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MGN > SEC Filings for MGN > Form 10-Q on 14-Nov-2012All Recent SEC Filings

Show all filings for MINES MANAGEMENT INC

Form 10-Q for MINES MANAGEMENT INC


14-Nov-2012

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in our Annual Report on Form 10-K for the year ended December 31, 2011, as well as with the financial statements and related notes and the other information appearing elsewhere in this report. As used in this report, unless the context otherwise indicates, references to "we," "our," the "Company" and "us" refer to Mines Management, Inc. and its subsidiaries collectively.

We are an exploration stage company with a large silver-copper project, the Montanore Project, located in northwestern Montana. The Montanore Project continues to be the Company's primary focus. During 2012, the Company continued planning for the advanced exploration and delineation drilling program at the Montanore Project, principally through the pursuit of federal and state agency permitting approvals.

Overview Third Quarter 2012

The Biological Consultation between the U.S. Forest Service ("USFS") and the U.S. Fish and Wildlife Service ("USFWS") has been initiated and is expected to conclude with a Biological Opinion.

Initial drilling at the La Estrella exploration project in Peru was encouraging and has extended the gold and silver mineralized zone.

The USFS and the Montana Department of Environmental Quality ("MDEQ") issued the completed Supplemental Draft Environmental Impact Study ("SDEIS") in late September 2011. The comment period on the SDEIS concluded on December 21, 2011. The USFS and MDEQ are currently incorporating the responses into the Final Environmental Impact Statement ("FEIS").

The Company continues to work with the U.S. Army Corps of Engineers ("Corps of Engineers") on the 404 permitting process. This process will continue concurrently with completion of the FEIS.

The Company continued meeting with federal and state agencies, members of Congress, Montana legislators, local Lincoln County Commissioners, Libby City officials, business leaders and community members in an effort to keep them informed of the project's status.

The Company continued its program to reduce expenditures and conserve cash pending the completion of permitting.

The Company's cash and investment position remained strong at $13.4 million as of September 30, 2012.

Current Activities

Montanore:

During the third quarter of 2012, the Company continued to maintain the Libby adit in a care and maintenance condition preparatory to development activities and adit rehabilitation when the Record of Decision is received. Technical support and assistance were provided for ongoing permitting and environmental efforts. Gathering of environmental data and reporting to state and federal agencies as part of the permitting process is ongoing.

The Company continued to work on mine plan reviews related to optimization of the Preliminary Economic Assessment ("PEA"). Utilizing the LIDAR generated topographical maps of the project site, the Company also continued work on resource model evaluations and identification of target areas which are being incorporated into the planned underground drill program. The Company is currently reviewing and updating the cost estimates for the revised delineation drilling program.

La Estrella:

At its La Estrella project in Peru, the Company completed an eight hole diamond core drill program totaling approximately 2,700 meters in August 2012, in a program


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designed to test the southwestern extent of a gold and silver mineralized zone, which remains open to the north, south, and west. Seven of the eight holes intersected gold and silver mineralization exceeding 100 meters in thickness. The 2012 drilling program has extended the known mineralized zone by approximately 300 meters to the west over an extent of approximately 500 meters north to south. Currently, we are evaluating and modeling the data.

Montanore Permitting and Environmental

The agencies initiated work to prepare the FEIS for the Montanore Project. The preparation of the FEIS includes updating the document to provide better clarity, additional support information, and other key elements necessary to complete the document.

An equally important aspect of the permitting process involves consultation between the USFS and the USFWS. The Fisheries Biological Assessment ("BA") was initiated in April. A draft revision was submitted for review which has been completed. The Fisheries BA is being updated along with the completion of a mitigation plan. Once these two items are completed, the USFWS will commence work on the Biological Opinion ("BO").

Consultation with regard to the Terrestrial (grizzly bears, etc.) BA has also commenced. The USFWS has completed an internal review of the Terrestrial BA which was completed by the USFS and submitted in July of 2011. The USFWS has provided comments to the USFS which is actively addressing those comments. At the same time, the USFWS has commenced work on portions of the Terrestrial BO that are not subject to USFS updates to the BA.

The Company continues to work with the Corps of Engineers on the 404 permitting process. The Corps of Engineers has determined that the application is complete and is analyzing the proposal. The Clean Water Act requires that the Environmental Protection Agency ("EPA") play a support role in the analysis. The Corps of Engineers and EPA are working together on the permitting process, which continues concurrently with the FEIS process schedule. In addition, the Company continues to communicate with the EPA on information and clarification on the 404 permitting process and related issues.

Completion of the permitting process is contingent upon the completion of the FEIS and issuance of a Record of Decision.

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 when incurred, with the exception of equipment and buildings 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.

Quarter Ended September 30, 2012

The Company reported a net loss of $2.7 million for the quarter ended September 30, 2012 compared to a net loss of $2.8 million for the quarter ended September 30, 2011. The most significant changes in operating expenses were: (1) a $0.9 million decrease in general and administrative expenses primarily due to the value of stock compensation issued during the third quarter of 2012 compared to 2011mostly offset by (2) a $0.7 million increase in technical services associated with the exploration of the La Estrella Project. There was also a $0.1 million decrease in other income primarily from the change in the fair market value of warrant derivatives which expired in April of 2012.

Nine Months Ended September 30, 2012

The Company reported a net loss of $6.4 million for the nine months ended September 30, 2012 compared to a net loss of $3.1 million for the nine months ended September 30, 2011. The $3.3 million increase in net loss was primarily attributable to the change in other income, including: (1) a decrease of $1.5 million in the net gain on fair market value of warrant derivatives which expired in April of 2012, and (2) the absence of the 2011 period gain of $2.0 million on the sale of available-for-sale securities. Operating expenses decreased by $0.2 million with significant changes in the following line items:
(1) general and administrative expenses decreased by $0.9 million primarily due to the higher value of stock compensation issued during the third quarter of 2011 and (2) legal, accounting, consulting, and filing fees decreased for a combined total of $0.2 million due to the absence of various costs associated with the completion of the underwritten public


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offering during 2011, almost entirely offset by (3) a $1.0 million increase in technical services due to the exploration of the La Estrella Project.

Liquidity

During the nine months ended September 30, 2012, the net cash used in operating activities was approximately $5.6 million, which is $0.5 million more than the same period during the prior year. We have continued to limit activity levels, including capital expenditures, until the timing for the receipt of the Record of Decision for the Montanore Project becomes clearer.

We anticipate expenditures of approximately $2.0 million for the final three months of 2012, which we expect to consist of approximately $1.0 million for general and administrative expenses, $0.5 million for permitting, engineering, and geologic studies for the permitting for the Montanore Project and $0.5 million on exploration support including permit renewals and resource modeling at La Estrella. We expect to fund these expenditures from cash on hand. Additional external financing would be required following receipt of the Record of Decision to complete the evaluation drilling program and a bankable feasibility study at the Montanore Project and to fund increased exploration efforts at the La Estrella property in 2013. We expect the timing and amount of additional external financing to be based on the timing of the Record of Decision and planned drilling program for Montanore and on 2012 exploration results and additional exploration plans, if any, for La Estrella.

Off-Balance Sheet Arrangements

As of September 30, 2012, we had no existing off-balance sheet arrangements (as defined under SEC rules) that have, or are reasonably likely to have, a material current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

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