Mines Management, Inc. (NYSE Amex:MGN)(TSX:MGT) is pleased to announce results for the second quarter, 2009.
In the second quarter of 2009, the Company:
- Completed the EIS public comment period June 29, 2009, with agencies currently compiling the data.
- Approved and adopted the Shareholders Rights Plan at the June 18, 2009 Annual Meeting of shareholders.
- Demobilized Small Mine Development, the adit rehabilitation contractor, on April 30, 2009 after installation and testing of the sumps for the water treatment system at the Montanore adit site.
- Maintained a strong cash and investment position at June 30, 2009, with $15.5 million of unrestricted cash, availability under its line of credit, and unrestricted certificates of deposit.
The net cash expenditures for the six months ended June 30, 2009 were $0.1 million for the purchase of equipment and completion of the water treatment plant and other site infrastructure and $4.4 million for operating activities. The Company believes that it has sufficient working capital to complete the rehabilitation of the Libby adit and commencement of delineation drilling. Given our current available funds of approximately $15.5 million on June 30, 2009, we will require approximately $10.0 million of external financing in 2010 to fund the final phases of the advanced exploration program and delineation drilling program and completion of a bankable feasibility study. The Company continues to investigate financing opportunities and the potential for equity or debt financing during the current year.
Advanced Exploration and Delineation Drilling Program
Libby operations in the second quarter of 2009 included continued operations on the Montanore site water treatment system and dewatering of the decline. After completion of the 7200 foot level sump and decanting system, Small Mine Development, the adit rehabilitation contractor, was demobilized April 30, 2009 as an expenditure conservation measure pending completion of the permitting process. To date, infrastructure placed in the decline includes a refuge chamber, mine power center and temporary pump station along with the previously installed sumps and pumping system at the 700 ft. location. The decline is now in a standby mode pending notification from the relevant governmental agencies regarding approval of the draft Environmental Impact Statement (“EIS”) and issuance of a Record of Decision.
Engineering for the nitrate removal addition to the water treatment system is complete with construction on hold pending receipt of the EIS and Record of Decision. Construction of the nitrate system is scheduled to start and be completed prior to beginning to drive the final section of the adit to reach the ore body and install drill stations. The current schedule is to begin constructionof the concrete chambers in the early fall of 2009 or late April/early May of 2010 based on timing of receipt of the Record of Decision following completion of the final EIS.
Engineering and geology work continues using existing information. Geology confirmation mapping is beginning with the advance of the rehabilitation down the decline. Currently, hydrological studies are being carried out for the creation of a hydrological model for the rock formations being crossed by the decline.
Permitting and Environmental
In the second quarter of 2009, the U.S Forest Services (USFS) and the Montana Department of Environmental Quality (DEQ) issued the draft environmental impact statement for public review. The agencies extended the public review period for 30 days to June 29, 2009. The public meeting for comments was held as scheduled on April 16, 2009. The Company finished its review of the draft EIS and is working with the agencies on its comments to the draft EIS. We anticipate that the EIS contractor will compile all comments generated from the public by the end of July.
The Company continues to work on technical and regulatory issues with the agencies with regard to the EIS, project mitigation, public comments and other project issues. The Company continues to collect baseline data in anticipation of starting up the evaluation work in 2010. This includes data regarding fisheries, water quality, grizzly bear, and other important environmental receptors. Also, a site meeting occurred in June, 2009 with the Montana DEQ, U.S. Forest Service, Environmental Protection Agency, and Army Corps of Engineers to review the project as part of their selection of the Least Damaging Practical Alternative (LDPA) process.
The agencies have reviewed the Company’s three-dimensional hydrologic model and are working collaboratively to determine how it can be implemented in the EIS. This new model addresses water quantity, water quality, and other public and agency comments for the project. The Company has also started to initiate hydrological investigation in the Libby Adit, as required by Minor Revisions to Permit 150, which will provide important technical data for the hydrologic model.
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 and infrastructure, 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 June 30, 2009
The Company reported a net loss for the quarter ended June 30, 2009 of $1.9 million, or $0.08 per share, compared to a net loss of $2.5 million, or $0.11 per share, for the quarter ended June 30, 2008. The $0.6 million decrease in net loss in the second quarter of 2009 is attributable to decreases in operating expenses of $0.4million over the second quarter of 2008, principally in general and administrative expenses, and an increase in other income of $0.2 million. The decrease in operating expenses resulted from a decline in promotion and investor relations spending of $0.1 million, and $0.5 million in stock compensation. Technical services increased in 2009 over 2008 for work on the adit and the underground water treatment system of $0.2 million before SMD was demobilized the end of April. The increase in other income resulted from the adoption on January 1, 2009 of the reporting requirements of EITF 07-5 which resulted in a $0.3 million gain on warrant derivatives. Net interest income decreased by $0.1 million in 2009.
Six Months Ended June 30, 2009
The Company reported a net loss for the six months ended June 30, 2009 of $4.9 million, or $0.22 per share, versus a loss of $4.4 million or $0.19 per share for the six months ended June 30, 2008. The $0.5 millionincrease in net loss in 2009 is largely attributable to increased technical services costs in 2009 for work on the Libby adit water treatment system including rehabilitation, sump and decant construction, and pumping station installation of $0.6 and additional permitting and environmental costs of $0.4 million. This was offset by reduced general and administrative costs including decreases of $0.2 million in investor relation expenditures and $0.4 million for stock compensation, and an increase of $0.1 million for consulting services. Legal, accounting, and consulting fees decreased by $0.2 million in 2009, and net interest income decreased by $0.2 million.
Liquidity
During the six months ended June 30, 2009, the net cash used for operating activities was $4.4 million, which consisted largely of permitting and technical expenses associated with increased activities at the Montanore Project site. The net cash used in investing activities during the quarter was $0.1 million, principally for construction in progress.
We continue to reduce activity levels, including capital expenditures, until the timing of the Record of Decision becomes more clear. We anticipate expenditures of approximately $4.5 million in the final two quarters of 2009, which will consist of $1.5 million per quarter for general and administrative expenses and $1.5 million for ongoing expenses in preparation for the delineation drilling program, additional mine scoping studies, and responding to EIS comments.
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 comments regarding further exploration and evaluation of the Montanore Project, including planned rehabilitation and extension of the Libby adit, drilling activities, feasibility determination, 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 in 2009 and 2010; and potential completion of a bankable feasibility study. The use of any of the words "anticipate," "estimate," "expect," "may," "project," "should," "believe," and similar expressions are intended to identify uncertainties. We believe the expectations reflected in those forward looking statements are reasonable. However, we 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 into this report: 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 this Annual Report on Form 10-K for the period ending December 31, 2008.
Contacts:
Mines Management, Inc.
Vice President Corporate Development &
Investor Relations
Douglas Dobbs, 509-838-6050
info@minesmanagement.com
