Focused Management Keith Hulley, President

and Chief Operating Officer

Apex Silver Mines
Corporation How does the Company manage diverse skills and disciplines
over a wide geographic area?
Prior to joining Apex in October
“Based on my years of experience 1996, Keith Hulley was Director Our corporate philosophy has always been property portfolio, emphasizes what can be
of Operations at Western one of “cutting no corners”. We seek to do accomplished when experienced professionals
in the mining industry, Mining Holdings Limited things right and to hire the best people for the focus on clear goals. Each section of this
Corporation where he was job. Our success in advancing the San annual report highlights the accomplishments
I can easily report that this responsible for all global mining activity including Cristobal Project during 1998, while continuing of our management team as they describe
mine production, concentrating, smelting, refining and to evaluate the geologic potential of our large their individual responsibilities.
is far and away sales. While at Western Mining, Mr. Hulley also super-
vised the development, construction and operation of
one of the most attractive projects the Mount Keith open-pit nickel mine, an A$450 mil-
lion facility. A mining engineer with more than 30 North Jayula
I have ever encountered. years experience, Mr. Hulley has held senior execu-
tive positions with BP Minerals, Atlas Corporation and
Mother Nature has been extremely USMX. Over the course of his career, Mr. Hulley has
worked as a miner and shift supervisor in South
kind to us at San Cristobal, African gold mines, served as mine superintendent for
Bingham Canyon in Utah and managed an early
and we intend to capitalize phase of exploration and development at the Ok Tedi San Cristobal
project in Papua New Guinea.
on her gift by grasping the opportunity
to develop a world scale mining operation.”
Jayula

East Jayula

How will the Company effectively manage

the development of the largest mining Delgado

project ever constructed in Bolivia?

This will be a team effort. Apex’s man- development of San Cristobal. During
agement will be working hand-in-glove 1998, amongst other accomplishments,
with one of the world’s leading engi- they negotiated an agreement with the
neering and constructing companies. local community– with the assent and
This process will be facilitated by the enthusiastic support of all sectors of
experience of the professionals staffing Bolivian authorities, both political and
the operations of Andean Silver (Apex’s religious – to relocate with our assis-
South American subsidiary) in Bolivia. tance to a new site of their choice where
Many of these personnel joined Apex the quality of their lives will be much Village of San Cristobal
upon our acquisition of Mintec, the improved. Under Andean’s supervision, Tesorera
leading mining consulting firm in Bolivia, the process of the town’s construction
early in 1998. and relocation is now well advanced.
Having local management with a thor- Andean personnel have also headed
What is your current timeline
ough knowledge of Bolivian regulatory the evaluation of Apex’s South American
for the development of and legal requirements has proved property holdings in Bolivia and Peru.
San Cristobal? invaluable. Under the leadership of Both their knowledge of the mining
Johnny Delgado, a Bolivian national and industry and understanding of local
Our current timeline for San Cristobal Andean Silver’s President, Andean per- requirements have greatly facilitated our What environmental standards
calls for completing the bankable sonnel have skillfully supported the South American exploration efforts. will you follow in developing
feasibility study in mid-1999 and securing
San Cristobal?
financing later in the year with construc-
tion beginning shortly thereafter. As part 1998 1999 2000 2001 2002 We are committed to developing and
of the ongoing engineering work, the Reserve/Sterilization Drilling operating San Cristobal in accordance
Company is also working toward the Detailed Metallurgical Testing with both Bolivian standards and best
delivery of a lump-sum turnkey contract Feasibility Study industry practice that will also satisfy our
Environmental/Permitting
proposal that would facilitate our project Arrange Financing
project financing lenders. Consistent with
financing effort. Current plans call for a Engineering & Construction
Johnny Delgado our corporate philosophy of “cutting no
two-year construction period with com- Start-up/Commissioning Chief Executive Officer corners”, our policy is to comply with all
missioning in late 2001 and commercial Commercial Production Andean Silver Corporation applicable foreign laws and regulations
production in 2002. Current timeline for the development of the San Cristobal open pit mine. wherever we operate.

6 7
Discovery Larry Buchanan, Chief Geologist
Apex Silver Mines Corporation
Tqfp (Rhyodacite Porphyry)
Tvcs (Volcaniclastics)
Ore
Pit Outline

Looking NW B'
Dr. Larry J. Buchanan, known within Apex Silver as the father of San
Cristobal, is a noted exploration geologist whose analysis of epithermal
Delgado
deposits has given rise to the industry paradigm known as “The Buchanan 4300m

Model”. With over 30 years experience, Dr. Buchanan played a key role in Tesorera 150 m offset Jayula
B
identifying several million plus ounce gold deposits before joining Apex Silver. A'
A Tqfp

Why Bolivia? Tvcs 4100m

Using history as a key to the future, significant silver mines are more likely to be found San Cristobal Geology — Cobrizos
where silver has been mined before. Bolivia is home to the largest silver deposit ever
Breaking the Mold Calamena Tvcs Tqfp Tvcs 3900m
mined, the Cerro Rico de Potosi found in 1545, which is still producing today. 600 m
Cross section of primary deposits at San Cristobal.
Located about 200 kilometers northeast of San Cristobal, the Cerro Rico funded the Most primary silver is produced from
B'
Spanish treasury for several centuries. As an indication of its wealth and influence, small, high-cost underground mines that
N
Potosi was one of the largest cities in the Western Hemisphere in the late 16th century. exploit high-grade vein and limestone Delgado Jayula

San Cristobal is located approximately 500 kilometers south of the capital city of replacement deposits. With large proven of 1.90:1 (tonnes waste per tonne of ore).
East Jayula
La Paz on the Bolivian Altiplano within the Andes. Larry Buchanan describes and probable reserves (259 million tonnes) A limited drill program, focusing on the A'
San Cristobal as being in “elephant country”, since it is located southwest of Potosi outcropping on the surface, San Cristobal area east of the current pit, is planned for B'

and east of world-class copper mining operations like Collahuasi, El Abra, will “break the mold” with a large-scale, North Jayula 1999 at San Cristobal to demonstrate the Tesorera
San Cristobal
Chuquicamata and Escondida. low cost open pit silver-zinc-lead mine. Jayula potential of significant additional reserves. Townsite
A'
By year-end 1998, the Company had Delgado East Jayula During 1998, Apex’s land position
Lake Titicaca Tesorera
drilled and assayed a total of 169,500 Colon
Gigantes expanded significantly from approximately
PERU La Paz N
meters at San Cristobal, or 742 drill holes. Animas 6,500 acres held in 1997 to approximately
Inca
1998 drilling (97,000 meters) doubled ore Toldos
345,000 acres so that it now encompass-
Kori Kollo
reserves and connected the two original es the entire San Cristobal Mining District.
ore bodies, Tesorera and Jayula, so that SE Toldos Of the ten additional targets currently Drill Hole 500 m
the deposit will be mined from one large being investigated within the San Rim of San Cristobal Pit
Potosi pit. The cross section illustrates San Cristobal Mining District, six of them are
Cristobal’s relatively subdued topography higher grade than the average grade of
San Cristobal drill hole location map showing the outline
PACIFIC CHILE Salar de BOLIVIA which provides for a favorable strip ratio our existing reserves. of the proposed San Cristobal open pit and cross section
OCEAN Uyuni Uyuni 1 km
Iquique lines A-A’ and B-B’.
Collahuasi
San Cristobal
Drilled Areas With Reserves
El Abra Higher Grade Mineralized Zones
Chuquicamata Alteration Zones Drilled Areas Still In Review

San Cristobal is located near other

Calama Siliceous Residue Original Apex Mineral Concessions How was San Cristobal discovered?
Mejillones Alunite, Kaolin, Pyrite Expanded Apex Mineral Concessions
large producing mines in the Escondida ARGENTINA Propylitization
Cordilleran mineral belt. Antofagasta Illite, Sericite in Lower Levels
San Cristobal District exploration targets. In January 1995, Larry Buchanan was sent ues. Larry recognized immediately the
Silification
Adularization to Bolivia to evaluate prospects identified potential for a bulk tonnage polymetallic
by Johnny Delgado, who was at the time deposit along the lines of Real de Angeles
Level of Boiling
of 2.84 WT.%
Ore Minerology head of the country’s leading mining con- in Mexico. Real de Angeles was a highly
NaCl Solution at
Depth (m.) Temperature Indicated General Water Table (contained metals) The basic theory behind the Buchanan sulting firm (Mintec). One of the prospects profitable, smaller scale open pit silver
What is the 0
100˚ model is that the interface between the
precious metals and the base metals rep-
he visited was the Toldos mine, an opera-
tion he judged to be too small on its own
mine that ceased production in 1998 due
to depletion of reserves.
Buchanan Model? 150˚
Rare Gold
Usually in resents the level where episodic boiling of to be of continuing interest. Watching the Drilling commenced in 1996 once the
Pyrite the metal-bearing fluids takes place. sunset that evening with his colleagues entire target area had been acquired. The
The Buchanan Model describes a metals Boiling causes first the base metals, then Jon Gelvin and Carlos Murillo, he noted first hole hit long intervals of ore grade sil-
100
deposition process for epithermal mineral silver sulfides and later gold to deposit in that the rocks in the crater on the adjoin- ver, zinc and lead. With 169,500 meters
deposits hosted in volcanic rock. a well-defined temporal and vertical ing San Cristobal property turned orange completed, San Cristobal now has 259
Gold in Pyrite
Epithermal deposits are formed when Silver Sulfosalts sequence. Episodic sealing of the frac- indicating alteration. Other major mining million tonnes of proven and probable
minerals precipitate from hot aqueous ture system, followed by a build-up of companies had evaluated San Cristobal reserves, making it the world’s largest
200˚
solutions near the earth’s surface. By pressure and re-boiling of the solutions, for gold, but not for silver. Before leaving open pit silver deposit, more than three
studying numerous precious and base 200 gives rise to the brecciation and banded the following day, they hiked into the times the size of Real de Angeles before it
Proustite (silver)
metal vein deposits hosted in volcanic Argentite (silver) vein fillings that are often observed in crater to investigate and were sufficiently was mined. San Cristobal remains open
environments, Dr. Buchanan was able to Electrum (gold with silver) epithermal deposits. encouraged to collect several hundred laterally as well as to depth, with many
describe the metals deposition sequence surface samples, all of which proved to new satellite targets.
Looking east at San Cristobal with Jayula drill pads on the
for a “typical epithermal deposit”, thereby left of the photograph and Tesorera drill pads on the right.
contain anomalous to ore grade silver val- As a postscript, Larry Buchanan became
identifying the spatial relationships 300 Precious Metal Horizon
Argentite (silver)
Apex’s Chief Geologist in 1995, a position
between mineral assemblages, alteration Electrum (gold with silver) he holds today. Johnny Delgado became
Minor Base Metals
patterns and ore controls. CEO of Andean Silver, Apex’s South
Careful mapping of alteration zones and Boiling Level American subsidiary, after Mintec was
mineral assemblages assist the user of acquired by Apex in 1997. Jon Gelvin
the Buchanan Model in locating “blind” or 400 Galena (lead) joined Apex in 1996 and heads up Apex’s
Sphalerite (zinc)
unexposed mineral deposits. By studying Base Metal Horizon Chalcopyrite (copper) activities in Mexico and Central America,
the spatial relationships, the occurrence Rare Argentite (silver) where his team has been responsible for
of different types of mineral assemblages identifying some of the Company’s most
becomes predictable. promising new exploration targets.
250˚
500
Idealized cross section of Buchanan Model.