|        | OMB APPROVAL                                        |
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|   | OMB Number: 3235-0070                               |
|   | Expires: January 31, 2008                           |
|   | Estimated average burden hours per response: 192.00 |

 

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,DC 20549**

**FORM 10-Q**

**(MARK ONE)**

**x**                              QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE QUARTERLY PERIOD ENDED March 31, 2007.

**o**                                 TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE TRANSITION PERIOD FROM                 TO                 .

**COMMISSIONFILE NUMBER  000-29786**

**MINES MANAGEMENT, INC.**

(Exact Name of Registrantas Specified in its Charter)

| **IDAHO**                        | ** ** | **91-0538859**       |
|----------------------------------|------------|----------------------|
| (State or Other  Jurisdiction of |       | (I.R.S. Employer     |
| Incorporation or  Organization)  |       | Identification  No.) |

 

| **905 W. Riverside Avenue, Suite 311**    | ** ** | ** ** |
|-------------------------------------------|------------|------------|
| **Spokane,  Washington**                  | ** ** | **99201**  |
| (Address Of  Principal Executive Offices) |       | (Zip Code) |

 

**(509) 838-6050**

(Registrant’s TelephoneNumber, Including Area Code)

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.  x Yes  o No

Indicate by check mark whether the registrant is alarge accelerated filer, and accelerated filer, or a non-accelerated filer. Seedefinition of “accelerated filer and large accelerated filer” in Rule 12b-2 ofthe Exchange Act. (Check one):

| Large accelerated filer o |   | Accelerated  filer x |   | Non-accelerated  filer o |
|--------------------------------|--------|---------------------------|--------|-------------------------------|

 

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  o  No  x

At May 2, 2007, 18, 899,467 shares of common stock,par value $0.001 per share, were issued and outstanding.

SEC 1296 (9-05)   Potential persons who are torespond to the collection of information contained in this form are notrequired to respond unless the form displays a currently valid OMB controlnumber.

 

----

**MINES MANAGEMENT,INC.FORM 10-QQUARTER ENDED March 31, 2007**

**INDEX**
|                                                                  | ** ** | ** **                                                                                  | ** ** | ** ** |
|------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------|------------|------------|
| PART I — FINANCIAL  INFORMATION (Note final to match pages) |       |                                                                                        |
|                                                             |       |                                                                                        |       |       |
| ITEM 1.                                                          |       | FINANCIAL  STATEMENTS                                                                       |       |       |
|                                                             |       |                                                                                        |       |       |
| ITEM 2.                                                          |       | MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |       |       |
|                                                             |       |                                                                                        |       |       |
| ITEM 3.                                                          |       | QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK AND HEDGING ACTIVITIES          |       |       |
|                                                             |       |                                                                                        |       |       |
| ITEM 4.                                                          |       | CONTROLS AND  PROCEDURES                                                                    |       |       |
|                                                             |       |                                                                                        |       |       |
| PART II — OTHER  INFORMATION                                |       |                                                                                        |
|                                                             |       |                                                                                        |       |       |
| ITEM 1.                                                          |       | LEGAL PROCEEDINGS                                                                           |       |       |
|                                                             |       |                                                                                        |       |       |
| ITEM 1A.                                                         |       | RISK  FACTORS                                                                               |       |       |
|                                                             |       |                                                                                        |       |       |
| ITEM 2.                                                          |       | UNREGISTERED  SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                                |       |       |
|                                                             |       |                                                                                        |       |       |
| ITEM 3.                                                          |       | DEFAULTS UPON  SENIOR SECURITIES                                                            |       |       |
|                                                             |       |                                                                                        |       |       |
| ITEM 4.                                                          |       | SUBMISSION OF  MATTERS TO A VOTE OF SECURITY HOLDERS                                        |       |       |
|                                                             |       |                                                                                        |       |       |
| ITEM 5.                                                          |       | OTHER INFORMATION                                                                           |       |       |
|                                                             |       |                                                                                        |       |       |
| ITEM 6.                                                          |       | EXHIBITS                                                                                    |       |       |
|                                                             |       |                                                                                        |       |       |
| SIGNATURES                                                       |       |                                                                                        |

 

2

----

**Part I — FinancialInformation**

**Item 1. Financialstatements (unaudited)**

**MINES MANAGEMENT, INC.AND SUBSIDIARIES**

**ConsolidatedFinancial Statements**

**March 31, 2007 and2006**

3

----

**Mines Management,Inc. and Subsidiaries**

**Contents**
|                                                         | ** ** | **Page** |
|---------------------------------------------------------|------------|----------|
| *FINANCIAL STATEMENTS:*                                 |       |     |
| * *                                                |       |     |
| *Consolidated  balance sheets*                          |       | 5        |
| * *                                                |       |     |
| *Consolidated  statements of operations*                |       | 6        |
| * *                                                |       |     |
| *Consolidated  statements of stockholders’ equity* |       | 7        |
| * *                                                |       |     |
| *Consolidated  statements of cash flows*                |       | 8        |
| * *                                                |       |     |
| *Notes to  consolidated financial statements*           |       | 9-17     |

 

4

----

**Mines Management,Inc. and Subsidiaries**

**ConsolidatedBalance Sheets (unaudited)**
| ** **                                                                                                                        | ** **   | **March 31,** 2007 | ** **   | **December 31,** 2006 | ** **   |
|-----------------------------------------------------------------------------------------------------------------------------------|--------------|-------------------------|--------------|----------------------------|--------------|
| ** **                                                                                                                        | ** **   | ** **              | ** **   | ** **                 | ** **   |
| ***Assets***                                                                                                                      |         |                    |         |                       |         |
| *CURRENT ASSETS:*                                                                                                                 | * *     | * *                | * *     | * *                   | * *     |
| Cash and cash  equivalents                                                                                                        |         | $                       | 617,297      |                       | $            | 743,652 |   |
| Interest  receivable                                                                                                              |         | 29,587                  |         | 64,426                     |         |
| Prepaid expenses  and deposits                                                                                                    |         | 30,786                  |         | 71,118                     |         |
| Total current  assets                                                                                                             |         | 677,670                 |         | 879,196                    |         |
| *MINERAL PROPERTIES*                                                                                                              |         | 504,492                 |         | 504,492                    |         |
| *PROPERTY AND EQUIPMENT:*                                                                                                         | * *     | * *                | * *     | * *                   | * *     |
| Mine buildings  and leasehold improvements                                                                                        |         | 265,698                 |         | 172,535                    |         |
| Equipment                                                                                                                         |         | 400,284                 |         | 259,914                    |         |
| Office equipment                                                                                                                  |         | 223,815                 |         | 222,514                    |         |
|                                                                                                                              |         | 889,797                 |         | 654,963                    |         |
| Less accumulated  depreciation                                                                                                    |         | 184,675                 |         | 156,280                    |         |
|                                                                                                                              |         | 705,122                 |         | 498,683                    |         |
| *INVESTMENTS:*                                                                                                                    | * *     | * *                | * *     | * *                   | * *     |
| Certificates of  deposit                                                                                                          |         | 2,541,013               |         | 4,370,253                  |         |
| Available-for-sale  securities                                                                                                    |         | 241,119                 |         | 77,844                     |         |
|                                                                                                                              |         | 2,782,132               |         | 4,448,097                  |         |
|                                                                                                                              |         | $                       | 4,669,416    |                       | $            | 6,330,468 |   |
| ***Liabilities  and Stockholders’ Equity***                                                                                  | *** *** | *** ***            | *** *** | *** ***               | *** *** |
| *CURRENT LIABILITIES:*                                                                                                            | * *     | * *                | * *     | * *                   | * *     |
| Accounts payable                                                                                                                  |         | $                       | 321,680      |                       | $            | 301,667 |   |
| Due to officer                                                                                                                    |         | 2,398                   |         | 2,398                      |         |
| Payroll taxes  payable                                                                                                            |         | 4,444                   |         | 3,549                      |         |
| Total current  liabilities                                                                                                        |         | 328,522                 |         | 307,614                    |         |
| *COMMITMENTS*                                                                                                                     | * *     | * *                | * *     | * *                   | * *     |
| *STOCKHOLDERS’ EQUITY:*                                                                                                      | * *     | * *                | * *     | * *                   | * *     |
| Common stock —  100,000,000 shares, $0.001 par value; 12,849,467 and 12,849,467 shares issued  and outstanding, respectively |         | 12,849                  |         | 12,849                     |         |
| Preferred stock  — 10,000,000 shares, no par value, authorized; -0- shares issued and  outstanding                           |         | —                  |         | —                     |         |
| Additional  paid-in capital                                                                                                       |         | 22,268,710              |         | 22,268,710                 |         |
| Accumulated  deficit                                                                                                              |         | (1,117,306              | )            | (1,117,306                 | )            |
| Deficit  accumulated during the development stage                                                                                 |         | (17,053,313             | )            | (15,208,078                | )            |
| Accumulated  other comprehensive income                                                                                           |         | 229,954                 |         | 66,679                     |         |
| Total  stockholders’ equity                                                                                                  |         | 4,340,894               |         | 6,022,854                  |         |
|                                                                                                                              |         | $                       | 4,669,416    |                       | $            | 6,330,468 |   |

 

See accompanying notes to consolidated financialstatements.

5

----

**Mines Management,Inc. and Subsidiaries**

**ConsolidatedStatements of Operations (unaudited)**
| ** **                                        | ** ** | ** **                                      | ** ** | ** **                  | ** ** | **From Inception**       | ** ** |
|---------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------|------------|-------------------------------|------------|
| ** **                                        | ** ** | ** **                                      | ** ** | ** **                  | ** ** | **August 12, 2002** | ** ** |
| ** **                                        | ** ** | **Three Months Ended** March 31, | ** ** | **Through  March 31,** | ** ** |
| ** **                                        | ** ** | **2007**                                        | ** ** | **2006**                    | ** ** | **2007**                      | ** ** |
| *REVENUE:*                                        |       |                                            |       |                        |       |                          |       |
| Royalties                                         |       | $                                               | 2,015      |                        | $          | 3,704                         |       | $ | 43,514 |   |
| *OPERATING EXPENSES:*                             |       |                                            |       |                        |       |                          |       |
| Depreciation                                      |       | 28,395                                          |       | 11,169                      |       | 120,661                       |       |
| Administrative                                    |       | 227,482                                         |       | 120,945                     |       | 2,210,231                     |       |
| Legal,  accounting, and consulting                |       | 275,094                                         |       | 36,738                      |       | 1,126,838                     |       |
| Miscellaneous                                     |       | 7,654                                           |       | 1,720                       |       | 39,787                        |       |
| Exploration                                       |       | 30,372                                          |       | —                      |       | 183,682                       |       |
| Oil and gas  operating                            |       | 113                                             |       | —                      |       | 12,286                        |       |
| Rent and office                                   |       | 114,877                                         |       | 59,220                      |       | 638,084                       |       |
| Compensation,  directors, officers and staff      |       | 260,713                                         |       | 181,713                     |       | 2,468,940                     |       |
| Taxes and  licenses                               |       | 48,706                                          |       | 13,865                      |       | 186,796                       |       |
| Telephone                                         |       | 9,458                                           |       | 5,109                       |       | 61,482                        |       |
| Fees, filing,  and licenses                       |       | 112,621                                         |       | 162,954                     |       | 1,346,917                     |       |
| Environmental                                     |       | 43,643                                          |       | 26,383                      |       | 564,471                       |       |
| Engineering                                       |       | 9,162                                           |       | 205,348                     |       | 1,437,572                     |       |
| Permitting                                        |       | 876,198                                         |       | 313,380                     |       | 3,425,865                     |       |
| Commissions                                       |       | —                                          |       | —                      |       | 68,440                        |       |
| Stock options  granted to officers and employees  |       | —                                          |       | —                      |       | 3,471,131                     |       |
| Stock options  granted for services               |       | —                                          |       | —                      |       | 601,204                       |       |
| Total operating  expenses                         |       | 2,044,488                                       |       | 1,138,544                   |       | 17,964,387                    |       |
| *LOSS FROM OPERATIONS*                            |       | (2,042,473                                      | )          | (1,134,840                  | )          | (17,920,873                   | )          |
| *OTHER INCOME:*                                   |       |                                            |       |                        |       |                          |       |
| Interest                                          |       | 197,238                                         |       | 79,486                      |       | 864,102                       |       |
| Miscellaneous                                     |       | —                                          |       | —                      |       | 3,458                         |       |
|                                              |       | 197,238                                         |       | 79,486                      |       | 867,560                       |       |
| *NET LOSS*                                        |       | $                                               | (1,845,235 | )                           | $          | (1,055,354                    | )          | $ | (17,053,313 | ) |
| *NET LOSS PER SHARE*                              |       | $                                               | (0.14      | )                           | $          | (0.08                         | )          |   |   |
| *WEIGHTED—AVERAGE COMMON SHARES OUTSTANDING* |       | 12,849,467                                      |       | 12,598,954                  |       |                          |       |

 

See accompanying notes to consolidated financialstatements.

6

----

**Mines Management, Inc.and Subsidiaries**

**Consolidated Statementsof Stockholders’ Equity (unaudited)**

**Three Months EndedMarch 31, 2007**
| ** **                                                  | ** ** | ** **       | ** ** | ** **       | ** ** | ** **   | ** ** | ** **      | ** ** | ** **      | ** ** | ** **          | ** **  | **Deficit**     | ** ** | ** **      | ** ** | ** **  | ** **  |
|-------------------------------------------------------------|------------|------------------|------------|------------------|------------|--------------|------------|-----------------|------------|-----------------|------------|---------------------|-------------|-----------------|------------|-----------------|------------|-------------|-------------|
| ** **                                                  | ** ** | ** **       | ** ** | ** **       | ** ** | ** **   | ** ** | ** **      | ** ** | ** **      | ** ** | ** **          | ** **  | **Accumulated** | ** ** | **Accumulated** | ** ** | ** **  | ** **  |
| ** **                                                  | ** ** | ** **       | ** ** | ** **       | ** ** | **Issuable** | ** ** | **Additional**  | ** ** | ** **      | ** ** | **During the** | ** **  | **Other**       | ** ** | ** **      | ** ** |
| ** **                                                  | ** ** | **Common Stock** | ** ** | **Common Stock** | ** ** | **Paid-in**  | ** ** | **Accumulated** | ** ** | **Development** | ** ** | **Comprehensive**   | ** **  | ** **      | ** ** |
| ** **                                                  | ** ** | **Shares**       | ** ** | **Amount**       | ** ** | **Shares**   | ** ** | **Amount**      | ** ** | **Capital**     | ** ** | **Deficit**         | ** **  | **Stage**       | ** ** | **Income**      | ** ** | **Total**   | ** **  |
| *BALANCES, AUGUST 12, 2002  (INCEPTION)*                    |       | 5,316,956        |       | $                | 5,317      |         | 90,000     |            | $          | 22,500          |       | $                   | 1,495,998   |            | $          | (1,117,306      | )          | $           | —      |   | $ | 846 |   | $ | 407,355 |   |
| Common  stock issued for cash                               |       | 5,169,312        |       | 5,130            |       | —       |       | —          |       | 14,152,615      |       | —              |        | —          |       | —          |       | 14,157,745  |        |
| Common  stock issued to directors                           |       | 375,000          |       | 375              |       | —       |       | —          |       | 149,625         |       | —              |        | —          |       | —          |       | 150,000     |        |
| Common  stock issued for services                           |       | 5,000            |       | 5                |       | —       |       | —          |       | 1,995           |       | —              |        | —          |       | —          |       | 2,000       |        |
| Issuable  common stock issued                               |       | 90,000           |       | 90               |       | (90,000      | )          | (22,500         | )          | 22,410          |       | —              |        | —          |       | —          |       | —      |        |
| Exercise  of stock options                                  |       | 1,181,462        |       | 1,181            |       | —       |       | —          |       | 957,548         |       | —              |        | —          |       | —          |       | 958,749     |        |
| Exercise  of stock warrants                                 |       | 684,117          |       | 724              |       | —       |       | —          |       | 1,568,359       |       | —              |        | —          |       | —          |       | 1,569,083   |        |
| Issuance  of stock options                                  |       | —           |       | —           |       | —       |       | —          |       | 3,900,257       |       | —              |        | —          |       | —          |       | 3,900,257   |        |
| Issuance  of stock for Heidelberg shares                    |       | 27,620           |       | 27               |       | —       |       | —          |       | (27             | )          | —              |        | —          |       | —          |       | —      |        |
| Revaluation  of stock options                               |       | —           |       | —           |       | —       |       | —          |       | 19,930          |       | —              |        | —          |       | —          |       | 19,930      |        |
| Comprehensive  loss:                                        |       |             |       |             |       |         |       |            |       |            |       |                |        |            |       |            |       |        |        |
| Adjustment  to net unrealized gain on marketable securities |       | —           |       | —           |       | —       |       | —          |       | —          |       | —              |        | —          |       | 65,833          |       | 65,833      |        |
| Net  loss                                                   |       | —           |       | —           |       | —       |       | —          |       | —          |       | —              |        | (15,208,078     | )          | —          |       | (15,208,078 | )           |
| Comprehensive loss                                          |       |             |       |             |       |         |       |            |       |            |       |                |        |            |       |            |       | (15,142,245 | )           |
| *BALANCES, DECEMBER 31, 2006*                               |       | 12,849,467       |       | 12,849           |       | —       |       | —          |       | 22,268,710      |       | (1,117,306          | )           | (15,208,078     | )          | 66,679          |       | 6,022,854   |        |
| Exercise  of stock options                                  |       | —           |       | —           |       | —       |       | —          |       | —          |       | —              |        | —          |       | —          |       | —      |        |
| Exercise  of stock warrants                                 |       | —           |       | —           |       | —       |       | —          |       | —          |       | —              |        | —          |       | —          |       | —      |        |
| Comprehensive  loss:                                        |       |             |       |             |       |         |       |            |       |            |       |                |        |            |       |            |       |        |        |
| Adjustment  to net unrealized gain on marketable securities |       | —           |       | —           |       | —       |       | —          |       | —          |       | —              |        | —          |       | 163,275         |       | 163,275     |        |
| Net  loss                                                   |       | —           |       | —           |       | —       |       | —          |       | —          |       | —              |        | (1,845,235      | )          | —          |       | (1,845,235  | )           |
| Comprehensive  loss                                         |       |             |       |             |       |         |       |            |       |            |       |                |        |            |       |            |       | (1,681,960  | )           |
| *BALANCES, MARCH 31, 2007*                                  |       | 12,849,467       |       | $                | 12,849     |         | —     |            | $          | —          |       | $                   | 22, 268,710 |            | $          | (1,117,306      | )          | $           | (17,053,313 | ) | $ | 229,954 |   | $ | 4,340,894 |   |

 

See accompanying notes to consolidated financial statements.

7

----

**Mines Management,Inc. and Subsidiaries**

**ConsolidatedStatements of Cash Flows (unaudited)**
| ** **                                                                           | ** ** | **Three Months Ended  March 31,** | ** ** | **From  Inception  August 12,  2002  Through   March 31,** | ** ** |
|--------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|---------------------------------------------------------------------------|------------|
| ** **                                                                           | ** ** | **2007**                                         | ** ** | **2006**                                                                  | ** ** | **2007** | ** ** |
| ***Increase (Decrease) in Cash and Cash Equivalents*** | ** ** | ** **                                       | ** ** | ** **                                                                | ** ** | ** ** | ** ** |
| *CASH FLOWS FROM OPERATING  ACTIVITIES:*                                             | ** ** | ** **                                       | ** ** | ** **                                                                | ** ** | ** ** | ** ** |
| Net loss                                                                             |       | $                                                | (1,845,235 | )                                                                         | $          | (1,055,354 | ) | $ | (17,053,313 | ) |
| Adjustments to  reconcile net loss to net cash used in operating activities:         |       |                                             |       |                                                                      |       |   |   |
| Issuance of  stock options                                                           |       | —                                           |       | —                                                                    |       | 4,072,335 |   |
| Stock received  for services                                                         |       | —                                           |       | —                                                                    |       | (11,165 | ) |
| Depreciation                                                                         |       | 28,395                                           |       | 11,169                                                                    |       | 120,661 |   |
| Changes in  assets and liabilities:                                                  |       |                                             |       |                                                                      |       | — |   |
| Interest  receivable                                                                 |       | 34,839                                           |       | (1,734                                                                    | )          | (29,587 | ) |
| Prepaid expenses  and deposits                                                       |       | 40,332                                           |       | 15,169                                                                    |       | (30,286 | ) |
| Accounts payable                                                                     |       | 20,013                                           |       | (119,483                                                                  | )          | 324,078 |   |
| Severance  payable                                                                   |       | —                                           |       | (20,000                                                                   | )          | — |   |
| State income  taxes payable                                                          |       | —                                           |       | —                                                                    |       | (164 | ) |
| Payroll taxes  payable                                                               |       | 895                                              |       | (12,886                                                                   | )          | 1,264 |   |
| Net cash used in  operating activities                                               |       | (1,720,761                                       | )          | (1,183,119                                                                | )          | (12,606,177 | ) |
| *CASH FLOWS FROM INVESTING  ACTIVITIES:*                                             |       |                                             |       |                                                                      |       |   |   |
| Purchase of  fixed assets                                                            |       | (234,834                                         | )          | (5,602                                                                    | )          | (823,945 | ) |
| (Purchase) Sale  of certificates of deposit                                          |       | 1,829,240                                        |       | (40,966                                                                   | )          | (2,541,013 | ) |
| Increase in  mineral properties                                                      |       | —                                           |       | —                                                                    |       | (144,312 | ) |
| Net cash  provided by (used in) investing activities                                 |       | 1,594,406                                        |       | (46,568                                                                   | )          | (3,509,270 | ) |
| *CASH FLOWS FROM FINANCING  ACTIVITIES:*                                             |       |                                             |       |                                                                      |       |   |   |
| Proceeds from  sales of common stock                                                 |       | —                                           |       | 1,146,500                                                                 |       | 16,685,409 |   |
| *NET INCREASE (DECREASE) IN CASH  AND CASH EQUIVALENTS*                              |       | (126,355                                         | )          | (83,187                                                                   | )          | 569,962 |   |
| *CASH AND CASH EQUIVALENTS,  BEGINNING OF PERIOD*                                    |       | 743,652                                          |       | 4,648,294                                                                 |       | 47,335 |   |
| *CASH AND CASH EQUIVALENTS, END OF PERIOD*                                           |       | $                                                | 617,297    |                                                                      | $          | 4,565,107 |   | $ | 617,297 |   |

 

See accompanying notes to consolidated financialstatements.

8

----

**MinesManagement, Inc. and Subsidiaries**

**Notes to Consolidated FinancialStatements**

***NOTE 1 — ORGANIZATIONAND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:***

*Organization:*

Mines Management,Inc. (the Company) is a publicly held Idaho corporation incorporated in1947.  The Company acquires, explores,and develops mineral properties principally in North America.  The Company performed exploration activitiesin South America in 2002.

*Summaryof Significant Accounting Policies:*

a.               Theaccompanying consolidated financial statements, include the accounts of MinesManagement, Inc., and its wholly-owned subsidiaries, Newhi, Inc., MontanoreMineral Corporation, and Montmin Corporation. Intercompany balances and transactions have been eliminated.  Newhi, Inc. was formed by the Company for thepurpose of merger with Heidelberg Silver Mining Company, Inc.  In the merger, completed on April 15,1988, Heidelberg Silver Mining Company, Inc., was merged into Newhi, Inc.  To effect the merger, the Company issued367,844 shares of its previously unissued common stock.  Also in connection with this merger, theCompany issued 11,117 shares of common stock and paid $4,446 as a finder’sfee.  Montanore Mineral Corporation andMontmin Corporation were acquired in conjunction with a stock transferagreement with Noranda Finance Corporation as described more fully in note 9.

b.              Allexploration expenditures are expensed as incurred.  Significant property acquisition payments foractive exploration properties are capitalized. If no mineable ore body is discovered, previously capitalized costs areexpensed in the period the property is abandoned.  Once a feasibility study has been completed,approved by management, and a decision is made to put the ore body intoproduction, expenditures to develop new mines, to define further mineralizationin existing ore bodies, and to expand the capacity of operating mines, arecapitalized and amortized on the units of production basis over proven andprobable reserves.

Shoulda property be abandoned, its capitalized costs are charged to operations.  The Company charges to operations theallocable portion of capitalized costs attributable to properties sold.  Capitalized costs are allocated to propertiessold based on the proportion of claims sold to the claims remaining within theproject area.

c.               The Companyevaluates its long-lived assets for impairment when events or changes incircumstances indicate that the related carrying amount may not berecoverable.  If the sum of estimatedfuture net cash flows on an undiscounted basis is less than the carrying amountof the related asset grouping, an asset impairment is considered to exist.  The related impairment loss is measured bycomparing estimated future net cash flows on a discounted basis to the carryingamount of the asset.  Changes insignificant assumptions underlying future cash flow estimates may have amaterial effect on the Company’s financial position and results ofoperations.  To date no such impairmentshave been identified.

d.              Property andequipment are stated at cost.  Buildingsand leasehold improvements are depreciated on the straight-line basis over anestimated useful life of 39 years. Machinery and furniture are generally being depreciated usingaccelerated methods over estimated useful lives ranging from 5 to 10 years.

e.               Basic anddiluted loss per share is computed using the weighted average number of sharesoutstanding during the periods (12,849,467 and 12,781,827 in the first quarterended March 31, 2007, and the year ended December 31, 2006, respectively).  Stock options and warrants outstanding areantidilutive and are not considered in the computation.

9

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*Summaryof Significant Accounting Policies (continued):*

f.                 Cash andcash equivalents include cash on hand, cash in banks, investments incertificates of deposit with original maturities of 90 days or less, and moneymarket funds.

g.              The Company’sfinancial instruments, as defined by Statement of Financial AccountingStandards (SFAS) No. 107, *Disclosuresabout Fair Value of Financial Instruments*, include cash and loanspayable.  All instruments are accountedfor on a historical cost basis, which, due to the short maturity of thesefinancial instruments, approximates fair value at March 31, 2007.

h.              Deferredincome tax is provided for differences between the bases of assets andliabilities for financial and income tax reporting.  A deferred tax asset, subject to a valuationallowance, is recognized for estimated future tax benefits of tax-basis operatinglosses being carried forward.

i.                  Thepreparation of financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date ofthe financial statements and the reported amounts of revenues and expensesduring the reporting period.  Actualresults may differ from those estimates.

j.                  TheCompany has adopted SFAS No. 143, *Accountingfor Asset Retirement Obligations*, which establishes a uniformmethodology for accounting for estimated reclamation and abandonmentcosts.  According to SFAS No. 143,the fair value of a liability for an asset retirement obligation (ARO) will berecognized in the period in which it is incurred if a reasonable estimate offair value can be made.  The ARO iscapitalized as part of the carrying value of the assets to which it isassociated, and depreciated over the useful life of the asset.

In March 2005, the Financial AccountingStandards Board (“FASB”) issued Interpretation (FIN) No. 47, *Accounting for Conditional Asset RetirementObligations*, which clarifies that the term *conditional asset retirement obligation* asused in SFAS No. 143 refers to a legal obligation to perform an assetretirement activity where the timing or method of settlement is conditional ona future event.  Where the obligation toperform the asset retirement activity is unconditional, even though uncertaintyexists about the timing or method of settlement, the entity is required torecognize a liability for the fair value of the conditional retirementobligation if reasonably estimable.  FINNo. 47 also clarifies when an entity would have sufficient information toreasonably estimate fair value.  At March31, 2007, no asset retirement liabilities have been recorded by the Company.

k.               Certainamounts in the prior-period financial statements have been reclassified forcomparative purposes to conform to current period presentation with no effecton previously reported net loss.

10

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*Summaryof Significant Accounting Policies (continued):*

l.                  In December 2004,FASB issued SFAS No. 123R, *Share-BasedPayment*, which revised SFAS No. 123 and superseded APBNo. 25 and its related implementation guidance.  SFAS No. 123R requires measurement andrecording to the financial statements of the costs of employee servicesreceived in exchange for an award of equity instruments based on the grant-datefair value of the award, recognized over the period during which an employee isrequired to provide services in exchange for such award.  Effective January 1, 2004, the Companyadopted SFAS No. 123R, as amended by SFAS No. 148, *Accounting for Stock-Based Compensation—Transitionand Disclosure*.  As providedfor under SFAS No. 148, the Company used the “modified prospective method” oftransition.  Under that method oftransition, the costs recognized in the financial statements for the quartersended March 31, 2007 and 2006 are the same as if they had been based on theirfair values at the grant date.  There wasno stock-based compensation recognized for the quarters ended March 31, 2007and 2006.

At March 31, 2007, theCompany had four stock option plans, which are described more fully in note 6.

11

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***NOTE2 — STOCKHOLDERS’ EQUITY:***

*Common Stock:*

*In 2003, the Company sold 1,152,007 common shares for$1,267,207 ($1.10 per share).  Inconnection with the stock sales, the Company granted warrants to purchase up to1,152,007 common shares at $1.20 per share through two years from the date ofissue.  Cumulative warrants exercisedrelating to this issue at December 31, 2006, 2005, and 2004, were 1,152,007,1,152,007, and 573,640 shares, respectively.*

In 2004, theCompany sold 1,285,000 common shares for $6,425,000 ($5.00 per share).  In connection with the stock sales, theCompany granted warrants to purchase up to 511,000 common stock shares at $7.25per share through five years from the initial exercise date.  The Company paid a cash finder’s fee of 7% ofthe gross offering funds received in the offering.  The finder also received 3% warrantcompensation or warrants to purchase 192,750 common shares at $7.25 per sharethrough February 18, 2009.  Thesewarrants were repriced at $6.00 per share in October 2005 and to $5.00 pershare in April 2007 in accordance with the terms of the 2004 warrant agreement.Cumulative warrants exercised relating to this issue at December 31, 2006,2005, and 2004, were 145,750, 40,000, and -0-, respectively.

In 2005, theCompany sold 1,016,667 common shares for $6,100,002 ($6.00 per share).  In connection with the stock sales, theCompany granted warrants to purchase up to 737,084 common stock shares at $8.25per share through five years from the initial exercise date.  To date, no warrants have beenexercised.  The Company paid a cashfinder’s fee of 7% of the gross offering funds received in the offering.  The finder also received a 3.75% warrantcompensation or warrants to purchase 228,750 common shares at $8.25 per sharethrough October 20, 2010.  These warrantswere repriced at $5.00 per share in April 2007 in accordance with the terms ofthe 2005 warrant agreement.

In 2005, theCompany also sold an additional 40,000 common shares for $240,000 ($6.00 pershare).

*Preferred Stock:*

The Company hasauthorized 10,000,000 shares of no-par-value preferred stock.  Through March 31, 2007, the Company had notissued any of the authorized preferred stock.

***NOTE3 — MINING PROPERTIES:***

Miningproperties are comprised of acquisition, exploration, and development costsrelated to the Montanore property in northwestern Montana and the Advance andIroquois properties in the Northport region of northeastern Washington, asshown below:

|            | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|------------|------------|--------------------|------------|-----------------------|------------|
| ** ** | ** ** | **2007**           | ** ** | **2006**              | ** ** |
| Montanore  |       | $                  | 278,519    |                  | $          | 278,519 |   |
| Advance    |       | 2,139              |       | 2,139                 |       |
| Iroquois   |       | 223,834            |       | 223,834               |       |
|       |       | $                  | 504,492    |                  | $          | 504,492 |   |

*** ***

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***NOTE3 — MINING PROPERTIES (continued):***

***TheMontanore property (formerly the Noxon property) is located in northwesternMontana and includes 18 mining claims covering 355 acres plus one 5-acrepatented mill site.  In August 2002, theCompany acquired a controlling interest in the Montanore silver and copperdeposit in Sanders County, Montana.  TheCompany received a quitclaim deed from Noranda Mineral Corp. (Noranda) whenNoranda elected to withdraw from the project. The mineral rights acquired by the Company are subject to a $0.20 perton royalty, and a 5% net profits royalty which would commence after theoperator has recovered all of its exploration and development costs.  In December 2002, the Company received aquitclaim deed to all intellectual property connected with studies that Norandacarried out on the project.***

The Advanceproperty consists of 720 acres of patented mineral rights.  Although the Company does not own theoverlying surface rights to its patented mineral rights, it does have right ofaccess to explore and mine.

The Iroquoisproperty consists of 64 acres of patented mineral and surface rights and 15unpatented mining claims containing 300 acres.

***NOTE4 — INVESTMENTS:***

The Company owns one $111,549 certificate of depositand one $1,124,055 certificate of deposit for a total of $1,235,604.  These investments mature in 2008 and earnrates of 3.64 and 5.28% respectively. The Company owns six $217,568 certificates of deposit for a total of$1,305,409.  These investments mature in2009 and earn rates of 4.21%.

The Company owns 45,000 free-trading shares ofBitterroot Resources, Ltd. (BTT), a public Canadian corporation traded on theToronto Venture Exchange.  The shares areheld as “available for sale.”  Thisinvestment is being recorded at fair market value with a correspondingadjustment to stockholders’ equity.  The45,000 free-trading shares at March 31, 2007 and December 31, 2006 have amarket value of $26,930 and $28,213 U.S. funds, respectively.  The Company also owns 196,000 free-tradingshares of Centram Exploration Ltd., a public Canadian corporation traded on theToronto Venture Exchange.  The shares areheld as “available for sale.”  The shareswere received in year 2002 in exchange for administrative services provided bythe Company.  The 196,000 free-tradingshares at March 31, 2007 and December 31, 2006 have a market value of $214,189and $49,631 U.S. funds, respectively.

***NOTE 5 — STOCK OPTIONS:***

During the yearended December 31, 1998, the shareholders of the Company approved twostock-based compensation plans: a fixed employee stock-based compensation planand a performance-based plan.  Under thefixed plan, the Company may grant options to purchase up to 460,000 shares ofcommon stock.  The option price may notbe less than the fair market value on the date of grant of the shares.  Stock options are exercisable within ten years from the date of the grant of theoption.  Options under the fixed planvest immediately.

At March 31, 2007,no 1998 nonqualified plan options were outstanding.

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***NOTE 5 — STOCK OPTIONS(continued):***

Under the performance based plan, the Company maygrant options to purchase up to 460,000 shares of common stock.  The option price may not be less than thefair market value on the date of grant of the shares.  Stock options are exercisable within tenyears from the date of the grant of the option. Options under the incentive plan vest immediately.

At March 31, 2007,no incentive-based plan options were outstanding.

During the yearended December 31, 2003, the stockholders of the Company approved two newstock-based compensation plans — the 2003 Stock Option Plan (which includesboth qualified and nonqualified options) and the 2003 Consultant StockCompensation Plan.  Under the 2003 StockOption Plan, the Company may grant options to purchase up to 1,200,000 sharesof common stock.  Under the 2003Consultant Stock Compensation Plan the Company may grant options to purchase upto 400,000 shares of common stock. During 2004, the Company increased the maximum number of common sharesavailable under the 2003 Stock Option Plan and the 2003 Consultant StockCompensation Plan to 3,000,000 and 700,000 shares, respectively.

Under both 2003plans the option price may not be  lessthan 100% of the fair market value per share on the date of grant.  Stock options are  exercisable within ten years from the date ofthe grant of the option.  Vesting of theoptions granted under both plans is at the prerogative of the Board ofDirectors.  Options granted under theplans in 2003 vest immediately except for options issued to Glenn Dobbs,President and Chairman of the Board of Directors. Options issued to Mr. Dobbswere 50% vested at year end December 31, 2003 and become fully vested uponcompletion of certain financing arrangements. The options granted to Mr. Dobbs were fully vested at year endDecember 31, 2004.

At March 31, 2007, thefollowing 2003 plan options were outstanding:

|         | ** ** | ** **         | ** **  | ** **   | ** **              | **Remaining**   | ** **          | ** ** | ** **      |
|--------------|------------|--------------------|-------------|--------------|-------------------------|-----------------|---------------------|------------|-----------------|
| ** **   | ** ** | ** **         | ** **  | **Weighted** | ** **              | **Contractual** | ** **          | ** ** | ** **      |
| **Exercise** | ** ** | **Number of** | ** **  | **Average**  | ** **              | **Life**        | ** **          | **Number** | ** **      |
| **Prices**   | ** ** | ** **         | **Options** | ** **   | **Exercise Price** | ** **      | **(in years)** | ** ** | **Exercisable** | ** ** |
| $            | 1.60       |               |        | 500,000      |                    | $               | 1.60                |       | .93             |   | 500,000 |   |
| 1.85         |       |               | 100,000     |         | 1.85                    |            | 1.41                |       | 100,000         |   |
| 3.95         |       |               | 20,000      |         | 3.95                    |            | 2.23                |       | 20,000          |   |
| 4.65         |       |               | 475,000     |         | 4.65                    |            | 2.09                |       | 475,000         |   |
| 3.75         |       |               | 220,000     |         | 3.75                    |            | 2.76                |       | 120,000         |   |
| 3.93         |       |               | 155,000     |         | 3.93                    |            | 2.84                |       | 155,000         |   |
| 4.01         |       |               | 214,000     |         | 4.01                    |            | 3.16                |       | 214,000         |   |
| 5.01         |       |               | 5,000       |         | 5.01                    |            | 3.22                |       | 5,000           |   |
| 5.01         |       |               | 175,000     |         | 5.01                    |            | 4.20                |       | 175,000         |   |
| 5.01         |       |               | 30,000      |         | 5.01                    |            | 4.41                |       | 10,000          |   |
| 5.01         |       |               | 100,000     |         | 5.01                    |            | 3.71                |       | 100,000         |   |
| 5.01         |       |               | 200,000     |         | 5.01                    |            | 4.33                |       | —          |   |
| Subtotal     |       | 2,194,000          |        | $            | 3.70                    |            |                |       | 1,874,000       |   |
|              |            |                    |             |              |                         |                 |                     |            |                 |  |  |  |

 

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***NOTE 5 — STOCK OPTIONS(continued):***

During January2005, the Company issued 214,000 stock options to an individual as compensationfor the  performance of marketingservices. The options have an exercise price of $4.01 and vested 25% at thetime of issuance, 25% in 60 days thereafter and the remaining balance onMay 28, 2005.

During February2005, the Company issued 205,000 stock options to directors and employees.  The options have an exercise price of $3.93and vested immediately.  The optionsexpire five years from issuance.

During June 2005,the Company issued 25,000 stock options to an individual as compensation forthe performance of consulting services. The options have an exercise price of $5.70 and vested immediately.  These options expire five years fromissuance.

During June 2005,the Company issued 25,000 stock options to an individual as compensation forthe performance of consulting services. The options had an exercise price of $5.99 per share, representing theshare price at the close of trading on June 6, 2005, and vested 40% at thetime of  grant (June 6, 2005), and20% each on June 6 of 2006, 2007, and 2008. The Company has a policy of re-pricing all incentive stock options asmarket conditions allow.  As a result,the above stock option grants on June 6, 2005 were cancelled and replacedby the same number of stock options at an exercise price of $4.92 per sharerepresenting the stock price as of the close of trading on September 7,2005.  During September 2006, theremaining options outstanding were forfeited.

During December2005, the Company issued 100,000 stock options to an officer.  The options had an exercise price of $6.34per share, representing the share price at the close of trading onDecember 13, 2005, and vested 50% at the time of issuance(December 13, 2005), and 50% on December 13, 2006.  During October 2006, the options werecancelled and replaced by the same number of stock options at an exercise priceof $5.01 per share representing the stock price as of the close of trading onOctober 3, 2006.

During June 2006,the Company issued 170,000 stock options to officers, directors, and employeesand 5,000 stock options to an individual as compensation for the performance ofconsulting services.  The options had anexercise price of $6.20 and vested immediately. The options expire five years from issuance.  During October 2006, the options werecancelled and replaced by the same number of stock options at an exercise priceof $5.01 per share representing the stock price as of the close of trading onOctober 3, 2006.

During July andSeptember 2006, the Company issued 200,000 stock options to directors and30,000 to our new Project Engineer for the Montanore Project.  The options had exercise prices of $6.42 and$6.21, respectively.  The options issuedto the directors vest over a two year period, 20,000 on July 9, 2007 and 20,000on July 9, 2008 for each director.  Forthe options issued to the new employee, 10,000 vested immediately, while theremaining 20,000 vest over a two year period, 10,000 on September 20, 2007 and10,000 on September 20, 2008. Fair value of the options is calculated using theBlack-Scholes option-pricing model and is recognized as the options vest.  During October 2006, the options werecancelled and replaced by the same number of stock options at an exercise priceof $5.01 per share representing the stock price as of the close of trading onOctober 3, 2006.

Optionsoutstanding at March 31, 2007, have a remaining contractual life ofapproximately three years.

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***NOTE6 — CONCENTRATION OF CREDIT RISK:***

The Companymaintains its cash and cash equivalents in one financial institution.  Balances are insured by the Federal DepositInsurance Corporation up to $100,000 per institution.

***NOTE7 — DEFERRED INCOME TAX:***

At March 31, 2007, and December 31, 2006, theCompany had deferred tax assets that were fully reserved by valuationallowances.  Following are the componentsof such assets and allowances:

|                                    | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                         | ** ** | **2007**           | ** ** | **2006**              | ** ** |
| Deferred tax  assets arising from: |       |               |       |                  |       |
| Net operating loss carryforwards   |       | $                  | 2,044,000  |                  | $          | 1,770,000 |   |
| Stock option compensation          |       | 610,000            |       | 610,000               |       |
| Accrued severance compensation     |       | 0                  |       | 0                     |       |
|                               |       | 2,654,000          |       | 2,380,000             |       |
| Less valuation allowance           |       | 2,654,000          |       | 2,380,000             |       |
| Net deferred tax  assets           |       | $                  | —     |                  | $          | — |   |

 

For the periods presented, the effective income tax rate differed fromthe expected rate because of the effects of annual changes in the deferred taxasset valuation allowance.  Changes inthe deferred tax asset valuation allowance for the years ended March 31, 2007and December 31, 2006 relate only to corresponding changes in deferred taxassets for those periods.

At March 31, 2007, the Company had federal tax-basis net operatingloss carryforwards totaling approximately $13,600,000 which will expire invarious amounts from 2008 through 2027.

***NOTE8 — COMMITMENTS:***

On August 11, 2005, Mines Management was named as a co-defendant in alawsuit filed by Montana Reserves Company (“MRC”) in the Superior Court of theState of Washington in Spokane County, Washington.  Named as co-defendants are Noranda Minerals,Normin Corp., Mines Management and Newhi, Inc. The action seeks damages in connection with the conveyance of theMontanore property from Noranda to Newhi, and challenges the computation of anet proceeds royalty payable to MRC pursuant to a Royalty Agreement betweenNoranda and MRC in respect to the Montanore property.  Management does not believe that the outcomeof this lawsuit will have a material adverse effect.

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***NOTE9 — BUSINESS COMBINATION:***

On May 31, 2006, Noranda Finance Corporation and Newhi, Inc. executed astock transfer agreement by which all issued and outstanding shares of capitalstock for both Noranda Minerals Corporation and Normin Corporation have beentransferred to Newhi, Inc.  NorandaMinerals Corporation and Normin Corporation are Delaware corporationsregistered to do business in Montana.  Atthe same time, Newhi submitted a $30,000 cash bond to the Montana Department ofEnvironmental Quality (DEQ) to replace Noranda’s previous bond.  Subsequently, the official names of thecompanies where changed to Montanore Mineral Corporation and MontminCorporation, respectively.  The existingMontana State Hard Rock Permit #00150 and MPDES permit MT-00320279 stayed inplace with Montanore Mineral Corporation, formerly known as Noranda MineralsCorporation, which is now owned by Newhi, Inc., a wholly-owned subsidiary ofthe Company.

***NOTE10 — SUBSEQUENT EVENT:***

On April 20, 2007 the Company completed a public offering of 6,000,000units at a price of $5.00 per unit, resulting in gross proceeds of $30,000,000($28,200,000 net proceeds).  Each unit iscomprised of one share of common stock and one-half of one common stockpurchase warrant, with each full warrant being exercisable for five years topurchase one share of common stock at an exercise price of $5.75 per share.

The underwriters were granted an over-allotment option, exercisable fora period of 30 days following the closing, to acquire up to an additional900,000 units.

On May 7, 2007, the Company received notice that the underwriters hadelected to exercise the over-allotment option for 836,600 units.  The total offering is therefore 6,836,600units for gross proceeds to the Company of $34,183,000, or $32,132,020 in netproceeds to the Company, after deducting underwriting commissions but beforededucting offering expenses.  The sharesof common stock issuable in connection with the exercise of the over-allotmentare not included in the number of shares outstanding as reported in thisQuarterly Report on Form 10-Q.

 

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**Item2:****          Management’sDiscussion and Analysis of Financial Condition and Results of Operations**

On April 20, 2007, MinesManagement, Inc. (“MMI” or the “Company”) completed a US$30,000,000 publicoffering at $5.00 per unit in which 6,000,000 units were sold, realizingUS$28,200,000 net proceeds to the Company after deducting underwritingcommissions but before deducting offering expenses.  As a result, the Company has sufficient fundson hand for the first three phases of its planned advanced exploration and delineation program that it expectsto undertake at the Montanore project over the next two years.  The Montanore project continues to be theCompany’s main focus and, in addition to the planned delineation drillingprogram, the Company is continuing its repermitting efforts with applicablefederal and state agencies and its optimization review of the Project.

**Overview**

Inthe first quarter of 2007, the Company

·                       Completed the $30 million public offering described above.

·                       Maintained strong cash and investment position with $3.5 million on handat March 31, 2007.

·                       Continued adding infrastructure at the Libby adit site.

·                       Completed a water quality pilot plant test and analysis in the Libbyadit.

·                       Continued work with state and federal agencies to provide technicalinformation in support of the preparation of the draft of the environmentalimpact statement.

·                       Finished a detail schedule and budget for the next two years for theMontanore project.

The Company has initiated itsplanned two-year advanced exploration and delineation drilling program at theMontanore Project.  We expect to dewaterand rehabilitate the Libby adit, and then advance the adit approximately 3,000feet toward the middle of the deposit. We plan an additional 10,000 feet of development drifting to providedrill access to different portions of the deposit, construction of drillstations, and diamond core drilling of approximately 50 holes totalingapproximately 45,000 feet. The objectives of our advanced exploration anddelineation program are to:

·                       Expand theknown higher grade intercepts of the Montanore deposit;

·                       Developadditional information about the deposit;

·                       Furtherassess and define the mineralized zone; and

·                       Provideadditional geotechnical, hydrological, and other data.

We expect that results of thedrilling program, if successful, would provide data to support the completionof a bankable feasibility study.

The net cash expenditures foroperating activities for the quarter ending March 31, 2007 was $1.7million.  The Company believes that therecently completed financing, raising $28.2 million, net of commissions butbefore expenses, provides sufficient working capital for rehabilitation of theLibby adit and commencement of the evaluation drilling program over the nexttwo years.  In order to complete theplanned program, the Company would need an additional $10 million in externalfinancing.

**Permittingand Environmental**

During the first quarter of2007, MMI continued to address technical questions and comments generated bythe U.S. Forest Service and the Montana Department of Environment Quality(MDEQ) as they prepare the draft environmental impact statement (EIS) relatingto the Montanore Project.  In response,MMI submitted final technical information for the proposed tailings dam designand the transmission line and additional technical information regarding roaduse, mitigation of impact on grizzly bear and grizzly bear habitat and watermanagement.

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The collection of the requestedinformation culminated in the submission by MMI in February 2007 of a revisedproject description for the EIS incorporating all technical comments generatedby the agencies to that point.

Our third-party EIS contractorcontinues to work on alternative analyses of the environmental impacts of theProject.

**Geology**

In the first quarter of 2007,MMI continued work on the geologic model of the Montanore deposit, includingdigitally defining shapes that represent bedding planes and rock types. Thisgeologic model will be enhanced with the results of the planned delineationdrilling program, with the goal of better defining the predictability of thedeposit ore grades and of the ore and mineralized zones.

During the first quarter of2007, MMI also identified potential geology staff for the Project with an emphasison employing individuals to work on the upcoming delineation drilling program.

**Engineering**

The primary engineering focusduring the first quarter of 2007 was the activity associated with installinginfrastructure at the Libby adit site in preparation for the commencement ofdelineation drilling.

Montanore Project optimizationopportunities continued to be reviewed and developed by the engineering staff.

**AdvancedExploration and Delineation Drilling Program**

In July 2006, MMI initiatedsite preparation for the delineation drilling program planned at the Libbyadit.  These efforts continued in thefirst quarter of 2007, during which time MMI completed construction of theshop, office, and rehabilitation of the portal and generators.  Ventilation fans and other equipment wereinstalled in the Libby adit site.

Following completion of thepilot scale tests of the water treatment method in 2007, MMI prepared a bidpackage that should be submitted in the second quarter of 2007, with deliveryand commencement of operation of the water treatment plant anticipated to occurlate in the second quarter and early third quarter of 2007.

Also in the first quarter of2007, MMI placed orders for underground equipment including a roof bolter,scissor deck, underground loader, and underground trucks, which are expected tobegin arriving in May or June of 2007, with deliveries continuing throughoutthe year.

MMI currently has fouremployees at the adit site and plans to hire four additional employees startingin the second quarter of 2007.

**Financialand Operating Results**

Mines Management is anexploration stage company with a large silver/copper project, the MontanoreProject, located in northwest Montana. The Company continues to expense all of its expenditures and has norevenues from mining operations. Financial results of operations include primarily interest income,general and administrative expenses, permitting and engineering expenses, andother miscellaneous.

**QuarterEnded March 31, 2007**

The Company reported a net lossfor the quarter ended March 31, 2007 of $1.8 million or $0.14 per sharecompared to $1.1 million loss or $0.08 per share for the quarter ended March31, 2006.  The $0.7 million increase innet loss was attributed to increased expenditures for the first quarter 2007compared to first quarter 2006 resulting from increased activity for theMontanore Project including permitting, technical studies, and preparation forthe Libby adit rehabilitation and delineation drilling program, and corporatelegal, accounting, and administrative expenses relating to the public offeringcompleted on April 20, 2007.

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**Liquidity**

Forthe quarter ended March 31, 2007, the net cash used for operating activitieswas $1.7 million, which largely consisted of permitting, engineering and sitepreparation expenses for the Libby adit rehabilitation and delineation drillingprogram. The net cash provided by investing activities for the quarter was $1.6million from the sale of certificates of deposit. The net decrease in cash onhand at the end of the first quarter 2007 versus year end 2006 was $0.1million.

The Company anticipates spending approximately $15million from cash and investments on hand for the final three quarters of 2007for activities related to the Libby adit rehabilitation and delineationdrilling program.

**ForwardLooking Statements**

Some information contained inor incorporated by reference into this report may contain forward lookingstatements.  These statements includecomments regarding Montanore Project permitting, the commencement andcompletion of activities related to the planned rehabilitation of the Libbyadit and delineation drilling program, the hiring of additional staff, and themarkets for silver and copper.  The useof any of the words “development”, “anticipate”, “continues”, “estimate”, “expect”,“may”, “project”, “should”, “believe”, and similar expressions are intended toidentify uncertainties.  We believe theexpectations reflected in those forward looking statements are reasonable.  However, we cannot assure that theexpectations will prove to be correct. Actual results could differ materially from those anticipated in theseforward looking statements as a result of the factors set forth below and otherfactors set forth and incorporated by reference into this report:

·                  Worldwideeconomic and political events affecting the supply of and demand for silver andcopper

·                  Volatility inthe market price for silver and copper

·                  Financial marketconditions and the availability of financing on acceptable terms

·                  Uncertaintiesassociated with developing new mines

·                  Variations inore grade and other characteristics affecting mining, crushing, milling andsmelting and mineral recoveries

·                  Geological,technical, permitting, mining and processing problems

·                  Theavailability, terms, conditions and timing of required governmental permits andapprovals

·                  Uncertaintyregarding future changes in applicable law or implementation of existing law

·                  The availabilityof experienced employees

·                  The factorsdiscussed under “Risk Factors” in our Form 10-K, as amended, for the periodending December 31, 2006.

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**Item 3.    Quantitative and Qualitative Disclosures About Market Risk andHedging Activities**

Allof our cash balances are held in U.S. dollars and our long term investmentcertificates of deposit  are denominatedin U.S. dollars in local and national banking institutions.  We manage the timing of cash required forreview of the Montanore deposit permitting, and engineering of the MontanoreProject and for general corporate purposes utilizing our money market accountand invest funds not immediately required in investments, currently incertificates of deposit with varying maturities and fixed early retirement costs of three monthsinterest.  Our policy is to invest onlyin government and corporate grade securities rated “investment grade” orbetter.

Themarket prices of base and precious metals such as silver and copper fluctuatewidely and are affected by numerous factors beyond the control of any miningcompany.  These factors includedexpectations with regard to the rate of inflation, the exchange rates of the dollar and othercurrencies, interest rates, global or regional political, economic or bankingcrises, and a number of other factors. If the market price of silver or copper should decrease, the value ofthe Company’s Montanore Project could decline and the Company might not be ableto recover its investment in that project. Any determination to develop or construct a mine would be made longbefore the first revenues from production would be received. Price fluctuationsbetween the time that such decisions are made and the commencement ofproduction could affect the economics of the mine.

**Item 4.    Controls and Procedures**

Glenn M. Dobbs, MMI’s Presidentand CEO, and James H. Moore, MMI’s Chief Financial Officer and Treasurer, haveevaluated MMI’s disclosure controls and procedures as of March 31, 2007.  Based upon this evaluation, the ChiefExecutive Officer and Chief Financial Officer concluded that MMI’s disclosurecontrols and procedures are designed and were effective as of March 31, 2007 togive reasonable assurances that the information required to be disclosed in thereports that MMI files or submits under the Exchange Act of 1934, as amended,is recorded, processed, summarized and reported, within the time periodsspecified in the rules and forms of the Securities and Exchange Commission, andthat such information is also accumulated and communicated to MMI’s management,including its Chief Executive Officer and Chief Financial Officer.

There were no changes in MMI’sinternal controls or, to the knowledge of the management of MMI, any otherchanges that materially affect, or are reasonably likely to materially affect,MMI’s internal control over financial reporting.

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**PART II: OTHERINFORMATION**

**Item1.    Legal Proceedings**

On August 11, 2005, MinesManagement was named as a co-defendant in a lawsuit filed by Montana ReservesCompany (“MRC”) in the Superior Court in Spokane County Washington.  Named as co-defendants are Noranda Minerals,Normin Corp., Mines Management and Newhi, Inc.  Theaction seeks damages in connection with the conveyance of the Montanoreproperty from Noranda to Newhi, and challenges the computation of a netproceeds royalty payable to MRCpursuant to a Royalty Agreement between Noranda and MRC in respect to theMontanore property.  Managementdoes not believe that the outcome of this lawsuit will have a material adverseeffect on Mines Management’s business or results of operations.

**Item 1a.**                    Risk Factors

There are no material changesfrom the risk factors previously disclosed in the Company’s Annual Report onForm 10-K, as amended, for the year ending December 31, 2006.

**Item 2.    UnregisteredSales of Equity Securities and Use of Proceeds**

None

**Item3.    Defaults Upon Senior Securities**

None

**Item4.    Submission of Matters to a Vote ofSecurity Holders**

None

**Item5.    Other Information**

None

**Item 6.    Exhibits**
| (a)    |   | Exhibits: |   |                                                                                                           |   |
|--------|--------|-----------|--------|----------------------------------------------------------------------------------------------------------------|--------|
|   |   | 31.1      |   | Certification of  Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act                    |   |
|   |   | 31.2      |   | Certification of  Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act                    |   |
|   |   | 32.1      |   | Certification of  Chief Executive Officer pursuant to 18 U.S.C., 1350 (Section 906 of the  Sarbanes-Oxley Act) |   |
|   |   | 32.2      |   | Certification of Chief  Financial Officer pursuant to 18 U.S.C., 1350 (Section 906 of the  Sarbanes-Oxley Act) |   |

 

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**SIGNATURES**

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on behalf of the undersigned thereunto dulyauthorized.
| Date: May 10, 2007 | By:    | /s/ Glenn M. Dobbs                    |
|--------------------|--------|---------------------------------------|
|               |   | Glenn M. Dobbs                        |
|               |   | President and Chief Executive Officer |
|               |   |
|               |   |
| Date: May 10, 2007 | By:    | /s/ James H. Moore                    |
|               |   | James H. Moore                        |
|               |   | Chief Financial Officer               |

 

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