APEX SILVER MINES LTD - 10-K Annual Report

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

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 ý No o

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. o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes ý No o

The aggregate market value of the voting and non-voting common equity held by non-affiliates as of June 30, 2003, was approximately $268,000,000, based on the closing price of the Ordinary Shares on the American Stock Exchange of $14.75 per share.

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 2004 Annual Meeting of Shareholders are incorporated by reference in Part III of this Report on Form 10-K.

Apex Silver Mines Limited, incorporated under the laws of the Cayman Islands in 1996, is engaged in the exploration and development of silver properties in South America, Mexico, Central America and Central Asia. We have a large diversified portfolio of privately owned and controlled silver exploration properties. We have rights to or control over 100 silver and other mineral exploration holdings, divided into 34 property groups, located in or near the traditional silver producing regions of Bolivia, Mexico, Peru, El Salvador and Kyrgyzstan. 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, based on $4.62 per ounce silver, $0.38 per pound zinc and $0.22 per pound lead, total approximately 211 million tonnes of ore grading 65.81 grams per tonne of silver, 1.63% zinc and 0.61% lead, containing approximately 446 million ounces of silver, 7.6 billion pounds of zinc and 2.8 billion pounds of lead. The prices used represent the three year average price for each of the metals as per guidelines established by the Securities and Exchange Commission. None of our properties is in production, and consequently we have no operating income or cash flow.

As used herein, Apex Limited, 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.

All currency references are to United States dollars, unless otherwise indicated.

We make available, free of charge through our Internet web site at http://www.apexsilver.com, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC.

Apex Limited is one of a limited number of mining companies which focuses on silver exploration, development and production. Our strategy is to capitalize on the San Cristobal Project and 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 construction, development and operation of large scale, open pit and underground, precious and base metals mining operations, as well as the identification and exploration of mineral properties.

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 city of La Paz, which is the seat of government where executive and legislative powers reside. 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 100 kilometers to the northeast. The railroad begins at the Chilean port of Antofagasta, approximately 460 kilometers southwest of San Cristobal, and continues north to La Paz.

The San Cristobal property is comprised of certain mining concessions which are part of a large block of concessions covering approximately 480,000 acres which we own or control. In addition, we have acquired rights to approximately 200,000 acres for transportation and power lines. Under these mining concessions, we have 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 the proposed San Cristobal open pit mine, was mined by underground block caving and open pit mining between 1985 and 1995. At present, there is no significant mining or processing plant or equipment on the San Cristobal property.

We believe that our San Cristobal property contains one of the largest known open pit silver-lead-zinc deposits in the world. Current proven and probable reserves at San Cristobal, total approximately 211 million tonnes of ore grading 65.81 grams per tonne of silver, 1.63% zinc and 0.61% lead. These reserves contain approximately 446 million ounces of silver, 7.6 billion pounds of zinc and 2.8 billion pounds of lead. The reserves are based on $4.62 per ounce silver, $0.38 per pound zinc and $0.22 per pound lead. These prices represent the three year average prices for each of the metals as per guidelines established by the Securities and Exchange Commission. 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, the currently defined pit bottom.

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 flotation methods. We would transport mined ore to the primary crusher by truck and then convey the crushed ore to a mill and flotation plant. The ore would be ground in semi-autogenous (SAG) and ball mill circuits, and then processed by selective flotation to produce separate zinc-silver and lead-silver concentrates and lesser amounts of silver bulk concentrates. We expect to transport the filtered concentrates by road or railroad to a port in Chile, and then by ocean vessel to smelters and refineries in Asia, the Americas and Europe.

In September 2000, we announced that positive metallurgical and operational improvements occurring subsequent to completion of the San Cristobal feasibility study had further enhanced the project economics. Once commercial production is attained, we believe the operation should produce an annual average of approximately 21 million contained ounces of silver, 478 million contained pounds of zinc and 155 million contained pounds of lead over a mine life of approximately 15 years, with higher metal 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 or increased in scale.

We have spent approximately $98 million in project capital at San Cristobal, including approximately $33 million in construction costs, through December 31, 2003. Based on certain revisions made during 2000 to the September 1999 feasibility study for the San Cristobal Project, which assumes contract mining, we forecast additional capital costs for construction to total approximately $435 million, net of approximately $60 million in expected tax credits, including approximately $25 million which will be recovered against our future Bolivian income taxes after commencement of production. We believe capital costs have increased since this estimate was made, but have not yet updated the capital cost estimate.

Life-of-mine average cash operating cost for San Cristobal is currently forecast to average approximately $1.95 per ounce of silver, net of lead by-product credits, and $0.27 per pound of zinc. For the first five years of production, the average cash operating cost per ounce of silver, net of lead by-product credits, is projected to be $1.23 and the average cash operating cost per pound of zinc is projected to be $0.23. Operating cash cost is a non-GAAP financial measure. Our estimated operating costs include estimated mining, milling and mine-related overhead costs, and exclude taxes, depreciation and amortization. The average cash operating cost per ounce of silver is equal to the pro-rata share of estimated average operating costs for the period divided by the estimated number of ounces of silver to be produced during the period reduced by the ounces required to cover estimated refining, treatment and transportation charges for the period with the result further reduced by estimated lead byproduct credits for the period. Average cash operating cost per pound of zinc is equal to the pro-rata share of estimated average operating costs for the period divided by the estimated number of pounds of zinc to be produced during the period reduced by the pounds required to cover estimated refining, treatment and transportation charges for the period. We have included estimated average cash operating cost information to provide investors with information about the cash generating capabilities of our San Cristobal Project. This information will differ from measures of performance determined in accordance with generally accepted accounting principles (GAAP) and should not be considered in isolation or as a substitute for measures of performance that will be prepared in accordance with GAAP. These measures are not necessarily indicative of operating profit or cash flow from operations to be determined under GAAP and may not be comparable to similarly titled measures of other companies.

Due primarily to weak silver prices, we reduced spending on San Cristobal development during 2001 through 2003. We advanced the project during this period primarily by continuing the evaluation and negotiation of infrastructure arrangements, including the selection of a port from which to ship the concentrates to smelters and arrangements for the transportation of concentrates from San Cristobal to the port and the provision of power to San Cristobal.

In 2003, we entered into long-term contracts for the truck and rail transportation of concentrates from San Cristobal and for the use of the port in Mejillones, Chile to store, load and export concentrates. Both contracts are subject to typical conditions precedent, including obtaining necessary permits and approvals from Bolivian and Chilean authorities, closing of debt financing for the project and satisfying conditions for the initial borrowing. Both contracts are subject to early termination by either party if these and certain other conditions precedent are not completed by year-end 2004 in the case of the transportation contract and by the end of the first quarter of 2005 in the case of the port contract.

With the recent increase in silver and zinc prices and our success in raising additional financing through the sale of ordinary shares, we plan to move forward with the development of San Cristobal, and expect to spend approximately $25 million in 2004. During 2004, we plan to engage an engineering and construction firm to complete detailed engineering and incorporate required changes into the development plan for construction of the project. Changes to the development plan may result in an increase in our expected capital costs for construction. We also plan to commence construction of roads and bridges for mine construction access and development and to build mancamps for construction. We expect to complete infrastructure arrangements for transportation and power. We continue to consider several alternatives for power for the San Cristobal Project. We also plan to renew the operating permits for construction and operation of the mine and processing facilities, which expire this year. In addition, we will

be working actively towards completion of the financing requirements for San Cristobal if metals and capital markets remain attractive.

Assuming that the metals markets remain favorable and that we are able to complete the additional financing required for the Project, we expect construction to commence at San Cristobal in the first half of 2005 and start-up and production to commence in 2007.

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.

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 recalculated in February 2004 using a $4.66 net smelter return per tonne cutoff value and reduced market price assumptions of $4.62 per ounce silver, $0.38 per pound zinc and $0.22 per pound lead, reflecting the three year rolling average prices through December 2003. The

following tables show our 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 of ore (000s)	Silver Grade (oz./tonne)	Zinc Grade (%)	Lead Grade (%)	Silver Ounces (000s)	Zinc Tonnes (000s)	Lead Tonnes (000s)
Sulfide Ore	202,069	2.016	1.70	0.60	407,371	3,435	1,212
Oxide Ore	8,901	4.390	0.10	0.64	39,075	9	57

Bolivia is situated in central South America and is bordered by Peru, Brazil, Paraguay, Argentina and Chile. It has an area of approximately 1.1 million square kilometers and a population of approximately 8.5 million people. Bolivia's official and most widely spoken language is Spanish, but over 70 percent of the population is either native Aymara or Quechua Indian.

Bolivia has experienced slow economic growth and increasing political and economic instability in the last three years. In late 2003, there were violent demonstrations in La Paz and elsewhere in Bolivia, protesting the free-trade policies of the Bolivian government and specifically the proposed export of natural gas to the U.S. through Chile and the impact of U.S. policies regarding the drug trade. These demonstrations resulted in the resignation of President Sanchez de Lozada, in October 2003, and his constitutional replacement by President Mesa. Although to date these conditions and events have not caused any adverse impact on our San Cristobal Project, there can be no assurance regarding when or whether these political and economic uncertainties will be successfully resolved, that the political and economic climate may not become more unstable or that the political and economic uncertainties would not have an adverse impact on the development of San Cristobal.

Bolivian law provides for unrestricted repatriation of capital, freedom to import goods and services, equality under the law between foreign and domestic companies, and the creation of "free trade zones."

Mining companies in Bolivia are subject to a 25% income tax, with taxable income determined in accordance with Bolivian generally accepted accounting principles. Mining companies are also subject to a complementary mining tax, creditable against the income tax, ranging from 3% to 7% of revenue generated from product sales. Bolivian source income, including dividends and interest, is subject to a 12.5% withholding tax. Other taxes include import taxes of 5% on capital goods and 10% on other imports, and value added tax (VAT) of 13%. As an exporter, we will be able to apply for a refund of import duties and VAT paid on imports and raw materials included in the cost of exported goods, limited to 13% of the total value of the exports. We previously entered into an agreement with the government of Bolivia pursuant to which we would receive a certain portion of VAT refunds prior to the commencement of production. That agreement has since expired and we will be seeking to enter into a new agreement.

All mineral deposits in Bolivia are the property of the State. Mining concessions awarded by the State grant the holder, subject to certain payments, the exclusive right to carry out prospecting, exploration, exploitation, concentration, smelting, refining and marketing activities with respect to all mineral substances located within a given concession. Under Bolivian law, local and foreign companies are treated equally in obtaining mineral concessions. With respect to nationalized and other concessions still held by State-owned Comibol, private investors may inter into joint venture, lease or services agreements with

Comibol. Holders of mining concessions are obliged to pay an annual mining patent, the fees for which are progressive and are based on the number of years of existence of the concession. Mining concessions are liable to forfeiture when the corresponding annual patent fails to be paid. Concessions established before the enactment of the New Mining Code in 1997 which comprise an area of more than 1,000 mining claims pay the equivalent of $1.00 per claim per year for the first five years of the existence of the concession; thereafter, the patent increases to the equivalent of $2.00 per claim per year. Concessions established under the New Mining Code pay the following: for the first five years of the existence of a concession, the owner is required to pay the equivalent of $25.00 per square per year; thereafter the patent increases to the equivalent of $50.00 per square per year. Most of our Bolivian concessions were established prior to enactment of the New Mining Code.

Bolivia has a national environmental policy to protect the environment, promote sustainable development, promote the preservation of biological diversity and promote environmental education. Under Bolivia's environmental regulations, environmental impact assessments are required, and concession holders must maintain waterways running through their concessions in their unspoiled state, employ exploration and development techniques that minimize environmental damage and minimize damage to surface rights, to neighboring concessions and to the environment. In practice, foreign mining companies operating in Bolivia generally adhere to U.S. and European environmental standards for mining and exploration.

Bolivia has experienced high levels of unemployment and underemployment. Bolivia has a large pool of unskilled and, in the mining sector, semi-skilled labor, but a relative shortage of skilled labor and managerial expertise overall. A large portion of the labor force that is engaged in wage employment is also unionized, although union participation is not mandatory and collective bargaining agreements are very rare, as negotiations are generally carried out between an individual company's union and management.

Other than San Cristobal, we have a portfolio of silver properties in Bolivia, Mexico, Peru and Central Asia totaling approximately 760,000 acres which contain potential for silver mineralization or other significant exploration potential. These mineral properties typically consist of:

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 us. Although we believe that our exploration properties may contain significant silver and/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 exploration holdings consist primarily of ownership interests, leases, options and joint ventures, all in varying percentages. The distribution of these holdings is summarized in the table below. Acreage amounts shown below represent a 100% interest.

Country				Number of Exploration Property Groups	Acreage
Mexico				7	131,000

South America
	Bolivia			17	355,000
	Peru			27	110,000

		Subtotal		44	465,000

Central Asia				2	164,000

			Total	53	760,000

We believe that our most interesting exploration property is Platosa-Saltillera, located in Durango State in northern Mexico. Our joint venture partners have initiated a test mining program on a small portion of the property in which we did not choose to participate. We have retained a net smelter return royalty on this mining project. During 2004, the joint venture will map and sample an additional 9,766 hectares exploration project at Platosa-Saltillera. In addition to Platosa-Saltillera, we have holdings in Mexico in the historic Zacatecas mining district as well as several other silver properties in the States of Guerrero, Durango and Zacatecas.

We also have holdings, joint ventures and options in Bolivia, other than the San Cristobal Project, including a property in the historic Pulacayo silver mining district. We have an exploration office in Lima and are actively exploring for silver in Peru, the world's second largest silver producing country. We have acquired the mineral rights to several historic silver districts in the northeastern and southeastern parts of the country. In Central Asia, we have two mineral prospecting licenses in Kyrgyzstan.

We continue to explore options designed to achieve full recognition of the value of our exploration portfolio, including the possibility of forming a subsidiary into which we may consolidate most of our exploration properties outside the San Cristobal District. If we elect to proceed with SilEx, SilEx may become an independently funded exploration subsidiary focused on silver, gold and precious metal deposits and polymetallic deposits containing precious metals.

Investors in Apex Limited should consider carefully, in addition to the other information contained in, or incorporated by reference into, this report, the following risk factors:

We have 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.

We have a history of losses and 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, 2003, we had an accumulated deficit of $78.8 million. There can be no assurance that we will achieve or sustain profitability in the future.

The estimates of our reserves and other mineralization estimates are potentially inaccurate.

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 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:

Since we have not commenced production on any of our properties, reserves and other mineralization estimates 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.

The San Cristobal Project is subject to risks including delays in commencement and completion and we may be unable to achieve anticipated production volume or manage cost increases.

Completion of the development of the San Cristobal Project is subject to various factors, including the maintaining of recent price levels for silver and zinc, the availability, terms, conditions and timing of acceptable arrangements for financing, power, transportation, construction, contract mining and smelting, and required government approvals, including renewal of the construction and operations permit, and the performance of our engineering and construction contractor and suppliers and consultants. The lack of

availability on acceptable terms or the delay in any one or more of the other items listed above could also delay or prevent the development of San Cristobal. There can be no assurance:

We have never developed or operated a mine or managed a significant mine development project. We cannot assure you that the development of San Cristobal will be completed at the cost and on the schedule predicted, or that silver, zinc and lead grades and recoveries, production rates or anticipated capital or operating costs will be achieved.

If the actual cost to complete the development of the San Cristobal Project is significantly higher than currently 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, reduced silver and zinc prices 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 also subject to the other risk factors described herein.

We anticipate that the majority, if not all, of any 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, our ability to generate revenue and profits would be materially adversely affected.

We anticipate that as we develop San Cristobal and bring it 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 to increase substantially demands on our operating and financial systems. There can be no assurance that we will successfully meet these demands and manage our anticipated growth.

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:

The aggregate effect of these factors on metals prices is impossible for us to predict. Decreases in metals prices have delayed, and could in the future 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. There can be no assurance that metals prices will not decline.

The following table sets forth for the periods indicated (1) the Comex nearby active silver futures contract's high and low price of silver in U.S. dollars per troy ounce and (2) the London Metals Exchange's high and low settlement prices of zinc and lead in U.S. dollars per pound.

	Silver				Zinc				Lead
Year	Silver				Zinc				Lead
Year	High		Low		High		Low		High		Low
1999	$	5.77	$	4.86	$	0.56	$	0.41	$	0.25	$	0.21
2000		5.57		4.62		0.58		0.46		0.26		0.18
2001		4.83		4.03		0.48		0.33		0.24		0.20
2002		5.13		4.22		0.42		0.33		0.24		0.18
2003		5.99		4.35		0.46		0.34		0.34		0.19

The closing prices of silver, zinc and lead on March 5, 2004 were $6.99 per troy ounce, $0.51 per pound, and $0.39 per pound, respectively.

We may not be successful in hedging against price, currency and interest rate fluctuations and may incur mark to market losses and 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 may also engage in activities to hedge the risk of exposure to currency and interest rate fluctuations related to the development of San Cristobal in Bolivia or in other countries in which we incur substantial expenditures for exploration or development. Further, terms of our financing arrangements may require us to hedge against these risks. We 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.

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.

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. 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:

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, or that our exploration programs will result in new proven and probable reserves in sufficient quantities to justify commercial operations in any of our properties, other than the San Cristobal Project.

We consider from time to time the acquisition of operating or formerly operating mines. Our decisions to acquire these properties are based on a variety of factors including historical operating results, estimates of and assumptions about future reserves, cash and other operating costs, metals prices and projected economic returns, and evaluations of existing or potential liabilities associated with the property and its operation. Other than historical operating results, all of these may differ significantly from our estimates and assumptions. In addition, there is intense competition for attractive properties. Accordingly, there is no assurance that our acquisition efforts will result in profitable mining operations.

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. Feasibility studies derive estimates of cash operating costs based upon, among other things:

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. These uncertainties include:

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 development, construction and 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.

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. Title insurance generally is not available, and our ability to ensure that we have obtained secure claim to individual mineral properties or mining concessions may be severely constrained. We have not conducted surveys of all of the claims in which we hold direct or indirect interests and, therefore, the precise area and location of these claims may be in doubt. Accordingly, our mineral properties may be subject to prior unregistered agreements, transfers 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.

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.

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.

Our San Cristobal Project and our exploration activities are 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, 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:

In particular, Bolivia has experienced slow economic growth and increasing political and economic instability in the last three years. In late 2003, there were violent demonstrations in La Paz and elsewhere in Bolivia, protesting the free-trade policies of the Bolivian government and specifically the proposed export of natural gas to the U.S. through Chile and the impact of U.S. policies regarding the drug trade. These demonstrations resulted in the resignation of President Lozada, in October 2003, and his replacement by President Mesa. Although to date these conditions and events have not caused any adverse impact on our San Cristobal Project, there can be no assurance regarding when or whether these political and economic uncertainties will be successfully resolved, that any political and economic climate may not become more unstable or that the political and economic uncertainties would not have an adverse impact on the development of San Cristobal.

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:

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.

Our activities are subject to foreign environmental laws and regulations which may materially adversely affect our future operations.

We conduct mineral exploration and development activities primarily in Central America and South America, and are most active in Bolivia, where the San Cristobal Project is located, and Mexico. With the development of San Cristobal, we also expect to conduct mining operations in Bolivia. These countries have laws and regulations which control the exploration and mining of mineral properties and their effects on the environment, including air and water quality, mine reclamation, waste handling and disposal, the protection of different species of flora and fauna and the preservation of lands. These laws and regulations will require us 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.

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.

Our ability to obtain dividends or other distributions from our subsidiaries may be subject to restrictions imposed by law and foreign currency exchange regulations.

We conduct, and will continue to conduct, all of our operations through subsidiaries. Our ability to obtain dividends or other distributions from our subsidiaries may be subject to restrictions on dividends or repatriation of earnings under applicable local law, monetary transfer restrictions and foreign currency exchange regulations in the jurisdictions in which the subsidiaries operate. Our subsidiaries' ability to pay dividends or make other distributions to us is also subject to their having sufficient funds to do so. If our subsidiaries are unable to pay dividends or make other distributions, our growth may be inhibited unless we are able to obtain additional debt or equity financing on acceptable terms. In the event of a subsidiary's liquidation, we may lose all or a portion of our investment in that subsidiary.

We may not be able to raise the funds necessary to explore and develop our mineral properties.

Although we have raised approximately $209 million through equity sales in early 2004, we will need additional 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 would 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.

We are dependent on the services of key executives including our chairman and our chief executive 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 Apex Limited, 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.

The substantial control of Apex Limited by our directors, officers and 5% shareholders may have a significant effect in delaying, deferring or preventing a change in control of Apex Limited or other events which could be of benefit to our other shareholders.

As of March 5, 2004, Thomas S. Kaplan and the other directors of Apex Limited 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 25 million shares, or 52%, of our outstanding shares, assuming the conversion of currently exercisable options and warrants. This level of ownership by these persons may have a significant effect in delaying,

deferring or preventing a change in control of Apex Limited or other events which could be of benefit to our other shareholders.

Apex Limited and certain lower tier subsidiaries may be treated as passive foreign investment companies for U.S. federal income tax purposes.

We believe that we likely were a passive foreign investment company (a "PFIC") for one or more past years including 2003, and likely will be a PFIC with respect to 2004 and potentially with respect to future years as well. If we are a PFIC, then a U.S. person who disposes or is deemed to dispose of Ordinary Shares or warrants to acquire Ordinary Shares at a gain, or who received a so-called "excess distribution" on the shares or warrants, 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). The PFIC rules are complex, and holders are urged to consult their own tax advisers regarding the consequences to them of us being classified as a PFIC. We do not intend to make or issue to holders of our securities determinations as to our PFIC status for any taxable years.

As we believe that we likely were a PFIC for the 2003 tax year, U.S. persons who owned (directly or under applicable attribution rules) Ordinary Shares in 2003 should consider whether to make a QEF election with respect to 2003 for their Ordinary Shares, and for their indirect ownership in any subsidiary of ours that was a PFIC in 2003. The tax consequences of a QEF election are complex, and holders of Ordinary Shares should consult their tax advisors regarding the advisability of making this election. A QEF election for a taxable year must be made on or before the due date (as may be extended) for filing the shareholder's federal income tax return for the tax year. In order to make a QEF election, a holder of Ordinary Shares must request and obtain certain information from us. On request from a holder of Ordinary Shares, we will endeavor to furnish the information necessary to make a QEF election within ninety days after the request.

We have in certain prior filings stated that we believed that (i) Apex Limited may be considered a PFIC but (ii) none of our non-U.S. lower tier subsidiaries was a corporation for U.S. tax purposes that would itself be considered to be a PFIC. We now believe that certain of our non-U.S. lower tier subsidiaries, including the subsidiary that contains the principal assets associated with the San Cristobal Project, were corporations for U.S. tax purposes that constituted PFICs in certain prior years. As a result, there is a possibility that some shareholders may suffer adverse U.S. federal income tax consequences that arguably might not have been suffered had they been aware of the PFIC status of these lower tier subsidiaries. Such shareholders may, however, be able to make retroactive elections in some cases that would mitigate any such adverse consequences. Moreover, under applicable proposed regulations, the fact that our lower tier subsidiaries of any consequence may not have had earnings and profits for any taxable year since formation may arguably eliminate any such tax consequences in respect of prior taxable years. For the current and all subsequent taxable years, we believe that the potential for our lower tier subsidiaries to be classified as PFICs with respect to new investors can be substantially eliminated without adverse tax consequences.

In the future, holders of our shares may claim that they have suffered adverse tax consequences for which they could have taken remedial action if they had been aware that such subsidiaries constituted PFICs. It is not possible for us to determine the number of shareholders, if any, that might make such a claim or to determine the merits or impact of such claims on us and whether such claims may be material to us.

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:

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 Apex Limited 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.

Silver has traditionally served as a medium of exchange, much like gold. 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. While silver continues to be used as a form of investment and a financial asset, the principal uses of silver are industrial, primarily in electrical and electronic components, photography, jewelry, silverware, 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. Additionally, new uses of silver are being developed in connection with the use of superconductive wire.

Most silver production is obtained from mining operations in which silver is not the principal or primary product. Approximately 80% of mined silver is produced as a by-product of mining lead, zinc, gold, nickel or copper deposits. The CPM Group estimates that total silver supply from mine production, recycling, estimated dishoarding and government stockpile sales has been insufficient to meet industrial demand since 1990, and that stockpiles are continuing to diminish.

The following table sets forth for the periods indicated the Comex nearby active silver futures contract's high and low price of silver in U.S. dollars per troy ounce. On March 5, 2004 the closing price of silver was $6.99 per troy ounce.

	Silver
Year	Silver
Year	High	Low
1999	5.77	4.86
2000	5.57	4.62
2001	4.83	4.03
2002	5.13	4.22
2003	5.99	4.35

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

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 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. Lead is widely recycled, with secondary production accounting in recent years for approximately 50% to 52% of total supply.

The following table sets forth for the periods indicated the London Metals Exchange's high and low settlement prices of zinc and lead in U.S. dollars per pound. On March 5, 2004 the closing prices of zinc and lead were $0.51 and $0.39 per pound, respectively.

	Zinc		Lead
Year	Zinc		Lead
Year	High	Low	High	Low
1999	0.56	0.41	0.25	0.21
2000	0.58	0.46	0.26	0.18
2001	0.48	0.33	0.24	0.20
2002	0.42	0.33	0.24	0.18
2003	0.46	0.34	0.34	0.19

The following table includes information as of March 5, 2004, except as otherwise indicated, concerning the beneficial ownership of the ordinary shares by:

We have two executive officers, a chief executive officer and a chief financial officer. All information is taken from or based upon ownership filings made by such persons with the SEC or upon information provided by such persons to us. Except as otherwise noted, we believe that all of the persons and groups shown below have sole voting and investment power with respect to the ordinary shares indicated. As of March 5, 2004, 47,347,536 of our ordinary shares were issued and outstanding.

		Beneficial Ownership
Directors, Executive Officers and 5% Shareholders of Apex Limited(1)
	Number		Percentage
Moore Global Investments Ltd./Remington Investment Strategies L.P./Moore Emerging Markets(2)		5,734,266		12.1	%
Wellington Capital Management Company LLP(3)		4,765,200		10.1	%
FMR Corp.(4)		4,685,400		9.9	%
George Soros(5)		3,457,823		7.3	%
Strong Capital Management, Inc.(6)		3,327,631		7.0	%
Harry M. Conger(7)		50,877		*
David Sean Hanna(7)		52,002		*
Charles L. Hansard(7)		19,998		*
Ove Hoegh(7)		52,002		*
Keith R. Hulley(7)(8)		126,237		*
Thomas S. Kaplan(7)(8)(9)		2,347,342		4.9	%
Kevin R. Morano(7)		39,605		*
Charles B. Smith(7)		33,361		*
Paul Soros(7)(10)		521,681		1.1	%
Mark A. Lettes(7)(8)		53,239		*
Directors and executive officers as a group(10 persons)(11)		3,296,344		6.8	%

Apex Limited has two executive officers. 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	41	Chairman of Apex Limited
Keith R. Hulley	64	Chief Executive Officer, Apex Limited; President, Apex Corporation
Marcel F. DeGuire	54	Vice President of Project Development, Apex Corporation
Mark A. Lettes	54	Chief Financial Officer, Apex Limited; Vice President, Finance and Chief Financial Officer, Apex Corporation
Larry J. Buchanan	59	Chief Geologist, Apex Corporation
Igor Levental	48	Vice President, Investor Relations and Corporate Development, Apex Corporation
Michael F. Shaw	57	Vice President, Project Manager, San Cristobal, Apex Corporation
Carlos H. Fernandez Mazzi	45	President and Chief Executive Officer, Andean Silver Corporation LDC

Thomas S. Kaplan. Mr. Kaplan has been the Chairman of our board of directors since our 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 eleven 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 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 since April 1997 and was elected as our Chief Executive Officer in 2002. A mining engineer with more than 40 years experience, Mr. Hulley serves as the President 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 us, 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, 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 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 Project Development of Apex Corporation. Prior to joining Apex Corporation in August 1996, he served as Vice President of Project Development and Country Manager 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 was built to process 37,800 tonnes of ore per day 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 and 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, and was elected as Apex Limited's Chief Financial Officer in 2002. 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 over 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 has served as Chief Geologist and a principal advisor to our international operations since he joined Apex Corporation in 1995. Dr. Buchanan was 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 included Cyprus Minerals Company, FMC Corporation, Total Resources, Inc. and Fischer-Watt Gold Co. Inc. Dr. Buchanan is a shareholder and director of Begeyge Minera Ltda. Dr. Buchanan holds a B.Sc. and a Ph.D in economic geology from the Colorado School of Mines.

Igor Levental. Mr. Levental has served as Vice President, Investor Relations and Corporate Development of Apex Corporation since January 2003. From September 2002 until joining Apex Corporation, Mr. Levental was an independent consultant. Mr. Levental served as Director of Corporate Communications for Dicon Fiberoptics, Inc. from March 2002 through September 2002, where he was responsible for marketing and promoting Dicon in advance of Dicon's initial public offering. From 1999 to 2002, Mr. Levental served as Homestake Mining Company's Vice President of Investor Relations where he was responsible for the design and implementation of Homestake's investor relations strategy. Mr. Levental served as Manager, Corporate Development for Homestake from 1994 to 1999. As a member of Homestake's Corporate Development team, Mr. Levental assisted in various corporate development transactions totalling over $1 billion. From 1992 to 1994, Mr. Levental was a Senior Consultant for Homestake. From 1989 to 1992 Mr. Levental served as Vice President of Investor and Public Relations of International Corona Corporation, which was acquired by Homestake in 1992. Mr. Levental has a total of 21 years of experience in investor relations and corporate development. Mr. Levental earned a B.Sc. in chemical engineering and an M.B.A. from the University of Alberta, Canada. Mr. Levental is a registered professional engineer in the province of Ontario and is a member of the National Investor Relations Institute.

Michael F. Shaw. Mr. Shaw has served as Vice President of Apex Corporation since May 2000 and as Project Manager for the San Cristobal Project since January 1999. Prior to joining Apex Corporation, Mr. Shaw served from 1996 through 1998 as 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 the solvent extraction-electrowinning expansion of its Cerro Verde copper mine in Peru. Under Mr. Shaw's 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 a 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.

Carlos H. Fernandez Mazzi. Mr. Fernandez has served as President and Chief Executive Officer of Andean Silver Corporation LDC, our wholly owned subsidiary, since January 2002. From January 1999 through year-end 2001, he served as Executive Vice President and Chief Operating Officer of Andean Silver Corporation, and since July 1998 he has been a director of the San Cristobal Foundation. Andean Silver Corporation indirectly owns the San Cristobal Project. The San Cristobal Foundation implements community related investments near the San Cristobal Project. Prior to joining Apex Limited, Mr. Fernandez worked in the financial sector for over 12 years, specializing in investment banking and trade finance. From September 1996 through July 1998, Mr. Fernandez was a founding partner and director of Sudamer Valores S.A., a licensed brokerage firm, and a founding partner and chief executive officer of Innova Capital, a financial advisory and asset management firm, both located in La Paz, Bolivia.

From 1985 through 1996, he held various positions at BHN Multibanco S.A., including director responsible for new business development, Executive Vice President and Vice President, Operations and Finance. Mr. Fernandez earned a B.S. in industrial and systems engineering from the University of Arkansas and an M.B.A. from the University of Notre Dame.

Our insider trading policy permits our officers, directors and other insiders to enter into trading plans or arrangements for systematic trading in our securities under Rule 10b5-1 of the Securities Exchange Act of 1934. Certain of our officers previously have established such plans, and we anticipate that some or all of our other officers, directors or insiders may establish trading plans at some date in the future.

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

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 5% of those costs.

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. Unit	Metric Measure	Metric Unit	U.S. Measure
1 acre	0.4047 hectares	1 hectare	2.47 acres
1 foot	0.3048 meters	1 meter	3.28 feet
1 mile	1.609 kilometer	1 kilometer	0.62 miles
1 ounce (troy)	31.103 grams	1 gram	0.032 ounces (troy)
1 ton	0.907 tonne	1 tonne	1.102 tons

We may be subject from time to time to legal claims or proceedings, with or without merit. There are currently no legal claims or proceedings pending against us.

No matters were submitted to a vote of security holders in the fourth quarter of 2003.

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

Our Ordinary Shares are listed on the American Stock Exchange under the symbol "SIL." As of March 5, 2004, we had approximately 160 shareholders of record and an estimated 6,500 additional beneficial holders whose Ordinary Shares were held in street name by brokerage houses.

We have never paid any dividends on our Ordinary Shares and expect for the foreseeable future to retain all of our earnings from operations for use in expanding and developing our 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 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 5, 2004 was $22.85.

	2003				2002
Period	2003				2002
Period	High		Low		High		Low
1st Quarter	$	16.42	$	12.90	$	13.46	$	9.73
2nd Quarter		15.38		12.35		18.12		11.85
3rd Quarter		18.06		13.40		17.00		11.55
4th Quarter		21.51		12.70		15.63		12.15

The selected consolidated financial data of Apex Limited for the years ended December 31, 2003, 2002, 2001, 2000, and 1999, and the period from December 22, 1994 (inception) through December 31, 2003, are derived from our audited consolidated financial statements. 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.

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

The following discussion and analysis should be read 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, Mexico, Central America and Central Asia. We currently focus our resources primarily on the development and financing of our San Cristobal Project in Bolivia. At present, none of our properties is in production and, consequently, we have no current operating income or cash flow.

We completed an initial public offering of our Ordinary Shares on December 1, 1997. We completed a subsequent offering of Ordinary Shares and warrants during November 1999. During January and February 2004 we completed additional subsequent offerings totaling 10.4 million Ordinary Shares resulting in gross proceeds of $218.4 million and net proceeds of $208.6 million after commissions and fees. The 2004 offerings were completed at an average offering price of $21.01 per share and substantially completed the sale of securities available under our shelf registrations filed with the Securities and Exchange Commission.

During the first half of 2003, metals prices and capital market conditions remained at levels that we deemed unattractive for the development of San Cristobal. As a result, we kept exploration and administrative costs at levels below those of the previous two years. Interest income fell from the level earned in 2002, because capital market interest rates fell. Trading income improved, mainly due to the effect of higher metals prices on the small amount of silver and zinc that we had bought.

As metals prices rose late in 2003 and into the early part of 2004, we found the market conditions improving and as a result, were able to successfully complete the above-noted equity offerings in early 2004. During 2004, we anticipate working with our lead arranger for project financing, Barclays Capital, and other financial organizations to advance the financing for San Cristobal. During 2004, we anticipate completing most of the remaining engineering required to develop San Cristobal.

Interest and Other Income. Our interest and other income for the year ended December 31, 2003 was $0.5 million compared to $0.9 million and $2.2 million for the years ended December 31, 2002 and 2001, respectively. The 2003 decrease in interest and other income compared to 2002 is primarily the result of lower interest rates during 2003. The decrease in interest and other income for 2002 compared to 2001 was due to lower average cash balances and lower interest rates during 2002 as compared to 2001.

Trading Gains and Losses. We recorded a trading gain for the year ended 2003 of approximately $0.7 million compared to trading losses of approximately $0.1 million for 2002 and $1.0 million for 2001. The improvement in 2003 as compared to 2002 is primarily the result of rising silver and zinc prices, and to a lesser extent, rising lead prices during 2003. The improvement in 2002 of a $0.1 million loss as compared to the $1.0 million loss in 2001 is primarily the result of a smaller deterioration in the value of our long position in zinc during 2002. Inception to date, we have recorded a gain of approximately $0.2 million related to the trading program. That amount represents approximately $0.6 million of cash gains partially offset by $0.4 million of unrealized losses at December 31, 2003. Under FAS 133, fair value measurements may vary substantially from period to period based on spot prices, forward prices and quoted option volatilities.

Exploration. Our exploration expenses, including property holding costs and allocated administrative expenses, were $2.7 million for the year ended December 31, 2003, including $0.3 million value of Ordinary Shares issued to consultants, as compared to $3.9 million, including $0.9 million value of Ordinary Shares issued to acquire mineral rights, for the year ended December 31, 2002, and $3.7 million, including $0.9 million value of Ordinary Shares issued to acquire mineral rights for the year ended December 31, 2001. The decreases in our exploration expenses since 2001 were due primarily to the increased emphasis on conserving our cash balances.

Administrative. Our administrative expenses were $4.6 million for the year ended December 31, 2003 compared to $5.5 million and $5.9 million for the years ended December 31, 2002 and 2001, respectively. The decrease in our administrative expenses since 2001 is primarily the result of cost savings associated with the reduction of personnel and office facilities as part of our cash conserving policy. In addition, the 2003, 2002 and 2001 expenses include $1.8 million, $1.9 million and $0.5 million respectively, for the value of stock, options and warrants issued to consultants in lieu of cash.

Income Taxes. Apex Silver Mines Corporation, our U.S. management services company, is subject to U.S. income taxes. Otherwise we pay no income tax in the U.S. since we are incorporated in the Cayman Islands and do not conduct or expect to conduct business in the U.S. that would generate U.S. taxable income. The Cayman Islands currently impose no corporate taxation. We have been granted an exemption until January 16, 2015 from any form of corporate taxation that may subsequently be adopted in the Cayman Islands. Deferred tax assets of approximately $49.9 million at December 31, 2003, resulting from operating loss carry-forwards of our subsidiaries, have been entirely offset by valuation allowances.

As of December 31, 2003, we had cash and cash equivalents of $40.9 million compared to $44.1 million at December 31, 2002. The decrease in our cash and cash equivalents during 2003 is the result of $3.9 million capitalized to property, plant and equipment related to the development of the San Cristobal Project, $3.2 million used to fund operations, property holding costs and administrative costs, net of interest and other income, partially offset by $3.9 million in proceeds from the exercise of our stock options by certain employees, consultants and a former director.

Pursuant to two universal shelf registration statements filed with the Securities and Exchange Commission, we sold 10.4 million Ordinary Shares during January and February 2004. The sales resulted in gross proceeds of $218.4 million and net proceeds of $208.6 million after commissions and fees. The offerings were completed at a weighted average offering price of $21.01 per share and the offerings substantially complete the sale of the securities available under these registration statements. Proceeds from the offerings will be used to finance a portion of the construction and development of San Cristobal, advance evaluation of exploration properties and for general corporate purposes.

If metals and capital markets remain at levels that will allow us to do so, we intend to substantially complete the financing requirements for our San Cristobal project in the next twelve months. We continue to work with our lead arranger for project financing, Barclays Capital, as well as several multilateral agencies, to develop financing options for San Cristobal as part of a total financing package that may incorporate support from other official agencies as well as debt financing from banks and the use of capital markets. We have spent approximately $33 million on construction costs through December 31, 2003 and have expended approximately $98 million in total project capital on San Cristobal to date. Based on estimated revisions made during 2000 to the September 1999 feasibility study for the San Cristobal project, which assumes contract mining, we forecast remaining capital costs for construction to total approximately $435 million net of approximately $60 million in expected tax credits, including approximately $25 million which will be recovered against our future Bolivian income taxes after commencement of production. We expect to complete detailed engineering during 2004 and incorporate into our feasibility study any changes deriving from our ultimate infrastructure arrangements, which may result in increases to our forecasted

construction capital and working capital requirements. There can be no assurance that metals or capital markets will maintain their recently improved state or that we will be able to obtain the required remaining financing on terms that we find attractive, or at all.

During the next twelve months we expect to spend up to $25 million on infrastructure development, engineering and other costs related to our San Cristobal project. In addition, in order to maintain our current portfolio of mineral properties, we expect to make lease, patent and option payments during the next twelve months of about $1 million. There also is likely to be some discretionary spending on attractive exploration opportunities as they arise. Total administrative expenses are not expected to exceed $8 million during 2004, net of interest and other income. We plan to fund our project and operating expenditures for the next twelve months from our existing cash balances.

The following table summarizes our contractual obligations at December 31, 2003:

Contractual Obligations	Total		Less Than 1 - Year		2 - 3 Years		4 - 5 Years		Thereafter
	(thousands)
Debt	$	690	$	91	$	599	$	—	$	—
Capital Leases		—		—		—		—		—
Operating Leases		607		211		396		—		—
Purchase Obligations		—		—		—		—		—
Other GAAP Liabilities		—		—		—		—		—

From time to time we enter into lease option agreements related to exploration properties that are of interest to us. These agreements normally contain escalating lease payments required to maintain our exploration rights to the property. Such agreements are not included in the above table because exploration success is historically low and the agreements can be terminated by us at any time.

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. We expect 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 our mining operations and exploration activities. We intend to maintain standards of environmental compliance consistent with best contemporary industry practice.

The selection and application of accounting policies is an important process that has developed as our business activities have evolved and as the accounting rules have changed. Accounting rules generally do not involve a selection among alternatives, but involve an implementation and interpretation of existing rules, and the use of judgment, to the specific set of circumstances existing in our business. We comply with all applicable rules on or before their adoption, and we believe the proper implementation and consistent application of the accounting rules is critical. Our critical accounting policies are discussed below. You

should also read Note 2 of the accompanying Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K.

Our financial condition and results of operations as reflected in our financial statements are affected by estimates that we, or experts that we have retained, have made as to our proven and probable reserves. Reserve estimates involve subjective judgment and are based on numerous assumptions that may later prove to be inaccurate. These estimates include engineering evaluations of assay values derived from samplings of drill holes and other openings. Additionally, changes in the market prices of metals may render certain reserves containing relatively lower grades of mineralization uneconomic to mine. Further, availability of permits, changes in operating and capital costs, and other factors could materially and adversely affect ore reserves. Our current proven and probable reserve estimates at San Cristobal, total approximately 211 million tonnes of ore grading 65.81 grams per tonne of silver, 1.63% zinc and 0.61% lead. These reserves contain approximately 446 million ounces of silver, 7.6 billion pounds of zinc and 2.8 billion pounds of lead. The reserves are based on $4.62 per ounce silver, $0.38 per pound zinc and $0.22 per pound lead. These prices represent the three year average prices for each of the metals as per guidelines established by the Securities and exchange Commission.

To complete the project financing on San Cristobal, we may be required to hedge a portion of our planned production. In addition, when San Cristobal enters production, we may sell forward a portion of our production and use price-hedging techniques to mitigate some of the risks associated with fluctuating metals prices. We currently engage in limited metals trading activities utilizing puts and calls and other market instruments in anticipation of potential lender requirements for the San Cristobal project financing. We measure the fair value of open positions at each reporting period and record the difference in the carrying value to current earnings, in accordance with Statement of Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("FAS 133"). Under FAS 133, fair value measurements may vary substantially from period to period based on spot prices, forward prices and quoted option volatilities.

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 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.

To complete the project financing for San Cristobal, we expect to be required to hedge a portion of our planned production. In addition, when San Cristobal enters production, we may sell forward a portion of our production and use price hedging techniques to mitigate some of the risks associated with fluctuating metals prices. We currently engage in limited metals trading activities, utilizing puts and calls and other market instruments in anticipation of potential lender requirements for the San Cristobal project financing. See "Results of Operations."

The consolidated financial statements and supplementary information filed as part of this Item 8 are listed under Part IV, Item 15, "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

Our management carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report. Based on this evaluation, the principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are effective as of December 31, 2003.

During the quarter ended December 31, 2003, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to affect, our internal control over financial reporting.

While we believe our internal controls are adequate and that there are no material weaknesses, it should be noted that our disclosure controls and procedures and our internal controls will not necessarily prevent all error or fraud, and can thus not provide absolute assurance that all control issues or fraud can be detected.

Information regarding directors of Apex Limited 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 2004 annual meeting of shareholders (the "Proxy Statement"). See "Part I—Items 1 and 2: Business and Properties—Management" for information regarding executive officers of Apex Limited and certain executive officers of Apex Corporation.

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.

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 by reference in this report on Form 10-K.

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.

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

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.
10.1		Management Services Agreement among the Company and its subsidiaries.(2)
10.2		Non-Employee Directors' Share Plan, as amended.(1)
10.3		Employees' Share Option Plan.(1)
10.4		Form of Option Grant to Non-Employee Directors dated April 10, 1997.(3)
10.5		Employment contract between the Company and Marcel F. DeGuire, dated July 23, 1996.(2)
10.6		Employment contract between the Company and Mark A. Lettes, dated May 19, 1998.(1)
10.7		Employment contract between the Company and Keith R. Hulley, dated August 4, 1996.(2)
10.8		Registration Rights Agreement, dated October 28, 1997, by and among the Company, Silver Holdings, Consolidated, Argentum, Aurum LLC and Thomas S. Kaplan.(2)
10.9		Amended and Restated Voting Trust Agreement, dated October 29, 1997, between Thomas Kaplan and Consolidated.(2)
10.10		Form of Change of Control Agreement dated June 26, 2000.(4)
21		List of Subsidiaries.
23.1		Consent of Independent Accountants.
23.2		Consent of Mine Reserves Associates, Inc.
31.1		Certification of Chief Executive Officer of Periodic Report Pursuant to Rule 13a—14(a) and Rule 15d—14(a) (Section 302 of the Sarbanes-Oxley Act of 2002).
31.2		Certification of Chief Financial Officer of Periodic Report Pursuant to Rule 13a—14(a) and Rule 15d—14(a) (Section 302 of the Sarbanes-Oxley Act of 2002).
32.1		Certificate of Principal Executive Officer pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)
32.2		Certificate of Principal Financial Officer pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)

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 5, 2004 on its behalf by the undersigned, thereunto duly authorized.

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 Thomas S. Kaplan	Director	March 5, 2004
/s/ HARRY M. CONGER Harry M. Conger	Director	March 5, 2004
David Sean Hanna	Director
/s/ CHARLES L. HANSARD Charles L. Hansard	Director	March 5, 2004
/s/ OVE HOEGH Ove Hoegh	Director	March 5, 2004
/s/ KEITH R. HULLEY Keith R. Hulley	Director	March 5, 2004
/s/ KEVIN R. MORANO Kevin R. Morano	Director	March 5, 2004
/s/ PAUL SOROS Paul Soros	Director	March 5, 2004
/s/ CHARLES B. SMITH Charles B. Smith	Director	March 5, 2004
/s/ MARK A. LETTES Mark A. Lettes	Chief Financial Officer (Principal Financial and Accounting Officer)	March 5, 2004

		Page
Report of Independent Accountants		F-2
Consolidated Balance Sheets at December 31, 2003 and 2002		F-3
Consolidated Statements of Operations for the years ended December 31, 2003, 2002, and 2001 and for the period from December 22, 1994 (inception) through December 31, 2003		F-4
Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2003, 2002, and 2001 and for the period from December 22, 1994 (inception) through December 31, 2003		F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002, and 2001 and for the period from December 22, 1994 (inception) through December 31, 2003		F-7
Notes to the Consolidated Financial Statements		F-8

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, changes in shareholders' equity and cash flows present fairly, in all material respects, the financial position of Apex Silver Mines Limited and its subsidiaries (a development stage enterprise) at December 31, 2003 and December 31, 2002, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2003 and, cumulatively, for the period from December 22, 1994 (date of inception) to December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. 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 of America, 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 our opinion.

APEX SILVER MINES LIMITED
An Exploration and Development Stage Company

CONSOLIDATED BALANCE SHEETS

(Expressed in United States dollars)

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

APEX SILVER MINES LIMITED
An Exploration and Development Stage Company

CONSOLIDATED STATEMENTS OF OPERATIONS

(Expressed in United States dollars)

APEX SILVER MINES LIMITED
An Exploration and Development Stage Company

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(Expressed in United States dollars)

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

APEX SILVER MINES LIMITED
An Exploration and Development Stage Company

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Continued)

(Expressed in United States dollars)

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

APEX SILVER MINES LIMITED
An Exploration and Development Stage Company

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in United States dollars)

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

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 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 1996, Apex Limited issued 4,256,700 Ordinary Shares at $8 per share in a private placement transaction (the "Private Placement") for net proceeds of approximately $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. In conjunction with the Recapitalization and the Private Placement, Apex Limited and the shareholders of Apex LDC entered into a 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 36,874,640 Ordinary Shares outstanding at December 31, 2003 At December 31, 2003 Apex 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.

e. 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, priced at $12.00 per unit, were comprised of one Ordinary Share and a warrant which was exercisable for one-half of an Ordinary Share at a price of $18.00 per ordinary share. All of the warrants expired on November 4, 2002 and none of the warrants was exercised.

f. During April 2002, the Company sold 500,000 of its Ordinary Shares, pursuant to a universal shelf registration statement. The sale resulted in gross proceeds of approximately $6.6 million and expenses of approximately $0.1 million, which were paid in the form of a stock grant.

g. 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 its subsidiaries.

h. The Company, through indirect subsidiaries, conducts exploration activities in Mexico, Central America and South America and currently holds interests in non-producing silver resource properties in Bolivia, Mexico and Peru. The Company is in the process of developing its San Cristobal property and evaluating certain of its other properties to determine the economic feasibility of bringing one or more of the properties into production.

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:

These consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries.

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

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.

The Company expenses general prospecting costs and the costs of acquiring and exploring unevaluated mining properties. When a mineral property is determined to have proven and probable reserves, development costs are capitalized to mineral properties. When proven and probable ore reserves are developed and operations commence, capitalized costs will be amortized using the units-of-production method over proven and probable reserves. 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, 2003, capitalized property and development costs related to the San Cristobal Project amounted to $95,041,161. No other amounts related to mineral properties have been capitalized.

Mineral properties include costs to acquire development properties and property development costs. Mineral properties brought into production will be charged to operations using the units-of-production method based on estimated recoverable proven and probable reserves. Buildings are stated at cost and are depreciated using the straight-line method, over useful lives of thirty to forty years. Mining equipment and machinery are stated at cost and are depreciated using the straight-line method over useful lives of three to eight years. Other furniture and equipment are stated at cost and are depreciated using the straight-line method over estimated useful lives of three to five years.

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 grouping, 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.

At December 31, 2003, the Company has a stock-based employee compensation plan, which is described more fully in Note 8. The Company accounts for this plan under the recognition and measurement principles of APB Opinion No. 25, "Accounting for Stock Issued to Employees", and related interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation ("FAS 123"), to stock-based employee compensation:

		Year ended December 31, 2003			Year ended December 31, 2002			Year ended December 31, 2001
Net loss, as reported		$	(6,043,912	)	$	(8,654,089	)	$	(8,583,569	)
Less: Total stock based compensation expense determined under fair value based method for all awards, net of tax effect			(2,828,410	)		(2,614,014	)		(888,481	)

Pro forma net loss		$	(8,872,322	)	$	(11,268,103	)	$	(9,472,050	)

Net loss per Ordinary Share:
	Basic and diluted—as reported	$	(0.17	)	$	(.24	)	$	(.25	)

	Basic and diluted—pro forma	$	(0.24	)	$	(.32	)	$	(.27	)

For purposes of calculating the fair value of options, volatility for the three years presented 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 December 31, 2003		Year ended December 31, 2002		Year ended December 31, 2001
Weighted average risk-free interest rate	2.50	%	3.10	%	4.08	%
Volatility	42.80	%	42.50	%	40.60	%
Expected dividend yield	—		—		—
Weighted average expected life (in years)	2.93		2.91		2.88

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 2,119,425, 1,963,891and 1,895,150 Ordinary Shares were not included in the computation of diluted earnings per share at December 31, 2003, 2002, and 2001 respectively, because to do so would have been antidilutive. Also, warrants to purchase 100,000 Ordinary Shares were not included in the computation of diluted earnings per share at December 31, 2003, because to do so would have been antidilutive.

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 Statement of Accounting Standards No. 137, Deferral of the Effective Date of FAS Statement No. 133, became effective for the Company January 1, 2001. 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 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.

To complete the project financing on San Cristobal, the Company may be required to hedge a portion of its planned production. In addition, when San Cristobal enters production, the Company may sell forward a portion of its production and use price-hedging techniques to mitigate some of the risks associated with fluctuating metals prices. The Company currently engages in limited metals trading activities utilizing puts and calls and other market instruments in anticipation of potential lender requirements for the San Cristobal project financing. The Company measures the fair value of open positions at each reporting period during 2003, and records the difference in the carrying value to current earnings, in accordance with FAS 133. Adoption of FAS 133 had no effect on the Company's results of operations or

financial position as previously the Company had marked its open positions to market and included gains or losses in earnings. During 2003, 2002 and 2001 the Company recorded mark to market gains (losses) of approximately $728,000, ($71,000) and ($972,000) respectively. Inception to date the Company has recorded a gain of approximately $216,000 related to the trading program. Of that amount, approximately $560,000 represents a cash gain partially offset by $344,000 of unrealized losses in value at December 31, 2003. Under FAS 133, fair value measurements may vary substantially from period to period based on spot prices, forward prices and quoted option volatilities.

Effective January 1, 2003, the Company adopted Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations("FAS 143") which established a uniform methodology for accounting for estimated reclamation and abandonment costs. Adoption of the standard had no current impact on the Company's earnings or financial position. See note 10.

In April 2002, the FASB issued Statement of Financial Accounting Standards No. 145, Rescission of FAS Statements No. 4, 44 and 64, Amendment of FAS Statement No. 13, and Technical Corrections ("FAS 145"), which is generally effective for transactions occurring after May 15, 2002. Through the rescission of FAS Statements 4 and 64, FAS 145 eliminates the requirement that gains and losses from extinguishment of debt be aggregated and, if material, be classified as an extraordinary item net of any income tax effect. FAS 145 made several other technical corrections to existing pronouncements that may change accounting practice. The Company has adopted FAS 145 which did not have an impact on its results of operations or financial position at the time of adoption and is not expected to have a material impact in the future.

In June 2002, the FASB issued Financial Accounting Standards No. 146, Accounting for Costs Associated with Exit or Disposal Activities ("FAS 146"). FAS 146 is effective for exit or disposal activities that are initiated after December 31, 2002. This Statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." The Company has adopted FAS 146 which did not have an impact on its results of operations or financial position at the time of adoption and is not expected to have a material impact in the future.

In December 2002, the Financial Accounting Standards Board issued Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure ("SFAS No. 148"). SFAS No. 148, amends SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. As the Company accounts for stock-based employee compensation using the intrinsic value method in accordance with APB No. 25, Accounting for Stock Issued to Employees, the Company has adopted the disclosure requirements of SFAS No. 148, effective December 31, 2002.

In April 2003, the FASB issued SFAS No. 149 "Amendment of Statement 133 on Derivative Instruments and Hedging Activities" ("SFAS 149") to amend and clarify financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. The changes in this statement improve financial reporting by requiring that contracts

with comparable characteristics be accounted for similarly to achieve more consistent reporting of contracts as either derivative or hybrid instruments. SFAS 149 is effective for contracts entered into or modified after June 30, 2003. SFAS 149 did not have any impact on the Company's financial position or results of operations at December 31, 2003, or for the year then ended. SFAS 149 is not expected to have any impact on the Company's financial position or results of operations.

In May 2003, the FASB issued SFAS No. 150 "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity" ("SFAS 150") providing guidance regarding classification of freestanding financial instruments as liabilities (or assets in some circumstances). This SFAS was originally effective for financial instruments entered into or modified after May 31, 2003, otherwise at the beginning of the first interim period beginning after June 15, 2003 and was to be applied prospectively. However, on October 29, 2003, the FASB decided to defer the provisions of paragraphs 9 and 10 of SFAS 150 as they apply to mandatorily redeemable non-controlling interests. These provisions require that mandatorily redeemable minority interests within the scope of SFAS 150 be classified as a liability on the parent company's financial statements in certain situations, including when a finite-lived entity is consolidated. The deferral of those provisions is expected to remain in effect while these interests are addressed in either Phase II of the FASB's Liabilities and Equity Project or Phase II of the FASB's Business Combinations Project. The Board also decided to (i) preclude any "early" adoption of the provisions of paragraph 9 and 10 for these non-controlling interests during the deferral period, and (ii) require the restatement of any financial statements that have been issued where these provisions were applied to mandatorily redeemable non-controlling interests. SFAS 150 is not expected to have any impact on the Company's financial position or results of operations.

In November 2002, the Financial Accounting Standards Board issued Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others ("FIN No. 45"). FIN No. 45 broadens the disclosures to be made by the guarantor about its obligations under certain guarantees. FIN No. 45 also requires a guarantor to recognize a liability for the fair value of the obligation undertaken in issuing the guarantee at the inception of a guarantee. The recognition provision of FIN No. 45 is applicable on a prospective basis for guarantees that are issued or modified after December 31, 2002. As required by FIN No. 45, the Company has adopted the disclosure requirements effective December 31, 2002. The Company has adopted FIN No. 45 which did not have an impact on its results of operations or financial position at the time of adoption and is not expected to have a material impact in the future.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51 ("FIN No. 46"), which provides guidance on the identification and reporting for entities over which control is achieved through means other than voting rights. FIN 46 defines such entities as variable interest entities (VIEs). A FASB Staff Position issued in October 2003 deferred the effective date of FIN 46 to the first interim or annual period ending after December 15, 2003 for entities created before February 1, 2003 if certain criteria are met. Subsequently, during December 2003, the FASB issued a revised Fin 46 (FIN 46R) which replaces the original interpretation. Application of this revised interpretation is required in financial statements for companies that have interests in VIEs or potential VIEs commonly referred to as special-purpose entities for periods ending after December 15, 2003. Application for all other types of entities is required in financial statements for periods ending after March 15, 2004. The Company is currently evaluating the impact FIN 46R will have on its financial statements. Based on current assessments the Company does not beleive that FIN 46 will have impact on results of operations, financial position or cash flow.

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 may 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, 2003 and 2002, operating loss carryforwards generated by our activities in Bolivia amounted to approximately $20.0 and $18.6 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.

As of December 31, 2003 and 2002, operating loss carryforwards generated by the Company's subsidiaries other than Bolivia amounted to approximately $29.9 and $28.3 million, respectively. The deferred tax assets resulting from these operating loss carryforwards have been entirely offset by valuation allowances.

	December 31, 2003		December 31, 2002
Prepaid insurance	$	487,677	$	505,861
Prepaid consulting & contractor fees		1,317,442		—
Trade receivables, travel advances and other		361,883		28,374

	$	2,167,002	$	534,235

The prepaid consulting and contractor fees at December 31, 2003, consist primarily of the value of stock issued to two contractors to provide exploration services related to certain of the Company's properties in Bolivia, Peru and Uzbekistan, which will be completed in 2004. Included in trade receivables, travel advances and other at December 31, 2003, is the $225,641 value of stock options exercised in late December 2003, for which the cash had not been received.

The Company has recorded value added tax ("VAT") paid in Bolivia and Mexico as recoverable assets. Bolivian law states that VAT paid prior to production is recoverable as a credit against Bolivian taxes arising from production, including income tax. The VAT paid in 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. The VAT paid in Mexico is related to exploration activities and according to Mexican law is recoverable upon application to the tax authorities. Although the Company has filed applications to recover all VAT paid through the third quarter of 2002, the Mexican tax authorities have not refunded any

VAT to the Company since early 2000. The Company has been informed that the Mexican tax authorities, for their own fiscal reasons, have made no VAT refunds to any companies since early 2000. Based on these circumstances, the Company recorded a 50% impairment of the recoverable VAT in Mexico, although it remains the Company's intent to recover the full amount. At December 31, 2003, the recoverable VAT recorded for Bolivia and Mexico is $5,056,095 and $182,553 respectively after the impairment.

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

	December 31, 2003			December 31, 2002
Mineral properties (San Cristobal)	$	95,041,160		$	90,322,022
Buildings		1,408,242			1,408,242
Mining equipment and machinery		2,971,288			3,039,941
Other furniture and equipment		845,252			845,252

		100,265,942			95,615,457
Less: Accumulated depreciation		(2,286,626	)		(1,834,106	)

	$	97,979,316		$	93,781,351

Depreciation expense for the periods ended December 31, 2003, 2002 and 2001 totaled $35,841, $67,409 and $126,661, respectively. For the periods ended December 31, 2003, 2002 and 2001, depreciation associated with the San Cristobal Project was capitalized in the amounts of $469,195, $507,874 and $384,852 respectively.

		December 31, 2003			December 31, 2002
San Cristobal area properties		$	—		$	164,000
San Cristobal Foundation			689,958			689,958

	Sub-total		689,958			853,958
Less: Current portion			(90,500	)		(84,000	)

	Total	$	599,458		$	769,958

In 1998 and prior the Company exercised options to purchase certain properties in the San Cristobal area and recorded notes payable on the Company's books related to those purchases. During 2003 the Company issued 11,287 of its Ordinary Shares valued at $164,000 to Monica de Prudencio as payment in full for the last of those notes.

In 1999 the Company executed a non-interest bearing note agreement with the San Cristobal Foundation for $2 million payable by the end of 2005. During 2002 the Company issued 50,000 of its Ordinary Shares valued at $809,500 to the San Cristobal Foundation as partial payment on the note. Prior to 2002 the Company had made payments on the note totaling $500,542. The note was being carried on the Company's books for $689,958 at December 31, 2003.

The Company has established a plan to issue share options and other awards to be valued 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 granted cannot exceed ten percent of the Company's outstanding shares. 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. 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 granted cannot exceed five percent of the Company's outstanding shares. 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 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 ten 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.

A summary of the Company's stock options at December 31, 2003, 2002 and 2001 and changes during those years is presented in the following table:

Options granted during 2003, 2002 and 2001 ranged in exercise price from $13.83 to $16.95, $7.00 to $15.76 and $7.44 to $10.32 respectively.

In addition, on December 4, 2003, December 13, 2002 and December 13, 2001, the Company issued 48,142, 61,396, and 73,638 respectively of its Ordinary Shares to employees as performance bonuses. One hundred percent of the bonus was paid in shares for all three years. These shares vest two years after the grant date.

No asset retirement liabilities have been recorded by the Company at December 31, 2003, as there has been no disturbance that would require reclamation or remediation at San Cristobal or at any of the Company's other projects.

The Company has lease commitments associated with the corporate headquarters office space, which expires in 2006 as follows:

		2004		2005		2006		2007		2008
Corporate headquarters office lease		$	211,205		$	214,715		$	181,367		$	—		$	—

Payments associated with this lease were recorded to rent expense by the Company in the amounts of $215,323, $214,631and $145,666 for the years ended December 31, 2003 2002and 2001respectively.

The Company had outstanding letters of credit totaling $460,000 and $200,000 at December 31, 2003 and 2002, respectively. The outstanding letters of credit at December 31, 2003 are associated with the power facilities and the port facilities for the San Cristobal Project. The Company has an agreement with the bank whereby $800,000 of cash is blocked to collateralize the current and possible future letters of credit.

The Company's financial instruments consist of cash and cash equivalents, receivables, value added tax recoverable, accounts payable, other current liabilities and long-term debt. Except for the value added tax 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, 2002 and 2001, are as follows:

	2003		2002
	Carrying Amount		Fair Value		Carrying Amount	Fair Value
Value added tax recoverable	$	5,238,648		$	3,807,476	$	5,205,157	$	3,783,134
Notes payable		689,958			540,649		769,958		629,621

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

In 1998, the Company adopted Statement of Accounting Standards No. 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 substantially all of the Company's long-lived assets are in Bolivia.

The following table summarizes the Company's quarterly results of operations for the years ended December 31, 2003 and 2002:

On January 28, 2004, the Company completed an 8.1 million share offering at a price of $20.79 per share realizing total gross proceeds of $168.4 million and net proceeds of $161.1 million after commissions and fees. On February 18, 2004, the Company completed an additional 2.3 million share offering at a price of $21.81 per share realizing total gross proceeds of $50 million and net proceeds of $47.4 million after commissions and fees. The proceeds from the two offerings will be used to finance a portion of the construction and development of the Company's San Cristobal Project, advance evaluation of exploration properties and for other general corporate purposes.

(Mark One)
ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2003
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Walker House Mary Street George Town, Grand Cayman Cayman Islands, British West Indies (Address of principal executive office)		Not Applicable (Zip Code)
(345) 949-0050 (Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Ordinary Shares, $0.01 par value		Name of each exchange on which registered American Stock Exchange

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

																	For the period December 22, 1994 Inception Through December 31, 2003
		Year ended December 31,
		2003			2002			2001			2000			1999
		(amounts in thousands, except per share amounts)
Statement of Operations:
Income and expenses
	Interest and other income	$	550		$	870		$	2,158		$	5,206		$	1,028		$	14,269
	Trading gains (losses)		728			(71	)		(972	)		457			86			216
	Exploration		(2,733	)		(3,852	)		(3,727	)		(4,412	)		(6,014	)		(62,890	)
	Administrative		(4,553	)		(5,534	)		(5,916	)		(8,755	)		(2,846	)		(33,836	)
	Amortization and depreciation		(36	)		(67	)		(127	)		(236	)		(233	)		(1,131	)

Loss before minority interest			(6,044	)		(8,654	)		(8,584	)		(7,740	)		(7,979	)		(83,372	)
Minority interest in loss of consolidated subsidiary			—			—			—			—			—			4,559

Net loss for the period		$	(6,044	)	$	(8,654	)	$	(8,584	)	$	(7,740	)	$	(7,979	)	$	(78,813	)

Net loss per Ordinary Share—Basic and diluted		$	(0.17	)	$	(0.24	)	$	(0.25	)	$	(0.22	)	$	(0.29	)	$	(2.84	)

Weighted average Ordinary Shares outstanding			36,576			35,678			34,634			34,473			27,601			27,795

Cash Flow Data:
Net cash provided by (used in) financing activities		$	3,875		$	11,277		$	(148	)	$	(439	)	$	94,073		$	205,764
Net cash used in operating activities			(3,199	)		(3,692	)		(7,175	)		(7,582	)		(8,289	)		(75,301	)
Net cash used in investing activities			(3,923	)		(4,976	)		(12,244	)		(27,172	)		(15,705	)		(89,564	)

		$	(3,247	)	$	2,609		$	(19,567	)	$	(35,193	)	$	70,079		$	40,899

Balance Sheet Data:
Total assets		$	146,511		$	144,055		$	135,898		$	143,715		$	151,077
Long term liabilities			599			770			1,630			1,896			3,137
Shareholders' equity			143,986			141,731			132,266			137,557			144,828

			December 31, 2003			December 31, 2002
Assets
Assets
	Cash and cash equivalents		$	40,898,745		$	44,145,593
	Accrued interest receivable			27,739			136,489
	Prepaid expenses and other assets			2,167,002			534,235

		Current assets		43,093,486			44,816,317
	Property, plant and equipment (net)			97,979,316			93,781,351
	Value added tax recoverable (net)			5,238,648			5,205,157
	Other			199,542			251,959

		Total assets	$	146,510,992		$	144,054,784

Liabilities and Shareholders' Equity
Liabilities
	Accrued salaries, wages and benefits		$	37,480		$	31,668
	Accounts payable			1,797,368			1,438,425
	Current portion of notes payable			90,500			84,000

		Current liabilities		1,925,348			1,554,093
Notes payable				599,458			769,958
Commitments and contingencies (Note 11)				—			—

		Total liabilities		2,524,806			2,324,051
Shareholders' equity
	Ordinary Shares, $.01 par value, 75,000,000 shares authorized; 36,874,640 and 36,268,317 shares issued and outstanding, respectively			368,746			362,683
	Contributed surplus			222,430,086			214,136,784
	Accumulated deficit			(78,812,646	)		(72,768,734	)

		Total shareholders' equity		143,986,186			141,730,733

		Total liabilities and shareholders' equity	$	146,510,992		$	144,054,784

			Year ended December 31, 2003			Year ended December 31, 2002			Year ended December 31, 2001			For the period December 22, 1994 (inception) through December 31, 2003
Income and expenses
	Interest and other income		$	549,624		$	869,512		$	2,157,442		$	14,269,527
	Trading gains (losses)			728,465			(71,213	)		(971,669	)		216,331
	Exploration			(2,733,113	)		(3,851,529	)		(3,727,237	)		(62,890,117	)
	Administrative			(4,553,047	)		(5,533,450	)		(5,915,444	)		(33,836,098	)
	Amortization and depreciation			(35,841	)		(67,409	)		(126,661	)		(1,131,175	)

Loss before minority interest				(6,043,912	)		(8,654,089	)		(8,583,569	)		(83,371,532	)
Minority interest in loss of consolidated subsidiary				—			—			—			4,558,886

		Net loss for the period	$	(6,043,912	)	$	(8,654,089	)	$	(8,583,569	)	$	(78,812,646	)

Net loss per Ordinary Share—basic and diluted(1)			$	(0.17	)	$	(0.24	)	$	(0.25	)	$	(2.84	)

Weighted average Ordinary Shares outstanding				36,576,367			35,677,844			34,634,026			27,794,516

		APEX SILVER MINES LIMITED Registrant
		By:	/s/ KEITH R. HULLEY Keith R. Hulley Chief Exeuctive Officer (Principal Executive Officer)

		Shares Outstanding	Amount		Contributed Surplus			Accumulated Deficit and Comprehensive Deficit			Total Shareholders' Equity
Issuance of shares upon incorporation
	December 22, 1994 ($0.85 per share)	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 ($8.00 per share)		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 ($11.00 per share)		268,496		2,685		2,950,771			—			2,953,456
Issuance of shares to associates ($11.00 per share)		138,595		1,386		1,523,159			—			1,524,545
Issuance of shares for services ($1.49 per share)		115,207		1,152		231,566			—			232,718
Stock option compensation expense		—		—		416,562			—			416,562
Issuance of shares upon Initial Public Offering ($11.00 per share)		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 ($7.91 per share)		25,001		250		197,473			—			197,723
Stock awards ($8.50 per share)		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 ($8.77 per share)		25,549		256		223,900			—			224,156
Sale of Ordinary Share units ($12.00 per unit)		8,090,132		80,901		94,004,628			—			94,085,529
Commissions paid in stock ($12.00 per share)		84,184		842		(842	)		—			—
Stock awards ($12.06 per share)		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
Stock compensation ($10.88 per share)		5,100		51		55,412			—			55,463
Stock awards ($9.13 per share)		15,361		153		140,168			—			140,321
Unearned compensation		—		—		272,667			—			272,667
Net loss and comprehensive loss		—		—		—			(7,739,853	)		(7,739,853	)

Balance, December 31, 2000		34,486,629		344,866		192,742,800			(55,531,076	)		137,556,590

			Year ended December 31, 2003			Year ended December 31, 2002			Year ended December 31, 2001			For the period December 22, 1994 (inception) through December 31, 2003
Cash flows from operating activities:
	Net cash used in operating activities (Note 9)		$	(3,198,699	)	$	(3,692,392	)	$	(7,174,665	)	$	(75,301,567	)

Cash flows from investing activities:
	Additions to property, plant, and equipment			(3,922,731	)		(4,975,491	)		(12,244,412	)		(89,563,661	)

		Net cash used in investing activities		(3,922,731	)		(4,975,491	)		(12,244,412	)		(89,563,661	)

Cash flows from financing activities:
	Net proceeds from issuance of Ordinary Shares			—			6,550,000			—			198,311,070
	Payment of notes			—			(335,657	)		(474,001	)		(1,949,550	)
	Proceeds from exercise of stock options & warrants			3,874,582			5,062,952			325,996			9,685,409
	Deferred organizational and financing costs			—			—			—			(282,956	)

		Net cash provided by (used in) financing activities		3,874,582			11,277,295			(148,005	)		205,763,973

Net increase (decrease) in cash and cash equivalents				(3,246,848	)		2,609,412			(19,567,082	)		40,898,745
Cash and cash equivalents beginning of period				44,145,593			41,536,181			61,103,263			—

Cash and cash equivalents end of period			$	40,898,745		$	44,145,593		$	41,536,181		$	40,898,745

Supplemental non-cash transactions:
	Shares issued as compensation (expensed) at an average price of $18.57, $12.95 and $9.27 per share respectivly		$	1,037,755		$	954,647		$	758,524
	Shares issued as compensation (capitalized) at an average price of $12.97and $12.95 per share respectivly		$	311,075		$	195,504		$	—
	Acquisition of mineral rights for Ordinary Shares at an average of $15.37 and $9.43 per share respectivly		$	—		$	892,159		$	906,751
	Payment of debt with Ordinary Shares at an average of $14.53, $16.19 and $10.95 per share respectivly		$	164,000		$	953,500		$	776,082
	Payment of consulting services with Ordinary Shares, options and warrants at an average of $15.13, $13.34 and $11.04 per share respectivly		$	2,911,942		$	3,563,045		$	525,440
	Assets transferred as partial payment of debt		$	—		$	—		$	206,911

	2003				2002				2001
Options	Number of Shares		Average Price Per Share		Number of Shares		Average Price Per Share		Number of Shares		Average Price Per Share
Outstanding at beginning of period	1,963,891		$	11.01	1,895,150		$	9.69	1,498,128		$	9.91
Granted during period	592,005		$	16.69	635,235		$	13.11	571,548		$	9.24
Forfeited or expired during period	(86,750	)	$	11.08	(11,250	)	$	9.03	(135,407	)	$	10.53
Exercised during period	(349,720	)	$	9.84	(555,244	)	$	9.12	(39,119	)	$	8.33

Outstanding at end of period	2,119,426		$	12.75	1,963,891		$	11.01	1,895,150		$	9.69

Exercisable at end of period	1,097,081				971,116				922,720
Weighted average fair value of options outstanding			$	3.37			$	3.02			$	2.27
Weighted average remaining contractual life	7.8 years				7.9 years				7.9 years

			Year ended December 31, 2003			Year ended December 31, 2002			Year ended December 31, 2001			For the period December 22, 1994 (inception) through December 31, 2003
Cash flows from operating activities:
	Net loss		$	(6,043,912	)	$	(8,654,089	)	$	(8,583,569	)	$	(78,812,646	)
	Adjustments to reconcile net loss to net cash used in operating activities:
		Amortization and depreciation		35,841			67,409			126,661			1,131,175
		Minority interest in loss of consolidated subsidiary		—			—			—			(4,558,886	)
		Stock compensation expense		1,037,755			954,647			758,524			3,736,578
		Shares issued in consideration for services		2,911,942			3,563,045			525,440			8,524,972
		Shares issued to purchase mineral rights		—			892,159			906,754			1,798,913
Changes in operating assets and liabilities:
		(Increase) decrease in accrued interest receivable		108,750			(57,444	)		135,214			(27,739	)
		(Increase) decrease in prepaid expenses and other assets		(1,632,767	)		(366,772	)		60,301			(2,253,744	)
		Increase in value added tax recoverable		(33,491	)		(134,020	)		(47,116	)		(5,238,648	)
		Increase (decrease) in accrued salaries, wages and benefits		5,812			7,700			(135,497	)		37,480
		Increase (decrease) in accounts payable		358,943			146,868			(933,158	)		(97,272	)
		Other increase (decrease)		52,428			(111,895	)		11,781			458,300

Net cash used in operating activities			$	(3,198,699	)	$	(3,692,392	)	$	(7,174,665	)	$	(75,301,567	)

	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
2003
Net loss for the period	$	1,693,285	$	2,060,712	$	954,837	$	1,335,078
Net loss per Ordinary Share—basic and diluted	$	0.05	$	0.06	$	0.03	$	0.04
2002
Net loss for the period	$	1,070,235	$	3,264,637	$	2,412,383	$	1,906,834
Net loss per Ordinary Share—basic and diluted	$	0.03	$	0.09	$	0.07	$	0.05