- 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.
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, 2010The 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 million increase 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.