MINES MANAGEMENT, INC. (NYSE Amex: MGN)(TSX: MGT) is pleased to announce results for the first quarter.
First Quarter Highlights
- The U.S. Forest Service and the Montana Department of Environmental Quality (“DEQ”) issued the draft Environmental Impact Statement (“EIS”) for the public comment period which ends on June 27, 2009. On May 15, 2009, the government agencies extended the public comment period by 30 days from its original expiration date of May 28, 2009.
- Small Mine Development (SMD), the Company’s underground mine contractor, continued the excavation of two sumps and placed them into service as part of the adit dewatering system to clarify water before sending it to the water treatment plant.
- The Company maintained a strong cash and investment position at March 31, 2009, with $17.9 million of unrestricted cash, availability under its line of credit, and unrestricted certificates of deposit.
- The Company implemented a program to reduce expenditures and conserve cash during the current metal price downturn.
The net cash expenditures for the quarter ended March 31, 2009 was $2.1 million for operating and investing activities. Management has reviewed near term spending forecast and implemented a plan to diligently conserve cash where prudent. The Company believes that it has sufficient working capital to complete the rehabilitation of the Libby adit and commencement of delineation drilling.
Advanced Exploration and Delineation Drilling Program
Libby operations in the first quarter of 2009 included continued operations on the Montanore site water treatment system, construction of dewatering sumps, completion of the design work of the nitrate removal system and continued planning for the rehabilitation of the 14,000 foot Libby adit.
Small Mine Development, our adit rehabilitation contractor, is currently re-bolting and scaling the entry of the adit. At of the end of March 2009, it has advanced in excess of 5000 feet. Advance rates are expected to increase as Small Mine Development gains familiarity with our equipment and develops a systematic approach to the work. Thus far, the ground conditions appear to be as expected. Original projections had required that welded wire mesh be installed on the ribs down approximately 5 ft. from the sill. After the first quarter advance, it now appears that this may not be necessary throughout the adit.
Engineering for the nitrate removal addition to the water treatment system is complete, but construction is on hold pending receipt of the EIS and Record of Decision (ROD). 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 ROD 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, a system is being developed to evaluate the water producing areas as they are encountered.
Permitting and Environmental
In the first quarter of 2009, the U.S. Forest Services (USFS) and the Montana Department of Environmental Quality (MDEQ) completed the draft environmental impact statement. The public notice of availability was published and the document was made available for public review. The public comment period ends June 27, 2009. The Company is reviewing the draft environmental impact statement (DEIS) and will provide comments prior to the deadline. A public meeting was held on April 16, 2009 at which the agencies accepted additional comments from the public.
The Company continues to work with the agencies on other issues during the public comment period. In addition, the Company has initiated discussions with the USFS and MDEQ on the selection of the preferred alternative process once the public comment period closes. Preliminary discussions with the USFS and the U.S. Fish and Wildlife Service were completed in the first quarter of 2009 concerning the biological assessment and biological opinion that will be initiated once a preferred alternative is selected by the agencies.
The Army Corps of Engineers (ACOE) is evaluating information to determine the Least Damaging Practical Alternative (LDPA) for the tailings impoundment. The ACOE previously considered the Poorman Creek Impoundment alternative as its preliminary LDPA, but is now reviewing comments provided by the USFS concerning the Little Cherry Creek Impoundment alternative. Following review, it will determine which alternative will finally be selected as the LDPA.
The Company submitted a three-dimensional numerical hydrologic model to the agencies as part of the DEIS comments. The agencies completed a two-dimensional numerical hydrologic model to predict groundwater/surface water issues. The Company’s model is the next level of technical predictions that can incorporate geology, structures and other important hydrologic features. The Company anticipates working with the agencies to incorporate the more dynamic numerical model as part of the update to the final EIS.
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 and site infrastructure, which are capitalized. Financial results of operations include primarily interest income, general and administrative expenses, permitting, project advancement and engineering expenses.
Quarter Ended March 31, 2009
The Company reported a net loss for the quarter ended March 31, 2009 of $3.0 million, or $0.13 per share, compared to a net loss of $1.8 million, or $0.08 per share, for the quarter ended March 31, 2008. The $1.2 million increase in net loss in the first quarter of 2009 is attributable to increases in technical expenses of approximately $0.8 million over the first quarter of 2008, principally due to payments to underground mining contractor SMD for site rehabilitation, sump construction and dewatering, and for EIS technical consultants , environmental expenses, and permitting. General and administrative expenses increased $0.1 million due to the addition of supervisory mine site employees since the first quarter of 2008 and normal annual wage increases, offset by decreases of $0.1 million in legal, accounting and consulting expenses in the first quarter of 2009 over the comparable 2008 period. As a result of adopting a new accounting standard, the Company had a loss from the change in fair value of warrants classified as derivative instruments of $0.3 million for the quarter ended March 31, 2009. Interest income also decreased by $0.2 million, as the Company’s interest-bearing bank balances declined.
Liquidity
During the quarter ended March 31, 2009, the net cash used for operating activities was $2.0 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, for construction in progress.
We are taking steps to reduce activity levels, including capital expenditures, until the timing of the Record of Decision becomes more clear. We anticipate expenditures of approximately $9.0 million the final three quarters of 2009, which will consist of $1.5 million per quarter for general and administrative expenses and $4.5 million for ongoing expense of preparation for the delineation drilling program and addition mine scoping studies. Given our current cash position of $17.9 million on March 31, 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 will investigate financing opportunities and options from equity and debt financing during the current year.
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.
Douglas Dobbs, 509-838-6050
Vice
President Corporate Development & Investor Relations
info@minesmanagement.com