Apex Silver Announces Letter of Intent for Sale of San Cristobal Mine to Sumitomo

Apex Silver Mines Limited (AMEX: SIL) today announced that it has entered into a non-binding letter of intent with Sumitomo Corporation providing for the sale of Apex Silver's interest in the San Cristóbal mine to Sumitomo for a cash purchase price of $22.5 million. Apex Silver would continue to manage the mine following the sale.

Sumitomo currently owns a 35% interest in the mine indirectly through Minera San Cristóbal, S.A., a subsidiary of Apex Silver (MSC). Sumitomo also has the right to convert outstanding borrowings under a $100 million line of credit extended to MSC by one of Sumitomo's subsidiaries into additional MSC equity interests. MSC has borrowed $82 million under this facility. If those borrowings were fully converted, Sumitomo would have an aggregate 53.6% indirect interest in the San Cristóbal mine.

Jeffrey G. Clevenger, President and Chief Executive Officer of Apex Silver, stated, "We are pleased that Apex Silver will continue to partner with Sumitomo at this world-class mine, and we look forward to a comprehensive resolution of the issues that the company has faced as a result of the current volatility in the commodity and financial markets."

Summary of Key Terms:

Sumitomo (or an affiliate) will purchase Apex's and its affiliates' remaining equity interests in MSC, shareholder loans to MSC and certain other assets for a cash purchase price of $22.5 million, payable at the closing of the sale. Sumitomo (or an affiliate) will assume the liabilities relating to the San Cristóbal mine, including borrowings under the project finance facility for the mine and certain related liabilities under metal derivatives positions, net of the $91 million restricted cash at Apex Silver that has been pledged as collateral for the derivatives positions.

Apex Silver Mines Corporation (ASMC), a wholly owned subsidiary of Apex Silver, will manage MSC for an annual fee to be determined, but that will be not less than $6 million and sufficient to cover ASMC's costs. ASMC will also be entitled to an annual incentive fee of up to $1.5 million based on achievement of benchmarks for operating efficiency mutually agreed by the parties. The management agreement will have a minimum term of 12 months, after which Sumitomo may terminate the agreement on six months' notice and ASMC may terminate on 12 months' notice. The agreement will also be subject to early termination in certain circumstances. Apex Silver will guarantee ASMC's performance.

Apex Silver will receive limited contingent value rights entitling it to participate in the appreciation of the value of the mine in certain circumstances.

The non-binding letter of intent is subject to significant conditions, including completion by Sumitomo of diligence, the preparation of definitive documentation, the approval by the board of directors of each party and the restructuring of the mine's project finance facility and metal derivatives positions and Apex Silver's convertible notes in a voluntary reorganization under chapter 11 of the U.S. Bankruptcy Code.

About Apex Silver

Apex Silver is a mining, exploration and development company. Its 65%-owned San Cristóbal mine is the world's largest development in silver and zinc. The ordinary shares of Apex Silver trade on the American Stock Exchange under the symbol "SIL."

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, including statements regarding the intention of Apex Silver to enter into a definitive agreement relating to the sale of Apex Silver's interest in the San Cristóbal mine and the restructuring of Apex Silver's capital structure and the expected continuation of Apex Silver as a management services and exploration company. These statements are subject to risks and uncertainties, including those relating to the ability of Apex Silver and Sumitomo to reach a definitive agreement on all terms of the sale, including terms relating to Apex Silver's management of the mine, and the risk that creditors of Apex Silver or the mine will not agree to a restructuring on terms satisfactory to Sumitomo. The ability of Apex Silver to achieve the contemplated sale could also be affected by other factors, including those relating to its operations such as further decreases in metals prices, whether and to what extent the financial markets continue to experience significant volatility; and political unrest and uncertainty in Bolivia. Apex Silver assumes any obligation to update this information.

CONTACT:
Apex Silver Mines Corporation
Jerry W. Danni
Sr. Vice President Corporate Affairs
(303) 839-5060