Golden Minerals Co - Annual Report: 2008 (Form 10-K)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Commission file number 1-13627

APEX SILVER MINES LIMITED
(Exact Name of Registrant as Specified in its Charter)

         Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o    No ý

         Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o    No ý

         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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

         Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

         Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o    No ý

         The aggregate market value of the voting and non-voting common equity held by non-affiliates as of June 30, 2008 was approximately $129 million, based on the closing price of the registrant's ordinary shares on the American Stock Exchange of $4.91 per share. For the purpose of this calculation, the registrant has assumed that its affiliates as of June 30, 2008 included three shareholders who collectively held approximately 54% of its outstanding ordinary shares. The number of ordinary shares outstanding on March 11, 2009 was 59,000,832.

EXPLANATORY NOTE

        On January 12, 2009, Apex Silver Mines Limited ("Apex Silver") and its wholly-owned subsidiary, Apex Silver Mines Corporation ("ASMC"), filed voluntary petitions for reorganization relief under Chapter 11 of the U.S. Bankruptcy Code (the "Bankruptcy Code"). A Joint Plan of Reorganization (the "Plan") was approved by the U.S. Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court") on March 4, 2009, and Apex Silver is expected to emerge from Chapter 11 protection as a Delaware corporation named Golden Minerals Company on or about March 24, 2009. This annual report on Form 10-K provides information about operations of Apex Silver for the year ended December 31, 2008, as well as information about the expected operations of Golden Minerals Company, which will be the successor to Apex Silver for purposes of reporting under the U.S. federal securities laws.

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FORWARD-LOOKING STATEMENTS

        Some information contained in or incorporated by reference into this annual report on Form 10-K may contain forward-looking statements. These statements include comments regarding:

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Our pending Chapter 11 proceeding, including the timing of effectiveness of the Plan, the effects of the Chapter 11 proceeding on our business, and our ability to successfully reorganize and continue as a going concern under the terms contemplated in the Plan;



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The management, plans and objectives of Golden Minerals Company;



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Our ability to successfully consummate the sale of our interests in the San Cristóbal mine to Sumitomo Corporation ("Sumitomo");



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The expected future financial condition and liquidity of our successor, Golden Minerals Company, including the ability of Golden Minerals Company to successfully raise additional capital following our emergence from bankruptcy and the timing of such potential future capital raises;



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The timing and cost of the evaluation and expansion of our exploration portfolio, including activities to be conducted during 2009 on certain of our exploration properties;



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Our ability to successfully manage the San Cristóbal mine and our ability to identify and capitalize on other similar opportunities to provide mining services;



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Bolivian political and economic conditions; and



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Planned spending on corporate costs and exploration activities.

        The use of any of the words "anticipate," "continues," "estimate," "expect," "may," "will," "project," "should," "believe" and similar expressions are intended to identify uncertainties. We believe the expectations reflected in those forward-looking statements are reasonable. However, we cannot assure that these expectations will prove to be correct. Actual results could differ materially from those anticipated in these forward-looking statements as a result of the factors set forth below and other factors set forth in, or incorporated by reference into, this annual report:

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Failure to consummate the Plan;



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Failure to consummate the proposed sale of our interests in the San Cristóbal mine to Sumitomo;



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The ability of our successor, Golden Minerals Company, to raise necessary capital by the end of fiscal 2009 on acceptable terms or at all, particularly in light of the deterioration of financial market conditions and the persistent dislocation of the credit markets;



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Our ability to successfully manage the San Cristóbal mine on behalf of Sumitomo under the terms of our proposed Management Agreement (defined below) and our ability to successfully expand our mine services business, particularly if metals prices experience significant declines;



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Our ability to continue to retain key management and mining personnel necessary to successfully manage the San Cristóbal mine;



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Worldwide economic and political events affecting the market prices for silver, zinc, lead and other minerals which may be found on our exploration properties;



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Political and economic instability in Bolivia (and other countries in which we conduct our business) and future actions of the Bolivian government with respect to nationalization of

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natural resources or other changes in the mining or taxation policies of the Bolivian government that may affect the management of the San Cristóbal mine; and

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The factors discussed under "Risk Factors."

        Many of these factors are beyond our ability to control or predict. You should not unduly rely on our forward-looking statements. These statements speak only as of the date of this annual report on Form 10-K. Except as required by law, we are not obligated to publicly release any revisions to these forward-looking statements to reflect future events or developments. All subsequent written and oral forward-looking statements attributable to Apex Silver and persons acting on our behalf are qualified in their entirety by the cautionary statements contained in this section and elsewhere in this annual report on Form 10-K.

CONVERSION TABLE

        In this annual report on Form 10-K, figures are presented in both United States standard and metric measurements. Conversion rates from United States standard to metric and metric to United States standard measurement systems are provided in the table below. All currency references in this annual report on Form 10-K are to United States dollars, unless otherwise indicated.

GLOSSARY OF SELECTED MINING TERMS

"Assay" means to test ores or minerals by chemical or other methods for the purpose of determining the amount of valuable metals contained.

"Base Metal" means a classification of metals usually considered to be of low value and higher chemical activity when compared with the precious metals (gold, silver, platinum, etc.). This nonspecific term generally refers to the metals copper, lead, tin, and zinc.

"Breccia" means rock consisting of fragments, more or less angular, in a matrix of finer grained material or of cementing material.

"Concentrates" means the clean product of ore or metal separated from its containing rock or earth by froth flotation or other methods of mineral separation.

"Diamond Core" means a rotary type of rock drill that cuts a core of rock two centimeters or more in diameter that is recovered in long cylindrical sections.

"Epigenetic" means a mineral deposit formed later than the enclosing rocks.

"Feasibility Study" means an engineering study designed to define the technical, economic, and legal viability of a mining project with a high degree of reliability.

"Igneous" means of a rock or mineral that solidified from molten or partly molten material.

"Mineralized Material" is that part of a mineral system that has potential economic significance but cannot be included in the proven and probable ore reserve estimates until further drilling and metallurgical work is completed, and until other economic and technical feasibility factors based upon such work have been resolved. The Securities and Exchange Commission (the "SEC") does not

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recognize this term and investors are cautioned not to assume that any part of mineralized material estimates will ever be converted into reserves.

"Outcrop" means the exposure of bedrock or strata projecting through the overlying cover of detritus and soil.

"Oxide" means mineralized rock in which some of the original minerals have been oxidized (combined with oxygen).

"Precious Metal" means any of several relatively scarce and valuable metals, such as gold, silver, and the platinum-group metals.

"Probable Reserves" means reserves for which quantity and grade and/or quality are computed from information similar to that used for proven reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation.

"Proven Reserves" means reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes, and grade and/or quality are computed from the results of detailed sampling, and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well-defined that size, shape, depth and mineral content of reserves are well established.

"Reclamation" means the process of returning land to another use after mining is completed.

"Recoverable" means that portion of metal contained in ore that can be extracted by processing.

"Recovery" means that portion of the metal contained in the ore that is successfully extracted by processing, expressed as a percentage.

"Reserves" means that part of a mineral deposit that could be economically and legally extracted or produced at the time of reserve determination.

"Reverse Circulation" means a drilling method using a tri-cone bit, during which rock cuttings are pushed from the bottom of the drill hole to the surface through an outer tube by liquid and/or air pressure moving through an inner tube.

"Sediment" means solid fragmental material that originates from weathering of rocks and is transported or deposited by air, water or ice, or that accumulates by other natural agents, such as chemical precipitation from solution or secretion by organisms, and that forms in layers on the Earth's surface at ordinary temperatures in a loose, unconsolidated form.

"Sedimentary" means formed by the deposition of sediment.

"Strip Ratio" means the ratio between tonnage of waste and ore in an open pit mine.

"Sulfide" means a compound of sulfur and some other element.

"Syngenetic" means a mineral deposit formed contemporaneously with, and by essentially the same processes as, the enclosing rocks.

"Variogram" means a plot of the variance (one-half the mean squared difference) of paired sample measurements as a function of the distance (and optionally of the direction) between samples. Typically, all possible sample pairs are examined and grouped into classes of approximate equal distance and direction. Variograms provide a means of quantifying the commonly observed relationship that samples close together tend to have more similar values than samples far apart.

"Vein" means a fissure, fault or crack in a rock filled by minerals that have precipitated from fluids that have traveled upwards from some deep source.

"Volcaniclastic" means clastic (broken) rocks composed solely or primarily of volcanic materials that have been transported and reworked through mechanical action, such as by wind or water.

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PART I

ITEMS 1 AND 2:    BUSINESS AND PROPERTIES

        Apex Silver Mines Limited, incorporated under the laws of the Cayman Islands in 1996, is engaged in the mining, exploration and development of silver and other mineral properties primarily in Latin America. On January 12, 2009, Apex Silver and its wholly-owned subsidiary, ASMC, filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code ("Chapter 11") with the Bankruptcy Court. The Plan was approved by the Bankruptcy Court on March 4, 2009. In connection with our planned emergence from bankruptcy as a newly formed Delaware corporation named Golden Minerals Company, we expect to sell our 65% interest in the San Cristóbal mine to Sumitomo and continue to operate the San Cristóbal mine. We will also continue to own and explore our broad portfolio of exploration properties. We expect to emerge from Chapter 11 on or about March 24, 2009.

        As used herein unless the context otherwise requires, "Apex Silver", "we", "us" and "our" refer collectively to Apex Silver Mines Limited, its predecessors, successors, subsidiaries and affiliates or to one or more of them as applicable.

Available Information

        We make available, free of charge through our website at www.apexsilver.com, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. Following our emergence from Chapter 11, these materials will be available at our new website at www.goldenminerals.com. Information on these websites is not incorporated into this annual report on Form 10-K and is not a part of this report.

Reorganization and Expected Emergence from Chapter 11

Factors Leading to Chapter 11 Proceeding

        As more fully described below, several factors led to our filing for protection under Chapter 11, including the following:

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Unanticipated increases in the price of silver, lead, and zinc beginning in 2006 and continuing through the first three quarters of 2008 resulted in substantial derivative settlement payments under the metals derivative positions required by the Project Finance Facility (defined below) that exceeded operating cash flow from the San Cristóbal mine, and required contributions of significant additional amounts to our 65%-owned Bolivian subsidiary, Minera San Cristóbal S.A. ("MSC");



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The ramp-up of the San Cristóbal mine, which began in mid-2007, was slower and more costly than expected and production was lower and increased more slowly than anticipated due to equipment failures, the unavailability of sufficient process water and other factors; and



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Increasing costs during the ramp-up of the San Cristóbal mine and continuing throughout 2008 of energy, consumable commodities, ocean freight and treatment and refining coupled with rapidly falling metals prices in the second half of 2008 resulted in significant operating losses and required contribution of significant additional amounts to MSC to fund the ongoing operations of the San Cristóbal mine.

        In order to complete the construction of the San Cristóbal mine, MSC borrowed $225 million under a project finance facility with senior lenders (the "Project Finance Facility") secured by all of MSC's assets and guaranteed pro rata to their ownership interests by Apex Silver and Sumitomo. As a condition of the Project Finance Facility, MSC was required to provide price protection for a portion of

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its planned metals production and an Apex Silver subsidiary entered into metals derivative positions with hedge banks using primarily forward sales but also puts and calls to comply with these obligations.

        During the third quarter 2008, we projected that future cash funding requirements for the San Cristóbal mine for the fourth quarter 2008 through the end of 2009 would be approximately $350 million, with our 65% share totaling nearly $230 million. At September 30, 2008, we had on hand only approximately $45 million of unrestricted liquid cash and investments (excluding illiquid auction rate securities). To preserve our remaining balance of cash and investments, we reached an agreement with Sumitomo in August 2008 under which Sumitomo agreed to provide working capital for MSC on a unilateral basis through a $50.0 million subordinated facility (the "Working Capital Facility"). Through a series of amendments throughout the remainder of 2008, the maximum borrowing amount was subsequently increased to $150.0 million, all of which was fully drawn as of December 31, 2008.

        In addition to the liquidity issues we faced, several covenant violations were expected to occur under the Project Finance Facility, which would have entitled the Project Finance Facility senior lenders to accelerate all indebtedness under the Project Finance Facility, including the derivative positions. If we had been unable to repay those obligations when due, the senior lenders and the counterparties under the derivative positions would have been entitled to enforce their liens and take possession of the collateral securing indebtedness under the Project Finance Facility and the derivative positions. In addition, a failure to pay amounts due and payable under the Project Finance Facility and the derivative positions would have resulted in a default under the terms of our 4.0% and 2.875% Convertible Senior Subordinated Notes due 2024 (collectively, the "Subordinated Notes"), entitling the holders to accelerate the maturity of the Subordinated Notes, which aggregated $290 million in principal amount.

        Given our liquidity situation, we sought to explore various options for a financial restructuring and in July 2008 retained a financial advisor, Jefferies & Company, Inc. ("Jefferies"), to assist with and facilitate additional external debt or equity financing or a sale of some or all of our interest in the San Cristóbal mine. Following an extensive marketing effort by Jefferies, two bidders (including Sumitomo) submitted written indications of interest in early October to acquire all of our direct and indirect interests in the San Cristóbal mine. After considering these offers, and determining that other capital raising efforts were not likely to be successful, our board of directors (the "Board") determined that the Sumitomo bid was the best alternative to pursue to maximize value for our stakeholders, based in part on Sumitomo's commitment to continue funding the San Cristóbal mine and to consummate a purchase and sale transaction.

        On November 13, 2008, we entered into a letter of intent with Sumitomo that contemplated Sumitomo's purchase of all of our direct and indirect interests in the San Cristóbal mine. In December 2008, as a component of our restructuring efforts, we entered into a termination agreement with the hedge banks and Sumitomo under which the hedge banks terminated the outstanding metals derivative positions. Also in December 2008, Sumitomo purchased 90% of the loans under the Project Finance Facility from the senior lenders and executed a standstill agreement with us under which Sumitomo agreed to forbear from exercising its rights and remedies with respect to any defaults under the Project Finance Facility. Immediately prior to our Chapter 11 filing, the standstill agreement terminated and Sumitomo accelerated these loans. Sumitomo subsequently entered into a new standstill agreement with us which is expected to remain in effect until the sale of the San Cristóbal mine and our emergence from Chapter 11.

Chapter 11 Proceeding

        On January 12, 2009, Apex Silver and its wholly-owned subsidiary, ASMC, filed voluntary joint petitions for reorganization relief under Chapter 11, with the Bankruptcy Court. Apex Silver also commenced a provisional liquidation proceeding in the Cayman Islands. Our subsidiaries outside the

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United States, including MSC, the Bolivian subsidiary that owns and operates the San Cristóbal mine, were not included in the Chapter 11 filing or in any other bankruptcy or reorganization proceeding.

        Under Chapter 11, we are operating our businesses as a debtor-in-possession under court protection from creditors and claimants under the jurisdiction of the Bankruptcy Court and under the supervision of the joint provisional liquidators in the Cayman Islands. Since the Chapter 11 filing, orders sufficient to enable us to conduct normal business activities have been entered by the Bankruptcy Court. To provide us with the cash and liquidity necessary to fund our 65% share of working capital required by the San Cristóbal mine, we have entered into a $35 million debtor-in-possession term credit facility (the "DIP Financing Facility") pursuant to a Secured Super-Priority Debtor-in-Possession Credit and Security Agreement, dated as of January 20, 2009, with Sumitomo as lender. As of March 16, 2009, we have borrowed $6.5 million under the DIP Financing Facility. At the Effective Date (as defined below), Sumitomo will waive and release us from any liability associated with amounts outstanding under the DIP Financing Facility.

        As of February 4, 2009, we and ASMC had agreed to the principal terms of the Plan with Sumitomo, certain supporting senior lenders under the Project Finance Facility and holders of the Subordinated Notes holding approximately 77% in face amount of outstanding Subordinated Notes. All of these parties executed the Plan Support Agreement, dated January 12, 2009, and the Additional Plan Support Agreement, dated January 29, 2009 (collectively, the "Plan Support Agreement"), which set forth the terms and conditions of the Plan.

        On March 4, 2009, the Bankruptcy Court entered an order confirming our Plan. We intend to declare the Plan effective and emerge from Chapter 11 protection on or about March 24, 2009 (the "Effective Date"), assuming all conditions set forth in the Plan have been satisfied or waived in accordance with the Plan.

Key Features of the Plan of Reorganization

        Under the Plan, all of the assets of Apex Silver, other than a small cash reserve for the payment of liquidation expenses, will be transferred to Golden Minerals Company, a Delaware corporation that will be our successor. Apex Silver will be liquidated in accordance with Cayman Islands law.

        The Plan also calls for us to sell to Sumitomo our remaining direct and indirect interests in the San Cristóbal mine, including our 65% interest in MSC, for a cash purchase price of $27.5 million, plus $2.5 million in expense reimbursements and the assumption of certain liabilities, pursuant to the Purchase and Sale Agreement dated January 12, 2009 (the "Purchase Agreement") among Apex Silver, certain other wholly-owned subsidiaries of Apex Silver, Sumitomo and one of Sumitomo's wholly-owned subsidiaries. In addition, under the Purchase Agreement and the Plan, we will be released from liabilities associated with the San Cristóbal mine, including our guarantee of San Cristóbal's indebtedness. Sumitomo may terminate the Purchase Agreement under certain circumstances, including if the closing of the transaction does not occur prior to March 31, 2009. Although the consummation of the transactions contemplated by Purchase Agreement is subject to fulfillment of customary conditions, we anticipate that they will be consummated on or about the Effective Date in conjunction with, and as a condition to, our emergence from bankruptcy.

        As a condition to the closing of these transactions, ASMC will enter into a management services agreement with Sumitomo (the "Management Agreement") under which we will provide certain management services to the San Cristóbal mine in consideration of an annual fee of approximately $6.0 million and a potential annual incentive fee of $1.5 million. The services will include, for example, management of technical and operating activities, administrative support, information technology and local community relations. The Management Agreement will have an initial term of 12 months and thereafter may be terminated by us with 12 months' prior notice or by Sumitomo with six months' prior notice. If terminated by Sumitomo, we will be entitled to a $1.0 million termination fee. We will not be required to pay a termination fee.

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        Under the Plan, because the class of holders of Subordinated Notes voted to accept the Plan, our Subordinated Notes will be cancelled in exchange for a pro rata distribution of (i) common stock of Golden Minerals Company, and (ii) approximately $45 million in cash. In addition, the holders of Subordinated Notes will be entitled to receive any cash amounts held by us at the Effective Date in excess of the sum of (a) $15 million, plus (b) a reserve for accrued liabilities at the Effective Date and certain projected reorganization expenses that will be incurred after the Effective Date. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources." Other unsecured creditors will receive cash payments for their claims, up to a maximum recovery of $10,000 per claim, or a pro rata distribution of common stock of Golden Minerals Company. Our current equity holders will receive no recovery under the Plan and the ordinary shares of Apex Silver will be cancelled in connection with the Cayman Islands liquidation proceeding.

        We expect that Golden Minerals Company will have approximately 3,200 beneficial shareholders at the Effective Date. We expect shares of Golden Minerals Company to commence trading in the over-the-counter market on or about the Effective Date and also expect to pursue a listing on a U.S. national securities exchange and the Toronto Stock Exchange.

        At the Effective Date, Sumitomo will waive and release us from any liability associated with amounts outstanding under the DIP Financing Facility, Project Finance Facility and the Working Capital Facility. The other senior lenders under the Project Finance Facility will likewise waive and release us from any liability associated with amounts outstanding under the Project Finance Facility.

        Upon the Effective Date, Apex Silver and ASMC will be discharged from any and all claims arising prior to the Effective Date except as provided by the Plan and all persons holding such claims will be enjoined from asserting such claims against Apex Silver, ASMC, Golden Minerals Company and certain third parties, including Apex Silver's present and former directors and officers.

Business Strategy

        Following our emergence from Chapter 11 (see "—Reorganization and Expected Emergence from Chapter 11") our strategy will be to focus on exploration, providing mine services and growth through strategic business transactions.

        Our exploration business strategy is to enhance shareholder value through advancing projects from discovery through development into profitable operating mines. In evaluating whether an exploration project warrants potential future development, we plan to establish minimum requirements for reserves and annual saleable metal production rates and estimated mine development, capital and operating cost requirements. We may generate value from exploration properties that do not satisfy the minimum economic requirements for development through sale or farm-out to third parties, or through retaining royalty interests.

        The second component of our business strategy is to leverage the experience and skill of our seasoned management team by performing mine services, including feasibility studies and project development strategies; engineering, construction and procurement management; environmental permitting and corporate social responsibility; technical team support; and operations management. Upon the consummation of the sale of our interests in the San Cristóbal mine to Sumitomo, we will enter into a Management Agreement under which we will manage the San Cristóbal mine. In addition, we intend to identify and capitalize on other opportunities to earn fees or equity interests in other mine development or operations projects.

        Finally, we plan to actively pursue growth through strategic opportunities, including acquisitions, joint ventures and asset consolidations. We expect to evaluate and pursue selected opportunities that can bring synergy to existing assets and leverage the strengths of our management team.

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Exploration

        Our exploration activities are a key component of our business strategy. We own and control a broad portfolio of exploration properties, which have not been directly impacted by our Chapter 11 proceeding. We have maintained our rights in these properties and at the Effective Date, these properties will be transferred to Golden Minerals Company. Our portfolio of approximately 45 exploration properties is located primarily in districts in Latin America that we believe have high potential. As of March 11, 2009, we had approximately 120 employees and contractors in our three primary exploration offices in Argentina, Mexico and Peru. In evaluating whether an exploration project warrants potential future development, we plan to establish minimum requirements for reserves and annual saleable metal production rates and estimated mine development, capital and operating cost requirements. We may generate value from exploration properties that do not satisfy the minimum economic requirements for development through sale or farm-out of the property to a third party, or through retaining a royalty interest.

        We have three properties that are in intermediate to advanced stages of exploration: (i) the 65% owned El Quevar silver project in Argentina, (ii) the 100% owned Zacatecas silver and base metals project in Mexico, and (iii) the 100% owned Microondas silver, gold and base metals project in Mexico. The map below shows the location of our exploration activities and some of our projects:

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        During 2008, we spent approximately $25.4 million in the aggregate on our exploration properties. We conducted drilling activities on eight projects, including 112 holes totaling 23,301 meters, and expect at least three of those projects to advance to a further stage of exploration. In 2009, we intend to accelerate the rate of review on our various exploration properties and to continue to aggressively seek new opportunities. We plan to spend approximately $12 million on our exploration properties during 2009 to fund, among other things, additional drilling on those properties we believe to be most promising, as well as preliminary metallurgical, engineering and environmental work. From January 1, 2009 through March 11, 2009, we have drilled approximately 2,138 meters in nine holes, with six holes at El Quevar and three holes at Microondas.

Intermediate to Advanced Exploration Properties

        Set forth below are descriptions of the three exploration properties that we currently believe are our most promising. Although we believe that these properties may contain significant silver and/or other mineralization, we have not completed feasibility studies on any of these properties and none of these properties may advance to development. None of the properties have established proven or probable ore reserves.

        The descriptions of our advanced exploration properties appearing below contain selected information regarding drilling and analytical results. This information may not be representative of all of our current or future results of exploration, and there can be no assurance that mineralized material, proven and probable reserves or an operating mine will be developed on any of these properties. Complete drill results will be available on our website following the Effective Date at www.goldenminerals.com. The information contained on our website is not incorporated herein by reference.

El Quevar (Argentina)

Location and Access

        Our 65% owned El Quevar silver project is located in the Salta Province in the Altiplano region of northwestern Argentina, approximately 300 kilometers northwest of the city of Salta. The project is also accessible by a 300 kilometer dirt and gravel road from the city of Calama in northern Chile. The village of Pocitos with approximately 150 inhabitants, about 15 kilometers to the west, is the nearest settlement. A high tension power line is located approximately 30 kilometers from the site and a high pressure gas line is located within 5 kilometers.

        The El Quevar project is located near Nevado Peak, in a valley with altitudes ranging from 4,300 to 5,200 meters above sea level. We have established a camp with accommodation for 40 people approximately 10 kilometers west of the project. The climate of the area is high mountain desert, with some precipitation in summer (as snow) and little snow in winter.

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        The map below shows the location of the El Quevar project.

Title and Ownership Rights

        The El Quevar project is comprised of 16 mining concessions and exploration claims. Nine concessions are owned or controlled by a joint venture in which we currently hold a 65% interest, one concession is 100% owned by us, and the six exploration claims are 100% owned by us. In total, the El Quevar project encompasses approximately 64,988 hectares.

        The area of nearly all of our exploration activities at El Quevar is within the concessions that are owned or controlled by a joint venture between us and an Argentine subsidiary of Hochschild Mining Group ("Hochschild"), a publicly traded Peru-based mining company. Under the terms of the joint venture agreement, we have earned a 65% interest in the joint venture by funding the required level of exploration expenses. Our interest in the venture will increase to 80% if we complete a feasibility study by November 2010 and begin production at El Quevar within two years following completion of the feasibility study. We are required to fund all costs of exploration, development and construction but can recover amounts paid on behalf of Hochschild from 50% of its share of cash flow, which would provide us with 90% of cash flow until all costs are recovered.

        Three of the concessions controlled by the joint venture are not owned by the joint venture, but are subject to options to purchase from the existing concession owner. These concessions contain the Yaxtché target, on which we have identified an estimate of mineralized material (see "—Geology and Mineralization"). One option agreement covers the El Quevar II concession and one-half of the Castor concession and another option agreement covers the Nevado I concession. Remaining payments on those option agreements are set forth below:

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        We currently plan to make the 2009 option payments, and to make the remaining option payments subject to the availability of funding and the results of our additional drilling and planned feasibility work.

        In addition, under the terms of the option agreements, the joint venture would be required to pay a 1% net smelter return royalty on the value of all minerals extracted from the El Quevar II or Nevado I concessions and one-half of the minerals extracted from the Castor concession. The joint venture would also be required to pay a 3% net smelter return royalty to the Salta province. To maintain the concessions, we make yearly rental payments to the Argentine government of approximately $165,000 in the aggregate.

Property History

        Mining activity in and around the El Quevar project dates back at least 80 years. Between 1930 and 1950 there was production from small workings in the area for extraction of lead and silver. No production records exist from that period. The first organized exploration activities on the property occurred during the 1970s, although no data from that period remains. Over the last 30 years, several companies have carried out exploration activity in the area, including BHP Billiton, Industrias Peñoles, Mansfield Minerals and Hochschild Mining Group. In general, these activities consisted only of local sampling, but BHP Billiton and Hochschild Mining Group conducted limited drilling programs in the area.

Exploration Activities

        We initiated exploration at El Quevar during 2004 and through the end of 2008, we had spent approximately $8.5 million on exploration and related activities. In 2008, we built a camp at the project site to accommodate a work force of approximately 40 people. We rely on power generated from two diesel-powered generators.

        Through year-end 2008, we have collected more than 3,000 surface samples and completed 78 diamond drill holes totaling approximately 15,500 meters. Approximately 67 of the holes intersected significant silver-lead-zinc mineralization (see "—Geology and Mineralization").

        During 2009, we plan to spend approximately $3 million to further our exploration program at El Quevar. This amount includes additional drilling, which commenced in the first quarter, geological studies and a preliminary economic assessment. The purpose of this program is to further define the zones of known mineralization in support of a preliminary economic assessment.

        We have obtained all required permits to conduct the exploration activities scheduled for 2009. We have also submitted and received government approval of an environmental impact statement for anticipated exploration activities. Additional permits would be required in order to advance development of the El Quevar property beyond the exploration stage, and we currently expect we would be able to obtain the necessary permits.

Geology and Mineralization

        The geology of the El Quevar project is characterized by silver-rich veins and disseminations in Tertiary volcanic rocks that are part of an eroded stratovolcano. Mineralization occurs in east-trending structural zones that generally dip to the north. There are at least three sub-parallel structures that extend for an aggregate length of approximately 12 kilometers. Several volcanic domes (small intrusive bodies) have been identified and mineralization is also found in breccias associated with these domes, especially where they are intersected by the structures.

        At year-end 2008, we had completed approximately 15,500 meters of diamond drilling in 78 drillholes. Of these holes, 48 were drilled to test the main Yaxtché zone of potential mineralization,

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with 38 of the Yaxtché holes intersecting significant silver mineralization. Our work indicates that the Yaxtché zone is at least 800 meters in length and up to 50 meters in width. Our drilling further indicates that the silver mineralization is continuous laterally and to depths of 150 to 200 meters below surface in the main area. The zone appears to be faulted on the east and west ends, but geological mapping and a geophysical survey suggest that the zone has been faulted down and preserved and continues in both directions. We commenced a drilling program in the first quarter of 2009 to establish that the Yaxtché zone does continue to the east and west and we have intersected the zone at depth in two holes drilled on the eastern extension and in one hole drilled on the western extension. We have received assay results for the first hole in this program (QVD-079), which returned 7 meters averaging 177 grams per tonne silver from the interval from 127 meters to 134 meters and 4 meters averaging 4.31% lead and 48 grams per tonne silver from the interval from 179 meters to 183 meters. We will report complete assay results from this program on our website following the Effective Date at www.goldenminerals.com.

        Our work has identified at least 14 potential zones of mineralization, including the Yaxtché zone. We currently believe the Yaxtché zone is the most promising. We plan to continue to advance these targets and expect to drill test several of them in 2009.

        In February 2009, a technical report for the El Quevar project (the "El Quevar Technical Report") was prepared by SRK Consulting in accordance with the requirements of the SEC's Guide 7. The El Quevar Technical Report and other information on the project, including drill hole results will be available on our website following the Effective Date at www.goldenminerals.com. The estimated mineralized material in the Yaxtché zone, assuming a price of $12.00 per ounce of silver, is shown in the table below:

*

The estimate was prepared on the assumption that mixed and sulfide material would be mined by underground methods and oxide material would be mined in an open pit. Due to the higher mining costs associated with underground mining, the cut-off grade for mixed and sulfide material is significantly higher than the cut-off grade for oxide material. The estimate assumes 65% recovery for oxide material, 90% recovery for mixed oxide and sulfide material and 95% for sulfide material.

        Under standards promulgated by the SEC, a deposit reported as "mineralized material" does not qualify as a reserve until comprehensive evaluation, based upon unit costs, grade, recoveries, and other factors concludes economic and legal feasibility. The Yaxtché deposit may never be classified as reserves under SEC standards and it may not be economically feasible to extract any portion of the deposit.

Zacatecas (Mexico)

Location and Access

        The Zacatecas project surrounds the municipalities of Zacatecas, Veta Grande, Guadalupe, Pánuco, and Morelos in the state of Zacatecas, Mexico. All of our Zacatecas properties can be easily

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reached within 10 kilometers from the city of Zacatecas by paved and dirt roads. A location map is shown below.

Title and Ownership Rights

        We own or control approximately 180 concessions totaling approximately 15,050 hectares in the Zacatecas project. Of these concessions, all but six are 100% owned by us. We hold the remaining six concessions under purchase options with private owners with option payments of $45,000 due in 2009, $57,500 in 2010, $354,000 in 2011 and $59,000 in 2012. To maintain all of the concessions, we also pay approximately $55,000 per year to the Mexican government.

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Property History

        The Zacatecas Mining District is located in the central part of Mexico, in the Faja de Plata mineral belt. A map of the mineral belt is shown below. Production from the Zacatecas district is estimated by the Mexican Federal Mining Agency to exceed 750 million ounces of silver. Investors are cautioned that the existence of mining operations or mineral deposits on adjacent properties is not indicative of whether mineral deposits occur on our properties.

Exploration Activities

        From 1994 to 2005, we did sporadic reconnaissance work on some of the Zacatecas concessions, including taking approximately 2000 surface samples. In 2006, we began systematic reconnaissance work on all concessions that we controlled. On the basis of this and the previous work, we identified the Muleros, El Cristo and San Manuel-San Gil areas of interest. In these areas, we performed more detailed mapping work, as well as trenching and detailed sampling, and in the Muleros area, we completed a two-stage diamond drilling program of 37 holes totaling 6,816 meters. We believe that each of the target areas has significant potential for the discovery of high-grade silver with associated base metals and gold. We have spent approximately $8.5 million to date on exploration and property acquisition in the Zacatecas district.

        In addition to the work in these target areas, we drilled two diamond drill holes totaling 1,116 meters on our La Esperanza claim, adjacent to the Cozamin copper mine operated by Capstone Mining Company. We believe that this drilling indicates that the copper-rich Mala Noche vein system extends onto the La Esperanza claim, which could contain a significant deposit.

Geology and Mineralization

        At a regional level, the Zacatecas Mining District is located within the physiographical provinces of the Western Sierra Madre and the Central Plateau. The basement rock units in the area include the metamorphic rocks of the Zacatecas Formation of Upper Triassic age. Overlying these rocks are the

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volcano-sedimentary units of the Chilitos Formation of Upper Jurassic-Lower Cretaceous age. During the Tertiary, a polymictic conglomerate known as the "Red Zacatecas Conglomerate" was discordantly deposited, and overlying this, andesitic to rhyolitic flows and tuffs were deposited. All units are intruded by small stocks and plugs of rhyolitic to andesitic composition.

        The Zacatecas Formation is composed of a sequence of sericitized phyllites and metamorphosed shales, sandstones, conglomerates and limestones. These rocks are host to some veins such as those of the El Bote vein system and the deeper portions of the Mala Noche vein system.

        The Chilitos Formation of Upper Jurassic-Lower Cretaceous age is a volcano-sedimentary sequence made up of massive and pillowed lavas of basaltic-andesitic composition with intercalations of sedimentary, volcaniclastic and calcareous rocks, metamorphosed to greenschist facies. This sequence is locally thrust over the Zacatecas Formation and is the main host rock for mineral systems in several mining districts in the region, including Zacatecas and Fresnillo.

        During the Oligocene-Miocene period, extensive deformation occurred that produced normal faulting, forming grabens and horsts bearing generally north-northeast/south-southwest. It was during this phase of deformation that most of the epigenetic mineral deposits were formed.

        In the three target areas identified by us, rocks of the Chilitos Formation are host to the veins. The three main target areas—Muleros, El Cristo and San Manuel-San Gil—are described in more detail below.

        Muleros Area—Located in the northern part of the Zacatecas Mining District, the Muleros area covers an area of roughly 1,800 meters by 2,400 meters, where four sub-parallel epithermal vein-faults outcrop. The veins are composed of quartz and calcite, and contain silver mineralization associated with minor antimony and lead and zinc. The main vein system bears N40° to 70°W and dips 60° to 85° mainly to the southwest, with thicknesses that vary from 0.1 meters to 6.2 meters, and lengths from 1,000 to 2,500 meters, with shorter offshoots. The total length of all the outcropping veins is about 6,500 meters, and of the inferred veins (i.e., those that do not continuously outcrop) is 2,100 meters, with an average width of 1.33 meters.

        From 2006 to the present, we have taken 1,111 surface samples from outcrops and trenches. The grades in the veins range from 0.06 to 1.64 grams per tonne of gold, and from 29 grams per tonne to 987 grams per tonne of silver, with anomalous values in base metals over widths ranging from 0.3 to 1.3 meters.

        At Muleros, we have drilled 37 diamond drill holes totaling 6,816 meters. There were two stages of drilling. The first program was carried out with a total of 3840 meters distributed over 31 short bore holes. The purpose of this program was to determine the structural behavior of the veins, the vein textures and the geochemistry at a vertical depth of about 100 meters from the surface. Shallow drill holes at Muleros returned up to 400 grams per tonne silver over one meter. The second program was carried out with a total of 2976 meters distributed over six boreholes. These holes were deeper tests (over 300 meters in depth), meant to intersect the veins in a postulated zone of high grade mineralization. The results indicate that the dip of the veins changed, becoming less steep than indicated at the surface and the intersections were less deep than planned (meaning they may have intercepted the upper part of a possible high grade zone). Results from this drilling returned narrow intercepts of silver mineralization of up to 450 grams per tonne over one meter.

        Our planned 2009 exploration program includes 3000 meters of diamond drilling designed to further explore the potential for high grade mineralization at depth at an estimated cost of about $800,000.

        El Cristo Area—Located in the central portion of the Zacatecas Mining District, the El Cristo area covers a surface area of 800 meters by 2000 meters, where five sub-parallel epithermal quartz-calcite

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veins outcrop. These veins correspond to the northwestern extension of the Vetagrande vein system. From 2006 to October 2008, we took approximately 1,017 surface samples from outcrops and trenches, of which 516 are from the veins. These samples have returned from 0.01 to 1.1 grams per tonne gold and 9 to 580 grams per tonne silver, with anomalous values in copper, lead and zinc. The average vein width is 1.5 meters. The main vein system bears N50 to 60? W and dips 60 to 80? SW, with thicknesses varying from 0.15 meters to 5.0 meters, and lengths from 500 to 2400 meters, with shorter offshoots. The total length of the outcropping veins and their respective offshoots is approximately 8,000 meters.

        The area has been mapped at a 1:2,500 scale and we have completed an environmental impact report. The proposed 2009 exploration program includes 3,000 meters of diamond drilling at an estimated cost of $600,000.

        San Manuel-San Gil Area—Located in the central portion of the Zacatecas Mining District, the San Manuel-San Gil area covers an area of 8 square kilometers, where sub-parallel epithermal veins and alteration zones outcrop. The main vein system bears N60W to East-West and dips to the north and south, with thicknesses varying from 0.10 meters to 7 meters, and lengths from 400 to 1400 meters with shorter offshoots. The total length of all the outcropping veins and their respective offshoots is about 7000 meters, with an average width of 1.2 meters. We have taken 167 chip-channel samples that have returned trace to 1.36 grams per tonne gold, 1 to 536 grams per tonne silver, and highly anomalous values in copper, lead (up to 3.62%) and zinc (up to 9.8%).

        We carried out a geochemical soil sampling program in an area measured 4.16 kilometers by 2 kilometers with a 2.6 kilometers by 1.6 kilometers mesh, with east-west lines every 100 meters and samples every 50 meters in a north-south direction. A total of 785 samples were taken. The strongest anomaly is located in the southeastern portion of the area. The area is being mapped and sampled and we expect to complete this work in 2009. The proposed 2009 exploration program includes approximately 1,000 meters of drilling at an estimated cost of $200,000.

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Microondas (Mexico)

Location and Access

        The Microondas silver, gold and base metals project is located in the State of Zacatecas, 120 kilometers northwest of the city of Zacatecas and 15 kilometers southwest of the town of Río Grande, in the municipality of the same name. From the city of Zacatecas, access is by federal paved highway No. 49 to Kilometer 134, where a well-maintained dirt road turns off to the west to the project area.

Title and Ownership Rights

        At the Microondas project we control 15 concessions, with a total of 8,978 hectares. We own 100% of 11 of the concessions. We hold four concessions under purchase option agreements with third parties, with aggregate payments of $65,000 in 2009, $115,000 in 2010 and $135,000 in 2011. To maintain the property, we also are required to pay approximately $90,000 annually to the Mexican government.

Property History

        The Microondas project is located in the Cazaderos Mining District, which has been explored by several companies over the years and mined on a small scale. There is no statistical record of production; upper, oxidized portions of the Santo Niño, La Encantada, La Soledad and La Concepción veins were mined for gold and silver.

        From 1970 to 1980, the CRM (Mineral Resource Council, now the Mexican Geological Service) explored the area and drilled two diamond core holes in the Santo Niño and La Encantada veins. Drill hole CRM- 1, on the Santo Niño vein, intersected, at a depth of 130 meters, 1.75 meters averaging trace gold and 152 grams per tonne silver and a second intercept of 2.0 meters averaging trace gold and 136 grams per tonne silver. Drill hole CRM- 2 cut the vein at a depth of 135 meters, with 1.8 meters averaging 2.0 grams per tonne gold and 573 grams per tonne silver. These drill holes are located in the area we control.

        La Compañía Fresnillo S.A. de C.V., a division of Industrias Peñoles, in 1986 explored and drilled two holes on the northwest end of the Santo Niño vein, outside the area we currently control. From 1994 to 1995, Kennecott Mining carried out a geological, geochemical and geophysical exploration program and drilled 12 holes, totaling 1401 meters. This work was done in the northwestern part of the district, in an area currently controlled by a subsidiary of Hecla Mining Company, which has conducted

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exploration, including diamond drilling from early 2007 to date. From 1996 to 1997, Monarch Mining Company explored the area, but conducted no drilling.

Exploration Activities

        In 2002, we applied for mining concessions covering 8,500 hectares in the area. From 2002 to 2005, we did reconnaissance work, mainly in the southern part of the district, consisting of 1:25,000 scale mapping and collection of 865 surface and underground samples.

        In 2008, we conducted systematic sampling and mapping work in the southern part of the area including detailed geological mapping, collection of 522 surface and underground samples, submission of an environmental report and a permit for surface land use and design of a proposed drilling program. To date, we have spent approximately $670,000 on the project, including field work and property acquisition.

Geology and Mineralization

        Regionally, the oldest rocks are from the Indidura Formation of Upper Cretaceous age. This formation is comprised of a package of clayey limestone in thin strata, from gray to dark gray in color, with intercalations of shale. Overlying the Indidura Formation are the rocks of the Caracol Formation, of Upper Cretaceous age, made up of greywacke, shale, siltstone and sandstone. Intruding into the sedimentary rocks are rhyolitic and quartz-monzonite dikes and, covering them, rhyolitic and basalt flows and tuffs of Tertiary age are observed.

        In the main area of the project, the most common rocks are the older sedimentary units, including the Indidura and Caracol Formations, which host the mineralized veins. Overlying the sedimentary rocks are post-mineral rhyolitic flows and tuffs and basalts of Tertiary age.

        The structural geology is influenced by Laramide tectonics, followed by the emplacement of hypabyssal intrusions during the Eocene-Oligocene that gave rise to the northwest and north-south fault systems and secondary alignments where the mineralized veins occur.

        The main target area measures approximately 4.5 kilometers by 2 kilometers, and consists of epithermal veins with mineralization mainly in lens-shaped zones of various lengths. The main mineralized systems bear N30° to 50°W, N to S and N20°40°E with dips between 50° and 80° to the southwest and northwest respectively. The veins range in thickness from 1 to 3 meters and have lengths ranging from 1,200 meters to 2,400 meters, with offshoots of shorter lengths. Locally, there are areas of intense brecciation and stockwork veining in the walls of the structures that reach thicknesses of 30 meters. The veins are made of quartz, quartz-calcite and calcite with gold and silver mineralization.

        The structural motion is of the right lateral offset type, where the veins striking north-south are more open or dilated, and constitute one of the high-priority exploration targets with potential for high grade silver with gold, at depths between 100 meters and 300 meters below surface. To date, four such dilation zones have been found, with strike lengths ranging from 50 meters to 400 meters along veins mainly bearing N-S, exhibiting anomalous values in surface sampling up to 1121 grams per tonne silver, and 4.5 grams per tonne gold. The veins bearing northwest are another of the targets and so far, seven areas have been identified with anomalies greater than 50 grams per tonne of silver and 0.1 grams per tonne gold, with lengths ranging from 50 meters to 500 meters.

        We have drilled three holes totaling approximately 480 meters in the first quarter 2009 to test the targeted veins in several areas, and have intercepted the vein in each hole. These holes are part of a 10 to 15 hole $600,000 drilling program at Microondas planned for 2009. We have identified several additional target areas that may be drilled, depending on the results of our initial tests.

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Early Stage Exploration Properties

        We believe that the properties described below, while not as advanced as El Quevar, Zacatecas and Microondas, appear to be promising based on our activities to date. We intend to conduct further mapping, sampling and drilling on these properties during 2009. Although we believe that these properties merit further exploration activities, our activities are at a preliminary stage and we do not yet consider any one of these properties to be individually material.

Antofalla (Argentina)

        Our Antofalla project consists of six concessions totaling approximately 8,750 hectares located near the town of Antofalla in northwest Argentina. We have conducted a significant program of surface sampling and mapping on the project. We have identified several mineralized breccia zones and veins containing potentially significant values in silver, lead, zinc and gold. We have designed a drilling program which may be executed in 2009.

Anita (Peru)

        The Anita project, located in the north-central Peruvian Andes, is composed of six concessions totaling approximately 2,800 hectares. We are conducting our activities on three of the concessions under the terms of an option agreement, with a term through September 2010, which will require the payment of $3 million if we elect to acquire the property. We have completed detailed mapping and sampling programs and conducted geophysical surveys to define targets for drill testing. We have completed a limited first-phase drilling program of seven holes. This drilling has indicated several areas of interesting silver-lead-zinc mineralization that require follow-up work. We plan to continue our geological studies and conduct additional staged drilling programs to test this large mineral system.

Palca (Peru)

        The Palca project is located in the Puno province in southern Peru and is distinguished by an extensive series of veins aggregating more than five kilometers in length containing silver, gold and base metals in locally significant amounts. We are acquiring a 100% interest in the project, which is made up of six concessions totaling approximately 1,900 hectares, through a contract with a Canadian junior exploration company. We plan to complete our detailed evaluation, which will be followed by a recommendation to drill test the targets identified.

Farm-outs, Royalties and Other Dispositions

        Exploration properties that we decide not to advance are evaluated for joint venture, sale of all or a partial interest, and royalty potential. In evaluating whether an exploration project warrants potential future development, we will establish minimum requirements for reserves and annual saleable metal production rates and estimate mine development, capital and operating cost requirements to determine if developing the project is economically viable. Exploration properties that do not satisfy the minimum economic requirements for development may generate value through sale or farm-out to third parties, or through retaining royalty interests. We have minority ownership interests and/or royalties in the following properties that were once part of our exploration portfolio:

Paca-Pulacayo Joint Venture (Bolivia)

        We own 16 mining concessions totaling approximately 34,000 hectares near the city of Uyuni in southwestern Bolivia, including seven concessions that are part of a venture with the Bolivian government mining entity COMIBOL. These properties comprise our Paca-Pulacayo silver and base metals project, which, according to published government and private reports, includes one of the largest past producers of silver in Bolivia. We discovered a silver-zinc deposit in two areas following

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exploration in the period from 1998 through 2002. We have contributed these properties to a joint venture with Canadian-based Apogee Minerals Ltd. Under the terms of the joint venture, Apogee may earn a 60% interest in the project by completing a feasibility study before the end of 2009.

        If Apogee earns its 60% interest in the project, we would have the right to maintain our 40% interest and fund our pro rata share of mine construction, relinquish our 40% interest and retain a production royalty in an amount to be negotiated, or increase our interest in the venture to 60% by funding the full amount of mine construction. If Apogee fails to complete a feasibility study in 2009, it could lose its interest in the project. In that event, we could exercise our right to terminate the venture and regain a 100% interest in the project.

        In December 2008, Apogee reported mineral resources for the Pulacayo deposit in a technical report prepared pursuant to Canadian National Instrument 43-101—Standards of Disclosure for Mineral Projects ("NI43-101"). The report estimated indicated resources of 7,003,000 tonnes with an average grade of 53 grams per tonne silver, 1.42% zinc and 0.63% lead, and inferred resources of 9,556,000 tonnes with an average grade of 75 grams per tonne silver, 1.46% zinc and 0.61% lead. Apogee is a Canadian issuer and is permitted to disclose estimates of measured, indicated and inferred mineral resources under NI 43-101. Mineral resources which are not mineral reserves do not have economic viability. While such terms are recognized and required by Canadian regulations, the SEC does not recognize them. Investors are cautioned not to assume that any part or all of the mineral deposits in these categories will ever be converted into reserves.

Platosa Royalty (Mexico)

        During 2004, we sold to Excellon Resources Inc. the mineral rights to a portion of our Platosa silver-lead-zinc property in Mexico. We retained a net smelter return royalty interest, which is currently 3%, and will decrease to 2% after we have received $4 million in royalty payments. At that time, Excellon will have the right to reduce our royalty interest to 1% upon payment of a $1 million fee. Through December 31, 2008, we have received royalty payments from Excellon of approximately $3.2 million.

Otuzco (Peru)

        We owned eight concessions totaling 3,400 hectares on our Otuzco silver-lead-zinc project in Peru. After conducting a detailed geological evaluation of the concessions, we determined that the mineral potential at the Otuzco project did not meet our requirements. We have entered into an agreement with Apoquindo Minerals Inc., a Canadian junior exploration company, to sell the concessions for a total of $3.0 million, payable in installments over four years. We received the initial payment of $150,000 in 2008, and $35,000 in 2009; the remaining installment payments are due as follows: $350,000 in 2010, $500,000 in 2011, $900,000 in 2012 and $1,100,000 in 2013. If these payments are not completed, the property will be returned to us and we will retain all amounts previously paid.

Mine Services

        Following the Effective Date, a key component of our business activities will be providing mine services. Initially, our primary focus will be managing the San Cristóbal mine under the Management Agreement with Sumitomo. In addition, we intend to leverage the experience and skill of our management team and select outsourced talent by performing mine services, including feasibility studies and project development strategies; engineering, construction and procurement management; environmental permitting and corporate social responsibility; technical team support; and contract operations management.

        Under the San Cristóbal Management Agreement, we will provide management services including, for example, management of technical and operating activities, administrative support, information

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technology and local community relations. We will also provide logistics and marketing services for a three month transitional period following the Effective Date. Certain services, such as lobbying, governmental relations and tax planning, are not included in the services to be provided under the Management Agreement. We will be paid an annual fee of approximately $6 million, and be eligible to receive an annual incentive fee of $1.5 million based on achievement of certain negotiated performance targets.

        The Management Agreement will have an initial term of 12 months and thereafter may be terminated by us with 12 months' prior notice or by Sumitomo with six months' prior notice. If terminated by Sumitomo, we will be entitled to a $1.0 million termination fee. We will not be required to pay a termination fee.

        In addition, we intend to identify and capitalize on other opportunities to provide management services on a fee basis with an opportunity to earn an equity interest in other third-party development projects or operations.

San Cristóbal Mine

        We own 65% of MSC, a Bolivian company that owns and operates the San Cristóbal mine, located in the San Cristóbal mining district of the Potosi Department in southwestern Bolivia. Sumitomo owns the remaining 35% of MSC. In connection with our emergence from Chapter 11, we plan to sell all of our remaining interests in the mine to Sumitomo (see "—Reorganization and Expected Emergence from Chapter 11"). We will simultaneously enter into the Management Agreement with Sumitomo pursuant to which we will continue to operate the mine on behalf of Sumitomo in exchange for an annual fee (see "—Mine Services"). The sale of the San Cristóbal mine to Sumitomo is expected to be consummated on or about March 24, 2009.

        The San Cristóbal mine is located at an elevation of approximately 13,000 feet in the Bolivian Altiplano in the Andes Mountains, approximately 500 kilometers south of the city of La Paz. The San Cristóbal mine is accessible by an improved gravel road from the town of Uyuni, approximately 100 kilometers to the northeast, and from the Chilean border town of Ollagüe, approximately 135 kilometers to the west. The mine is located approximately 50 kilometers south of a railroad that runs between Bolivia and Chile. A spur has been built to connect the mine to the railroad for the shipment

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of concentrates. MSC has constructed a private airstrip at the mine, which is used primarily for the transport of personnel. The map below shows the location of the San Cristóbal mine.

        Other than sporadic underground mining in the area of the current pit over the previous 350 years, only one portion of the San Cristóbal mine, the Toldos deposit, has been previously mined. The Toldos mine was operated by Empresa Minera Yana Mallcu S.A. as a block-caving underground operation between 1985 and 1988, and as an open-pit mine and silver heap leach between 1989 and 1995. The Toldos mine was shut down in 1995, and no significant mining or processing plant or equipment remains from that operation.

        The San Cristóbal mine is comprised of certain mining concessions that are part of a large block of concessions covering approximately 500,000 acres that we own or control. MSC has the right to carry out exploration, mining, processing and marketing of all mineral substances located within the concessions, and to use the water found on the concessions. In order to maintain its rights to the San Cristóbal concessions, MSC must make annual mining patent payments to the Bolivian government totaling approximately $575,000.

        MSC spent approximately $760 million to develop and construct the mine from inception of the project in January 2004. This amount excludes operating expenses incurred during start-up and thereafter and approximately $100 million spent at the site prior to January 1, 2004 on early stage exploration and development activities.

        The San Cristóbal mine consists of an open pit mine and concentrator with a designed capacity of 40,000 tonnes per day. A contract miner extracts ore from the open pit by conventional truck and shovel operation and transports mined ore by truck from the pit to the primary crusher. The crushed ore is then transported by a 1.7 kilometer overland conveyor to an ore stockpile. A reclaim system moves crushed ore from the stockpile for grinding in a semi-autogenous (SAG) and ball mill circuit. The ore is then processed by a selective flotation process in which lead is first floated and zinc is suppressed to produce a lead-silver concentrate, and then zinc is floated and lead is suppressed to produce a zinc-silver concentrate. Concentrates are then filtered, loaded into containers and transported by rail to the port in Mejillones, Chile, and then by ocean vessel to smelters and refineries around the world.

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        MSC commenced production at the San Cristóbal mine in August 2007. During 2008, MSC shipped approximately 421,000 tonnes of zinc and lead concentrates containing approximately 14.6 million ounces of payable silver, 158,000 tonnes of payable zinc and 59,000 tonnes of payable lead. As of December 31, 2008 it had stockpiled approximately 29.9 million tonnes of work-in-process ore. Approximately 9.5 million tonnes of the stockpiled ore is sulfide ore and the remainder is oxide ore. The mill currently processes sulfide ore, with the oxide ore scheduled for processing later in the mine life.

Reserves

        Reserves at the San Cristóbal mine are based on 549 reverse circulation drill holes and 85 diamond case drill holes totaling approximately 150,000 meters. The drill holes were generally spaced at intervals of approximately 75 meters. This drilling indicates that the mineralization is present over an area of 1,500 meters by 1,500 meters. The ore deposit defined by this drilling is open at depth and laterally.

        The quality assurance/quality control program used at San Cristóbal included regular insertion and analysis of blanks and standards to monitor laboratory performance. Blanks were used to check for contamination and standards were used to check for grade-dependent biases. Duplicate samples were routinely submitted to different laboratories for assay, with the results of these assays analyzed in total and separately by deposit, drill type and grade. We conducted confirmation drilling, including our own twinning of reverse circulation holes with diamond core holes and independent confirmation drilling by an independent firm.

        Proven and probable reserves for the San Cristóbal mine at December 31, 2008 were calculated by WLR Consulting, Inc. using a $17.57 net smelter return per tonne cutoff value and market price assumptions of $13.31 per ounce silver, $1.27 per pound zinc and $0.90 per pound lead. These prices represent the three-year average prices for each of the metals through December 2008 as required by SEC guidelines.

        The following table shows our proven and probable sulfide and oxide reserves of silver, zinc, and lead. Our reserves were calculated using a fully designed pit model that incorporates design slopes, practical mining shapes and access ramps. Ore blocks within the deposit model are designated as proven if they are within 40 meters (40% of the average variogram range) and at least three drill holes were used to evaluate the block. Ore blocks are designated as probable if they are between 40 meters and the average variogram range of 100 meters and at least two drill holes were used to evaluate the block. Additionally, blocks within 40 meters but evaluated by a single drill hole were also classified as

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probable. Proven and probable classifications are determined only after economic criteria are applied to define the ore.

(1)

Amounts are shown as contained metals in ore and therefore do not reflect losses in the recovery process. Sulfide ore reserves are expected to have an approximate weighted average recovery of 67% for silver, 85% for zinc and 73% for lead. Oxide ore reserves are expected to have an average recovery of 60% for silver and 50% for lead. The estimated strip ratio of the mine is 2.08:1.

Geology

        The geology of the San Cristóbal deposit dates to the Miocene age and is comprised of volcaniclastic rocks (tuff and tuffites), sedimentary and igneous (intrusive) rocks within a circular volcanic crater approximately four kilometers in diameter. Volcaniclastic and sedimentary units formed during periods of intense volcanism and subsequent erosion, occupying the center portion of the crater, and were intruded by repeated intrusive events.

        The San Cristóbal orebody is comprised of two major mineralized zones (Jayula and Tesorera), which outcrop at the surface but join at depth to form a contiguous orebody. The San Cristóbal orebody has formed as a result of syngenetic and epigenetic mineralizing events. Approximately half of the current known mineralization lies within the volcaniclastic units as disseminated stratabound mineralization, which is of a higher grade than mineralization in the intrusives. Mineralization within the intrusives is largely restricted to breccias on the contacts with the surrounding rocks and in veins and disseminations in the interior of the intrusive bodies. The dominant sulfide minerals hosting the zinc, lead and silver are sphalerite, galena and tetrahedrite, respectively. Surface weathering has affected the upper part of the orebody (approximately 45 to 70 meters), creating a small layer of oxide ore which covers the larger sulfide orebody beneath.

Republic of Bolivia

        Bolivia is situated in central South America and is bordered by Peru, Brazil, Paraguay, Argentina and Chile. It has an area of approximately 1.1 million square kilometers and a population of approximately 9 million people.

        In December 2005, Evo Morales, the leader of the Movement to Socialism party, was elected president. At various times since his election, President Morales and others in his administration have made public statements regarding their desire to exert greater state control over natural resource production in Bolivia, including mining.

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        In 2007, the Bolivian government enacted various changes to applicable mining taxes. The potential for the government to make additional changes that would have the effect of increasing the total tax burden on the San Cristóbal mine continues to exist, and any such changes could adversely affect the earnings and cash flow generated by the San Cristóbal mine.

        In December 2008, Bolivia approved a new constitution in a national referendum that significantly affects the legal framework governing mining in Bolivia. The new constitution requires that existing mining concessions by replaced by mining agreements negotiated with the Bolivian government within one year of enactment of the new constitution. The new constitution does not specify the effect on existing concessions or provide either general or specific terms for the mining agreements. There can be no certainty as to the form and content of these contracts that must be negotiated with the Bolivian government.

        We report our operations through a single business segment. See Note 25 to our Consolidated Financial Statements—"Segment Information."

Metals Market Overview

        The San Cristóbal mine, which we will cease to own following our emergence from Chapter 11, produces concentrates containing silver, zinc and lead. With respect to our exploration properties, we have targeted properties containing silver, gold, zinc, lead and/or copper. Descriptions of the markets for these metals are provided below.

Silver Market

        Silver has traditionally served as a medium of exchange, much like gold. Silver's strength, malleability, ductility, thermal and electrical conductivity, sensitivity to light and ability to endure extreme changes in temperature combine to make it a widely used industrial metal. While silver continues to be used as a form of investment and a financial asset, the principal uses of silver are industrial, primarily in electrical and electronic components, photography, jewelry, silverware, batteries, computer chips, electrical contacts, and high technology printing. Silver's anti-bacterial properties also make it valuable for use in medicine and in water purification. Additionally, new uses of silver are being developed in connection with the use of superconductive wire.

        Most silver production is obtained from mining operations in which silver is not the principal or primary product. Approximately 80% of mined silver is produced as a by-product of mining lead, zinc, gold or copper deposits.

        The following table sets forth for the periods indicated the New York Commodities Exchange ("COMEX") nearby active silver futures contract's high and low price of silver in U.S. dollars per troy ounce. On March 11, 2009, the closing price of silver was $12.80 per troy ounce.

Gold Market

        For centuries, gold has been desirable for its rarity, beauty, and unique properties. Because gold is highly valued and in very limited supply, it has long been used as a medium of exchange or money.

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        The production of ornamental objects was probably the first use of gold over 6000 years ago. Today, about 78% of the gold consumed each year is used in the manufacture of jewelry, with approximately 12% of demand for gold from industry. Gold is an excellent conductor of electricity, is extremely resistant to corrosion, and is one of the most chemically stable of the elements, making it critically important in electronics and other high-tech applications.

        The most important industrial use of gold is in the manufacture of electronics. A small amount of gold is used in almost every sophisticated electronic device. Gold's unique properties make it also useful in medical applications.

        The following table sets forth for the periods indicated the London Bullion Marketing Association's high and low gold fixes in U.S. dollars per troy ounce. On March 11, 2009, the closing price of gold was $900 per troy ounce.

Zinc, Lead and Copper Markets

        Due to the corrosion resisting property of zinc, it is used primarily as the coating in galvanized steel. Galvanized steel is widely used in construction of infrastructure, housing and office buildings. In the automotive industry, zinc is used for galvanizing and die-casting, and in the vulcanization of tires. Smaller quantities of various forms of zinc are used in the chemical and pharmaceutical industries, including fertilizers, food supplements and cosmetics, and in specialty electronic applications such as satellite receivers.

        The primary use of lead is in motor vehicle batteries, but it is also used in cable sheathing, shot for ammunition and alloying. Lead in chemical form is used in alloys, glass and plastics. Lead is widely recycled, with secondary production accounting in recent years for approximately half of total supply.

        Copper is the world's third most widely used metal, and is mostly used in industries such as construction and industrial machinery manufacturing. Copper has the second highest electrical conductivity of any element after silver and may be alloyed with zinc, producing brass.

        The following table sets forth for the periods indicated the London Metals Exchange's high and low settlement prices of zinc and lead in U.S. dollars per pound and COMEX high and low First Position settlement prices of copper in U.S. dollars per pound. On March 11, 2009, the closing prices of zinc, lead and copper were $0.55, $0.58 and $1.62 per pound, respectively.

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Employees

        As of March 11, 2009, we had approximately 1,060 employees, of which about 940 were employed by MSC. We expect that Golden Minerals Company will have approximately 120 employees.

Competition

        As an exploration stage company, we compete with other mineral resource exploration and development companies for financing and for the acquisition of new mineral properties. In addition, as a mine services provider, we compete with other mining companies to attract and retain key executives, skilled labor, contractors and other employees. The metals markets are cyclical and our ability to maintain our competitive position over the long term will be based on our ability to acquire and develop quality deposits, hire and retain a skilled workforce and to manage our costs.

        Many of the mineral resource exploration and development companies with which we compete have greater financial and technical resources than we do. Accordingly, these competitors may be able to spend greater amounts on acquisitions of mineral properties of merit, on exploration of their mineral properties and on development of their mineral properties. In addition, they may be able to afford greater geological expertise in the targeting and exploration of mineral properties. This competition could result in competitors having mineral properties of greater quality and interest to prospective investors who may finance additional exploration and development. This competition could adversely impact our ability to finance further exploration and to achieve the financing necessary for us to develop our mineral properties.

Regulatory and Environmental Compliance

        Our current and future exploration activities, as well as any future mining and processing operations, are subject to various federal, state and local laws and regulations in the countries in which we conduct our activities. These laws and regulations govern the protection of the environment, prospecting, development, production, taxes, labor standards, occupational health, mine safety, toxic substances and other matters. We expect to be able to comply with these laws. We intend to and expect to be able to obtain all licenses and permits required by all applicable regulatory agencies in connection with our mining operations and exploration activities. We intend to maintain standards of environmental compliance consistent with regulatory requirements. We expect to make expenditures to comply with applicable laws and regulations and do not believe that compliance will have a material adverse effect on our competitive position.

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ITEM 1A:    RISK FACTORS

        Investors in Apex Silver should consider carefully, in addition to the other information contained in, or incorporated by reference into, this annual report on Form 10-K, the following risk factors:

Bankruptcy and Related Considerations

Under the approved Plan, holders of existing equity securities in Apex Silver will receive nothing on account of their interests.

        Under the terms of the Plan, which was confirmed by the Bankruptcy Court and is expected to become effective on or about March 24, 2009, the holders of our existing ordinary shares will not receive anything on account of their shares. All such shares will be cancelled as a result of the Cayman Islands liquidation proceeding of Apex Silver.

We may be forced to liquidate if the Effective Date of the Plan is delayed.

        Although a confirmation order with respect to the Plan was entered by the Bankruptcy Court on March 4, 2009, and the Plan is expected to become effective on or about March 24, 2009, there can be no assurance that it will become effective on that date. If the Plan does not become effective on or prior to March 26, 2009, we must obtain Sumitomo's consent (not to be unreasonably withheld) to permit a later effective date.

        The effectiveness of the Plan is conditioned on the consummation of the transactions contemplated by the Purchase Agreement under which we are selling our direct and indirect interests in the San Cristóbal mine to Sumitomo. The Purchase Agreement is itself subject to certain conditions precedent, all of which must be met or waived prior to closing. We cannot emerge from Chapter 11 pursuant to the Plan without simultaneously consummating the transactions under the Purchase Agreement. If any of the conditions in the Purchase Agreement are not met, we may be delayed in closing, which could jeopardize our ability to emerge from Chapter 11. Sumitomo has a right to terminate the Purchase Agreement if the closing has not occurred on or before March 31, 2009.

        If we fail to meet the deadlines described above and the Plan does not become effective, we will have substantial difficulty reorganizing our operations and will likely be forced to liquidate. A termination of the Purchase Agreement would give Sumitomo a termination right under the DIP Financing Facility and the original Plan Support Agreement. Upon termination of the DIP Financing Facility and the original Plan Support Agreement, Sumitomo's obligation to forbear from exercising rights and remedies under the Project Finance Facility would terminate and Sumitomo could seek to foreclose on the San Cristóbal mine. Such circumstances would likely lead to the liquidation of our businesses.

        Moreover, even if a delay in the Effective Date of the Plan does not result in our being forced to liquidate, any prolonged continuation of the Chapter 11 proceeding beyond the anticipated Effective Date will adversely affect our businesses and operations. As long as the Chapter 11 proceeding continues, our senior management will be required to spend a significant amount of time and effort dealing with our reorganization instead of focusing exclusively on business operations. Prolonged continuation of the Chapter 11 proceeding may also make it more difficult to attract and retain management and other key personnel necessary to the success and growth of our businesses. Furthermore, as long as the Chapter 11 proceeding continues, we will be required to incur substantial costs for professional fees and other expenses associated with the proceeding.

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Risks Associated with our Business

We may not be able to continue as a going concern following emergence from Chapter 11 if we cannot fund operations through increased revenues or access to external sources of funding.

        Following our emergence from Chapter 11, we plan to focus our efforts on managing the San Cristóbal mine under the Management Agreement, continuing exploration activities on our portfolio of properties and leveraging our substantial industry experience to identify and capitalize on opportunities to provide mine management and other mine services to third parties.

        While we believe that this business plan is achievable, we will continue to face significant challenges in executing our strategies. In particular, for the foreseeable future, our revenues will comprise principally the management fee we earn under the Management Agreement in consideration of managing the San Cristóbal mine. While our annual management fee is approximately $6.0 million (plus the potential for an incentive payment), we expect to receive only a pro rata portion of this amount in 2009, or approximately $4.5 million. Moreover, Sumitomo may terminate the Management Agreement on 180 days' written notice after the initial term of 12 months provided that it pays us a $1 million termination fee. As a result, we may not receive any revenues under the Management Agreement as early as 18 months following the Effective Date. Other than the service fees we receive under the Management Agreement, our only other source of revenue will be interest on our auction rate securities and certain royalty payments. Moreover, we have not previously managed a mining property for a third party, nor sought to develop a mine management or services business, and we may not be successful in attracting new business on attractive terms or at all.

        Given the nature of our business and cash needs, we expect that we will incur operating losses for the foreseeable future and that we will need to raise additional capital by the end of 2009, at a time when we are in the early stages of re-aligning our operations based on a different business model. Upon emergence from Chapter 11, we will also not have any credit facility in place and believe that securing credit will remain difficult, if not impossible, for us due to our circumstances and the current constrained credit markets. If the current severe global recessionary environment persists or worsens, with continued disruptions in the financial markets, we may be unable to raise sufficient capital on favorable terms or at all. If we cannot fund our operations, we may face renewed challenges in continuing operations as a going concern. Moreover, the Amended and Restated Certificate of Incorporation (the "Certificate of Incorporation"), and Bylaws of Golden Minerals Company impose limits on our ability to issue preferred stock to raise capital for up to 14 months and, even if we were to obtain such approval, the issuance of such shares may cause the market price of the common stock of Golden Minerals Company to decline.

The sale of the San Cristóbal mine will significantly change our operations.

        If we achieve the sale of our 65% interest in the San Cristóbal mine to Sumitomo under the Purchase Agreement and a successful reorganization under the Plan, our operations will change significantly. In particular, we would cease operations as a mining business, while continuing business as a mine management and mineral exploration company, which would also change the basis of presentation of our results of operations and financial condition in material ways.

Our revenues will depend primarily on our agreement to manage the San Cristóbal mine.

        Following the consummation of the Plan and the sale of our interests in the San Cristóbal mine, our revenues will consist primarily of the management fees payable under the Management Agreement under which we will manage the San Cristóbal mine for Sumitomo. After the initial 12-month term, Sumitomo will be able to terminate the Management Agreement at its discretion upon 180 days' written notice provided that it pays us a $1 million fee. After the initial term, we have the right and might elect to terminate the Management Agreement. Sumitomo may not wish to continue the

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Management Agreement beyond the initial term and, as a result, our primary source of funding may not continue beyond the initial term. Moreover, the Management Agreement, and payments to us thereunder, may be reduced or suspended in certain circumstances in the event of a prolonged interruption in mining activities, including labor disturbances, shutdowns or events of force majeure, such as expropriation by the Bolivian government.

We have never previously managed a mining property for a third party and there can be no assurance that our mine management business will be successful.

        Under the Management Agreement, we expect to manage the San Cristóbal mine for a period of at least 18 months, including the six months' notice required to be given to us by Sumitomo in order to terminate the Management Agreement. We have never previously managed a mining property for a third party or sought to develop a mine management business, and we may not be successful in doing so. As economic conditions and certain commodity prices remain weak, it is possible that there will be insufficient demand for our services and that we will be unable to attract additional mine management business.

The exploration of mineral properties is highly speculative in nature, involves substantial expenditures and is frequently non-productive.

        Our future growth and profitability will depend, in large part, on our ability to identify and acquire additional mineral rights, and on the costs and results of our continued exploration programs. Competition for attractive mineral exploration properties is intense. Our strategy is to develop reserves through a broad program of exploration. Mineral exploration is highly speculative in nature and is frequently non-productive. Substantial expenditures are required to:

•

establish ore reserves through drilling and metallurgical and other testing techniques;



•

determine metal content and metallurgical recovery processes to extract metal from the ore;



•

determine the feasibility of mine development and production; and



•

construct, renovate or expand mining and processing facilities.

        If we discover ore, it usually takes several years from the initial phases of exploration until production is possible. During this time, the economic feasibility of production may change. As a result of these uncertainties, we may not successfully acquire additional mineral rights, or our exploration programs may not result in proven and probable reserves in sufficient quantities to justify commercial operations at any of our exploration properties.

        The decisions about future development of projects may be based on feasibility studies, which derive estimates of reserves, operating costs and project economic returns. Estimates of economic returns are based, in part, on assumptions about future metal prices and estimates of average cash operating costs based upon, among other things:

•

anticipated tonnage, grades and metallurgical characteristics of ore to be mined and processed;



•

anticipated recovery rates of silver and other metals from the ore;



•

cash operating costs of comparable facilities and equipment; and



•

anticipated climatic conditions.

        Actual cash operating costs, production and economic returns may differ significantly from those anticipated by our studies and estimates.

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Our mineral exploration projects may not contain reserves, be developed into mines or become profitable.

        We currently have a portfolio of approximately 45 exploration projects in six countries—Argentina, Australia, Bolivia, Ecuador, Mexico and Peru. None of our properties has been shown to contain proven or probable reserves. Our exploration properties may not contain reserves, be further developed or ultimately generate revenue or become profitable. Even if we establish the presence of reserves, the economic viability of the property may not justify further exploitation of a project. The failure to establish reserves could restrict our ability to successfully implement a strategy for long-term growth.

We may be required to indemnify Sumitomo in certain circumstances under the terms of the Purchase Agreement and such payments could have a material adverse effect on our financial condition.

        Under the terms of the Purchase Agreement pursuant to which we expect to sell our interests in the San Cristóbal mine to Sumitomo, we are required to indemnify Sumitomo in certain circumstances, including for losses, if any, arising as a result of certain excluded liabilities or a breach of certain customary representations and warranties. Our maximum exposure for such losses could be as much as the full amount of the $27.5 million cash purchase price, although for fraud or intentional misrepresentation, our liability exposure is not limited. Our obligations under the Purchase Agreement will be assumed by our successor, Golden Minerals Company, in connection with the Plan. If Golden Minerals Company were obligated to make indemnification payments, it could have a material adverse effect on its financial condition.

The calculation of our mineralized material is subject to significant estimates.

        None of our exploration properties has been shown to contain proven or probable reserves. We have completed a technical report on our El Quevar property which indicates the presence of mineralized material. See "Business and Properties—Exploration—El Quevar (Argentina)." Mineralization figures are based on estimates made by independent geologists or our own personnel, are inherently imprecise and depend on geological interpretation and statistical inferences drawn from drilling and sampling that may prove to be unreliable. There can be no assurance that these estimates will be accurate or that proven and probable reserves will be developed on these properties or that any such reserves could be mined and processed profitably.

Our long-term cash flow and profitability will be affected by changes in the prices of metals.

        Our ability to establish reserves and develop any of our exploration properties—and our profitability and long-term viability—depend, in large part, on the market price of silver, zinc, lead, gold, copper and other metals. See "Business and Properties—Metals Market Overview." The market prices for these metals are volatile and are affected by numerous factors beyond our control, including:

•

global or regional consumption patterns;



•

supply of, and demand for, silver, zinc, lead and other metals;



•

speculative activities;



•

expectations for inflation; and



•

political and economic conditions.

        The extreme volatility and disruption that have affected the financial markets have also extended to the commodity markets, including metals markets, which experienced significant volatility in 2008. This volatility can be expected to persist through 2009 and possibly beyond. Any extended weakness in the global economy could further increase volatility in metals prices or depress prices, which could in turn make it uneconomical for us to continue our exploration activities. Volatility or sustained price

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declines may also affect the number, quality and profitability of available mine service opportunities and adversely affect our ability to build our business.

Title to our mineral properties may be challenged.

        Our policy is to seek to confirm the validity of our rights to title to, or contract rights with respect to, each mineral property in which we have a material interest. However, we cannot guarantee that title to our properties will not be challenged. Title insurance generally is not available, and our ability to ensure that we have obtained secure rights to individual mineral properties or mining concessions may be severely constrained. We have not conducted surveys of all of the exploration properties in which we hold direct or indirect interests and, therefore, the precise area and location of these exploration properties may be in doubt. Accordingly, our mineral properties may be subject to prior unregistered agreements, transfers or claims, and title may be affected by, among other things, undetected defects. In addition, we may be unable to operate our properties as permitted or to enforce our rights with respect to our properties, and the title to our mineral properties may also be impacted by state action.

We may lose rights to properties if we fail to meet payment requirements or development or production schedules.

        We derive the rights to some of our mineral properties from leaseholds or purchase option agreements that require the payment of rent or other installment fees. For example, we have acquired certain of our rights on the El Quevar property through option agreements, which require aggregate payments of approximately $3.2 million over the next four years. The El Quevar property is our most advanced exploration property, and the only property on which we have estimated mineralized material. If we fail to make these payments when they are due, our rights to the property may terminate. Because our ability to make some of these payments is likely to depend on our ability to obtain external financing, we may not have the funds to make these payments by the required dates.

        Some contracts with respect to our mineral properties require development or production schedules. For example, the joint venture agreement by which we are acquiring our 80% interest in the El Quevar project requires that we complete a feasibility study by the end of 2010 and begin production within two years thereafter. Because we may not be able to meet any or all of the development or production schedules, we could lose our interests in the El Quevar or other properties as a result.

        Moreover, we are required in certain instances to make certain payments to governments in order to maintain our rights to our mineral properties. We may not be able to pay these yearly fees when they become due.

Our exploration and mine management activities are in countries with developing economies and are subject to the risks of political and economic instability associated with these countries.

        We currently conduct exploration and mine management activities almost exclusively in Latin American countries with developing economies, including Argentina, Bolivia, Mexico and Peru. These countries and other emerging markets in which we may conduct operations have from time to time experienced economic or political instability. We may be materially adversely affected by risks associated with conducting exploration and mine management activities in countries with developing economies, including:

•

political instability and violence;



•

war and civil disturbance;



•

acts of terrorism;

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•

expropriation or nationalization;



•

changing fiscal regimes;



•

fluctuations in currency exchange rates;



•

high rates of inflation;



•

underdeveloped industrial and economic infrastructure; and



•

unenforceability of contractual rights.

        Changes in mining or investment policies or shifts in the prevailing political climate in any of the countries in which we conduct exploration and mine management activities could adversely affect our business.

Our activities are subject to foreign environmental laws and regulations that may materially adversely affect our future operations.

        We conduct mineral exploration and mine management activities primarily in Argentina, Bolivia, Mexico and Peru. These countries have laws and regulations that control the exploration and mining of mineral properties and their effects on the environment, including air and water quality, mine reclamation, waste handling and disposal, the protection of different species of flora and fauna and the preservation of lands. These laws and regulations will require us to acquire permits and other authorizations for certain activities. In many countries, there is relatively new comprehensive environmental legislation, and the permitting and authorization process may not be established or predictable. We may not be able to acquire necessary permits or authorizations on a timely basis, if at all. Delays in acquiring any permit or authorization could increase the cost of our projects and could delay the commencement of production.

        Environmental legislation in many countries is evolving in a manner that will likely require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees. We cannot predict what environmental legislation or regulations will be enacted or adopted in the future or how future laws and regulations will be administered or interpreted. Compliance with more stringent laws and regulations, as well as potentially more vigorous enforcement policies or regulatory agencies or stricter interpretation of existing laws, may (i) necessitate significant capital outlays, (ii) cause us to delay, terminate or otherwise change our intended activities with respect to one or more projects, (iii) materially adversely affect our future exploration activities and (iv) negatively affect the profitability of the San Cristóbal mine or other projects we may manage in the future.

        Many of our exploration properties are located in historic mining districts where prior owners may have caused environmental damage that may not be known to us or to the regulators. In most cases, we have not sought complete environmental analyses of our mineral properties and have not conducted comprehensive reviews of the environmental laws and regulations in every jurisdiction in which it owns or controls mineral properties. To the extent we are subject to environmental requirements or liabilities, the cost of compliance with these requirements and satisfaction of these liabilities could have a material adverse effect on our financial condition and results of operations. If we are unable to fund fully the cost of remediation of any environmental condition, we may be required to suspend activities or enter into interim compliance measures pending completion of the required remediation.

We compete against larger and more experienced companies.

        The mining industry is intensely competitive. Many large mining companies are primarily producers of base metals or gold and may become interested in the types of deposits on which we are focused,

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which include polymetallic deposits containing significant quantities of base metals including zinc, lead, copper and gold. Many of these companies have greater financial resources, operational experience and technical capabilities than us. We may encounter increasing competition from other mining companies in our efforts to acquire mineral properties and hire experienced mining professionals. Increased competition in our business could adversely affect our ability to attract necessary capital funding, acquire suitable producing properties or prospects for mineral exploration in the future or maintain and develop our mine services business.

We depend on the services of key executives.

        We are dependent on the services of key executives including our Chief Executive Officer and a small number of highly skilled and experienced executives and personnel. Due to our relatively small size and our Chapter 11 proceeding, the loss of these persons or our inability to attract and retain additional highly skilled employees may have a material adverse effect on our business, our ability to manage the San Cristóbal mine and our financial condition, results of operations or cash flow.

We may be subject to fines or other penalties in connection with an alleged violation of the Foreign Corrupt Practices Act.

        We have concluded, based on the results of an internal investigation conducted under the direction of our Audit Committee, that certain senior employees of one of our South American subsidiaries were involved in making impermissible payments of approximately $125,000 to government officials in 2003 and 2004 in connection with an inactive, early-stage exploration property that is not related to any of our active exploration or mining properties. The involved employees are no longer employed by us, and based on findings to date, no changes to our financial statements previously filed with the SEC are warranted as a result of these matters. We have contacted the U.S. Department of Justice (the "DOJ") and SEC and reported the results of our internal investigation. We have been informed that the DOJ and SEC have commenced an investigation with respect to these matters, including possible violations of the Foreign Corrupt Practices Act. We are cooperating fully with the DOJ and SEC investigations.

        On January 7, 2009, we received a "Wells notice" from the staff of the SEC (the "Staff"), which states that the Staff intends to recommend to the SEC that an enforcement action be commenced against us, alleging violations of Sections 13(b)(2)(A), 13(b)(2)(B), 13(b)(5) and 30A of the Exchange Act. The Wells notice further states that the Staff may seek permanent injunctive relief, disgorgement, prejudgment interest and civil money penalties against us. We have learned that the Staff also issued Wells notices to a former Chief Financial Officer and former executive Chairman of the Board of Apex during the period of the alleged illegal payments. We intend to submit a Wells Statement putting forth our reasons that the SEC should not institute civil enforcement proceedings against us. We cannot predict with any certainty the final outcome of these investigations or enforcement actions, including any fines or penalties that may be imposed.

Risks Relating to the Common Stock of Golden Minerals Company

There may not be an active trading market for the common stock of Golden Minerals Company, which will affect a shareholder's ability to sell the shares or the price for which they can be sold.

        There is currently only a limited public market for ordinary shares of Apex Silver, but no trading market for common stock of Golden Minerals Company. Upon our emergence from Chapter 11, shares of common stock of Golden Minerals Company will be issued to the holders of our Subordinated Notes and other unsecured creditors. See "Business and Properties—Reorganization and Expected Emergence from Chapter 11." We expect trading in the common stock of Golden Minerals Company to commence trading in the over-the-counter market on or about the Effective Date and also expect to pursue a listing on a U.S. national securities exchange and the Toronto Stock Exchange. We may not be

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successful in achieving a listing, and you should not assume that a market for the common stock will develop, or if one develops, that it will provide securityholders with liquidity for the common stock.

The substantial control of Golden Minerals Company by a small number of stockholders could facilitate, defer or prevent a change of control of Golden Minerals Company or other events that could be adverse to our other stockholders or to Golden Minerals Company.

        Upon emergence from Chapter 11, five holders of Subordinated Notes will receive approximately 53% of the outstanding common stock of Golden Minerals Company. If holders of a significant number of shares of the Golden Minerals Company's common stock were to act as a group, these holders could be in a position to control the outcome of actions requiring stockholder approval, including facilitating, deferring or preventing a change of control or other events which may or may not be of benefit to other stockholders.

        Moreover, holders of Subordinated Notes who receive common stock of Golden Minerals may sell their stock. Future sales of substantial amounts of the common stock of Golden Minerals in the open market, or the availability of such shares for sale, could adversely affect the price of the common stock of Golden Minerals.

The estimated valuation of Golden Minerals Company common stock is not intended to represent the trading value of the stock.

        The number of shares of Golden Minerals Company common stock that will be issued to holders of Subordinated Notes and other creditors under the Plan was calculated using an estimate of the going concern value of Golden Minerals Company. The estimated valuation of Golden Minerals Company was based on certain generally accepted valuation analyses and is not intended to represent the trading value of the common stock in public or private markets.

We do not anticipate paying a dividend in the foreseeable future.

        For the foreseeable future, we expect to use all of our cash flow to fund our obligations under the Plan, and to advance our exploration portfolio and other business operations. Accordingly, we do not anticipate that Golden Minerals Company will pay cash dividends on its common stock in the foreseeable future. Moreover, the Certificate of Incorporation and Bylaws for Golden Minerals Company will prohibit the payment of dividends (in a single distribution or series of distributions) during the first 12 months after the Effective Date and prohibit payment of dividends (in a single distribution or series of distributions) in excess of 10% of the unrestricted cash held by Golden Minerals Company on the Effective Date until the two year anniversary of the Effective Date.

Risks Relating to Certain Tax and Accounting Consequences

Certain tax consequences of the Plan raise unsettled and complex legal issues and involve factual determinations.

        The federal income tax consequences of the Plan are complex and are subject to significant uncertainties. We have not sought any ruling from the Internal Revenue Service ("IRS") on the tax consequences of the Plan. Thus, there can be no assurance that the IRS will not challenge the various positions we have taken, or intend to take, with respect to the tax treatment in the Plan, or that a court would not sustain such a challenge.

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The status of Apex Silver as a passive foreign investment company ("PFIC") for U.S. federal income tax purposes may adversely affect holders of Subordinated Notes or ordinary shares.

        We believe that Apex Silver likely was a PFIC for 2004 through 2006, may have been a PFIC for 2007 and 2008 and may be a PFIC through the Effective Date. A holder of ordinary shares or Subordinated Notes who is a U.S. person for U.S. tax purposes (a "U.S. Holder") will be subject to certain adverse U.S. federal income tax rules if the U.S. Holder owns or has owned our shares or Subordinated Notes during any year in which we were or are a PFIC. Under the PFIC rules, such a U.S. Holder who disposes or is deemed to dispose of shares or Subordinated Notes (including a disposition of the Subordinated Notes upon the consummation of the Plan at the Effective Date) generally will be required to treat any gain on the disposition as an "excess distribution" under the PFIC rules. Under the PFIC rules, a U.S. Holder will be required to allocate any gain treated as an excess distribution with respect to the shares or Subordinated Notes, as applicable, to each day during the U.S. Holder's holding period on a straight-line basis. Any portion of the excess distribution that is allocable to the current year or to periods in the U.S. Holder's holding period before Apex Silver became a PFIC will be included in the U.S. Holder's gross income for the current year as ordinary income. Any portion of the excess distribution that is allocable to any other year will be taxable at the highest rate of taxation applicable to ordinary income for that year, without regard to the U.S. Holder's other items of income and loss for such year, and this tax will be increased by an interest charge computed by reference to the periods to which the tax is allocable and based on the rates generally applicable to underpayments of tax. A holder of shares in a PFIC can sometimes mitigate the impact of the PFIC rules by making a so-called "qualified electing fund" election, but this election is unavailable to holders of Subordinated Notes.

Shareholders of Golden Minerals Company may be required to treat gain recognized on a disposition of the common stock received upon consummation of the Plan as ordinary income in the nature of recapture.

        Holders of our Subordinated Notes and other unsecured creditors who acquire common stock of our successor, Golden Minerals Company, upon consummation of the Plan may be subject to special recapture rules under Section 108(e)(7) of the Internal Revenue Code of 1986, as amended. Under these recapture rules, such a holder may be required to treat gain recognized on the taxable disposition of such common stock of Golden Minerals Company as ordinary income if the holder claimed a bad debt deduction with respect to the Subordinated Notes or other unsecured claims or if the holder recognizes an ordinary loss on the exchange of Subordinated Notes or other unsecured claims for common stock of Golden Minerals Company.

Application of fresh start accounting requirements may result in a material adverse effect on the reported financial condition of Golden Minerals Company.

        As a result of the consummation of the Plan and the transactions contemplated thereby, we believe that we will be subject to the fresh-start accounting rules. Fresh-start accounting rules require that we record our assets and liabilities at fair value upon emergence from bankruptcy. As a result, we will need to determine the fair values of all of our assets, including our exploration properties. These may be impaired in the future if they are not determined to be economically viable properties. Golden Minerals Company will be treated as a "successor company" for accounting purposes and will be required to continue to report its predecessor activities, including the activities of MSC, when comparable prior period consolidated financial statements are presented.

ITEM 1B:    UNRESOLVED STAFF COMMENTS

        None.

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ITEM 3:    LEGAL PROCEEDINGS

        As previously disclosed, we have concluded, based on the results of an internal investigation conducted under the direction of our Audit Committee, that certain senior employees of one of our South American subsidiaries were involved in making impermissible payments of approximately $125,000 to government officials in 2003 and 2004 in connection with an inactive, early-stage exploration property that is not related to any of our active exploration or mining properties. The involved employees are no longer employed by us, and based on findings to date, no changes to our financial statements previously filed with the SEC are warranted as a result of these matters. We have contacted the DOJ and SEC and reported the results of our internal investigation. We have been informed that the DOJ and SEC have commenced an investigation with respect to these matters, including possible violations of the Foreign Corrupt Practices Act. We are cooperating fully with the DOJ and SEC investigations. On January 7, 2009, we received a "Wells notice" from the staff of the SEC (the "Staff"), which states that the Staff intends to recommend to the SEC that an enforcement action be commenced against us, alleging violations of Sections 13(b)(2)(A), 13(b)(2)(B), 13(b)(5) and 30A of the Exchange Act. The Wells notice further states that the Staff may seek permanent injunctive relief, disgorgement, prejudgment interest and civil money penalties against us. We have learned that the Staff also issued Wells notices to a former Chief Financial Officer and former executive Chairman of the Board of Apex during the period of the alleged illegal payments. We intend to submit a Wells Statement putting forth our reasons that the SEC should not institute civil enforcement proceedings against us. We cannot predict with any certainty the final outcome of these investigations or enforcement actions, including any fines or penalties that may be imposed.

        As discussed above, on January 12, 2009, Apex Silver and its subsidiary, ASMC, filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code, with the Bankruptcy Court. Apex Silver has also commenced a provisional liquidation proceeding in the Cayman Islands. We continue to operate our business as a "debtor-in-possession" under court protection from creditors and claimants and subject to the supervision of the Bankruptcy Court and the joint provisional liquidators in the Cayman liquidation proceeding. On March 4, 2009, the Bankruptcy Court entered an order confirming our Plan. We plan to declare the Plan effective and emerge from Chapter 11 protection on or about March 24, 2009. For additional information regarding our Chapter 11 proceeding, see "Business and Properties—Reorganization and Expected Emergence from Chapter 11."

ITEM 4:    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        No matters were submitted to a vote of security holders in the fourth quarter of 2008.

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PART II

ITEM 5:    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

        Following our emergence from Chapter 11 protection, our current equity holders will receive no recovery under the Plan and the ordinary shares of Apex Silver will be cancelled. Under the Plan, our successor following emergence from Chapter 11 will be Golden Minerals Company, a Delaware corporation with approximately 3,200 beneficial shareholders. We expect trading in the common stock of Golden Minerals Company to commence trading in the over-the-counter market on or about the Effective Date and also expect to pursue a listing on a U.S. national securities exchange and the Toronto Stock Exchange. We may not be successful in achieving a listing, and you should not assume that a market for the common stock will develop, or if one develops, that it will provide securityholders with liquidity for the common stock. See "Business and Properties—Reorganization and Expected Emergence from Chapter 11" and "Risk Factors—There may not be an active trading market for the common stock of Golden Minerals Company, which will affect a shareholder's ability to sell the shares or the price for which they can be sold."

        Prior to our Chapter 11 proceeding, our ordinary shares were traded on NYSE Alternext U.S., as successor to the American Stock Exchange (the "Exchange"), under the symbol "SIL" until January 12, 2009, when trading was halted as a result of our impending filing under Chapter 11. On February 4, 2009, trading was formally suspended and on March 4, 2009, our shares were formally delisted by the Exchange. Since February 4, 2009, our shares have been quoted on the Pink Sheets under the ticker symbol "APXSQ." As of March 11, 2009, Apex Silver had approximately 225 shareholders of record and an estimated 12,000 additional beneficial holders whose ordinary shares were held in street name by brokerage houses.

        The following table sets forth the high and the low sale prices per share of ordinary shares of Apex Silver for the periods indicated as reported by the Exchange. The closing price of the ordinary shares of Apex Silver on the Pink Sheets on March 11, 2009 was $0.01.

Dividends

        We have never paid a dividend on our ordinary shares and do not anticipate doing so in the foreseeable future.

Description of Capital Stock of Golden Minerals Company

Common Stock

        The Amended and Restated Certificate of Incorporation of Golden Minerals Company that will be adopted on the Effective Date authorizes the issuance of an aggregate of 50,000,000 shares of Golden Minerals Company common stock, par value $0.01 per share. Upon emergence from Chapter 11 in accordance with the Plan, on or after the Effective Date approximately three million shares of Golden Minerals Company common stock will be issued to the holders of the Subordinated Notes and Apex Silver's other unsecured creditors.

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Voting Rights

        Each holder of Golden Minerals Company common stock will be entitled to one vote per share. Subject to the rights of the holders of any outstanding preferred stock, all voting rights will be vested in the holders of shares of Golden Minerals Company common stock. Holders of shares of common stock will have noncumulative voting rights, which means that the holders of more than 50% of the shares voting for the election of directors will be able to elect 100% of the directors, and the holders of the remaining shares voting for the election of directors will not be able to elect any directors.

Dividends

        Holders of Golden Minerals common stock will be entitled to receive dividends when, as and if declared by the board of directors, out of funds legally available for their payment, subject to the rights of holders of any preferred stock outstanding. The Bylaws of Golden Minerals Company (the "Bylaws" and together with the Certificate of Incorporation, the "Organizational Documents") will provide that, for a one-year period following the Effective Date, Golden Minerals Company will not be permitted to declare or pay any dividend in respect of its common stock. Additionally, during the one-year period beginning on or about March 24, 2010, Golden Minerals Company will not be permitted to declare or pay any dividend in respect of its common stock if, after giving effect to such dividend, the aggregate amount of dividends so declared and paid would exceed 10% of the unrestricted cash held by Golden Minerals Company on the Effective Date.

Rights upon Liquidation

        In the event of Golden Minerals Company's voluntary or involuntary liquidation, dissolution or winding up, the holders of Golden Minerals Company common stock will be entitled to share equally in any of Golden Minerals Company's assets available for distribution after the payment in full of all debts and distributions and after the holders of any series of outstanding preferred stock have received their liquidation preferences in full.

Preferred Stock

        The Certificate of Incorporation of Golden Minerals Company will authorize the issuance of an aggregate of 10,000,000 shares of preferred stock, par value $0.01 per share. As of the Effective Date, there will be no shares of preferred stock outstanding.

        Pursuant to the Certificate of Incorporation, the board of directors will be permitted, from time to time, to direct the issue of shares of preferred stock in series and may, at the time of issue, determine the voting powers, full or limited, or without voting powers, and such designations, powers, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof. Satisfaction of any dividend preferences of outstanding preferred stock would reduce the amount of funds available for the payment of dividends on shares of Golden Minerals Company common stock. Holders of preferred stock may be entitled to receive a preference payment in the event of any liquidation, dissolution or winding up of Golden Minerals Company before any payment is made to holders of common stock. Under certain circumstances, the issuance of preferred stock may render more difficult or tend to discourage a merger, tender offer or proxy contest, the assumption of control by a holder of a large block of Golden Minerals Company's securities or the removal of incumbent management. Notwithstanding the foregoing, the affirmative vote of the holders of a majority in voting power of the outstanding shares of Golden Minerals Company common stock present in person or represented by proxy at a special or annual meeting duly called for purposes of such business will be required for the issuance of any shares of preferred stock prior to the later of the date (i) that is 14 months following the Effective Date and (ii) on which Golden Minerals Company holds

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its first meeting of stockholders at which directors are elected following the Effective Date (such date the "Restriction Expiration Date").

Preemptive Rights

        Under Delaware law, a stockholder is not entitled to preemptive rights to subscribe for additional issuances of common stock or any other class or series of common stock or any security convertible into such stock in proportion to the shares that are owned unless there is a provision to the contrary in the certificate of incorporation. The Certificate of Incorporation of Golden Minerals Company will not provide its stockholders with any preemptive rights.

Certain Provisions of the Organizational Documents

        The Certificate of Incorporation of Golden Minerals Company will provide that stockholder action can be taken only at an annual or special meeting and cannot be taken by written consent in lieu of a meeting.

        The Bylaws of Golden Minerals Company will provide that an annual meeting of stockholders can only be called pursuant to a resolution of the board of directors and, subject to the rights of holders of preferred stock, special meetings of stockholders may be called for any purpose by the board of directors pursuant to a resolution adopted by the affirmative vote of a majority of the total number of directors then in office or by the chairman of the board of directors. In addition, a special meeting of stockholders may be called by stockholders solely for the purpose of removing directors by one or more written requests by the holders of a majority in voting power of the outstanding shares of Golden Minerals Company common stock.

        The Bylaws of Golden Minerals Company will establish an advance notice procedure for stockholder proposals to be brought before a special or annual meeting of stockholders, including the proposed removal of directors or nomination of persons for election to the board of directors.

        Stockholders at an annual or special meeting will only be able to consider business within the purpose or purposes described in the notice of the meeting or brought before the meeting by or at the direction of the board of directors or by a stockholder who was a stockholder of record on the record date for such meeting, who is entitled to vote at the meeting and who has given Golden Minerals Company's secretary timely written notice, in proper form, of the stockholder's intention to bring that business before the meeting.

        In addition, the Organizational Documents will provide that:

•

For a two-year period commencing on the Effective Date, the board of directors of Golden Minerals Company must be comprised of six members (unless otherwise required by the rules of any stock exchange on which Golden Minerals Company's shares are listed), including the Chief Executive Officer and five independent directors, each of which shall serve an initial term of not less than 14 months. Stockholders of Golden Minerals Company may vote to remove any director for cause by the affirmative vote of a majority of the voting power of outstanding common stock. Additionally, stockholders may vote to remove a maximum of two directors without cause by the affirmative vote of the holders of 66²/3% in voting power of outstanding common stock at any time prior to Restriction Expiration Date; and



•

For a two-year period commencing on the Effective Date, Golden Minerals Company will not be able to enter into any Specified Transaction (defined below) without (i) the unanimous approval of the board of directors and (ii) the affirmative vote of the holders representing at least 75% of the outstanding shares of capital stock of Golden Minerals Company entitled to vote generally (considered for this purpose as one class). A "Specified Transaction" will mean (a) the sale, lease or exchange of all or any substantial part of Golden Minerals Company's property or assets

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(including, for this purpose, the property or assets of any subsidiary of Golden Minerals Company) in a single transaction or a series of related transactions or (b) a merger or consolidation to which Golden Minerals Company is a party, except any merger or consolidation involving Golden Minerals Company in which the shares of capital stock of Golden Minerals Company outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of (A) the surviving or resulting corporation or (B) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation.

        The foregoing summary of the capital stock of Golden Minerals Company is not complete. You should refer to the applicable provisions of the Organizational Documents, which will be adopted by Golden Minerals Company on the Effective Date, to the Plan and related disclosure statement and to Delaware corporate law for a complete statement of the terms and rights of the capital stock of Golden Minerals Company.

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ITEM 6:    SELECTED CONSOLIDATED FINANCIAL DATA

        We expect to emerge from Chapter 11 and to consummate the Plan on or about March 24, 2009, whereupon our business and operations will change substantially as a result of the sale of the San Cristóbal mine and the entry into the Management Agreement. Consummation of the Plan will accordingly have a material effect on our financial condition and results of operations. In addition to the selected historical consolidated financial data of Apex Silver for the five years ended December 31, 2008 provided below, we also present certain pro forma consolidated financial data to reflect the effects of the consummation of the Plan as though it had occurred as of the dates indicated below.

Selected Historical Consolidated Financial Data

        The selected consolidated financial data of Apex Silver for the years ended December 31, 2008, 2007, 2006, 2005 and 2004, are derived from our audited consolidated financial statements. This table should be read in conjunction with the Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations.

(1)

Amounts shown for the years ended December 31, 2008, 2007, 2006 and 2005 include gains and losses related to our open metals derivative positions, including realized cash losses related to the settlement of the positions during 2008 and 2007 and unrealized mark-to-market gains and losses during 2008, 2007, 2006 and 2005. See Note 14, "Derivative Positions," in our Consolidated Financial Statements beginning on page F-1.

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(2)

The 2008 amount includes a $63.1 million gain related to the sale of our retained interest in Sumitomo's share of future silver and zinc production from the San Cristóbal mine. The 2006 amounts include a $199.6 million gain related to the sale to Sumitomo of a 35% interest in the subsidiaries that own and operate the San Cristóbal mine.

(3)

The 2008 amount includes $150 million of funding by Sumitomo directly to our San Cristóbal mine. The 2007 amount includes $45 million of borrowings under the Project Finance Facility. The 2006 amount includes $180.0 million of borrowings under the Project Finance Facility and $156.8 million of net proceeds from the sale of ordinary shares. The 2004 amount includes $328.1 million of net proceeds from the issuance of the Subordinated Notes and $208.6 million of net proceeds from sale of ordinary shares.

Selected Consolidated Pro Forma Financial Data

        The following unaudited condensed consolidated pro forma financial statements give effect to the sale of our 65% direct and indirect interests in the San Cristóbal mine to Sumitomo for a cash purchase price of $27.5 million, plus $2.5 million for the reimbursement of certain expenditures previously incurred by Apex Silver on behalf of the San Cristóbal mine (the "Sale"). As part of the transaction, we will be released from all liabilities associated with the San Cristobal mine, including our guarantee of San Cristóbal indebtedness. We expect the transaction to be completed on or about March 24, 2009. As a condition to the closing we will enter into a Management Agreement with Sumitomo under which we will manage the San Cristóbal mine following consummation of the Sale and our emergence from Chapter 11. We will receive an annual fee of $6.0 million, and a potential annual incentive fee of $1.5 million.

        In addition, the unaudited condensed consolidated pro forma financial statements also give effect to the Plan under which holders of our Subordinated Notes will be entitled to receive a pro rata distribution of (i) common stock of Golden Minerals Company and (ii) approximately $45 million in cash. In connection with the Plan, the Subordinated Notes will be cancelled.

        The unaudited condensed consolidated pro forma balance sheet has been prepared as if the Sale occurred, the Plan was consummated and we emerged from Chapter 11 on December 31, 2008. The unaudited condensed consolidated pro forma statement of operations has been prepared as if the Sale occurred, the Plan was consummated and we emerged from Chapter 11 on January 1, 2008. Actual amounts may vary from these pro forma amounts pending a final determination of selling costs, the book value of the assets sold and liabilities assumed by Sumitomo at the date of the sale and a final determination of payments made under the Plan. These unaudited condensed consolidated pro forma financial statements should be read in conjunction with our historical financial statements included in this annual report on Form 10-K.

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APEX SILVER MINES LIMITED

CONDENSED CONSOLIDATED PRO-FORMA BALANCE SHEET

DECEMBER 31, 2008

(Expressed in United States dollars)
(Unaudited)

Note 1. The unaudited condensed consolidated pro forma balance sheet reflects the sale of our 65% direct and indirect interests in the San Cristóbal mine to Sumitomo as if the sale had occurred at December 31, 2008. The pro forma adjustments reflect:

a)

The $27.7 million net cash received from the sale of the San Cristóbal mine consisting of net proceeds from the sale of $30.0 million received from Sumitomo less $2.3 million of selling

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APEX SILVER MINES LIMITED

CONDENSED CONSOLIDATED PRO-FORMA BALANCE SHEET (Continued)

DECEMBER 31, 2008

(Expressed in United States dollars)
(Unaudited)

costs. The adjustment also includes $0.5 million of restricted cash released to us as a result of the sale, less approximately $1.0 million of cash held by the San Cristóbal mine.

b)

The $10.1 million loss recognized on the sale of the San Cristóbal mine, calculated as the difference between the $27.7 million of net cash received and the net book value of the assets sold and liabilities assumed by Sumitomo.



c)

The elimination of the $546.0 million of assets sold and $508.6 million of liabilities assumed by Sumitomo.

Note 2. The unaudited condensed consolidated pro forma balance sheet reflects the results of consummation of the Plan and our emergence from Chapter 11 at December 31, 2008. The pro forma adjustments reflect:

a)

The $45.0 million payment to the holders of our Subordinated Notes consisting of $28.6 million of existing cash and cash equivalents along with the assumed liquidation of $16.4 million of short term investments.



b)

The full settlement of the $290.0 Subordinated Note liability, including accrued interest, for a $45.0 million cash payment and 100% of the common stock of Golden Minerals Company and the recognition of a $247.9 million gain on the reorganization.

Note 3. As a result of the consummation of the Plan and emergence from Chapter 11, on or about March 24, 2009, Golden Minerals Company will be subject to the fresh-start accounting rules prescribed by AICPA Statement of Position 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code" ("SoP 90-7"). Fresh-start accounting requires that each balance sheet account be recorded at fair value at the date of emergence. Furthermore, the value of our assets and liabilities will be impacted by our operating activities between December 31, 2008 and the date of emergence from Chapter 11. A fair value assessment of our assets and liabilities (the emerged company will have no debt) is currently in process and may result in amounts different from those reported on the pro forma balance sheet. The fair value assessment will most likely result in an increase in the carrying value of a number of the exploration properties that we own or have the right to conduct exploration activities on, which historically have had a zero carrying value following our policy to recognize exploration costs as expense in the period incurred. In addition, SoP 90-7 provides that to the extent the reorganization value of a company upon emergence from Chapter 11 is less than or greater than the fair value of such company's net assets and liabilities, a gain or loss, respectively, would be reported upon emergence. As set forth in the Disclosure Statement filed with the Bankruptcy Court, for purposes of estimating recovery to creditors under the Plan, our estimated value is between $15 million and $30 million. Accordingly, the $38.6 million pro forma balance of shareholders' equity will be adjusted based upon application of fresh-start accounting to our assets and liabilities and any gain or loss recorded.

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APEX SILVER MINES LIMITED

CONDENSED CONSOLIDATED PRO-FORMA STATEMENT OF OPERATIONS

For the Year Ended December 31, 2008

(Expressed in United States dollars)
(Unaudited)

Note 1.  The unaudited condensed consolidated pro forma statement of operations for the year ended December 31, 2008 includes the results of operations for that period as if the sale of our 65% interest in the San Cristóbal mine to Sumitomo occurred at January 1, 2008. The pro forma adjustments reflect:

a)

The elimination of the results of operations of the San Cristóbal mine, and other subsidiaries, for the year ended December 31, 2008.



b)

The elimination of the gain recorded during the year related to the commodity derivatives required by the Project Finance Facility.



c)

The elimination of the $64.5 million gain we recognized from the sale of certain retained interests in the San Cristóbal mine to Sumitomo effective June 30, 2008.

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APEX SILVER MINES LIMITED

CONDENSED CONSOLIDATED PRO-FORMA STATEMENT OF OPERATIONS (Continued)

For the Year Ended December 31, 2008

(Expressed in United States dollars)
(Unaudited)

d)

The elimination of interest income earned by the subsidiaries that hold the San Cristóbal mine and interest expense primarily related to the $225 million Project Finance Facility, notes payable to Sumitomo and interest on leased mining equipment recorded as capital leases.



e)

The elimination of income taxes associated with the San Cristóbal mine.



f)

The elimination of Sumitomo's minority interest in the subsidiaries that own and operate the San Cristóbal mine.



g)

The contractual proceeds for services performed under the Management Agreement whereby we will manage the San Cristóbal mine on behalf of Sumitomo.

Note 2.  The unaudited condensed consolidated pro forma statement of operations for the year ended December 31, 2008 includes the results of operations for that period as if consummation of the Plan and emerging from Chapter 11 protection had occurred at January 1, 2008. The pro forma adjustments reflect:

a)

The elimination of costs related to the Plan and from Chapter 11.



b)

The elimination of interest expense related to the Subordinated Notes.

Note 3.  As discussed in Note 3 to the condensed consolidated pro forma balance sheet, we will be subject to fresh-start accounting rules which may result in the recognition of a gain or loss on reorganization upon emerging from Chapter 11. The pro forma statement of operations does not reflect the gain we will recognize upon emergence from Chapter 11, estimated to total approximately $247.9 million, related to the settlement of the Subordinated Notes, as reflected in the pro forma balance sheet above. Additionally, such gain will be adjusted as necessary to record fair value of the assets and liabilities of Golden Minerals Company upon emergence from Chapter 11.

        Golden Minerals Company will also be treated as a "successor company" for accounting purposes and will be required to continue to report its prior ownership in the San Cristóbal mine when comparable prior period consolidated financial statements are presented.

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ITEM 7:    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        The following discussion and analysis should be read together with the consolidated financial statements of Apex Silver and the selected historical financial data and related notes thereto included elsewhere in this annual report on Form 10-K. Because we consolidate the San Cristóbal mine in our financial statements, all production and financial information for the San Cristóbal mine is expressed on a 100% basis. We currently own 65% of the subsidiaries that own and operate the San Cristóbal mine and market concentrates to smelters around the world. As described under "Business and Properties—Reorganization and Expected Emergence for Chapter 11", we are currently operating under Chapter 11 protection and have entered into a Purchase Agreement to sell our interests in the San Cristóbal mine to Sumitomo as a condition to our emergence from Chapter 11.

        Although substantial progress has been made toward a financial restructuring of our operations, there are still numerous risks associated with our ability to consummate the transactions contemplated by the Purchase Agreement and to successfully emerge from bankruptcy. Should we be unsuccessful in closing these transactions, Sumitomo and the senior lenders could foreclose on the San Cristóbal assets under the Project Finance Facility and assert their deficiency claims against us in bankruptcy, transforming the current reorganization process under Chapter 11 into a liquidation proceeding under Chapter 7. In considering only those events and transactions that have occurred or closed prior to the filing of our annual report on Form 10-K, there is substantial doubt that we could continue as a going concern.

Overview of San Cristóbal Operations

        Concentrator throughput and concentrate production continued to improve during the fourth quarter 2008 at the San Cristóbal mine. Concentrator throughput for the fourth quarter 2008 averaged 38,200 tonnes per day, approximately 96% of the 40,000 tonnes per day designed capacity. Total throughput during the fourth quarter exceeded third quarter throughput by 4%, and average throughput in November and December 2008 and January 2009 was approximately 42,300 tonnes per day, approximately 6% above the 40,000 tonnes per day designed capacity.

        Zinc concentrate production of approximately 104,400 dry tonnes during the fourth quarter exceeded third quarter production by 1%, and lead concentrate production of approximately 33,500 dry tonnes during the fourth quarter exceeded third quarter production by 7%. During the fourth quarter of 2008, operating margins at the San Cristóbal mine continued to be adversely affected by declines in silver, zinc and lead prices, which declined, respectively, 17%, 32% and 47% during the fourth quarter, and 39%, 40% and 45% in the last six months of 2008. In addition, costs for reagents, diesel fuel and other materials consumed in the operation remained at substantially high levels through year-end 2008.

        Production from the San Cristóbal mine for 2008 totaled approximately 352,000 tonnes of zinc concentrate and 103,000 tonnes of lead concentrate, containing approximately 16.5 million ounces of payable silver, 173,400 tonnes of payable zinc and 66,500 tonnes of payable lead.

        Average recovery rates for 2008 were 64.7% for silver, 80.3% for zinc and 74.9% for lead and average head grade was 70.44 grams per tonne silver, 2.33% zinc and 0.81% lead.

Results of Operations

        Set forth below is a summary of significant components of our revenues and expenses for the year ended December 31, 2008. Our operations will change substantially as a result of the expected sale of our interests in the San Cristóbal mine to Sumitomo in connection with our emergence from Chapter 11 (see "Business and Properties—Reorganization and Emergence from Chapter 11"). As a result, revenue and expense trends described below will not be comparable to performance in future periods.

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        Sales of Concentrates and Costs Applicable to Sales.    We recorded as revenue sales of concentrates of $419.5 million and $45.9 million for the years ended December 31, 2008 and 2007, respectively. We recorded as costs applicable to sales $346.2 million and $42.9 million for the same periods, respectively. We began producing concentrates from our San Cristóbal mine during the third quarter of 2007; as such, the sales recorded during 2007 represent approximately three months of mine startup production. Prior to the startup of the San Cristóbal mine we had no operating mines and consequently no sales or related costs had been previously reported.

        Production Startup Income/(Expense), Net.    During the third quarter 2007 startup phase at San Cristóbal, one shipment of bulk lead concentrates was made to a smelter in Japan. The value of the concentrate shipment was approximately $6.7 million which was netted against $20.2 million of operating expense incurred during the period and the resulting net $13.5 million was reported as production startup income/expense, net at December 31, 2007.

        Exploration.    Our exploration expenses, including property holding costs and allocated administrative expenses, were $25.4 million for the year ended December 31, 2008, as compared to $15.4 million and $8.3 million for the years ending December 31, 2007 and 2006, respectively. Exploration expense was incurred primarily in Argentina, Mexico and Peru. During 2008, we increased drilling programs and other geologic testing to increase the rate of evaluation of many of our properties. None of the exploration expenses reported relate to the San Cristóbal mine.

        Administrative.    Administrative expense was $22.2 million, $21.9 million and $21.2 million for the years ended December 31, 2008, 2007 and 2006, respectively. Administrative expenses are incurred primarily by our corporate activities and consist primarily of compensation costs, professional fees paid for accounting and legal services, office and equipment lease costs and other general costs. Administrative expenses during 2008 were higher than prior periods due primarily to professional fees and other costs associated with our reorganization efforts and bankruptcy filing.

        Gains and Losses—Commodity Derivatives.    For the year ended December 31, 2008 we recorded a gain related to our metals derivative positions in the amount of $467.9 million compared to a gain of $19.3 million and a loss of $715.1 million for the years ended December 31, 2007 and 2006, respectively. The gains and losses are primarily the result of marking-to-market our open derivative positions as spot and forward prices for silver, zinc and lead fluctuate. The 2008 gain is net of a $40.0 million fee related to the termination of our hedge positions. During 2006 metals prices reached record high levels resulting in the large mark-to-market losses recorded during 2006. During the fourth quarter of 2007 and continuing through 2008, metals prices retreated from the earlier record highs resulting in the mark-to-market gains recorded during 2008 and 2007. In December 2008, the Project Finance Facility lenders, Sumitomo and Apex Silver executed an agreement under which the metals derivative positions were terminated and we were released from our obligations under the derivative positions. As a result, we had no open derivative positions as of December 31, 2008.

        Gains and Losses—Foreign Currency.    At December 31, 2008 and 2007 we had recorded receivables for value added tax ("VAT") payments made related to the development of the San Cristóbal mine in the amounts of $157.1 million and $95.3 million, respectively. The amounts receivable are denominated in the local Bolivian currency and converted to U.S. dollars for reporting purposes resulting in gains or losses related to fluctuations in the exchange rate. For the years ended December 31, 2008, 2007 and 2006 we recorded gains primarily related to the VAT receivable revaluation in the amounts of $18.3 million, $7.7 million and $0.9 million, respectively.

        Other Expense.    For the year ended December 31, 2007, we recorded as other expense $1.2 million of costs related to an engineering study on the economic optimization of processing oxide ore reserves at the San Cristóbal mine and a $1.2 million loss on the disposal of obsolete assets at the San Cristóbal mine. No amounts were recorded to other expense for the years ended December 31, 2008 and 2006.

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        Loss on Auction Rate Securities.    For the years ended December 31, 2008 and 2007, we recognized impairment charges related to our auction rate securities ("ARS") investments of $16.3 million and $34.5 million, respectively. The impairment charges are the result of deteriorating markets for certain of the ARS we hold for which the auctions continue to fail. The auctions for certain of the ARS began to fail during the third quarter of 2007 and continued to fail through December 31, 2008. At December 31, 2008 the carrying value of our ARS is $5.1 million.

        Depreciation, Depletion and Amortization.    We recorded depreciation, depletion and amortization expense of $37.9 million for the year ended December 31, 2008 as compared to $14.2 million and $0.4 million recorded for the years ended December 31, 2007 and 2006, respectively. The annual increases are the result of the commencement of operations during the third quarter 2007 at our San Cristóbal mine and the recording of depreciation, depletion and amortization related to the processing plant, mining equipment and other assets related to the production of concentrates from the mine. In addition, during the years ended 2007 and 2006, depreciation and amortization costs incurred in connection with the development of the mine were capitalized in the amounts of $3.2 million and $5.2 million, respectively.

        Interest and Other Income.    We recorded interest and other income of $6.0 million, $22.0 million and $19.7 million for the years ended December 31, 2008, 2007 and 2006, respectively. We held lower average cash and investment balances during 2008 as compared to the preceding years which resulted in lower interest being earned. In addition, interest rates were also lower during 2008 as compared to the preceding years.

        Royalty Income.    During 2008, 2007 and 2006, we earned $0.4 million, $1.3 million and $1.6 million, respectively, of royalty income from a property in Mexico on which we retained a net smelter return royalty. The property is being test mined by a joint venture partner, and we receive a royalty for product sold from the test mining operation.

        Gain on Sale of Interest in Subsidiary.    During 2006, we sold to Sumitomo for $224 million in cash a 35% interest in the three subsidiaries that owned the San Cristóbal mine, marketed project concentrates and held the metals derivative positions associated with the mine. We recorded a minority interest of $8.8 million in the net assets sold to Sumitomo and recognized a gain of $199.6 million related to the transaction. The gain was net of approximately $6.4 million of selling costs we incurred related to the transaction. No such transactions were recorded during 2008 or 2007. Under the terms of the 2006 sale to Sumitomo of a 35% interest in the San Cristóbal mine, we retained certain interests in Sumitomo's share of future silver and zinc production from the San Cristóbal mine. During 2008 we and Sumitomo agreed to terminate these retained interests for a onetime payment of $70.0 million from Sumitomo. We recorded a $63.1 million gain related to the transaction which is reflected as a component of the gain on the sale of interest in a subsidiary.

        Interest Expense and Other Borrowing Costs.    For the years ended December 31, 2008, 2007 and 2006 we recorded interest expense and other borrowing costs in the amounts of $75.5 million, $23.8 million and $0.8 million, respectively. The amounts are net of interest capitalized during the San Cristóbal mine construction in the amounts of $30.6 million and $26.1 million for the years ended December 31, 2007 and 2006, respectively. Interest expense and other borrowing costs consist of interest incurred on the Project Finance Facility, interest incurred on the Subordinated Notes and interest incurred on capital leases.

        Income Taxes.    ASMC, our U.S. management services company, is subject to U.S. income taxes on income derived from services provided to Apex Silver and its subsidiaries. Other than amounts payable by ASMC, we pay no income tax in the U.S. since we are incorporated in the Cayman Islands and do not conduct or expect to conduct business in the U.S. that would generate significant U.S. taxable income. The Cayman Islands currently impose no corporate taxation. We have been granted an

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exemption until January 16, 2015 from any form of corporate taxation that may subsequently be adopted in the Cayman Islands. Our income tax provisions of $8.4 and $2.9 million for the years ended December 31, 2008 and 2007, respectively, consist of $3.3 and $2.1 million withholding taxes either accrued or paid to Bolivia and the United States, $5.1 and $0.7 million income taxes either accrued or paid in Bolivia, and $0.1 million of accrued income taxes in the United States and other countries for the year ended December 31, 2007. For the year ended December 31, 2006, $0.7 million income tax relates solely to withholding taxes from the United States and Bolivia.

        Net deferred tax assets of $113.9 million, $66.1 million, and $28.3 million at December 31, 2008, 2007 and 2006, respectively, resulting primarily from operating loss carry-forwards and other temporary differences of our subsidiaries, have been fully offset by valuation allowances.

        Minority Interest in Losses of Consolidated Subsidiaries.    For the years ended December 31, 2008, 2007 and 2006, we allocated losses to the minority interest holder of $118.1 million, $87.4 million and $8.8 million, respectively. The 2008 amount is primarily related to Sumitomo's interest in certain losses related to San Cristóbal property, plant and equipment impairment charges and inventory write downs partially offset by gains related to marking our metal derivative positions to market. In accordance with generally accepted accounting principles in the United States, we do not allocate losses to the minority interest in excess of the minority owner's recorded interest in the subsidiary and at December 31, 2007 and 2006, we had absorbed approximately $23.6 million and $98.8 million of losses, respectively, that normally would have been allocated to the minority interest. During 2008 and 2007, $23.6 million and $75.2 million of the losses previously absorbed were recouped and included in minority interest in losses of consolidated subsidiaries for the respective periods. Also, during 2008, Sumitomo advanced an additional $86.9 million to fund its share of operating costs related to the San Cristóbal mine, we recorded $14.1 million of interest due Sumitomo on its cumulative share of advances to fund the San Cristóbal mine, and Sumitomo loaned MSC $150.0 million under the MSC working capital facility. All of these transactions were recorded to minority interest.

        Impairment of Long-lived Assets.    For the year ended December 31, 2008, we recognized an aggregate impairment loss on the San Cristóbal asset group that totaled $625.6 million. Due to declining metals prices, continued high operating costs and anticipated funding requirements and following the guidance of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", we used a probability weighted analysis of various cash flow scenarios in determining that future cash flows were not sufficient to recover the carrying value of the San Cristóbal asset group and accordingly wrote down the carrying value of our long-lived assets to their estimated fair value. Shortly after our emergence from Chapter 11, we will write off all assets and liabilities associated with San Cristóbal and record a gain or loss on the sale. The asset group includes all plant, property, and equipment, inventories, trade receivables, value added tax recoverable, accrued liabilities and leasing obligations related to the San Cristóbal mine.

Liquidity and Capital Resources

        At December 31, 2008, our aggregate balance of cash, restricted cash, and short- and long-term investments totaled $71.0 million (excluding ARS), of which $20.6 million was restricted. At December 31, 2007, our aggregate balance of cash, restricted cash, and short- and long-term investments totaled $199.2 million (excluding ARS), of which $103.3 million was restricted. The amounts held at December 31, 2008 include $33.7 million in cash and cash equivalents, $21.8 million in investments (including $5.1 million of illiquid ARS investments) and $20.6 million of cash that is restricted to working capital requirements at the San Cristóbal mine and interest and principal payments on the Project Finance Facility. At December 31, 2008, our aggregate unrestricted cash and investments (excluding ARS) totaled $50.4 million.

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        The decrease in our aggregate balance of cash, restricted cash, short- and long-term investments and restricted investments (excluding ARS) at December 31, 2008, compared to the prior year, is primarily the result of $139.6 million used to fund operations, $273.2 million used to settle derivative positions, $27.5 million invested in property, plant and equipment and $8.6 million to pay long term debt related to capital leases. The decrease in our cash and investment balances was partially offset by $236.9 million advanced by Sumitomo as its share of San Cristóbal funding, $70.0 million received from the sale of a deferred payment stream to Sumitomo and $14.1 million of deferred payments received from Sumitomo. In addition, the value of our investments was reduced by a $16.3 million additional impairment to the carrying value of our ARS.

        As described above, our liquidity deteriorated during 2008, causing us to file for Chapter 11 protection and take significant steps to restructure our business, including entering into an agreement with Sumitomo to sell our interests in the San Cristóbal mine. We anticipate that we will emerge from Chapter 11 on or about March 24, 2009. Under the terms of the Plan, the holders of the Subordinated Notes will be entitled to receive any cash amounts held by us at the Effective Date in excess of the sum of (a) $15 million, plus (b) a reserve for accrued liabilities at the Effective Date and certain projected reorganization expenses that will be incurred after the Effective Date. Following receipt of the proceeds from the sale of our interests in the San Cristóbal mine and the payment of amounts required under the Plan, we expect to have a balance of cash and investments of approximately $18 million (excluding ARS). In addition, we expect to receive approximately $4.5 million during the remainder of 2009 as our management fee under the Management Agreement with Sumitomo, and approximately $2 million in interest and royalty revenue. We will have no indebtedness following our emergence from Chapter 11.

        For the 2009 fiscal year, we expect to spend approximately $8 million in reorganization costs, $13 million on general corporate costs and $12 million on our exploration properties. Much of the spending on reorganization and general corporate costs will occur in the first half of 2009 and is related to our reorganization and emergence from bankruptcy. Following our emergence from bankruptcy on or about March 24, 2009 and through the remainder of the year, we expect to spend approximately $3 million on reorganization costs, $8 million on general corporate costs and $8 million on our exploration properties. We believe that the cash on hand at the Effective Date, together with interest and royalty income and amounts received under the Management Agreement, will provide us with enough cash to continue with our exploration program and offset general and administrative expenses through the end of 2009. We expect that we will need to raise substantial additional capital to pursue our business strategy beyond 2009. We cannot assure you that we will be able to do so on favorable terms or at all. See "Risk Factors—Risks Associated with our Business—We may not be able to continue as a going concern following emergence from Chapter 11 if we cannot fund operations through increased revenue or access to external sources of funding."

Off Balance Sheet Arrangements

        We have no off balance sheet arrangements.

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Table of Contractual Obligations

        The following table summarizes our contractual obligations at December 31, 2008:

(1)

As discussed under "Business and Properties—Reorganization and Expected Emergence from Chapter 11", the Subordinated Notes are in default due to our filing under Chapter 11 and consequently the full amount due under the Subordinated Notes were classified as current at December 31, 2008. Under the terms of the Plan, holders of the Subordinated Notes will be entitled to receive a pro rata distribution of (i) common stock of Golden Minerals Company, and (ii) cash proceeds of approximately $45 million as full settlement of the Subordinated Notes, upon emergence from Chapter 11. Interest payments on the Subordinated Notes represent amounts accrued through January 12, 2009, the date we filed for Chapter 11 protection.

(2)

As discussed under "Business and Properties—Reorganization and Expected Emergence from Chapter 11", MSC failed to make the principal and interest payment due under the Project Finance Facility on December 13, 2008 and failed to fulfill certain other covenants and thus is in default under the Facility. Consequently the full amount due under the Facility was classified as current at December 31, 2008. Interest payments on the Facility represent amounts accrued through January 12, 2009, the date we filed for Chapter 11 protection and received a standstill agreement from Sumitomo.

(3)

Capital leases shown are related to MSC's operation of the San Cristóbal mine, which will be sold to Sumitomo on the Effective Date of the Plan.

(4)

The operating lease obligations are related to our corporate headquarters office. The current lease expires April 30, 2009.

(5)

The San Cristóbal mine patent payments are payments MSC must make to the Bolivian government to maintain its rights to the San Cristóbal mining concessions. Amounts shown include payments through termination of the currently planned mine life in 2023.

        From time to time we enter into lease option agreements related to exploration properties that are of interest to us. These agreements typically contain escalating lease payments required to maintain our exploration rights to the property. Such agreements are not included in the above table because exploration success is historically low and we have the right to terminate the agreements at any time.

Critical Accounting Policies

        The selection and application of accounting policies is an important process that has developed as our business activities have evolved and as the accounting rules have changed. Accounting rules generally do not involve a selection among alternatives, but involve an implementation and interpretation of existing rules, and the use of judgment, to the specific set of circumstances existing in our business. Discussed below are the accounting policies that we believe are critical to our financial

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statements due to the degree of uncertainty regarding the estimates or assumptions involved and the magnitude of the asset, liability, revenue or expense being reported.

Mineral Reserves

        Mineral reserve estimates involve subjective judgment and are based on numerous assumptions that may later prove to be inaccurate. These estimates include engineering evaluations of assay values derived from samplings of drill holes and other openings. Additionally, changes in the market prices of metals may render certain mineral reserves containing relatively lower grades of mineralization uneconomic to mine. Further, availability of permits, changes in operating and capital costs, and other factors could materially and adversely affect mineral reserves.

Mineral Properties

        When we determine that a mineral property has proven and probable reserves, subsequent development costs are capitalized to mineral properties. When mineral properties are developed and operations commence, capitalized costs are charged to operations using the units-of-production method over proven and probable reserves. Beginning September 1, 1997, costs associated with our San Cristóbal project have been capitalized to construction in progress. As of August 2007, these costs were transferred to the mining, equipment and machinery section of property plant and equipment concurrent with the completion of construction of the mine. Capitalized costs at San Cristóbal include all direct costs associated with the project, certain interest costs, depreciation on assets being used to construct the project and other internally allocated costs directly associated with the advancement of the project.

Inventories

        Ore stockpiles and concentrate inventories are carried at the lower of average cost or net realizable value. Net realizable value represents the estimated future sales price of the product based on spot and future metals prices through estimated sale and settlement dates, less the estimated costs to complete production and bring the product to sale. The $18.6 million of concentrate inventories and $72.6 million of ore stockpile inventories recorded at December 31, 2008 were recorded at net realizable value. The $23.4 million of concentrate inventories and $77.7 million of ore stockpile inventories recorded at December 31, 2007, were recorded at cost. We recorded $52.5 million of inventory write downs during the year ended December 31, 2008. No inventory write down charges were recorded during the year ended December 31, 2007. The current portion of ore stockpiles is determined based on the expected amounts to be processed within the next 12 months. Ore stockpiles not expected to be processed within the next 12 months are classified as long-term.

Value Added Tax Recoverable

        We record value VAT paid in Bolivia and related to the San Cristóbal mine as a recoverable asset. The VAT is expected to be recovered through future production from the San Cristóbal mine. As export sales are made from the mine, we are entitled to file for tax credit certificates, called Cediems, from the government relating to current and previous VAT paid. The Cediems, once issued to us, can then be used as a credit against certain Bolivian income and import taxes or can be sold to other third parties at a small discount. We are currently filing for Cediems based on the export sales we have made to date. The process for receiving Cediems is administratively complex and can take one to two years from the date an application is filed. Future changes to Bolivian tax law could have an adverse effect on our ability to recover the VAT. As of December 31, 2008, we have filed for approximately $33.8 million of Cediems and have received approximately $0.4 million of Cediems that have been used to offset Bolivian income taxes. We believe, based on current Bolivian law and financial projections at the mine, that all of the VAT appearing on the balance sheet is recoverable. At December 31, 2008 and

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2007, the VAT recoverable amounts were $157.1 million and $95.3 million, respectively. The VAT recoverable amounts include $19.5 million and $8.6 million of recoverable Bolivian import duties for the years ended December 31, 2008 and 2007, respectively. The December 31, 2008 VAT recoverable balance of $157.1 million is net of $0.2 million of VAT recovered during 2008.

Derivative Positions

        We record all open derivative positions on our consolidated balance sheet at estimated fair value. Changes in the fair value of the open derivative positions are recorded each period in earnings as we do not account for any of our derivatives as hedge transactions. Prior to January 1, 2008, our metal derivative positions were valued from quoted market information reflected in the applicable commodities price indices for the periods the indices are available. For periods beyond the available indices these metal derivative positions were valued using quoted prices and extrapolation of the commodities price indices from the counterparties holding the metal derivative positions. We independently verified that the values received from the counterparties were based upon major commodities price indices such as the London Metal Exchange and New York Commodities Exchange and other available market data. As a result of our adoption of the provisions of Financial Accounting Standards No. 157, "Fair Value Measurements" on January 1, 2008, the fair value of our metal derivate liabilities are valued as above and then adjusted to reflect our credit risk and risk of non-performance.

        At December 31, 2008 we had no open derivative positions as the result of fully liquidating previously held positions during the fourth quarter 2008. At December 31, 2007 the fair value of our open derivatives positions was a net liability of $741.0 million.

Asset Retirement Obligations

        We record asset retirement obligations in accordance with Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations" ("FAS No. 143"), which establishes a uniform methodology for accounting for estimated reclamation and abandonment costs. According to FAS No. 143, the fair value of a liability for an asset retirement obligation ("ARO") is recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. An offsetting Asset Retirement Cost ("ARC") is capitalized as part of the carrying value of the assets with which it is associated, and depreciated over the useful life of the asset.

Revenue Recognition

        We sell our concentrates directly to smelters. We recognize a sale upon receipt of provisional payment, as this is the earliest point that both risk of loss and title transfer to the smelter.

        Concentrate sales are initially recorded based on 100% of the provisional sales prices. The provisional sales price is based on estimated metals contained in the concentrates (based on assay data) and the forward metals prices at the expected settlement date net of amounts retained by the smelter to cover its refining and treatment costs. Until final settlement, adjustments to revenue are recorded on a mark-to-market basis to reflect changes to the forward metals prices for the estimated date of settlement and changes in provisional metal quantities are adjusted upon receipt of new information and assays. The primary risk associated with recognition of sales on a provisional basis is the possibility of metal price fluctuations between the date initially recorded and the date of final settlement. If a significant decline in metal prices occurs between the provisional pricing date and the final settlement date, we could be required to return a portion of the sales proceeds received based on the provisional invoice.

        Sales based on a provisional sales price contain an embedded derivative that is required to be separated from the host contract for accounting purposes. The embedded derivative does not qualify for hedge accounting and is marked to market through earnings each period prior to final settlement.

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Income Taxes

        We account for income taxes in accordance with the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS 109") on a tax jurisdictional basis. We file Bolivia, United States and certain other foreign country income tax returns, and pay taxes reasonably determined to be due. The tax rules and regulations in these countries are highly complex and subject to interpretation. Our income tax returns are subject to examination by the relevant taxing authorities and in connection with such examinations, disputes can arise with the taxing authorities over the interpretation or application of certain tax rules within the country involved. In accordance with Financial Accounting Standards Interpretation No. 48, "Accounting for Uncertainty in Income Taxes", an interpretation of FAS 109, we identify and evaluate uncertain tax positions, and recognize the impact of uncertain tax positions for which there is a less than more-likely-than-not probability of the position being upheld when reviewed by the relevant taxing authority. Such positions are deemed to be unrecognized tax benefits and a corresponding liability is established on the balance sheet.

        We have recorded a full valuation allowance against our deferred tax assets based on the judgment that it is more likely than not that these deferred tax assets will not be utilized before their expiration. Due to the pending sale of the San Cristóbal property, it is not likely that we will generate sufficient taxable income to utilize our deferred tax assets in the future.

Auction Rate Securities

        Auction rate securities ("ARS") are floating rate securities with long-term nominal maturities of 25 to 45 years which are marketed by financial institutions with auction reset dates at 7, 28, or 35 day intervals to provide short-term liquidity. Beginning in August 2007 and continuing through December 31, 2008 a number of ARS auctions failed, resulting in a lack of liquidity in the ARS market. At the time the auctions failed we held approximately $71.7 million of ARS investments. During 2007 we liquidated ARS investments with a cost basis of $19.5 million for $15.7 million and recorded a $3.8 million loss. During 2008 we liquidated approximately $0.3 million of our ARS. In addition during 2008 and 2007 we recorded impairment charges of $16.3 million and $30.7 million respectively to earnings on the remaining ARS investments, resulting in a remaining carrying value of $5.1 million and $21.5 million at December 31, 2008 and 2007, respectively. The fair value for each ARS was determined by us, with the assistance of a third party valuation firm, using discounted cash flow, market value comparison and option pricing models. Inputs into the model include significant assumption regarding default, recovery and prepayment rates. There can be no assurance that the ultimate disposition of these securities will not result in recoverable values significantly different from the estimates we have made.

        We will not be able to liquidate our investments in ARS until a future auction for the ARS is successful or we sell the ARS in a secondary market at a potentially substantial discount and accordingly, these ARS have been classified as non-current. Based on our current cash, investment balances and expected operating cash flows, we do not anticipate that the lack of short-term liquidity for the ARS will adversely affect our ability to conduct business in the near term.

        See Note 4 of the accompanying Notes to our Consolidated Financial Statements included in this annual report on Form 10-K for additional accounting policies.

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ITEM 7A:    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

        Our current outstanding debt consists primarily of our Subordinated Notes, amounts borrowed under our $225 million Project Finance Facility for the construction of the San Cristóbal mine and amounts borrowed under the $150 million working capital facility provided by Sumitomo for MSC. The Subordinated Notes and the working capital facility bear interest at a fixed rate and thus do not have exposure to interest rate changes. The Project Finance Facility bears interest at LIBOR plus a credit spread. As of December 31, 2008, we had borrowed the full $225 million amount available under the facility. An increase of 0.5% in the LIBOR would result in an annual increase in interest expense of $1.125 million. We have not entered into any agreements to hedge against unfavorable changes in interest rates.

        Assuming we emerge from bankruptcy in accordance with the proposed Plan we will be relieved of our obligations with respect to the Subordinated Notes, the working capital facility and the Project Finance Facility. Our successor company, Golden Minerals Company, will not have any indebtedness following the Effective Date of the Plan. For additional information regarding the Chapter 11 protection and the treatment of our outstanding debt, refer to "Business and Properties—Reorganization and Emergence under Chapter 11."

        We invest excess cash in U.S. government and debt securities rated "investment grade" or better. The rates received on such investments may fluctuate with changes in economic conditions. As a result, our investment income may fall short of expectations during periods of lower interest rates. Based on the average cash balances outstanding during 2008, a 1% decrease in interest rates would have resulted in a reduction in interest income for the period of approximately 1.5 million.

Foreign Currency Exchange Risk

        Although most of our expenditures are in U.S. dollars, certain purchases of labor, operating supplies and capital assets for the San Cristóbal mine may be denominated in Bolivianos, Euros or other currencies. We will not own the San Cristóbal mine following our emergence from Chapter 11 and therefore we expect our exposure to foreign currency exchange risk will be significantly reduced. Nonetheless, to reduce exposure to this risk, we maintain minimum cash balances in foreign currencies and complete most of our purchases in U.S. dollars. At December 31, 2008, we did not hold any foreign currency derivative positions.

Commodity Price Risk

        For 2008, our primary source of revenue was from sales of concentrates containing silver, zinc and lead. As a result, changes in the price of any of these commodities had the potential to significantly affect our results of operations and cash flows.

        To comply with the Project Finance Facility, MSC was required to implement price protection for a portion of its planned silver, zinc and lead production from San Cristóbal. These positions began to mature in July 2007 and MSC was required to make significant cash payments to settle the positions. MSC made cash payments of $48.3 million to settle the positions maturing during 2007. In 2008, derivative positions matured for 2.8 million ounces of silver, 99,000 tonnes of zinc and 64,000 tonnes of lead, representing 17%, 57% and 96%, respectively, of MSC's 2008 silver, zinc and lead production. We made cash payments of $182.3 million to settle these positions.

        In December 2008, as a component of our restructuring efforts, we entered into a termination agreement with the hedge banks and Sumitomo under which the hedge banks terminated the outstanding metals derivative positions. See "Business and Properties—Reorganization and Expected Emergence for Chapter 11."

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        We will not own the San Cristóbal mine following our emergence from Chapter 11 and therefore our direct exposure to commodity price risk will be reduced. At December 31, 2008, we did not hold any commodity derivatives.

ITEM 8:    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        The consolidated financial statements and supplementary information filed as part of this Item 8 are listed under Part IV, Item 15, "Exhibits, Financial Statement Schedules" and contained in this annual report on Form 10-K at page F-1.

ITEM 9:    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

        Not applicable.

ITEM 9A:    CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

        The management of Apex Silver has evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of December 31, 2008.

        Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2008, our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), were effective and designed to ensure that (i) information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and instructions, and (ii) information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

        The management of Apex Silver, including the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

        Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Apex Silver have been detected.

Management's Report on Internal Control over Financial Reporting

        Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act, as amended). Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2008.

        In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control-Integrated Framework. Management has concluded that, as of December 31, 2008, our internal control over financial reporting is effective based on these criteria.

        The effectiveness of our internal control over financial reporting as of December 31, 2008 has been audited by PricewaterhouseCoopers LLP, an independent registered accounting firm, as stated in their report which appears herein.

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Changes in Internal Control over Financial Reporting

        There have been no changes to Apex Silver's internal control over financial reporting during the quarter ended December 31, 2008 that have materially affected, or are reasonably likely to materially affect, Apex Silver's internal control over financial reporting.

ITEM 9B:    OTHER INFORMATION

        None.

61

PART III

ITEM 10:    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Board of Directors of Apex Silver

        Set forth below is information regarding our directors as of March 16, 2009. All of our directors were elected prior to our filing under Chapter 11. We have not held any shareholders meetings while the Chapter 11 proceeding has been ongoing. Information about the expected composition of the board of directors of Golden Minerals Company is set forth below under "—Expected Board of Directors of Golden Minerals Company."

        During 2008, Messrs. Harry Conger, Ove Hoegh and Paul Soros resigned from our Board.

        Our current Board is described below.