Back to GetFilings.com

Use these links to rapidly review the document
TABLE OF CONTENTS

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

COMMISSION FILE NUMBER 1-13627

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 WHETHER THE REGISTRANT IS AN ACCELERATED FILER (AS DEFINED IN RULE 12B-2 OF THE EXCHANGE ACT): YES ý    NO o

        AT MAY 3, 2005, 48,065,297 ORDINARY SHARES, $0.01 PAR VALUE PER SHARE, WERE ISSUED AND OUTSTANDING.

APEX SILVER MINES LIMITED
FORM 10-Q
QUARTER ENDED MARCH 31, 2005

INDEX

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

APEX SILVER MINES LIMITED
An Exploration and Development Stage Company
CONSOLIDATED BALANCE SHEET
(Expressed in United States dollars)
(Unaudited)

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

3

APEX SILVER MINES LIMITED
An Exploration and Development Stage Company
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
(Expressed in United States dollars)
(Unaudited)

(1)

Interest expense and other borrowing costs are net of $1,104 and $114 capitalized for the three months ended March 31, 2005 and 2004 respectively and $3,582 capitalized for the inception to date period ended March 31, 2005.

(2)

Diluted earnings per share were antidilutive for all periods presented.

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

4

APEX SILVER MINES LIMITED
An Exploration and Development Stage Company
CONSOLIDATED STATEMENT OF CASH FLOWS
(Expressed in United States dollars)
(Unaudited)

(1)

During 2004 the Company reclassified auction rate securities having a stated or contractual maturity date for the underlying securities in excess of 90 days from cash equivalents to net cash used in investing activities. As a result of the purchase and sale of these securities the March 31, 2004 beginning cash balance decreased by $23.4 million from what was originally reported.

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

5

APEX SILVER MINES LIMITED
An Exploration and Development Stage Company

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

1.     Basis of Preparation of Financial Statements

        These unaudited interim consolidated financial statements of Apex Silver Mines Limited (the "Company") and its subsidiaries have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC"). Such rules and regulations allow the omission of certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America, so long as such omissions do not render the financial statements misleading. Certain prior period amounts have been reclassified to conform to the current period presentation.

        In the opinion of management, these financial statements reflect all adjustments that are necessary for a fair statement of the results for the periods presented. All adjustments were of a normal recurring nature. These interim financial statements should be read in conjunction with the annual financial statements of the Company included in its 2004 Annual Report on Form 10-K.

2.     Significant Accounting Policies

        In December 2004, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 123R, "Share-Based Payment" ("FAS No. 123R"), which revised Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation" ("FAS No. 123"), and superseded APB Opinion 25, "Accounting for Stock Issued to Employees" and its related implementation guidance. FAS No. 123R requires measurement and recording to the financial statements of the costs of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award, recognized over the period during which an employee is required to provide services in exchange for such award. The SEC has approved a new rule that for public companies delays the effective date of FAS 123(R). Under the SEC's rule, FAS 123(R) is now effective for public companies for annual, rather than interim, periods that begin after June 15, 2005. Effective January 1, 2004 the Company adopted FAS No. 123, as amended by FAS No. 148, "Accounting for Stock-Based Compensation—Transition and disclosure" ("FAS No. 148"). As provided for under FAS No. 148, the Company used the "modified prospective method" of transition. Under that method of transition the costs recognized in the financial statements for the quarters ended March 31, 2005 and 2004 are the same as if they had been based on their fair values at the grant date. The Company recognized stock-based compensation expense of $462 and $530 thousand net of $128 and $220 thousand capitalized for the quarters ended March 31, 2005 and 2004 respectively.

        The Company has adopted Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations" ("FAS 143") which establishes a uniform methodology for accounting for estimated reclamation and abandonment costs. According to FAS 143, the fair value of a liability for an asset retirement obligation ("ARO") will be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The ARO is capitalized as part of the carrying value of the assets to which it is associated, and depreciated over the useful life of the asset. At March 31, 2005 no asset retirement liabilities have been recorded by the Company as there has been only minimal disturbance that would require reclamation or remediation at San Cristobal or at any of the Company's other projects. Exploration, development and construction costs incurred to date consist primarily of building roads and other infrastructure and performing engineering for the project which will not be reclaimed. The Company expects a significant increase in activity at the San Cristobal site this year

6

which may require the recognition of an asset retirement obligation based upon estimated costs to reclaim the property.

New Accounting Standards

        In March, 2005, the ("FASB") issued Interpretation No. 47 ("FIN 47"), "Accounting for Conditional Asset Retirement Obligations", which clarifies that the term conditional asset retirement obligation, as used in FAS No. 143 refers to a legal obligation to perform an asset retirement activity where the timing or method of settlement are conditional on a future event. Where the obligation to perform the asset retirement activity is unconditional, even though uncertainty exists about the timing or method of settlement, the entity is required to recognize a liability for the fair value of the conditional retirement obligation if reasonably estimable. FIN 47 also clarifies when an entity would have sufficient information to reasonably estimate fair value. Currently the Company has not recorded an asset retirement obligation but an expected significant increase in activity at the San Cristobal site this year may require the recognition of an asset retirement obligation in the future.

        During 2004, a committee of the Emerging Issues Task Force ("EITF") began discussing the accounting treatment for stripping costs incurred during the production phase of a mine. During March 2005, the EITF reached a consensus that stripping costs incurred during the production phase of a mine are variable production costs that should be included in the costs of inventory produced during the period that the stripping costs are incurred. The Financial Accounting Standards Board ratified the EITF consensus. The EITF consensus is effective for the first reporting period in fiscal years beginning after December 15, 2005, with early adoption permitted. The Company is currently in the development phase and is currently evaluating the impact, if any, on the Company's financial position and results from operations once production commences.

3.     Investments

        The Company considers all highly-liquid investments with a maturity of three months or less when purchased to be cash equivalents. Short-term investments include investments with maturities greater than three months, but not exceeding twelve months. Long-term investments include investments with maturities greater than twelve months.

        The Company determines the appropriate classification of its investments in debt and equity securities at the time of purchase and reevaluates such determinations at each balance sheet date. Debt securities are classified as held to maturity when the Company has the intent and ability to hold the securities to maturity. Debt securities are stated at amortized cost, which approximates market, and include government agency and corporate obligations. Short term securities investments available for sale are marked-to-market at each reporting period. Changes in the value of the securities are recorded, net of tax, as a component of other comprehensive income. If declines in value are deemed other than temporary, a charge is made to net loss for the period.

7

        The Company invests only in government and corporate securities rated "investment grade" or better. The following tables summarize the Company's investments at March 31, 2005 and December 31, 2004:

8