UPDATE 1-Apex Silver Mines files for bankruptcy protection

By Emily Chasan

NEW YORK, Jan 13 (Reuters) - Apex Silver Mines Ltd SIL.A, which runs silver mining operations in Latin America, has sought bankruptcy protection from creditors with a New York court, with plans to sell its stake in a Bolivian mining operation.

The company filed a Chapter 11 petition with the U.S. bankruptcy court in Manhattan late Monday, and says it will receive $27.5 million plus other consideration for its stake in the San Cristbal Mine in Bolivia from Sumitomo Corp (8053.T).

Apex plans to reorganize itself as a holding company for subsidiaries that explore and develop silver and other mineral properties in Latin America and manager of the San Cristbal Mine.

Apex said in court papers that unanticipated increases in the price of silver, lead and zinc had compromised its hedge positions, and the ramp-up of its San Cristobal Mine was more costly than expected as energy and commodity costs jumped.

The company said it has reached an agreement on its plan of reorganization with Sumitomo, its senior lenders BNP Paribas and Barclays Capital, and certain debt holders with more than 60 percent of its outstanding subordinated notes.

As part of the Sumitomo deal, Apex said it will manage the mine in exchange for a $6 million annual management fee and a potential $1.5 million annual incentive fee. The Sumitomo deal will provide much of the cash to repay creditors of the bankrupt company, it said.

Apex said its existing shareholders would receive no repayment under the proposed plan.

Sumitomo will also provide the company with secured, super-priority debtor-in-posession financing to allow the company to fund itself during the bankruptcy, Apex said in a statement.