Mines Management, Inc. Announces Third Quarter 2010 Results
Mines Management, Inc. (NYSE Amex: MGN) (TSX: MGT) is pleased to
announce financial and operating results for the second quarter ending
September 30, 2010.
In the third quarter of 2010:
The USFS and the DEQ continued formulating responses to public
comments received on the DEIS for the Montanore Project.
Mine Quarry Engineering Services (MQES), the Company′s contractor,
continued its development of an Preliminary Economic Assessment (PEA)
of the Montanore Project.
The Company′s exploration and corporate development team continued to
explore additional resource opportunities in North America and Latin
America.
The Company continued meetings with federal and state agencies,
Montana legislators, and local Lincoln County Commissioners, Libby
City officials and residents.
The Company closed out the quarter at September 30, 2010 with $7.4
million of unrestricted cash and certificates of deposit.
The Company continued its program to reduce expenditures and conserve
cash pending the completion of permitting.
Current Activities
Until the environmental review process is complete, the Company is
prohibited from conducting drilling and other exploration activities at
the Libby adit. Current operations at the Libby adit include ongoing
treatment of inflow water through the water treatment plant. Water is
treated at a rate of approximately 350 gallons per minute on day shift.
This allows the inflow rate of approximately 72 gallons per minute to be
treated and maintains the water level in the Libby adit at the 7200 foot
level. Monitoring programs verify compliance with Montana DEQ standards
by sending random samples to independent laboratories for analysis.
Additional water monitoring programs verify non-degradation of the Libby
Creek drainage by sampling programs in the stream and in monitoring
wells near the site. Aquatic life monitoring programs continue to be
carried out in the surrounding drainages through the Company′s
biological contractor on a quarterly basis.
In April 2010, the Company contracted with Mine Quarry Engineering
Services (MQES) to prepare a PEA of the Montanore Project which will be
based, in part, on previous studies of the project and the existing NI
43-101 compliant report prepared in October 2005 by Mine Development
Associates, supplemented with current onsite engineering and geological
expertise. A PEA is an economic analysis of the potential viability of a
mineral resource undertaken prior to having sufficient exploration data
to support a prefeasibility study, which is a formal study prepared
after significant exploration data has been received that evaluates
whether the mineral resource can be mined economically. The PEA is being
prepared to update the overall scope of the Montanore Project to reflect
current mineral pricing and current preliminary mine planning, update
the report on metallurgical test work and process design, estimate
capital and operating costs and determine the economics to develop the
project as an underground mine and mill facility.
Permitting and Environmental
In order to advance the Montanore Project past the exploration stage,
the Company must obtain the requisite approvals, permits and opinions
from the USFS, the Montana DEQ, the Army Corps of Engineers and the U.S.
Fish and Wildlife Service. In 2005, the USFS and the Montana DEQ began a
joint review of the Montanore Project. As part of this process, the USFS
and Montana DEQ completed the DEIS in March 2009, evaluated the
environmental impacts of the project, circulated the DEIS to the
Environmental Protection Agency (EPA) and to the public for comment, and
is analyzing and responding to those comments in preparation of a final
EIS. Following completion of the wetlands analysis described below, the
agencies are likely to circulate a supplemental DEIS for public comment
addressing transmission lines, tailings impoundments, water quality,
wetlands and other issues. The final EIS, which will be issued after the
supplemental DEIS, will include, among other things, any project changes
from the DEIS including preferred project alternatives to mitigate
environmental impacts of the plant, portals, transmission lines and
tailings or to make a determination that no such alternative exists, as
well as an assessment of water quality. If, during the preparation of a
final EIS, significant new issues have been raised or significant
changes are required, the lead agency may choose to issue an additional
supplemental DEIS with an additional comment period prior to issuing the
final EIS. This allows the public and other agencies to review and
comment on the new material and analyses before the document is
finalized. Once a final EIS is prepared, it is circulated for public
comment for 30 days. Following the issuance of a final EIS and
resolution of any additional comments, and the issuance of the
biological opinions noted below, the USFS would issue a record of
decision setting forth its decision on our proposed plan of operations
and the necessary amendments to our hard rock mining permit that would
enable us to complete exploration activities at Montanore and commence
mining activities.
In the third quarter of 2010, the USFS and the Montana DEQ continued to
incorporate new technical information, assess mitigation of
environmental impacts, and evaluate reasonable alternatives in order to
address comments on the DEIS from the public and the EPA. Specifically,
based on comments concerning the transmission line alternatives
presented in the DEIS and following an extensive analysis, the USFS and
Montana DEQ selected their preferred alternative for the transmission
line location. This decision will now enable various aspects of the
environmental review process to advance.
As part of our permitting process, the USFS must undertake certain
biological assessments (BA) and submit draft reports of these
assessments to the U.S. Fish and Wildlife Service (FWS) for
consideration in connection with the FWS′s biological opinions
addressing the impact of the project on threatened and endangered
species, including grizzly bear and bull trout. The issuance of the
biological opinions by the FWS is required prior to the completion of a
record of decision. The USFS is working on a draft of the fisheries BA
and now that the transmission line alternative has been selected, a
draft grizzly bear BA can be finalized, which is expected to occur in
the fourth quarter of 2010. The issuance of the biological opinions may
take as much as 12 months following submission of completed BAs.
As part of the development of a final EIS and the determination of the
agencies′ preferred alternatives, the U.S. Army Corps of Engineers must
complete an analysis of potential project discharges of dredged or fill
material into waters of the United States, including wetlands. Such
discharges are regulated by Section 404 of the Clean Water Act which
requires a permit before dredged or fill material may be discharged. The
Company and the agencies have collaboratively developed wetlands
mitigation options. Numerous site tours and conceptual plans have been
prepared and are in the process of being finalized. The Company
estimates that the agencies could finalize their analysis of the wetland
mitigation plans in late 2010 or early 2011.
Based on the estimated timing of the supplemental DEIS and issuance of
biological opinions, the Company believes that the agencies could issue
a record of decision in late 2011, but in light of the fact that a large
part of the process is contingent upon variables outside our control,
there can be no certainty regarding such timing.
Financial and Operating Results
Mines Management, Inc. is an exploration stage company with a large
silver-copper project, the Montanore Project, located in northwestern
Montana. The Company continues to expense all of its expenditures with
the exception of equipment, buildings, and mining properties, including
mineral rights, which are capitalized. The Company has no revenues from
mining operations. Financial results of operations include primarily
interest income, general and administrative expenses, permitting,
project advancement and engineering expenses (which are included in the
technical services and exploration line item in the statement of
operations), depreciation expense and legal, accounting and consulting
expenses.
Quarter Ended September 30, 2010
The Company reported a net loss for the quarter ended September 30, 2010
of $2.7 million, or $0.12 per share, compared to a net loss of $2.3
million, or $0.10 per share, for the quarter ended September 30, 2009.
The primary factors driving the $0.4 million increase in net loss in the
third quarter of 2010 relative to the third quarter of 2009 were:
(i) an increase of $0.3 million in general and administrative expenses
due in large part to the issuance of stock compensation in the 2010
period as described in Note 9 of the financial statements, which was
offset by $0.1 million of decreases in other operating expenditures
reflecting completion of certain activities associated with seeking
permitting approvals; and
(ii) an increased loss in the fair market value of warrant derivatives
of $0.2 million.
Nine Months Ended September 30, 2010
The Company reported a net loss for the nine months ended September 30,
2010 of $7.4 million, or $0.32 per share, compared to a loss of $7.2
million or $0.32 per share for the nine months ended September 30, 2009.
The $0.2 millionincrease in net loss is attributable to the
following:
(i) increased general and administrative costs of $1.0 million in 2010
primarily due to grants of stock options in January and July of 2010;
(ii) increased legal, accounting and consulting costs of $0.1 million in
2010 due to fees associated with permitting issues;
(iii) decreased technical services costs of $0.5 million in 2010 due to
the suspension of the Libby adit rehabilitation work in April 2009; and
(iv) increased other income of $0.3 million primarily due to a smaller
loss in the fair market value of warrant derivatives.
Liquidity
At September 30, 2010, the Company had cash and cash equivalents and
unrestricted certificates of deposit of $7.4 million, and an additional
$1.8 million of available-for-sale securities. During the nine months
ended September 30, 2010, the Company′s net cash used for operating
activities was $5.2 million. The Company anticipates expenditures of
approximately $1.7 million in the final three months of 2010, which the
Company expects to consist of $0.9 million for general and
administrative expenses and $0.8 million for the preparation of the
preliminary economic assessment and responding to DEIS comments.
The Company continues to reduce activity levels to conserve cash,
including capital expenditures, until the timing for the receipt of the
record of decision becomes more clear. This process is expected to
continue through 2011. The Company will continue to evaluate financing
alternatives during the fourth quarter of 2010 and through 2011. If
additional financing is not obtained during this period, the Company
will be required to accelerate its cash management strategies and
further reduce its expenditures.
Mines Management, Inc. is an exploration stage company with a large
silver-copper project, the Montanore Project, located in northwestern
Montana. Advancement of the Montanore Silver-Copper Project continues to
be the Company′s primary focus. In order to advance the Montanore
Project, the Company must obtain the requisite project approvals and
permits from the U.S. Forest Service (USFS), the State of Montana, and
the Army Corps of Engineers. A draft environmental impact statement
(DEIS) was issued by the USFS and the Montana Department of
Environmental Quality (DEQ) in the first quarter of 2009. The comment
period has expired, and the agencies are responding to issues presented
in the course of preparation of the final environmental impact statement
(EIS).
FORWARD LOOKING STATEMENTS - Some information contained in or
incorporated by reference into this release may contain forward looking
statements as defined in the Private Securities Litigation Reform Act of
1995. These statements include, among other things, comments regarding
further exploration and evaluation of the Montanore Project, including
planned rehabilitation and extension of the Libby adit, drilling
activities, feasibility determinations, engineering studies,
environmental and permitting requirements, process and timing, and
estimates of mineralized material and measured, indicated and inferred
resources, financing needs, the markets for silver and copper, planned
expenditures for the remainder of 2010, sources of financing, potential
completion of a bankable feasibility study, results of the hydrological
model and the effects thereof, and the search for potential exploration
and development opportunity in the mining industry. The uses of any of
the words 'anticipate,' 'estimate,' 'expect,' 'may,' 'project,'
'should,' 'believe,' and similar expressions are intended to identify
uncertainties. The Company believe the expectations reflected in those
forward looking statements are reasonable. However, the Company cannot
assure that the 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 and incorporated by reference elsewhere in documents filed by
the Company with the U.S. Securities and Exchange Commission, and with
other regulatory authorities, including worldwide economic and political
events affecting the supply of and demand for silver and copper, and the
availability and cost of financing for mining projects, volatility in
the market price for silver and copper, financial market conditions and
the availability of financing on acceptable terms or on any terms,
uncertainty regarding whether reserves will be established at Montanore,
uncertainties associated with developing new mines, variations in ore
grade and other characteristics affecting mining, crushing, milling and
smelting and mineral recoveries, geological, technical, permitting,
mining and processing problems, the availability, terms, conditions and
timing of required governmental permits and approvals, uncertainty
regarding future changes in applicable law or implementation of existing
law, the availability of experienced employees, the factors discussed
under 'Risk Factors' in the Company′s Annual Report on Form 10-K for the
period ending December 31, 2009.
Mines Management, Inc.
Douglas Dobbs, Vice President Corporate
Development & Investor Relations, 509-838-6050
Fax: 509-838-0486
Email:
info@minesmanagement.com
Web:
www.minesmanagement.com