The U.S. Bankruptcy Court for the Southern District of New York has entered an order approving the joint plan of reorganization for Colorado-based Apex Silver, which involves the creation of a new company Golden Minerals.
Apex Silver expects the plan to go into effect on or about March 24, 2009, when a series of transactions which include the sale of the San Cristobal silver mine in Bolivia are completed.
Apex is selling its 65% interest in San Cristobal to joint venture partner Sumitomo for a cash purchase price of $27.5 million, plus $2.5 million in expense reimbursements, and the assumption of certain liabilities.
Sumitomo will retain certain management services from Apex for San Cristobal, paying an annual fee of $6 million to Apex and possibly an annual incentive fee of $1.5 million. If the agreement is terminated by Sumitomo, Apex will be entitled to a $1 million fee.
According to the plan, Golden Minerals Company-- a new corporation formed from the assets and presumably the personnel of Apex Silver-- will manage the San Cristobal mine and hold Apex assets once it emerges from bankruptcy, when Apex will be liquidated according to Cayman Islands law.
Holders of Apex's outstanding $290 million of 4% and 2.875% of convertible senior subordinated notes will be entitled to receive common stock of the Golden Minerals Company and $45 million in cash and cash equivalents held by the new company in excess of $15 million.
Other unsecured credits will be entitled up to a maximum of $10,000 per claim, or a pro rata distribution of stock of Golden Minerals Company.
Golden Minerals will focus on key properties within a portfolio of 45 exploration properties in South America and Mexico. The El Quevar silver project in Argentina and the Zacatecas silver and base metals project in Mexico are both in intermediate to advanced stages of exploration.
The new company will also provide nearly the same services that Apex Silver provided in terms of feasibility studies, project development, engineering, construction and procurement, environmental permitting and corporate social responsibility, technical support and operations management. Golden Minerals also intends to pursue growth through acquisitions, joint ventures, and asset consolidations.
The new company also intends to pursue a listing on a U.S. securities exchange and the Toronto Stock Exchange.
San Cristobal is believed to contain 450 million ounces of silver and 8 billion pounds of zinc and 3 billion pounds of lead in proven and probable reserves. However, the company's liquidity problems had been compounded by increased cash costs and high operating costs, while lead and zinc prices substantially declined.
Apex filed for bankruptcy in January and delisted from the NYSE last December.