After analysts expressed concern last month about the multi-million-dollar funding requirements of the San Cristobal silver mine in Bolivia, Denver-based Apex Silver Mines announced Monday it had reached an agreement with joint venture partner Sumitomo Corporation to sell the rights for deferred payments to Sumitomo for $70 million.

In an interview with Mineweb Monday,  Jerry Danni, Senior Vice President Corporate Affairs for Apex, said the deal will provide Apex with $100 million in unrestricted cash and a combined total of $198.9 million in aggregate and restricted cash, and short and long-term investments. Following closing of the transaction expected this month, Apex's unrestricted cash position will increase by $70 million.

During the first quarter of this year, Apex and Sumitomo contributed $82.1 million to San Cristobal to fund operating costs, income and other taxes, capex, financing costs, and settlement of metal derivative positions. Meanwhile, the Bolivian Government has enacted changes to applicable mining taxes which will result in a higher tax burden for San Cristobal, possibly as much as $90 million to be paid by January 1, 2009.

However, Sumitomo has decided to essentially purchase in advance its 7% share of payable zinc production, and 8% of total payable silver production from San Cristobal.

In a news release, Apex announced that it and Sumitomo plan to contribute an additional $10 million to San Cristobal sometime this week with Apex supplying $6.5 million while the remaining $3.5 million will be funded by Sumitomo. As previously noted, the amount of funding, if any, that San Cristobal requires depends on the relative amounts and timing of concentrate production, revenues and expenditures, which are difficult to predict while the mine continues to ramp up.

In addition, the company is continuing to explore with Sumitomo other opportunities to further improve the financial position of Minera San Cristobal. Apex and Sumitomo are also continuing to work with the lenders to increase flexibility under the San Cristobal finance agreements.

Jeffrey Clevenger, Apex President and CEO, said Monday in the statement, We are pleased with the support shown by our partner Sumitomo to improve the company's financial condition, and for their willingness to discuss additional liquidity support if necessary. We are proud to stand with our partner as we strengthen our alliance and commitment to San Cristobal.

Meanwhile, Danni told Mineweb Monday that autonomy referendums approved by three Bolivian provinces will have no impact on San Cristobal, which is located in the Potosí Department.

San Cristobal is expected to produce 15 million ounces of silver, 215,000 tonnes of zinc, and 75,000 tonnes of lead this year.