Spokane, Washington -- August 21, 2015 – MINES MANAGEMENT, INC. (NYSE-MARKET: MGN, TSX: MGT)(also the “Company”) announces financial and operating results for the second quarter ending June 30, 2015, and recent milestones achieved in the permitting process for the Montanore Silver-Copper Project, as well as achievements regarding litigation.
Highlights
The U.S. Forest Service (“USFS”) and the Montana Department of Environmental Quality (“MDEQ”) provided legal notice to the public on April 1, 2015 announcing the availability of the Final Environmental Impact Statement (“EIS”) and Draft Record of Decision (“ROD”). This initiated a 45 day public objection and resolution process, which ended May 15, 2015. The USFS has completed its review of the comments and issued a response letter requiring clarifying comments to be added to the Final EIS and Final ROD. The Company expects the permitting to be completed by late 2015 or early 2016.
The Company continued to work with the U.S. Army Corps of Engineers (“USACE”) on the Clean Water Act 404 permitting process. This process will continue concurrently with work on the Final EIS and although not required for the Final EIS, it is required prior to beginning construction of the tailings impoundment dam.
In May 2015, the Commissioners appointed by the U.S. District Court for the District of Montana, Missoula Division to determine just compensation for the Company’s easements across certain unpatented non-mineralized claims in the area of the Montanore Project following the conclusion of the trial in April, 2015, reported that claim-holders have lost no value and are due no compensation from the Company. On August 7, 2015, the U.S. District Court issued its final ruling affirming the Commissioners’ report.
Montanore Permitting and Environmental
Approval by regulatory agencies is required before the Montanore Project can proceed with exploration and project development. The agencies that are involved with the major permits include the USFS, MDEQ, USACE, and the U.S. Fish and Wildlife Service (“USFWS”). There are other permits required, such as water rights, which will involve other agencies.
The permitting process requires completion of the Final EIS before a ROD is issued by the USFS and MDEQ. The Final EIS describes various elements of the project, provides analysis of impacts, includes public input, and discloses aspects of the proposed project that were considered by the agencies. The Final EIS is used by the State of Montana to support issuance of the ROD and other permits.
On April 1, 2015, the USFS and MDEQ provided legal notice to the public announcing the availability of the Final EIS and Draft ROD. Following this public notice, the objection process commenced. The objection process is a new program replacing the previous USFS appeal program. Under the objection process, individuals or organizations with legal standing had 45 days, or until May 15, 2015, to provide the agencies with objections to the Final EIS and Draft ROD and their proposed resolutions to address their concern. The USFS has completed its review of the comments and issued a response letter requiring clarifying comments to be added to the Final EIS and Final ROD. After this has been completed, the USFS should file a Notice of Availability in the Federal Register indicating that the Final EIS and Final ROD have been issued. The State of Montana will then issue its version of the Final ROD in accordance with the Montana Environmental Policy Act. Receipt of the federal and Montana Final RODs provide the necessary authorizations for the Company to complete dewatering and proceed with underground drilling at the Montanore Project contingent upon meeting environmental mitigation requirements.
The other major permit required is the 404 permit issued by the USACE under the Clean Water Act. This permit is required when waters of the U.S. are impacted by a proposed action, in this case by the project tailings impoundment. The Company completed a compensatory mitigation plan for aquatic resources affected by the proposed tailings impoundment which was accepted by the USACE as complete during 2014. It is anticipated the USACE will make a permit decision shortly after the Final EIS is issued. The State of Montana must certify the USACE Section 404 authorization through the Section 401 certification process before the USACE can issue a permit. The State has been involved throughout the 404 review process and continues to work with the USACE during 2015. The Company expects the 404 permit will be issued subsequent to the issuance of the Final ROD.
The MDEQ continues to work on water rights, transmission line permits, and other minor regulatory reviews that will be required to gain approval for the project. Under the State of Montana’s regulations, the Company expects these permits to be issued following issuance of the Final EIS and ROD.
In June 2015, Save Our Cabinets, Earthworks, and Defenders of Wildlife filed a complaint in the United States District Court for the District of Montana challenging the issuance of the Biological Opinion regarding the Montanore Project by the USFWS. The USFWS has not yet responded to the complaint. The Company is not a party to this litigation. The Company does not currently expect that this litigation will delay the USFS objection and resolution process related to the issuance of the Final ROD.
Financial and Operating Results
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Six Months Ended June 30, 2015
The Company reported a decrease in operating expenses of $0.6 million during the six months ended June 30, 2015 compared to the six months ended June 30, 2014. The decrease in operating expenses consisted of a $0.2 million decrease in each of general and administrative expenses and technical services, a decrease of $0.4 million in depreciation, offset by an increase of $0.2 million in legal, accounting, and consulting expenditures. The $0.2 million decrease in general and administrative expenses included a decrease in payroll expenditures of $0.1 million as a result of having one less employee during the first six months of 2015 compared to the first six months of 2014 and a $0.1 million decrease in director compensation during 2015 compared to 2014. The $0.2 million decrease in technical services during 2015 primarily consisted of a reduction in fees paid to contractors and consultants working on the EIS as well as a reduction in the baseline studies associated with the EIS. The $0.4 million decrease in depreciation resulted from assets reaching the end of their depreciable lives with limited acquisitions of property and equipment during the past few years. The increase of $0.2 million in legal, accounting, and consulting expenditures primarily resulted from the litigation matter described in Highlights.
Liquidity
During the six months ended June 30, 2015, the net cash used in operating activities was approximately $2.6 million, which was comparable to the same period in the prior year. Net cash utilized by financing activities during the six months ended June 30, 2015 consisted of the payment of $0.1 million cumulative preferred stock dividends. The Company’s cash and cash equivalents decreased during the six months ended June 30, 2015 from $3.9 million at December 31, 2014 to approximately $1.1 million at June 30, 2015. Net cash provided by investing and financing activities amounted to $1.8 million during the six months ended June 30, 2014 and included certificates of deposit maturing and proceeds from common stock options exercised.
We do not currently have enough cash on hand to fund ongoing operating expenses, estimated at approximately $2.2 million for the final two quarters of 2015, consisting of approximately $0.6 million in each quarter for ongoing operating, legal, and general administrative expenses and $0.6 and $0.4 million in the third and fourth quarters, respectively, for permitting, environmental, engineering, and geologic studies for the Montanore Project. Additional financing will be required for the Company to continue its business and operations. Accordingly, the Company is seeking financing and may consider a joint venture of the Montanore Project or other strategic alternatives. There can be no assurance that the Company will be successful in obtaining financing or entering into another type of transaction that will permit it to continue its business, or that the terms of any such financing or transaction would not make future financings or transactions more difficult or otherwise limit the Company’s flexibility or opportunities in the future.
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