UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
DIVISION OF
CORPORATION FINANCE
Mail Stop 7010
July 5, 2006
Mr. Mark A. Lettes
Chief Financial Officer
Apex Silver Mines Limited
1700 Lincoln Street, Suite 3050
Denver, Colorado 80203
Re: Apex Silver Mines Limited
Registration Statement on Form S-3
Filed June 9, 2006
File No. 333-134912
Form 10-K for the Fiscal Year Ended December 31,
2005
Filed March 31, 2006
File No. 001-13627
Form 10-Q for the Fiscal Quarter Ended March 31,
2006
Filed May 9, 2006
File No. 1-13627
Dear Mr. Lettes:
We have limited our review of your filing to those issues we
have addressed in our comments. Where indicated, we think you
should
revise your document in response to these comments. If you
disagree,
we will consider your explanation as to why our comment is
inapplicable or a revision is unnecessary. Please be as detailed
as
necessary in your explanation. In some of our comments, we may
ask
you to provide us with information so we may better understand
your
disclosure. After reviewing this information, we may raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We
look forward to working with you in these respects. We welcome
any
questions you may have about our comments or on any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Form S-3 filed June 9, 2006
General
1. We have received your requests for confidential treatment. We
will
issue in a separate letter any comments relating to the
confidential
treatment request. We will not be in a position to consider a
request
for accelerated effectiveness of the Form S-3 until all
outstanding
issues, including any relating to the requests for confidential
treatment, have been resolved.
Form 10-K for the Fiscal Year Ended December 31, 2005
Financial Statements
Report of Independent Registered Public Accounting Firm, page F-2
2. We note that your auditors` report does not refer to the audit
of
the cumulative period from December 22, 1994 (inception) through
December 31, 2005 presented in your financial statements; however
the
cumulative period columns are not labeled unaudited. Please
resolve
this inconsistency.
Consolidated Statements of Cash Flows, page F-9
3. Tell us why you classified your fiscal year 2005 restricted
cash
balance increase of $135 million as an investing cash outflow on
your
statements of cash flows, given that you are reporting the
restricted
cash as an asset on your balance sheet as of December 31, 2005.
Similarly, explain why you classified your first quarter 2006
restricted cash balance decrease of $88.6 million as an investing
cash
inflow on your statements of cash flows on page 5 of your Form 10-
Q,
given that you appear to have held the cash at the beginning of
this
period. Explain the reasons you believe your reporting is
consistent
with the purpose of the statement described in paragraphs 4
through 6
of SFAS 95, and how you have interpreted the definitions of cash
and
cash equivalents and investing cash flows that are set forth in
paragraphs 8 and 15 through 17 of this guidance in arriving at
your
view.
Note 1 - Incorporation, Recapitalization and Operations, page F -
10
4. We note you disclose that Apex Silver was formed in March 1996
to
serve as a holding company for certain ownership interests in Apex
LDC, and that in August 1996, you completed a recapitalization
effected by a one-for-one exchange of shares between Apex Silver
and
Apex LDC. Please clarify in your disclosure why you used an
inception
date of December 22, 1994 in your financial statements if you were
not
formed until March 1996. Additionally, clarify whether your
recapitalization was a reverse merger, and what recapitalization
items
have been given retroactive effect to the date of incorporation of
Apex LDC. Disclose the number of shares exchanged, and the number
of
shares outstanding immediately before and after your
recapitalization
transaction. It should be clear which entity was regarded as the
acquiring entity for accounting purposes.
Note 2 - Summary of Significant Accounting Policies, page F-10
f. Mining properties, exploration and development costs, page F -
11
5. Please expand your disclosure to add details sufficient to
understand how your accounting policy compares to that required
under
EITF 04-3 for costs of acquiring properties having value beyond
proven
and probable reserves.
m. Derivative financial instruments, page F -15
6. We note your disclosure indicating that in the future you may
apply
hedge accounting to certain of your metals derivative positions.
Please understand that in order to qualify for hedge accounting of
forecasted transactions, or the normal sales scope exception in
SFAS
133, it is likely you would first need to establish production at
a
level that would allow you to appropriately form expectations
about
probability of occurrence; or to show sales at a level that would
appropriately be characterized as normal.
Note 3 - Investments, page F -17
7. We note from your statements of cash flows on page F-9 that you
had
a $145.5 million investing cash inflow in 2005 from sale of held-
to-
maturity investments. We note your disclosure on page F-19 that
you
had to liquidate $34 million of these investments prior to their
maturity dates as a requirement of your project finance facility.
Please clarify in your disclosure the reason for your sale of the
remaining held-to-maturity investments. The conditions supporting
your initial and continuing classification of the investments in
accordance with the guidance in paragraphs 7 through 9 of SFAS 115
should be clear.
Form 10-Q for the Fiscal Quarter Ended March 31, 2006
Financial Statements
Consolidated Statements of Cash Flows, page 5
8. The guidance in Rule 10-01(a)(4) of Regulation S-X requires a
greater level of detail in the operating section of your statement
of
cash flows when changes in individual line items exceed 10 percent
of
the average cash provided by operations for the most recent three
years. Please comply with this guidance.
Note 2 - Significant Accounting Policies, page 6
9. We note you disclose that in February 2006 you began mining
"significant amounts" of oxide ore reserves at your San Cristobal
project, which have been placed in stockpiles for future
processing;
and that you believe the quantity and value of the minerals mined
were
sufficient to declare the start of ore production under EITF 04-6.
Accordingly, you began including costs associated with your oxide
ore
production as long term inventory in your financial statements.
Tell
us how you concluded that the accounting for your stripping costs
complied with EITF 04-6 if your minerals are not yet saleable.
Engineering Comments
Form 10-K for fiscal year December 31, 2005
Reserves, page 9
10. You present the proven and probable reserves as the sum total
of
these categories. Combining the proven and probable reserve
categories, is contrary to the explicit guidance of Industry Guide
7,
which provides that reserves may be combined as "proven/probable"
only
if proven and probable reserves cannot be readily segregated.
Please
provide clarifying statements within the filing explaining why
these
reserve categories cannot be separated and define your criteria
for
designating reserves. In the event you can distinguish between
the
reserve categories, please provide clarifying statements within
the
filing explaining as to how you distinguish between proven and
probable reserves and restate your reserve tables, segregating the
proven ore from the probable ore.
Exploration, page 11
11. You disclose a total of 62 exploration properties in which
your
company has an interest. The company website summarizes the major
exploration properties by country, providing a map showing the
general
locations, targeted mineralization, and acreages involved. For
the
material exploration property(s), provide the disclosures required
by
Industry Guide 7 (b). In particular, provide:
* The location, means of access to the property(s), and
transportation
from the property(s).
* A brief description of the rock formations and mineralization of
existing or potential economic significance on the property(s).
* A description of any work completed on the property(s) and its`
present condition.
* Provide a description of equipment and other infrastructure
facilities.
* The current state of exploration of the property(s).
* The total cost of the property(s) has incurred to date and
planned
future costs.
* If applicable, provide a clear statement that the property(s) is
without known reserves and the proposed program is exploratory in
nature.
Refer to Industry Guide 7 (b) (1)-(5) for specific guidance.
Industry
Guide 7 can be reviewed on the Internet at
http://www.sec.gov/divisions/corpfin/forms/industry.htm#secguide7.
12. Insert a small-scale map showing the location and access to
the
property(s), as required by Instruction 3(B) of Rule 102 of
Regulation
S-K. Note that SEC`s EDGAR program now accepts Adobe PDF files
and
digital maps, so please include these maps in any amendments that
are
uploaded to EDGAR. It is relatively easy to include automatic
links
at the appropriate locations within the document to GIF or JPEG
files,
which will allow the figures and/or diagrams to appear in the
right
location when the document is viewed on the Internet. For more
information, please consult the EDGAR manual, and if addition
assistance is required, please call Filer Support at 202-942-8900.
Otherwise, provide the map to the staff for review.
Exhibit 23.2
13. Please include the date of signature with the consent of Mine
Reserves Associates, Inc.
Closing Comments
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested information. Detailed cover
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing your amendment and
responses
to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing
includes all information required under the Securities Act of 1933
and
that they have provided all information investors require for an
informed investment decision. Since the company and its
management
are in possession of all facts relating to a company`s disclosure,
they are responsible for the accuracy and adequacy of the
disclosures
they have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
? should the Commission or the staff, acting pursuant to
delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
? the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
? the company may not assert staff comments and the declaration
of
effectiveness as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the
United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division
of Corporation Finance in connection with our review of your
filing or
in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering of
the securities specified in the above registration statement. We
will
act on the request and, pursuant to delegated authority, grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Lily Dang at (202) 551-3867 or Karl Hiller,
Accounting Branch Chief, at (202) 551-3686 if you have questions
regarding comments on the financial statements and related
matters.
Direct your questions relating to the engineering comments to
George
Schuler, Mining Engineer, at (202) 551- 3718. Please contact
Carmen
Moncada-Terry at (202) 551-3687 or, in her absence, the
undersigned,
at (202) 551-3740 with any other questions.
Sincerely,
H. Roger Schwall
Assistant Director
cc: VIA FACSIMILE
Deborah Friedman
Davis Graham & Stubbs LLP
(303) 893-1379
Mr. Mark A. Lettes
Apex Silver Mines Limited
July 5, 2006
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