we all know the story of silver standard: good management, robust projects, and on the way to becoming a profitable mid-tier producer. but not all silver companies are the same. consider apex silver, which just declared bankruptcy. apex was as badly managed as can be. they had an asset of 450 million ounces of silver, which is capable of producing 15 million ounces per year, and still managed to mess up.

first, they took on lots of debt to go into production. their main project was in an unstable country (bolivia) which undoubtedly scared away some investors. their project also depends on base metal production, which wouldn't be so bad, except that apex hedged its lead and zinc (and silver) production when prices were rising, and is now being hurt by falling prices. in short, apex did everything wrong. so even though the price of silver went from $4 to $20, with its pullback in 2008, apex went bankrupt during a bull market in silver.

had metals prices not collapsed, apex probably would have muddled through long enough to be bailed out by the coming reflation. but it isn't just undercapitalized exploration companies that are falling by the wayside; even badly-managed producers can go out of business.

http://www.mineweb.com/mineweb/view/...