Apex Silver officials assured analysts Tuesday that Boliviahas no intention of nationalizing mining companies, stressing that the nation'sMining Ministry specifically mentioned it would not nationalize Apex's new SanCristobal silver mine.

However, analysts expressed concern about San Cristobal's funding requirements including$82.1 million contributed during the first quarter of this year and a possible$90 million tax payment that may have to be paid to the Bolivian government on January 1, 2009.

Jeff Clevenger, Apex President and CEO, briefed analysts onBolivia's current political situation including a vote by 85% of the voters inthe Santa Cruz Province in favor of autonomy. Currently Bolivia'sappointed governors report to President Evo Morales. Several provinces want toelect their own governors and legislatures independent from the centralgovernment with the ability to tax, manage their own natural resources andland, and to hire their own police forces.

On May 8, a bill passed Bolivia'sSenate, which calls for a referendum vote on President Morales and thegovernors of the country's nine department. Morales has signed the bill, whichis scheduled for a public hearing on August 10. Clevenger explained that ifmore votes are cast in the referendum against the President and the governorsthan when they were originally elected in 2005, an early election could bescheduled in Bolivia.

The Bolivian government has recently enacted various changesto applicable mining taxes, including increasing the income tax rate from 25%to 37.5% when metals prices are above specified thresholds, eliminating thecreditability of the complementary mining tax (CMT) against the income tax,again  when metals prices are abovespecified thresholds. These changes will result in a higher income tax burdenfor the company.

Apex Senior Vice President, Corporate Affairs Jerry Dannitold analysts that Bolivia is alsowriting regarding regulations pertaining to the transfer or mortgage of miningand exploration concessions. Danni said Apex believes that the changes wouldnot be applied to San Cristobal, butwould be applied to any new concessions.

Meanwhile, Apex and its partner Sumitomo are in continuingdiscussions with government representatives regarding various governmentproposals and their potential impacts on San Cristobal. Thecompany is unable to predict which additional changes, if any, will be made tocurrent mining tax legislation and the Mining Code, Apex said in a 10-Q formfiled Tuesday with the SEC.

During the first quarter of this year, Apex and Sumitomocontributed $82.1 million to San Cristobal to fundoperating costs, income and other taxes, capital costs, financing costs, andsettlement of metal derivative positions. Apex funded $48.8 million and theremaining $33.3 million was paid by Sumitomo. Although San Cristobal is still being ramped up, Apex toldthe SEC that they do not believe that the two companies will have to contributeany additional amounts to fund San Cristobaloperations through the end of the year and that cash flows from concentratesales will cover remaining costs.

Nevertheless, Apex warned that the joint venture may not beable to use its cash balances to fund both the operating and debt serviceamounts required by a credit facility and almost make a possible $90 milliontax payment.  Apex explained to analyststhat it is exploring alternatives for increasing liquidity in the event thatits current unrestricted cash balances and investments fall below acceptablelevels. Analysts expressed concerns Tuesday that Apex may be required to issuemore equity.


Apex reported a net loss of $9.3 million or negative16-cents per share for the first quarter of 2008, compared to a net income of$112 million ($1.91/sh) for the same quarter of 2007.

The company reported production of 2.9 million ounces ofpayable silver, 29,300 tonnes of payable zinc and 12,300 tonnes of payable leadfor the first quarter-2008. Apex projects full year 2008 production of 15million ounces of payable silver, 215,000 tonnes of payable zinc and 75,000tonnes of payable lead.

Average operating costs were raised to a range of negative$1.75 to negative $2.25 per payable ounce of silver (net of lead by-productcredits) and a range of 70-cents to 80-cents per payable pound of zinc.

Meanwhile, Apex is working on improving the reliability ofprocess water and plant availability on optimizing ore blends and recoveryrate. Throughput during the first quarter 2008 was constrained primarilybecause of a shortage of process water.