Mines Management Reports 2012 Third Quarter Results and Montanore Permitting Update
Spokane, Washington, November 19, 2012 /FSC/ - Mines Management, Inc. (NYSE-Amex: "MGN", TSX: "MGT"), (the "Company") is pleased to announce financial and operating results for the third quarter of 2012, including updates on the permitting process associated with the Montanore Silver-Copper Project and on the La Estrella Gold-Silver Project in Peru.
Mr. Glenn M. Dobbs, the Company's President and CEO, stated, "Significant progress has been made on the permitting process for the Montanore over the past quarter, and while the timing is always a significant variable, there are very few steps remaining in the permitting process. The Biological Consultation and preparation of the Biological Opinion are underway, which, upon completion, are expected to be followed by the Final Environmental Impact Statement and Record of Decision. The process has been long and arduous, but we are pleased that the Environmental Impact Statement is being constructed to address the major environmental concerns raised by the public so that when the process is complete, all major questions should have been addressed. At La Estrella, we are very gratified with the results of the initial exploration activities, and we plan to continue to advance the project in an aggressive and prudent manner which reflects both the growing potential of the project and our cash management needs."
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.
Description of Activities
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.
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 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 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.
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.
Michael G. Rasmussen, PhD, Vice President of Exploration for Mines Management, Inc., is a Qualified Person for the purposes of National Instrument 43-101 Standards of Disclosure for Mineral Projects of the Canadian Securities Administrators, and has approved the technical information contained in this news release.
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 located in northwestern Montana. The Montanore is an advanced stage exploration project containing a Canadian NI 43-101 compliant measured resource of 4.03 million tons of material grading 1.85 ounces per ton ("opt") silver and 0.74% copper, an indicated resource of 77.5 million tons grading 2.05 opt silver and 0.75% copper, and an inferred resource of 35.1 million tons grading 1.85 opt silver and 0.71% copper, and is currently undergoing the process to obtain permitting approval. Additional information is available at Mines Management's website: www.minesmanagement.com.
Cautionary Note to U.S. Investors concerning estimates of Measured, Indicated and Inferred Mineral Resources:
This press release uses the terms "Measured Mineral Resource", "Indicated Mineral Resource", and "Inferred Mineral Resource." We advise U.S. investors that while those terms are recognized and required by Canadian NI 43-101, the Securities and Exchange Commission does not recognize them. U.S. investors are cautioned not to assume that any part or all of the mineral deposits in these categories will ever be converted into mineral reserves. Inferred Mineral Resources have a greater amount of uncertainty as to their existence and as to their economic and legal feasibility. In accordance with Canadian rules, estimates of Inferred Mineral Resources cannot form the basis of feasibility or other economic studies. U.S. investors are cautioned not to assume that part or all of the Inferred Mineral Resources exists, or is economically or legally mineable. Disclosure of "contained ounces" in a Mineral Resource is permitted under Canadian regulations, however, the SEC normally only permits issuers to report mineralization that does not constitute 'reserves' by SEC standards as "in place" tonnage and grade without reference to unit measures. Accordingly, the information contained in this press release may not be comparable to similar information made public by U.S. companies that are not subject to NI 43-101.
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 U.S. and Canadian 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 comments regarding anticipated permitting and engineering activities and geologic studies, planning for the exploration and delineation drilling program at the Montanore Project pending permitting approvals, planned exploration expenditures and activities at the La Estrella exploration property in Peru, interpretation of the significance of initial drilling results at La Estrella including the extension of the gold and silver mineralized zone, financing needs, including the financing required to fund the final phases of the advanced exploration and delineation drilling program and a bankable feasibility study, the sufficiency of working capital to complete the rehabilitation of the Libby adit and commence delineation drilling and planned expenditures and cash requirements for 2012. Actual results may differ materially from those presented. Factors that could cause results to differ materially include delays in permitting at Montanore, delays with exploration at La Estrella, changes in interpretation of geological information, political unrest or delays in obtaining community agreements or permitting in Peru in connection with planned exploration activities, world economic conditions or fluctuations in silver, gold 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's Form 10-K for the year ended December 31, 2011, as amended.
FOR MORE INFORMATION:
Douglas Dobbs, Vice President of Corporate Development & Investor Relations
Mines Management, Inc.
905 West Riverside - Suite 311
Spokane, Washington 99201
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