- Proposal 1 — The Director Election Proposal: to elect two Class II directors, Mr. Glenn M. Dobbs and Mr. Roy G. Franklin, whose terms were scheduled to expire at the Meeting, for a term expiring at the 2014 annual meeting of shareholders;
- Proposal 2 — The Auditor Appointment Proposal: to ratify the appointment of the Company’s independent registered accounting firm, Tanner LC, for the fiscal year ending December 31, 2011; and
- Proposal 3 — The 2005 Warrant Proposal: to approve the issuance of a number of shares of common stock in excess of the NYSE Amex 20% limitation upon the exercise of common stock purchase warrants issued in a private placement and having a current exercise price of $2.56 per share, at the election of the holders thereof at any time or from time-to-time prior to the expiration of such warrants.
- On April 4, 2011, the Company completed an underwritten public offering of 5,120,000 shares of common stock that yielded net proceeds of approximately $15.2 million before deducting offering expenses. The Company intends to use the net proceeds for advancement of the permitting process for its Montanore Project, the commencement of the Company’s planned delineation drilling program which will include advancement of the adit, establishment of drilling stations and commencement of exploratory drilling, and for general corporate purposes, including possible acquisition and exploration of new mining properties.
- Mine and Quarry Engineering Services, Inc. of San Mateo, California (“MQES”) finalized the Technical Report entitled “Technical Report: Preliminary Economic Assessment, Montanore Project, Montana, USA prepared for Mines Management, Inc.” dated February 3, 2011 (“PEA”), which was filed with Canadian securities regulators in accordance with Canadian National Instrument 43-101—Standards of Disclosure for Mineral Projects (“NI 43-101”).
- The U.S. Forest Service (“USFS”) and the Montana Department of Environmental Quality (“MDEQ”) continued their environmental review, and are in the process of formulating responses to comments received from the public and from the Environmental Protection Agency (“EPA”) on the Draft Environmental Impact Study (“EIS”) for the Montanore Project.
- The Company continued meetings with federal and state agencies, Montana legislators, and local Lincoln County Commissioners, Libby City officials, business leaders and community members.
- The Company continued its program to reduce expenditures and conserve cash pending the completion of permitting.
- The Company sold one investment in marketable equity securities during March 2011, resulting in proceeds of $3.8 million and a realized gain of $2.0 million.
- Cash and investment position were significantly strengthened to $22.8 million at March 31, 2011.
- The Company’s exploration and corporate development team continued to examine and evaluate additional opportunities in North America and South America.
Current ActivitiesDuring the first quarter of 2011, MQES finalized the PEA which was prepared to provide guidance on the potential viability of the Montanore Project and the basis for the continuation of exploration activities. The PEA did not update the mineral resource analysis of the Montanore deposit completed in October 2005 by Mine Development Associates (“MDA Report”). Mineralized material, as set forth in the MDA Report, is 81.5 million short tons of material grading 2.04 oz/short ton silver and 0.75% copper with a cutoff grade of 1.0 oz /short ton silver. The PEA assumed pricing of the estimated Montanore resources based on a three year trailing average at August 16, 2010 (i.e. $3.10 per lb. for copper and $15.00 per ounce for silver) and developed cost estimates for development of the Montanore Project. Company personnel participated in preparation of the report by providing current pricing for equipment and revised mining concepts and plans for the study. Initial capital costs for the project were estimated to be $552.3 million (with ± 35% accuracy). The PEA concludes that the Montanore Project “demonstrates favorable economic potential” which justifies “commencement of a resource evaluation program and subsequent pre-feasibility study.” Other projects at the Montanore Project include the continued support of the permitting efforts through data gathering for the hydrological modeling, tailings permitting support, and other permitting related work currently underway. Hydrological work involves the monitoring of several sites in and around the project site. Included in the sites are surface stream flow, monitoring wells, and underground water flow measurements. Community support activities included work with groups affiliated with or located in the city of Libby, Montana, including the Job Service Employer’s Committee, the Chamber of Commerce and others. Permitting and Environmental The Company continues its efforts to obtain the requisite approvals, permits and opinions from the USFS, the MDEQ, the Army Corps of Engineers and the U.S. Fish and Wildlife Service, that would allow the Company to initiate its underground exploration drilling program and ultimately decide whether to advance the Montanore Project to the development stage. The EIS was completed in 2009 and the agencies determined that a Supplemental Draft Environmental Impact Statement (“SDEIS”) would be necessary to address specific project environmental issues. The agencies are working diligently to complete the SDEIS and the Company anticipates that the SDEIS could be issued by the agencies in mid-2011, which would be followed by a public comment period. During the first quarter, the Company completed a conceptual wetland mitigation plan that is necessary to support the Section 404 application and will likely be coordinated with the public notice of the SDEIS.
The USFS and MDEQ have been working closely with the Army Corps of Engineers and the U.S. EPA to address specific technical issues that will be included in the SDEIS. The agencies have significantly advanced the technical development of waste rock characterization, historical and predicted water quality analyses, and wetland delineation evaluations. The agencies continue to work with the Company on project hydrology, wetlands mitigation, and air quality model results to demonstrate compliance with new air quality guidance issues. It is expected that these topics will all be completed in time to facilitate the issuance of the SDEIS in mid-2011.As part of our permitting process, the USFS must undertake certain biological assessments 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 opinion by the FWS is required prior to the completion of a record of decision, discussed below. Mitigation plans for both grizzly bears and bull trout have been developed and will be finalized as part of the FWS’s final biological opinion. As part of the development of a final EIS and the determination of the agencies’ preferred alternatives, the U.S. Army Corps of Engineers (“Corps”) 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. During 2010, the Company worked with the Corps and the USFS to identify acceptable wetland mitigation sites for the project. Towards the latter part of 2010, the Company identified several sites that are anticipated to be sufficient to adequately provide compensatory mitigation for the loss of wetlands due to project activities. The USFS and MDEQ have selected preferred alternatives for the plant site, mine portals, and tailings facility. The Corps is expected to issue its determination that our proposed tailings site is the Least Environmentally Damaging Practicable Alternative, which is the first step in this 404 permit approval process, in the first half of 2011. The Corps is expected to issue a public notice of the proposed 404 permit at the same time the SDEIS is issued by the USFS. The subsequent public comment period for this 404 permit is anticipated to run concurrently with the SDEIS public comment period.
Issuance of a record of decision (“ROD”) by the USFS approving our proposed Mine Plan of Operations is the final step of the federal approval process and can occur only after the final FWS biological opinion, the 404 dredge and fill discharge permit and the final EIS have been issued. Following the ROD, the other agencies would be expected to issue their permits relating to mine development activities, including amendments to the hard rock mining permit and the MPDES permit, over a 6 month period. Once the USFS issues a ROD, we would be authorized to commence our planned advanced exploration and delineation drilling program. No further authorization would be required by the State of Montana for the exploration program, which received State approvals in 2006.It is estimated that a ROD could occur in 2012 allowing exploration and mine development work to commence; however, this timing is dependent on, among other things, the number of comments received from the SDEIS review process. 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. None of our properties, including our principal property, the Montanore Project, is currently in production. The Company continues to expense all of its expenditures when incurred, with the exception of equipment which is capitalized. Financial results of operations include primarily interest income, general and administrative expenses, permitting, project advancement and engineering expenses. Quarter Ended March 31, 2011 The Company reported net income for the quarter ended March 31, 2011 of $1.3 million, or $0.05 per share, compared to a net loss of $3.4 million, or $(0.15) per share, for the quarter ended March 31, 2010. The $4.7 million increase over the first quarter of 2010 is attributable to the following items: (1) General and administrative expenses decreased by $0.8 million from the first quarter of 2010, principally due to the issuance of stock options in January 2010 of $0.9 million offset by an increase in investor relations, travel, and consulting expenses in 2011 of $0.1 million; (2) Technical service expenses were $0.3 million less in 2011 due to stock options issued in 2010 of $0.2 million and a reduction of environmental fees and expenses in 2011 of $0.1 million; and (3) Other income increased by $3.6 million in 2011 compared to 2010 because of a $1.6 million gain recognized from the increase in the fair market value of warrant derivatives and a $2.0 million gain on the sale of available-for-sale securities in 2011.
LiquidityDuring the quarter ended March 31, 2011, the net cash used for operating activities was approximately $1.7 million, which is consistent with the prior year. We have continued to limit activity levels, including capital expenditures, until the timing of the ROD becomes clearer. We anticipate expenditures of approximately $6.0 million for the final three quarters of 2011, which will consist of $1.5 million per quarter for operating and general and administrative expenses and $0.5 million per quarter for permitting, engineering, and geologic studies to finalize the permitting for the Montanore Project. Given our current cash position of approximately $22.8 million on March 31, 2011, we expect to have adequate cash on hand to complete the permitting process and initiate the adit rehabilitation and drill station development. The Company intends to investigate project financing opportunities during the current year. About Mines Management Mines Management, Inc. is engaged in the business of acquiring and exploring, and if exploration is successful, developing mineral properties containing precious and base metals. The Company’s primary focus is on the advancement of the Montanore silver-copper project, an advanced stage exploration project, located in northwestern Montana. Statements Regarding Forward Looking Information: Some statements contained in this press release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and other applicable securities laws. Investors are cautioned that forward-looking statements are inherently uncertain and involve risks and uncertainties that could cause actual results to differ materially, including, among other things, comments regarding further exploration and evaluation of the Montanore Project, including drilling activities, feasibility determinations, including those in the Preliminary Economic Assessment, engineering and environmental studies, environmental, reclamation and permitting requirements and the process and timing and the costs associated with the foregoing; the process and timing associated with the permitting process, including the issuance of biological opinions, a supplemental and final environmental impact statement and a record of decision and completion of wetland mitigation plans; estimates of mineralized material; financing needs, including the financing required to fund the final phases of the advanced exploration and delineation drilling program and bankable feasibility study; use of the proceeds from the financing completed on April 4, 2011; sources of financing; the sufficiency of working capital to complete the rehabilitation of the Libby adit and commence delineation drilling; planned expenditures and cash requirements for 2011; efforts to reduce costs, including reducing manpower; results of the hydrological model and the effects thereof; the search for potential exploration and development opportunities in the mining industry; the possibility of challenges by environmental groups or others to our permitting efforts or planned exploration, development or mining activities; potential completion of a bankable feasibility study and the costs associated therewith; and markets for silver and copper. Actual results may differ materially from those presented. Factors that could cause results to differ materially include fluctuations in silver and copper prices. Mines Management, Inc, assumes no obligation to update this information. There can be no assurance that future developments affecting Mines Management, Inc, will be those anticipated by management. Please refer to the discussion of risk factors in the Company Form 10-K for the year ended December 31, 2010, as amended.