate taxation
which may subsequently be adopted in the Cayman Islands.

Liquidity and Capital Resources

As of December 31, 1999, our company had cash and cash equivalents of
approximately $96.3 million compared to $26.2 million at December 31, 1998. The
increase in our cash and cash equivalents during 1999 is due to the $94.1
million in net proceeds we received from our November 1999 offering of Ordinary
Shares and warrants, partially offset by our investments of approximately $16.1
million in the development of the San Cristobal Mine and $0.8 million in plant,
buildings and equipment, together with $7.2 million in other expenditures
related primarily to exploration and administration.

During November 1999, pursuant to a shelf registration statement filed with
the Securities and Exchange Commission, we sold 8,090,132 Ordinary Share units,
resulting in proceeds before commissions and fees of approximately $97.1
million and net proceeds of approximately $94.1 million. The Ordinary Share
units, each priced at $12.00 per unit, were comprised of one Ordinary Share and
one warrant with each warrant exercisable into one-half of an Ordinary Share at
any time on or before November 4, 2002 at a price of $18.00 per Ordinary Share.
The warrants, if exercised, would raise an additional $73.6 million for the
Company and would result in the issuance of 4,045,066 Ordinary Shares.

Based on the September 1999 feasibility study for the San Cristobal Project,
we expect capital costs for construction to total approximately $413 million.
In addition, we expect that the Project will require $15 million of working
capital and $20 million to pay Bolivian value-added tax during construction. We
should recover the value-added tax against our future Bolivian income taxes.
Based on our current development schedule for San Cristobal, we anticipate
capital expenditures of approximately $127 million over the next twelve months,
with the remaining $321 million to be spent in the following two years. We
expect to fund these expenditures from a combination of our existing cash
balances and financing raised from outside sources. Under the current schedule,
we expect our existing cash balances to be sufficient to fund ongoing
development of San Cristobal through the third quarter of 2000. We will need
significant additional financing from outside sources to complete San Cristobal
development.

We expect that outside sources of financing for San Cristobal will include
bank borrowings and future additional debt or equity financing. Our company
does not currently have a line of credit with any financial institution. We
have appointed Barclays and Deutsche Bank as co-lead arrangers for the project
financing of the San Cristobal Project and have begun negotiations regarding
the terms of a potential financing. There can be no assurance that we will be
able to obtain the required financing on terms that we find attractive, or at
all.

In order to maintain our mineral properties, we must make certain payments
including government mineral patent fees and commissions, work commitments,
lease and option payments and advance royalties. In order to maintain our
current portfolio of mineral properties, we will be required to make payments
during the next twelve months of approximately $0.5 million for San Cristobal,
$0.2 million for Cobrizos, $0.7 million for Platosa and $0.6 million for our
other exploration properties. In addition, we expect to make expenditures for
other continuing exploration, property acquisition, property evaluation and
general corporate expenses. Such expenditures are not anticipated to increase
significantly during the next twelve months. We expect to fund these
obligations from existing cash balances.

Environmental Compliance

Our current and future exploration and development activities, as well as our
future mining and processing operations, are subject to various federal, state
and local laws and regulations in the countries in which we conduct our
activities. These laws and regulations govern the protection of the
environment, prospecting, development, production, taxes, labor standards,
occupational health, mine safety, toxic substances and other matters. Our

24


management expects to be able to comply with those laws and does not believe
that compliance will have a material adverse effect on our competitive
position. We intend to obtain all licenses and permits required by all
applicable regulatory agencies in connection with its mining operations and
exploration activities. We intend to maintain standards of environmental
compliance consistent with best contemporary industry practice.

FORWARD-LOOKING STATEMENTS

Some information contained in or incorporated by reference into this report
on Form 10-K 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. 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 report:

. 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;

. 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. You
should not unduly rely on these forward-looking statements. These statements
speak only as of the date of this report on Form 10-K. 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 our company and
persons acting on our behalf are qualified in their entirety by the cautionary
statements contained in this section and elsewhere in this report on Form 10-
K.

ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Currently, our major principal cash balances are held in U.S. dollars. We
maintain minimum cash balances in foreign currencies and therefore have a
relative low exposure to currency fluctuations. Because we conduct our
activities largely in several foreign countries, we may in the future engage
in hedging activities to minimize the risk of exposure to currency and
interest rate fluctuations.

25


We expect that we will be required to hedge some portion of our planned
production in advance in order to complete the financing necessary to develop
San Cristobal. In addition, as we bring San Cristobal into production and
begin to derive revenue from the production, sale and exchange of metals, we
may utilize various price-hedging techniques to lock in forward delivery
prices on a portion of our production. We would expect to balance the use of
price-hedging techniques to mitigate some of the risks associated with
fluctuations in the prices of the metals we produce while allowing us to take
advantage of rising metal prices should they occur.

We are currently developing policies, procedures and guidelines for the
hedging of metal prices, interest rates and foreign currency exposure. We have
engaged in limited metals trading activities utilizing puts and calls in a
manner similar to anticipated lender requirements, for the purpose of testing
procedures and controls surrounding the trading function. At December 31,
1999, a mark to market of our open positions did not have a material effect on
our results of operations or financial position. There can be no assurance
that we will always benefit from the use of hedging techniques.

ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements and supplementary information filed as
part of this Item 8 are listed under Part IV, Item 14, "Exhibits, Financial
Statement Schedules and Reports on Form 8-K" and contained in this Form 10-K
at page F-1.

ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable.

PART III

ITEM 10: DIRECTORS OF THE REGISTRANT AND CERTAIN EXECUTIVE OFFICERS OF APEX
CORPORATION

Information regarding directors of Apex Limited and certain executive
officers of Apex Corporation is incorporated by reference to the section
entitled "Election of Directors" in our definitive proxy statement to be filed
with the Securities and Exchange Commission pursuant to Regulation 14A in
connection with the 2000 annual meeting of shareholders (the "Proxy
Statement").

ITEM 11: EXECUTIVE COMPENSATION

Reference is made to the information set forth under the caption "Executive
Compensation and Other Information" in our proxy statement, which information
(except for the report of the board of directors on executive compensation and
the performance graph) is incorporated by reference in this report on Form 10-
K.

ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Reference is made to the information set forth under the caption "Security
Ownership of Principal Shareholders and Management" in our proxy statement,
which information is incorporated herein by reference.

ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Reference is made to the information contained under the caption "Certain
Transactions" contained in our proxy statement, which information is
incorporated by reference in this report on Form 10-K.

26


PART IV

ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) Documents filed as part of this report on Form 10-K or incorporated by
reference.

1. The consolidated financial statements of the Company are listed on the
"Index to Financial Statements", on Page F-1 to this report.

2. Financial Statement Schedules (omitted because not material or not
applicable).

3. The following exhibits are filed with this report on Form 10-K or
incorporated by reference.



Exhibit
Number Description of Exhibits
------- -----------------------

3.1 Amended and restated Memorandum of Association of the Company.(1)

3.2 Amended and restated Articles of Association of the Company.(1)

4.1 Specimen of certificates representing the Company's Ordinary Shares,
par value U.S. $0.01 each.(2)

4.2 Form of Warrant Certificate.(3)

4.3 Form of Warrant Agreement dated November 5, 1999.(4)

10.1 Summary of the Company's 401(k) Plan.(2)

10.2 Management Services Agreement among the Company and its
subsidiaries.(2)

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 the Company and Marcel F. DeGuire, dated
July 23, 1996.(2)

10.7 Employment contract between the Company and Mark A. Lettes, dated May
19, 1998.(1)

10.8 Employment contract between the Company and Keith R. Hulley, dated
August 4, 1996.(2)

10.9 Employment contract between the Company and Douglas M. Smith Jr.,
dated January 21, 1997.(2)

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 the
Company, as required by Rule 306 of Regulation S-T.(2)

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 the Company, as
required by Rule 306 of Regulation S-T.(2)

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 the Company, as required by Rule 306 of
Regulation S-T.(2)

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 the Company, as
required by Rule 306 of Regulation S-T.(2)

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 the Company, as required by Rule 306 of Regulation S-T.(2)


27




Exhibit
Number Description of Exhibits
------- -----------------------

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 the
Company, as required by Rule 306 of Regulation S-T.(2)

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 the Company, as
required by Rule 306 of Regulation S-T.(2)

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 the Company, as required by Rule 306 of Regulation S-T.(2)

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 the Company, as required by Rule
306 of Regulation S-T.(2)

10.19 Board Designation Agreement, dated October 28, 1997, by and between
the Company and Silver Holdings.(2)

10.20 Registration Rights and Voting Agreement, dated October 28, 1997, by
and among the Company, Silver Holdings, Consolidated, Argentum, Aurum
LLC and Thomas S. Kaplan.(2)

10.21 Amended and Restated Voting Trust Agreement, dated October 29, 1997,
between Thomas Kaplan and Consolidated.(2)

10.22 Amended and Restated Voting Trust Agreement, dated October 29, 1997,
between Thomas Kaplan and Argentum LLC.(2)

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.(2)

21 List of Subsidiaries.

23 Consent of PricewaterhouseCoopers LLP.

27 Financial Data Schedule.

- --------
(1) Incorporated by reference to our Annual Report on Form 10-K for the year
ended December 31, 1998.
(2) Incorporated by reference to our Registration Statement on Form S-1 (File
No. 333-34685).
(3) Incorporated by reference to Exhibit 4.7 to the Registration Statement on
Form S-3 (File No. 333-76181), as amended, of the Registrant, first filed
with the Securities and Exchange Commission on April 13, 1999.
(4) Incorporated by reference to Exhibit 4.1 to the Form 8-K of the
Registrant, filed with the Securities and Exchange Commission on November
8, 1999.
(5) Incorporated by reference to Exhibit 4.3 in our Registration Statement on
Form S-8 (File No. 333-53185).

(b) The Company filed a Report an Form 8-K dated November 5, 1999, reporting
under Item 5 the offering of units comprised of one Ordinary Share and
one-half of a warrant, and the terms of the warrant.

28


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
March 10, 2000 on its behalf by the undersigned, thereunto duly authorized.

Apex Silver Mines Limited
Registrant

/s/ Thomas S. Kaplan
By: _________________________________
Thomas S. Kaplan
Chairman, Board of Directors

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the Registrant, in
the capacities and on the dates indicated.



Signature Title Date
--------- ----- ----


/s/ Thomas S. Kaplan Director March 10, 2000
______________________________________
Thomas S. Kaplan

/s/ Michael Comninos Director March 10, 2000
______________________________________
Michael Comninos

/s/ Harry M. Conger Director March 10, 2000
______________________________________
Harry M. Conger

/s/ Eduardo S. Elsztain Director March 10, 2000
______________________________________
Eduardo S. Elsztain

/s/ David Sean Hanna Director March 10, 2000
______________________________________
David Sean Hanna

/s/ Ove Hoegh Director March 10, 2000
______________________________________
Ove Hoegh

/s/ Keith R. Hulley Director March 10, 2000
______________________________________
Keith R. Hulley

/s/ Richard Katz Director March 10, 2000
______________________________________
Richard Katz

/s/ Kevin R. Morano Director March 10, 2000
______________________________________
Kevin R. Morano

/s/ Paul Soros Director March 10, 2000
______________________________________
Paul Soros


29


FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX



Page
----

Report of Management...................................................... F-2


Report of Independent Accountants......................................... F-2


Consolidated Balance Sheet at December 31, 1999 and 1998.................. F-3


Consolidated Statement of Operations for the years ended December 31,
1999, 1998, and 1997 and for the period from December 22, 1994
(inception) through December 31, 1999.................................... F-4


Consolidated Statement of Changes in Shareholders' Equity for the years
ended December 31, 1999, 1998, and 1997 and for the period from December
22, 1994 (inception) through December 31, 1999........................... F-5


Consolidated Statement of Cash Flows for the years ended December 31,
1999, 1998, and 1997 and for the period from December 22, 1994
(inception) through December 31, 1999.................................... F-6


Notes to the Consolidated Financial Statements............................ F-7


F-1


REPORT OF MANAGEMENT

Management is responsible for the preparation of the accompanying financial
statements and for other financial and operating information appearing in the
annual report. It believes that its accounting systems and internal accounting
controls, together with other controls, provide assurance that all accounts
and records are maintained by qualified personnel in requisite detail, and
accurately and fairly reflect transactions of Apex Silver Mines Limited and
its subsidiaries in accordance with established policies and procedures.

The Board of Directors has an Audit Committee, all of whose members are
neither officers nor employees of the Company or its affiliates. The Audit
Committee recommends independent public accountants to act as auditors for the
Company for consideration by the Board of Directors; reviews the Company's
financial statements; confers with the independent accountants with respect to
the scope and results of their audit of the Company's financial statements and
their reports thereon; reviews the Company's accounting policies, tax matters
and internal controls; and oversees compliance by the Company with the
requirements of federal regulatory agencies. Access to the Audit Committee is
given to the Company's financial and accounting officers and independent
accountants.

/s/ Thomas S. Kaplan /s/ Mark A. Lettes
Thomas S. Kaplan Mark A. Lettes
Chairman Vice President and Chief Financial
Apex Silver Mines Limited Officer

Apex Silver Mines Corporation
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Shareholders of Apex Silver Mines Limited

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of changes in shareholders' equity and
of cash flows present fairly, in all material respects, the financial position
of Apex Silver Mines Limited (successor to Apex Silver Mines LDC) and its
subsidiaries at December 31, 1999 and 1998 and the results of their operations
and their cash flows for the years ended December 31, 1999, 1998 and 1997 and
the period from December 22, 1994 (inception) through December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these statements in accordance
with auditing standards generally accepted in the United States which require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

PricewaterhouseCoopers LLP

Denver, Colorado
March 3, 2000

F-2


APEX SILVER MINES LIMITED
An Exploration and Development Stage Company

CONSOLIDATED BALANCE SHEET
(Expressed in United States dollars)



December 31, December 31,
1999 1998
------------ ------------

Assets
Current assets
Cash and cash equivalents......................... $ 96,296,577 $26,217,241
Accrued interest receivable....................... 61,119 126,332
Prepaid expenses and other assets................. 301,485 1,197,622
------------ -----------
Current assets.................................. 96,659,181 27,541,195
Mining properties and development costs........... 48,056,283 29,777,360
Plant, buildings and equipment (net).............. 2,505,483 2,229,584
Value added tax recoverable....................... 3,810,460 2,725,803
Other............................................. 45,997 73,092
------------ -----------
Total assets.................................... $151,077,404 $62,347,034
============ ===========
Liabilities and Shareholders' Equity
Current liabilities
Accrued salaries, wages and benefits.............. $ 118,108 $ 154,800
Accounts payable and other accrued liabilities.... 2,092,477 1,580,123
Current portion of notes payable.................. 901,459 248,773
------------ -----------
Current liabilities............................. 3,112,044 1,983,696
Notes payable....................................... 3,137,368 1,966,588
Commitments and contingencies (Note 10)............. -- --
Shareholders' equity
Ordinary Shares, $.01 par value, 75,000,000 shares
authorized; 34,471,268 and 26,250,761, shares
issued and outstanding, respectively (Note 1e)... 344,662 262,507
Contributed surplus............................... 192,274,553 97,946,434
Accumulated deficit............................... (47,791,223) (39,812,191)
------------ -----------
Total shareholders' equity...................... 144,827,992 58,396,750
------------ -----------
Total liabilities and shareholders' equity...... $151,077,404 $62,347,034
============ ===========



The accompanying notes form an integral part of these consolidated financial
statements.

F-3


APEX SILVER MINES LIMITED
An Exploration and Development Stage Company

CONSOLIDATED STATEMENT OF OPERATIONS
(Expressed in United States dollars)



For the period
December 22,
1994 (inception)
Year ended Year ended Year ended through
December 31, December 31, December 31, December 31,
1999 1998 1997 1999
------------ ------------ ------------ ----------------

Income
Interest and other
income............... $ 1,113,547 $ 2,444,357 $ 961,810 $ 5,571,687
----------- ------------ ------------ ------------
Total income........ 1,113,547 2,444,357 961,810 5,571,687
----------- ------------ ------------ ------------
Expenses
Exploration........... 6,013,535 9,965,999 13,357,617 48,166,709
Administrative........ 2,846,057 3,338,812 2,439,722 9,089,572
Amortization and
depreciation......... 232,987 169,116 149,429 665,515
----------- ------------ ------------ ------------
Total expense....... 9,092,579 13,473,927 15,946,768 57,921,796
----------- ------------ ------------ ------------
Loss before minority
interest............... (7,979,032) (11,029,570) (14,984,958) (52,350,109)
Minority interest in
loss of consolidated
subsidiary............. -- -- -- 4,558,886
----------- ------------ ------------ ------------
Net loss for the
period................. $(7,979,032) $(11,029,570) $(14,984,958) $(47,791,223)
=========== ============ ============ ============
Net loss per Ordinary
Share--basic and
diluted(1)............. $ (0.29) $ (0.42) $ (0.72) $ (2.19)
=========== ============ ============ ============
Weighted average Ordi-
nary Shares outstanding
(Notes 1e and 1h)...... 27,601,362 26,212,009 20,929,882 21,790,991
=========== ============ ============ ============

- --------
(1) Diluted earnings per share were antidilutive for all periods presented.


The accompanying notes form an integral part of these consolidated financial
statements.

F-4


APEX SILVER MINES LIMITED
An Exploration and Development Stage Company

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Expressed in United States dollars)



Accumulated
Deficit & Total
Shares Contributed Comprehensive Shareholders'
Outstanding Amount Surplus Deficit Equity
----------- -------- ------------ ------------- -------------

Issuance of shares upon
incorporation, December
22, 1994............... 8,822,546 $ 88,225 $ 5,571,398 $ -- $ 5,659,623
Net loss................ -- -- -- (213,165) (213,165)
---------- -------- ------------ ------------ ------------
Balance, December 31,
1994................... 8,822,546 88,225 5,571,398 (213,165) 5,446,458
Net loss and
comprehensive loss..... -- -- -- (1,861,185) (1,861,185)
---------- -------- ------------ ------------ ------------
Balance, December 31,
1995................... 8,822,546 88,225 5,571,398 (2,074,350) 3,585,273
Issuance of shares in
private placement...... 4,256,700 42,567 32,406,783 -- 32,449,350
Net loss and
comprehensive loss..... -- -- -- (11,723,313) (11,723,313)
---------- -------- ------------ ------------ ------------
Balance, December 31,
1996................... 13,079,246 130,792 37,978,181 (13,797,663) 24,311,310
Purchase of minority
interest in ASC
Bolivia................ 268,496 2,685 2,950,771 -- 2,953,456
Issuance of shares to
associates............. 138,595 1,386 1,523,159 -- 1,524,545
Issuance of shares for
services............... 115,207 1,152 231,566 -- 232,718
Stock option
compensation expense... -- -- 416,562 -- 416,562
Issuance of shares upon
Initial Public
Offering............... 5,523,372 55,234 54,719,730 -- 54,774,964
Net loss and
comprehensive loss..... -- -- -- (14,984,958) (14,984,958)
---------- -------- ------------ ------------ ------------
Balance, December 31,
1997................... 19,124,916 191,249 97,819,969 (28,782,621) 69,228,597
Exchange of Apex LDC
shares................. 7,079,006 70,790 (70,790) -- --
Stock options
exercised.............. 25,001 250 197,473 -- 197,723
Restricted stock
awards................. 21,838 218 185,407 -- 185,625
Unearned compensation... -- -- (185,625) -- (185,625)
Net loss and
comprehensive loss..... -- -- -- (11,029,570) (11,029,570)
---------- -------- ------------ ------------ ------------
Balance, December 31,
1998................... 26,250,761 262,507 97,946,434 (39,812,191) 58,396,750
Stock options
exercised.............. 25,549 256 223,900 -- 224,156
Sale of Ordinary Share
units (net)............ 8,090,132 80,901 94,004,628 -- 94,085,529
Commissions paid in
stock.................. 84,184 842 (842) -- --
Restricted stock
awards................. 15,542 156 187,475 -- 187,631
Unearned compensation
(net).................. -- -- (87,042) -- (87,042)
Net loss and
comprehensive loss..... -- -- -- (7,979,032) (7,979,032)
---------- -------- ------------ ------------ ------------
Balance, December 31,
1999................... 34,466,168 $344,662 $192,274,553 $(47,791,223) $144,827,992
========== ======== ============ ============ ============


The accompanying notes form an integral part of these consolidated financial
statements.

F-5


APEX SILVER MINES LIMITED
An Exploration and Development Stage Company

CONSOLIDATED STATEMENT OF CASH FLOWS
(Expressed in United States dollars)



For the period
December 22,
1994
(inception)
Year ended Year ended Year ended through
December 31, December 31, December 31, December 31,
1999 1998 1997 1999
------------ ------------ ------------ --------------

Cash flows from
operating activities:
Net cash used in
operating activities
(See Note 9)......... $ (8,288,609) $(11,463,133) $(17,990,299) $(53,652,838)
------------ ------------ ------------ ------------
Cash flows from
investing activities:
Mining properties and
development costs.... (15,017,926) (17,664,436) (5,214,815) (37,897,177)
Purchase of plant,
buildings and
equipment............ (687,280) (1,421,467) (719,146) (3,352,228)
------------ ------------ ------------ ------------
Net cash used in
investing activities... (15,705,206) (19,085,903) (5,933,961) (41,249,405)
------------ ------------ ------------ ------------
Cash flows from
financing activities:
Net proceeds from
issuance of Ordinary
Shares............... 94,085,529 -- 55,007,682 191,761,070
Payment of notes...... (236,534) (464,639) -- (701,173)
Proceeds from exercise
of stock options..... 224,156 197,723 -- 421,879
Deferred
organizational and
financing costs...... -- -- -- (282,956)
------------ ------------ ------------ ------------
Net cash provided by
(used in) financing
activities......... 94,073,151 (266,916) 55,007,682 191,198,820
------------ ------------ ------------ ------------
Net increase (decrease)
in cash and cash
equivalents............ 70,079,336 (30,815,952) 31,083,422 96,296,577
Cash and cash
equivalents beginning
of period.............. 26,217,241 57,033,193 25,949,771 --
------------ ------------ ------------ ------------
Cash and cash
equivalents end of
period................. $ 96,296,577 $ 26,217,241 $ 57,033,193 $ 96,296,577
============ ============ ============ ============
Supplemental non-cash
transactions:
Acquisition of
minority interest in
ASC Bolivia for
Ordinary Shares at
$11 per share........ $ -- $ -- $ 2,953,456
Acquisition of mining
properties for
asssumption of debt.. $ 260,000 $ -- $ 3,506,196
Commitment to fund the
San Cristobal
Foundation
capitalized as mining
properties........... $ 2,000,000 $ -- $ --
Non-cash debt
extinguished by one-
time early cash
payment.............. $ -- $ 826,196 $ --



The accompanying notes form an integral part of these consolidated financial
statements.

F-6


APEX SILVER MINES LIMITED
An Exploration and Development Stage Company

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States dollars)

1. Incorporation, Recapitalization, Initial Public Offering, Subsequent
Offerings, Ownership and Operations

a. Apex Silver Mines Limited ("Apex Limited" or the "Company") was formed
under the laws of the Cayman Islands in March of 1996 for the sole purpose of
serving as a holding company for certain ownership interests in Apex Silver
Mines LDC ("Apex LDC"). On April 15, 1996, holders of approximately 55% of the
then-outstanding shares of Apex LDC elected to participate, effective as of
the completion of a proposed private placement of shares of Apex Limited which
was completed as of August 6, 1996, in a recapitalization effected by an
exchange, on a one-for-one basis, of their shares in Apex LDC for identical
equity instruments of Apex Limited (the "Recapitalization"). The balance of
shareholders retained a direct ownership interest in Apex LDC. As a result of
this recapitalization, Apex LDC became a majority-owned subsidiary of Apex
Limited. The accompanying financial statements reflect the historical accounts
of the Company's predecessor, Apex LDC. For purposes of the accompanying
consolidated financial statements of Apex Limited, the recapitalization has
been given retroactive effect to the date of incorporation of Apex LDC, with
the results of operations and equity attributable to the other ownership
interests in Apex LDC being reflected in "minority interest in consolidated
subsidiary". Consequently, for purposes of these financial statements, Apex
Limited is considered the successor to Apex LDC.

b. In August of 1996, Apex Limited issued 4,256,700 Ordinary Shares in a
private placement transaction (the "Private Placement") for net proceeds of
$32.4 million. These proceeds were contributed to Apex LDC in exchange for the
issuance by Apex LDC of 4,256,700 shares of its share capital. As a result of
this private placement, the Company's ownership interest in Apex LDC was
increased from approximately 55% to 65%.

c. On December 1, 1997, the Company closed its initial public offering (the
"Offering") of Ordinary Shares. The Company sold 5,000,000 Ordinary Shares at
a price of $11 per share on the American Stock Exchange under the symbol
"SIL". In addition, on December 23, 1997, the underwriters exercised an option
to purchase an additional 523,372 Ordinary Shares at the initial price of $11
per share. Net proceeds raised in the offering were approximately $54.8
million. These proceeds were contributed to Apex LDC in exchange for the
issuance by Apex LDC of 5,523,372 shares of its capital.

d. Apex LDC was incorporated under the laws of the Cayman Islands on
November 23, 1994 as a 30-year limited duration company on the contribution of
all the assets of its predecessor entity, Apex Silver Mines Ltd., a Bermuda
corporation. (Actual contribution occurred on December 22, 1994.) The
Company's principal activities are the exploration and development of mineral
properties. The Company participates in the acquisition and exploration of
mineral properties for possible future development directly and indirectly
through Apex LDC's principal subsidiaries, Andean Silver Corporation LDC
("Andean"), ASC Bolivia LDC ("ASC Bolivia"), Apex Asia LDC ("Apex Asia"),
Minera de Cordilleras (Honduras), S. de R.L. ("Cordilleras Honduras"),
Cordilleras Silver Mines Ltd. ("Cordilleras Bahamas"), Cordilleras Silver
Mines (Cayman) LDC ("Cordilleras Cayman"), Compania Minerales de Zacatecas, S.
de R.L. de C.V. ("CMZ"), Apex Silver Mines Corporation, ("Apex Corporation")
and ASC Peru LDC ("ASC Peru").

e. In conjunction with the Recapitalization and the Private Placement, Apex
Limited and the shareholders of Apex LDC entered into a Buy-Sell Agreement
(the "Buy-Sell Agreement") which was intended to maintain the same beneficial
interest in Apex LDC attributable to all shareholders of Apex LDC prior to the
Recapitalization and Private Placement. During 1998, Pursuant to the terms of
the Buy-Sell Agreement, Apex Limited exchanged 7,079,006 of its Ordinary
Shares for an equal number of Apex LDC shares. Such shares are included in the
34,466,168 Apex Limited Ordinary Shares outstanding at December 31, 1999. At
December 31,

F-7


APEX SILVER MINES LIMITED
An Exploration and Development Stage Company

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in United States dollars)

1999, Apex Silver Mines Limited owned 100 percent of Apex LDC. Per the
provisions of the Buy-Sell Agreement, all of the outstanding shares of Apex
LDC are considered Ordinary Shares outstanding for the purposes of computing
net loss per Ordinary Share for the periods presented.

f. In November 1999, pursuant to a shelf registration statement filed with
the Securities and Exchange Commission, the Company sold 8,090,132 Ordinary
Share units, resulting in proceeds before commissions and fees of
approximately $97.1 million and net proceeds of approximately $94.1 million.
The Ordinary Share units, each priced at $12.00 per unit, were comprised of
one Ordinary Share and a warrant which is exercisable into one-half of an
Ordinary Share at any time on or before November 4, 2002 at a price of $18.00
per Ordinary Share. The warrants, if exercised, would raise an additional
$73.6 million for the Company and would result in the issuance of 4,045,066
Ordinary Shares.

g. The Company, through indirect subsidiaries, is active in Central America
and South America and currently holds interests in, or is the beneficial owner
of, non-producing silver resource properties in Chile, Bolivia, Honduras,
Mexico and Peru. The Company is in the process of evaluating certain of its
properties to determine the economic feasibility of bringing one or more of
the properties into production.

2. Summary of Significant Accounting Policies

These consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
("GAAP"). The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could
differ from those estimates. The policies adopted, considered by management to
be significant, are summarized as follows:

a. Basis of consolidation

These consolidated financial statements include the accounts of the Company
and its majority-owned subsidiaries. Investments in unincorporated joint
ventures are proportionately consolidated consistent with generally accepted
accounting practices in the mining industry.

b. Translation of foreign currencies

Substantially all expenditures are made in United States dollars.
Accordingly, the Company uses the United States dollar as its functional
currency.

c. Cash, cash equivalents and short-term investments

The Company considers all highly-liquid investments with a maturity of three
months or less when purchased to be cash equivalents. Short-term investments
include certificates of deposit with maturities greater than three months, but
not exceeding twelve months. Short-term investments are recorded at cost which
approximates fair value.

d. Mining properties, exploration and development costs

The Company expenses general prospecting costs and the costs of acquiring
and exploring unevaluated mining properties. When a property is determined to
have proven and probable reserves, development costs are capitalized. When ore
reserves are developed and operations commence, capitalized costs will be
amortized using

F-8


APEX SILVER MINES LIMITED
An Exploration and Development Stage Company

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in United States dollars)

the units-of-production method. Upon abandonment or sale of projects, all
capital costs relating to the specific project are written off in the period
abandoned or sold and a gain or loss is recognized. Beginning September 1,
1997, all costs associated with the Company's San Cristobal Project have been
capitalized. As of December 31, 1999, capitalized property and development
costs related to the San Cristobal Project amounted to $48,056,283. No other
amounts related to mineral properties have been capitalized.

e. Fixed assets

Buildings and equipment are carried at cost and are depreciated on a
straight-line basis over estimated useful lives of three to thirty years.

f. Asset impairment

The Company evaluates its long-lived assets for impairment when events or
changes in circumstances indicate that the related carrying amount may not be
recoverable. If the sum of estimated future net cash flows on an undiscounted
basis is less than the carrying amount of the related asset, an asset
impairment is considered to exist. The related impairment loss is measured by
comparing estimated future net cash flows on a discounted basis to the
carrying amount of the asset. Changes in significant assumptions underlying
future cash flow estimates may have a material effect on the Company's
financial position and results of operations. To date no such impairments have
been identified.

g. Stock compensation

As permitted under Statement of Financial Accounting Standards ("SFAS") No.
123, "Accounting for Stock-Based Compensation," the Company has elected to
measure compensation expense as prescribed by Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees." Under that method,
the difference between the exercise price and the estimated fair value of the
shares at the date of grant is charged to compensation expense ratably over
the vesting period.

h. Net loss per Ordinary Share

Basic earnings per share excludes dilution and is computed by dividing net
earnings available to ordinary shareholders by the weighted average number of
shares outstanding for the period. Diluted earnings per share reflect the
potential dilution that would occur if securities or other contracts to issue
Ordinary Shares were exercised or converted into Ordinary Shares.

Outstanding options to purchase 915,817, 626,571 and 455,625 Ordinary Shares
were not included in the computation of diluted earnings per share at December
31, 1999, 1998, and 1997 respectively, because to do so would have been
antidilutive.

i. New accounting pronouncements

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities ("FAS 133"). FAS 133, as amended by FAS
137, is effective for all fiscal quarters of all fiscal years beginning after
June 15, 2000 (January 1, 2001 for the Company). FAS 133 requires that all
derivative instruments be recorded on the balance sheet at their fair value.
Changes in the fair value of derivatives are recorded each period in current
earnings or other

F-9


APEX SILVER MINES LIMITED
An Exploration and Development Stage Company

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in United States dollars)

comprehensive income, depending on whether a derivative is designated as part
of a hedge transaction and, if it is, the type of hedge transaction. For fair-
value hedge transactions in which the Company is hedging changes in the fair
value of an asset, liability, or firm commitment, changes in the fair value of
the derivative instrument will generally be offset by changes in the hedged
item's fair value. For cash flow hedge transactions, in which the Company is
hedging the variability of cash flows related to a variable-rate asset,
liability or forecasted transaction, changes in the fair value of the
derivative instrument will be reported in other comprehensive income. The
gains and losses on the derivative instrument that are reported in other
comprehensive income will be reclassified as earnings in the periods in which
earnings are impacted by the variability of cash flows of the hedged item. The
ineffective portion of all hedges will be recognized in current-period
earnings.

The Company is in the process of determining the future impact that the
adoption of FAS 133 will have on its earnings or statement of financial
position.

Other pronouncements issued by authoritative bodies with future effective
dates are either not applicable or not material to the consolidated financial
statements of the Company.

j. Reclassification of prior year balances

Certain prior year balances have been reclassified to conform to the
classifications being presented at December 31, 1999.

3. Income Taxes

The provision for income taxes includes United States federal, state and
foreign income taxes currently payable and deferred based on currently enacted
tax laws. Deferred income taxes are provided for the tax consequences of
differences between the financial statement and tax bases of assets and
liabilities. A valuation allowance is recognized if, based on the weight of
available evidence, it is more likely than not that some portion or all of the
deferred tax asset will not be realized.

There is currently no taxation imposed by the Cayman Islands. If any form of
taxation were to be enacted, the Company has been granted exemption therefrom
to January 16, 2015. The Company's subsidiaries which do business in other
countries have not generated income and therefore are not liable for local
income taxes.

As of December 31, 1999 and 1998, operating loss carryforwards generated by
ASC Bolivia amounted to approximately $16.1 and $13.1 million, respectively.
Operating losses (as adjusted for inflation) may be carried forward and
deducted from taxable income indefinitely. The deferred tax asset resulting
from the operating loss carryforwards has been entirely offset by a valuation
allowance.

No net deferred tax assets related to operating losses generated through
December 31, 1999 by the Company's other foreign subsidiaries have been
included in the accompanying financial statements, as all such assets have
been entirely offset by a valuation allowance.

4. Value Added Tax Recoverable

The Company has recorded value added tax ("VAT") paid by ASC Bolivia and
Cordilleras Mexico as recoverable assets. The VAT paid by ASC Bolivia is
expected to be recovered through production from the proven and probable
reserves at the San Cristobal Project that the Company intends to develop.
Bolivian law states that VAT paid prior to production may be recovered as a
credit against Bolivian taxes arising from

F-10


APEX SILVER MINES LIMITED
An Exploration and Development Stage Company

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in United States dollars)

production, including income tax. The VAT paid by Cordilleras Mexico is
related to exploration activities and is recoverable upon application to the
tax authorities. Cordilleras Mexico has received VAT refunds relating to VAT
paid through 1996. Applications for refund of the remaining VAT paid through
1999 have been filed and payment is expected in due course. At December 31,
1999, the recoverable VAT recorded by ASC Bolivia and Cordilleras Mexico is
$3,473,181 and $337,279 respectively.

Because of the uncertainty of the recoverability of VAT paid by ASC Peru,
VAT costs incurred by ASC Peru are charged to expense as incurred.

5. Plant, Buildings and Equipment

The components of plant, buildings and equipment were as follows:



December 31, December 31,
1999 1998
------------ ------------

Buildings.......................................... $1,137,173 $ 828,077
Mining equipment and machinery..................... 1,267,679 1,513,757
Other furniture and equipment...................... 765,241 229,475
---------- ----------
3,170,093 2,571,309
Less: accumulated depreciation..................... (664,610) (341,725)
---------- ----------
$2,505,483 $2,229,584
========== ==========

Depreciation expense for the periods ended December 31, 1999, 1998 and 1997
totaled $176,395, $112,471 and $92,838, respectively. During 1999 and 1998
respectively, $168,461 and $135,561 of depreciation associated with the San
Cristobal Project was capitalized. No amounts were capitalized during 1997.

6. Notes Payable

The Company's Notes Payable consists of the following:


December 31, December 31,
1999 1998
------------ ------------

San Cristobal area properties...................... $2,238,827 $2,215,361
San Cristobal Foundation........................... 1,800,000 --
---------- ----------
Sub-total........................................ 4,038,827 2,215,361
Less current portion............................... (901,459) (248,773)
---------- ----------
Total............................................ $3,137,368 $1,966,588
---------- ----------


In 1996, 1997 and 1998 the Company exercised options to purchase the Toldos
and other properties in the San Cristobal area. At December 31, 1999, the
following outstanding notes payable were recorded on the Company's books
related to these options:

Banco de Santa Cruz--The Company will make annual payments of $68,914 for
each of the next six years, plus interest at Banco de Santa Cruz'
preferential rate of interest which was approximately 14% as of December
31, 1999. The note plus accrued interest was being carried on the company's
books for $422,827 at December 31, 1999.

F-11


APEX SILVER MINES LIMITED
An Exploration and Development Stage Company

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in United States dollars)


Barex--The Company will make one payment of $900,000 on December 1, 2001.
No interest is due on this note.

Monica de Prudencio--The Company makes monthly payments of $12,000 per
month through June 2004 and a final payment of $8,000 due July 15, 2004. No
interest is due on this debt. The note was being carried on the company's
books for $656,000 at December 31, 1999.

Oscar Bonifaz--The Company makes monthly payments of $10,000 per month
through November 2001. No interest is due on this debt. The note was being
carried on the company's books for $260,000 at December 31, 1999.

In addition to the notes related to the San Cristobal area properties, the
Company is carrying the following note payable:

San Cristobal Foundation--During the fourth quarter of 1999, the Company
entered into an agreement with the San Cristobal Foundation whereby it has
agreed to contribute $2 million to the Foundation through the end of 2005.
A payment in the amount of $200,000 was made to the Foundation during 1999.

7. Stock Option Plans

The Company has established a plan to issue share options and other awards
to be valued in whole or part by reference to the Company's shares for
officers, employees, consultants and agents of the Company and its
subsidiaries (the "Plan"). Under the Plan, the total number of options and
other awards outstanding at any time cannot exceed ten percent of the
Company's share capital. Options granted and other awards under the Plan are
non-assignable. Options exist for a term, not to exceed ten years, as fixed by
the Compensation Committee of the Board of Directors of the Company ("the
Committee"). Options vest ratably over periods of up to four years with the
first tranche vesting on the date of grant or the anniversary of the date of
grant. Unexercised options expire ten years after the date of grant.

The Company has established a share option plan for its non-employee
directors (the "Director Plan"). Under the Director Plan, the total number of
options outstanding at any one time cannot exceed five percent of the
Company's share capital. Pursuant to the Director Plan non-employee directors
receive (i) at the effective date of their initial election to the Company's
board of directors, an option to purchase the number of Ordinary Shares equal
to $50,000 divided by the closing price of the Ordinary Shares on the American
Stock Exchange (the "AMEX") on such date, (ii) at the close of business of
each annual meeting of the Company's shareholders, an option to purchase the
number of Ordinary Shares equal to $50,000 divided by the closing price of the
Ordinary Shares on the AMEX on such date, and (iii) at the close of business
of each meeting of the Company's Board of Directors, an option valued at
$3,000 calculated using the Black-Scholes option-pricing model to purchase
Ordinary Shares with an exercise price equal to that of the closing price of
the Ordinary Shares on the AMEX on such date. Options granted to a non-
employee director vest on the date of the grant and expire 10 years after the
date of the grant or one year after the date that such non-employee director
ceases to be a director of the Company. Options granted under the Director
Plan are transferable only in limited circumstances.

F-12


APEX SILVER MINES LIMITED
An Exploration and Development Stage Company

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in United States dollars)


The following table summarizes stock option information:



Year ended Year ended Year ended
December 31, December 31, December 31,
1999 1998 1997
------------ ------------ ------------

Options outstanding at beginning of
period............................. 626,571 455,625 281,250
Options granted during period....... 358,847 195,947 174,375
Options forfeited or expired during
period............................. (44,052) -- --
Options exercised during period..... (25,549) (25,001) --
--------- --------- ---------
Options outstanding at end of
period............................. 915,817 626,571 455,625
========= ========= =========
Options exercisable at end of
period............................. 563,898 391,222 241,727
Weighted average grant-date fair
value of options granted during
period............................. $1.36 $1.98 $1.08
Weighted average remaining
contractual life................... 8.3 years 8.3 years 8.9 years


Options granted during the period were at an average exercise price of
$11.76, $10.69 and $8.00 for the years 1999, 1998 and 1997 respectively.
Options granted during 1999 ranged in exercise price from $7.94 to $14.88.

Pro forma information regarding net income is required by SFAS No. 123, and
has been determined as if the Company has accounted for its stock options
under the fair value method of SFAS No. 123. For purposes of calculating the
fair value of options, volatility was not considered for the year ended
December 31, 1997, as the Company was non-public at the date of those grants.
The volatility for 1999 and 1998 is based on the historical volatility of the
Company's stock over its public trading life. The Company currently does not
foresee the payment of dividends in the near term. The fair value for these
options was estimated at the date of grant using the Black-Scholes option-
pricing model with the following assumptions:



Year ended Year ended Year ended
December 31, December 31, December 31,
1999 1998 1997
------------ ------------ ------------

Weighted average risk-free interest
rate............................... 5.64% 5.55% 6.27%
Volatility.......................... 42.10% 48.10% 0.00%
Expected dividend yield............. -- -- --
Weighted average expected life (in
years)............................. 2.73 2.53 2.33


For the purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The
Company's pro forma information follows:



Year ended Year ended Year ended
December 31, December 31, December 31,
1999 1998 1997
------------ ------------ ------------

As reported
Net loss........................ $(7,979,032) $(11,029,570) $(14,984,958)
Net loss per Ordinary Share..... (.29) (.42) (.72)
Pro forma
Net loss........................ $(8,509,350) $(11,548,400) $(15,199,421)
Net loss per Ordinary Share..... (.31) (.44) (.73)


F-13


APEX SILVER MINES LIMITED
An Exploration and Development Stage Company

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in United States dollars)


In addition, on December 14, 1999 and December 15, 1998, the Company issued
15,983 and 21,838 respectively of its Ordinary Shares to employees as a
portion of performance bonuses paid during these years. Such shares are
restricted for two years from the date of issuance and may not be traded or
pledged during that period. Should the employee terminate during the
restricted period the shares are forfeited to the Company. The shares, net of
441 forfeited shares, are included in the outstanding shares at December 31,
1999.

8. Related Party Transactions

Apex LDC engaged Tigris Financial Group Ltd. ("Tigris") and LCM Holdings LDC
("LCM") to provide management advisory services to Apex LDC and its
subsidiaries. Tigris is wholly owned by Mr. Thomas S. Kaplan, a director and
officer of Apex LDC and a director and shareholder of the Company. LCM is
wholly-owned by a shareholder of the Company. The LCM consulting arrangement
was terminated at the end of the first quarter of 1997, following the
formation of Apex Corporation. During the years ended December 31, 1999, 1998
and 1997 fees and reimbursed expenses paid to Tigris and LCM for such services
amounted to $20,495, $39,637, and $93,964, respectively.

During the year ended December 31, 1997, Apex LDC hired both individuals and
companies ("associates") to perform services on its behalf in countries in
which Apex LDC has mineral interests. These services include property
acquisitions on Apex LDC's behalf, consulting services and administrative
costs. In certain cases persons affiliated with such associates served as
officers or directors of certain Apex LDC's subsidiaries. During the year
ended December 31, 1997, the total amount charged to Apex LDC by such related
associates was $7,395,441 and is included in the statement of operations under
the applicable captions. In 1998 all of these associates became employees or
subsidiaries of Apex LDC and are no longer considered related parties.

Two individuals, one of whom is an officer of a subsidiary and a shareholder
of the Company, the second of whom is an officer of certain of the Company's
subsidiaries, are shareholders and directors of Begeyge Minera Ltda.
("Begeyge"), from whom the Company has the right to purchase the Suyatal
Project in Honduras for an aggregate purchase price of $3,000,000 (see Note
10). Begeyge also served as an associate during the year ended December 31,
1997.

F-14


APEX SILVER MINES LIMITED
An Exploration and Development Stage Company

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in United States dollars)


9. Cash Flow Information

A reconciliation of net earnings to cash from operations is as follows:



For the period
December 22,
1994
(inception)
Year ended Year ended Year ended through
December 31, December 31, December 31, December 31,
1999 1998 1997 1999
------------ ------------ ------------ --------------

Cash flows from
operating activities:
Net loss.............. $(7,979,032) $(11,029,570) $(14,984,958) $(47,791,223)
Adjustments to
reconcile net loss to
net cash used in
operating activities:
Amortization and
depreciation....... 232,987 169,116 149,429 665,515
Minority interest in
loss of
consolidated
subsidiary......... -- -- -- (4,558,886)
Stock option
compensation
expense............ 100,589 -- 416,562 517,151
Shares issued in
consideration for
services........... -- -- 1,524,545 1,524,545
Loss on asset
disposals.......... 9,933 -- -- 9,933
Changes in operating
assets and
liabilities:
(Increase) decrease
in accrued interest
receivable......... 65,213 (23,920) (102,412) (61,119)
(Increase) decrease
in prepaid expenses
and other assets... 896,137 (229,572) (813,825) (301,485)
Increase in Value
Added Tax
recoverable........ (1,084,657) (1,374,799) (1,351,004) (3,810,460)
(Increase) decrease
in amounts due from
affiliates......... -- 722,717 (1,254,800) --
Increase (decrease)
in accrued
salaries, wages &
benefits........... (36,692) 114,064 (269,933) 118,108
Increase (decrease)
in accounts payable
and other accrued
liabilities........ (520,182) 205,331 (1,302,711) 24,488
Increase (decrease)
in other assets.... 27,095 (16,500) (1,192) 10,595
----------- ------------ ------------ ------------
Net cash used in
operating activities... $(8,288,609) $(11,463,133) $(17,990,299) $(53,652,838)
=========== ============ ============ ============


F-15


APEX SILVER MINES LIMITED
An Exploration and Development Stage Company

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in United States dollars)


10. Commitments and Contingencies

Commitments

The Company will be required to make expenditures in the following amounts
to maintain its interests in the San Cristobal property.



2000 2001 2002 2003 2004
-------- -------- -------- -------- --------

San Cristobal................. $790,932 $444,142 $435,224 $426,182 $353,139

The Company has lease commitments associated with the corporate headquarters
office space as follows:


2000 2001 2002 2003 2004
-------- -------- -------- -------- --------

Corporate headquarters office
lease........................ $225,579 $187,987 $ -- $ -- $ --


Payments associated with this lease were recorded to rent expense by the
Company in the amounts of $146,714, $140,650, and $102,384 for the years ended
December 31, 1999, 1998 and 1997 respectively.

Contingencies

The Company holds the rights to a portfolio of properties and explores and
evaluates the mineral potential of these properties on an ongoing basis. The
Company's rights to maintain interests in these properties are contingent upon
the payment of certain fees, lease and option payments and/or performance of
work commitments. The Company would be required to make payments or
expenditures in the following amounts should it decide to continue the rights
to the following properties:



Property 2000 2001 2002 2003 2004
-------- ---------- ---------- ---------- ---------- ----------

Bolivia
Ximena Group.......... $ 129,163 $ 119,163 $ 9,163 $ 9,163 $ 9,163
Pulacayo.............. 18,000 18,000 18,000 18,000 18,000
General............... 24,890 24,890 24,890 24,890 24,890
Honduras
Sabanetas............. 65,000 50,000 50,000 50,000 50,000
Mexico
Saltillera and
Platosa(1)........... 700,000 1,100,000 1,200,000 975,000 --
San Luis Cordero...... 269,000 469,000 669,000 869,000 1,126,500
San Juan Cordero(2)... 137,000 218,000 390,000 1,560,000 148,000
General............... 44,900 49,900 34,900 34,900 34,900
Peru
Otuzco(3)............. 54,798 54,798 54,798 54,798 54,798
Aventura(4)........... 15,689 15,689 15,689 15,689 15,689
General............... 19,600 19,600 19,600 19,600 19,600
---------- ---------- ---------- ---------- ----------
Total............... $1,478,040 $2,139,040 $2,486,040 $3,631,040 $1,501,540
========== ========== ========== ========== ==========

- --------
(1) With the final payment in 2003 the Company would own 65% of these
properties. Included in the payment schedule is $1,775,000 in lease
payments and $2,570,000 of work commitments.
(2) The Company would pay an additional $462,000 in February 2004 if it
exercised a purchase option associated with certain portions of the
property. In lieu of this payment, the Company may elect to pay a 2.5% net
smelter return not to exceed $1,250,000.

F-16


APEX SILVER MINES LIMITED
An Exploration and Development Stage Company

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in United States dollars)

(3) The Company would pay an additional $550,000 if it exercised purchase
options associated with certain portions of the property.
(4) The Company would pay an additional $90,000 if it exercised purchase
options associated with certain portions of the property.

11. Fair Value of Financial Instruments

The Company's financial instruments consist of cash and cash equivalents,
receivables, VAT recoverable, accounts payable, other current liabilities and
long-term debt. Except for the VAT and long-term debt, the carrying amounts of
these financial instruments approximate fair value due to their short
maturities. The estimated fair values of the Company's long-term financial
instruments, as measured on December 31, 1999 and 1998, are as follows:



1999 1998
--------------------- ---------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ---------- ----------

VAT recoverable.................. $3,810,460 $2,999,445 $2,725,803 $2,145,645
Notes payable.................... 3,137,368 2,402,260 1,966,588 1,449,227


The fair values of the VAT recoverable and the long-term debt are estimated
based on the expected timing of future cash flows.

12. Segment Information

In 1998, the Company adopted SFAS 131, Disclosure about Segments of an
Enterprise and Related Information. The Company's sole activity is exploration
for and development of silver properties and, consequently, the Company has
only one operating segment--mining.

Substantially all of the Company's long-lived assets are in Bolivia.

F-17