UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-QSB



[ X ]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934



For the quarterly period ended September 30, 2004



OR



[    ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934



For the transition period from  to





Commission file number 000-29786



MINES MANAGEMENT, INC.





Idaho

91-0538859



(State of other jurisdiction of incorporation

(I.R.S. Employer Identification No.)

or organization)



905 West Riverside Avenue, Suite 311

Spokane, WA

99201



(Address of principal executive offices)

(Zip Code)



(509) 838-6050



(Issuer's telephone number, including area code)



Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for at least the past 90 days.

Yes    [X]     No



State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. 10,577,840 shares of Common Stock outstanding as of September 30, 2004.



Transitional Small Business Disclosure Format (check one);

Yes          No     [X]









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Mines Management, Inc.



Index





Part 1 - Financial Information





Item 1. Financial Statements (unaudited)



*

Consolidated Balance Sheets-September 30 , 2004 and December 31, 2003

*

Consolidated Income Statements-Nine Months Ended September 30,  2004 and 2003

*

Consolidated Statement of Cash Flows-Nine Months Ended September 30, 2004 and 2003

*

Consolidated Statements of Stockholders Equity-Nine Months Ended September 30, 2004

*

Notes to Consolidated Financial Statements





Item 2.  Managements Discussion and Analysis of Financial Conditions or Plan

of Operations



Item 3.  Controls and Procedures



Part 2 - Other Information



Item 1.  Legal Proceedings



Item  2.  Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities



Item  5.  Other Information



Item 6.   Exhibits



















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Mines Management, Inc.



Part 1  Financial Information-



Item 1.  Financial Statements



|Mines Management, Inc. and Subsidiary |                               |              |                     
|------------------------------------- | ----------------------------- | ------------ | --------------------
|                                      |                               |              |                     
|Consolidated Balance Sheets           |                               |              |                     
|                                      |                               |              |                     
|                                      |                               |              |                     
|                                      |                               |              |                     
|                                      |                               |              |                     
|Assets                                |                               |              |                     
|                                      |                               |              |                     
|CURRENT ASSETS:                       |                               |              |                     
|                                      | Cash and cash equivalents     | $  2,689,572 |                     
|                                      | Interest receivable           | 11,565       |                     
|                                      | Prepaid expenses and deposits | 43,779       |                     
|                                      |                               |              | Total current assets
|                                      |                               |              |                     
|MINERAL PROPERTIES                    | 504,492                       |              | 504,492             
|                                      |                               |              |                     
|PROPERTY AND EQUIPMENT:               |                               |              |                     
|                                      | Mine buildings                | 12,926       |                     
|                                      | Equipment                     |              | 44,098              
|                                      | Office equipment              | 56,211       |                     
|                                      |                               |              |                     
|                                      | Less accumulated depreciation | 75,085       |                     
|                                      |                               |              |                     
|                                      |                               |              |                     
|INVESTMENTS:                          |                               |              |                     
|                                      | Certificates of deposit       | 4,035,760    |                     
|                                      | Available-for-sale securities | 28,993       |                     
|                                      |                               |              |                     
|                                      |                               |              |                     
|                                      |                               |              |                     
|                                      |                               |              |                     
|                                      |                               |              |                     



See accompanying notes to consolidated financial statements.

---

|Mines Management, Inc. and Subsidiary             |                                              |                          |             |               |                   
|------------------------------------------------- | -------------------------------------------- | ------------------------ | ----------- | ------------- | ------------------
|                                                  |                                              |                          |             |               |                   
|Consolidated Statements of Operations (Unaudited) |                                              |                          |             |              
|                                                  |                                              |                          |             |               |                   
|                                                  |                                              |                          |             |               |                   
|                                                  |                                              |                          |             |               | Three Months Ended
|                                                  |                                              |                          |             |               | September 30,     
|                                                  |                                              |                          |             |               | 2004              
|                                                  |                                              |                          |             |               |                   
|REVENUE:                                          |                                              |                          |             |               |                   
|                                                  | Royalties                                    | $          575           |             | $    2,446    |                   
|                                                  |                                              |                          |             |               |                   
|OPERATING EXPENSES:                               |                                              |                          |             |               |                   
|                                                  | Depreciation                                 | 2,674                    |             | 550           |                   
|                                                  | Administrative                               | 80,263                   |             | 42,550        |                   
|                                                  | Legal, accounting, and consulting            | 64,295                   |             | -             |                   
|                                                  | Miscellaneous                                | 606                      |             | 58            |                   
|                                                  | Oil and gas operating                        | 3,915                    |             | 505           |                   
|                                                  | Rent and office                              | 15,671                   |             | 6,529         |                   
|                                                  | Compensation, directors, officers, and staff | 79,691                   |             | 57,186        |                   
|                                                  | Taxes and licenses                           | 6,485                    |             | 5,332         |                   
|                                                  | Telephone                                    | 928                      |             | 1,004         |                   
|                                                  | Fees, filing, and licenses                   | 62,925                   |             | 7,695         |                   
|                                                  | Commissions                                  | -                        |             | 41,250        |                   
|                                                  | Stock option expense                         | 164,212                  |             | 291,400       |                   
|                                                  |                                              | Total operating expenses | 481,665     |               | 454,059           
|                                                  |                                              |                          |             |               |                   
|LOSS FROM OPERATIONS                              | (481,090)                                    |                          | (451,613)   |               | (2,329,656)       
|                                                  |                                              |                          |             |               |                   
|OTHER INCOME:                                     |                                              |                          |             |               |                   
|                                                  | Interest                                     |                          | 30,528      |               | -                 
|                                                  | Miscellaneous                                | -                        |             | -             |                   
|                                                  |                                              |                          |             |               | 30,528            
|                                                  |                                              |                          |             |               |                   
|NET LOSS                                          |                                              | $   (450,562)            |             | $   (451,613) |                   
|                                                  |                                              |                          |             |               |                   
|NET LOSS PER SHARE                                | $       (0.04)                               |                          | $    (0.06) |               | $     (0.23)      
|                                                  |                                              |                          |             |               |                   
|WEIGHTED-AVERAGE COMMON                           |                                              |                          |             |               |                   
|                                                  | SHARES OUTSTANDING                           | 10,577,840               |             | 6,990,082     |                   
|                                                  |                                              |                          |             |               |                   



See accompanying notes to consolidated financial statements.

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|Mines Management, Inc. and Subsidiary                                                           |                                         |                                   |              |        |             |           |              |   |                |  
|----------------------------------------------------------------------------------------------- | --------------------------------------- | --------------------------------- | ------------ | ------ | ----------- | --------- | ------------ | - | -------------- | -
|                                                                                                |                                         |                                   |              |        |             |           |              |   |                |  
|Consolidated Statement of Stockholders Equity (Unaudited)
Nine Months Ended September 30, 2004
|                                                                                                |                                         |                                   |              |        |             |           |              |   |                |  
|                                                                                                |                                         |                                   |              |        |             |           |              |   |                |  
|                                                                                                |                                         |                                   |              |        |             |           | Additional   |   | Retained       |  
|                                                                                                |                                         |                                   | Common Stock |        | Paid-in     |           | Earnings     |   | Comprehensive  |  
|                                                                                                |                                         |                                   | Shares       |        | Amount      |           | Capital      |   | (Deficit)      |  
|BALANCES, DECEMBER 31, 2003                                                                     | 8,724,708                               |                                   | $  87,247    |        | $4,186,497  |           | $(2,615,760) |   | $      43,095  |  
|                                                                                                |                                         |                                   |              |        |             |           |              |   |                |  
|                                                                                                | Common stock issued for cash            | 1,683,639                         |              | 16,836 |             | 6,368,174 |              | - |                | -
|                                                                                                | Exercise of stock options               | 168,685                           |              | 1,687  |             | (1,687)   |              | - |                | -
|                                                                                                | Issuance of stock options               | -                                 |              | -      |             | 1,397,291 |              | - |                | -
|                                                                                                | Issuance of stock for Heidelberg shares | 808                               |              | 8      |             | (8)       |              | - |                | -
|                                                                                                | Comprehensive loss:                     |                                   |              |        |             |           |              |   |                |  
|                                                                                                |                                         | Adjustment to net unrealized gain |              |        |             |           |              |   |                |  
|                                                                                                |                                         | on marketable securities          | -            |        | -           |           | -            |   | -              |  
|                                                                                                |                                         | Net loss                          | -            |        | -           |           | -            |   | (2,251,849)    |  
|Comprehensive loss                                                                              |                                         |                                   |              |        |             |           |              |   |                |  
|                                                                                                |                                         |                                   |              |        |             |           |              |   |                |  
|BALANCES, SEPTEMBER 30, 2004                                                                    | 10,577,840                              |                                   | $  105,778   |        | $11,950,267 |           | $(4,867,609) |   | $       17,828 |  
|                                                                                                |                                         |                                   |              |        |             |           |              |   |                |  



See accompanying notes to consolidated financial statements.

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|Mines Management, Inc. and Subsidiary             |                                               |                               |                                    |                               |                                       |              
|------------------------------------------------- | --------------------------------------------- | ----------------------------- | ---------------------------------- | ----------------------------- | ------------------------------------- | -------------
|Consolidated Statements of Cash Flows (Unaudited) |                                               |                               |                                    |                              
|                                                  |                                               |                               |                                    |                               |                                       |              
|                                                  |                                               |                               |                                    |                               |                                       |              
|                                                  |                                               |                               |                                    |                               |                                       |              
|Increase (Decrease) in Cash and Cash Equivalents  |                                               |                               |                                    |                               |                                      
|CASH FLOWS FROM OPERATING ACTIVITIES:             |                                               |                               |                                    |                               |                                       |              
|                                                  | Net loss                                      |                               |                                    | $   (450,562)                 |                                       | $   (451,613)
|                                                  | Adjustments to reconcile net loss to net cash |                               |                                    |                               |                                       |              
|                                                  |                                               | used in operating activities: |                                    |                               |                                       |              
|                                                  |                                               |                               | Issuance of stock options          | 164,212                       |                                       | 291,400      
|                                                  |                                               |                               | Depreciation                       | 2,675                         |                                       | 550          
|                                                  |                                               |                               | Changes in assets and liabilities: |                               |                                       |              
|                                                  |                                               |                               |                                    | Interest receivable           | 7,735                                 |              
|                                                  |                                               |                               |                                    | Accounts receivable           | -                                     |              
|                                                  |                                               |                               |                                    | Prepaid expenses and deposits | 23,889                                |              
|                                                  |                                               |                               |                                    | Accounts payable              | 1,154                                 |              
|                                                  |                                               |                               |                                    | Severance payable             | (10,000)                              |              
|                                                  |                                               |                               |                                    | Payroll taxes payable         | 4,891                                 |              
|                                                  |                                               |                               |                                    |                               | Net cash used in operating activities | (256,006)    
|CASH FLOWS FROM INVESTING ACTIVITIES:             |                                               |                               |                                    |                               |                                       |              
|                                                  | Purchase of office equipment                  | -                             |                                    | (5,900)                       |                                       | (21,070)     
|                                                  | Purchase of certificates of deposit           | (3,022,303)                   |                                    | (1,000,000)                   |                                       | (3,035,760)  
|                                                  | Increase in mineral properties                | -                             |                                    | (37,786)                      |                                       | -            
|                                                  |                                               |                               |                                    |                               | Net cash used in investing activities | (3,022,303)  
|CASH FLOWS FROM FINANCING ACTIVITIES:             |                                               |                               |                                    |                               |                                       |              
|                                                  | Proceeds from sales of common stock           | 5,455                         |                                    | 582,250                       |                                       | 6,385,010    
|NET INCREASE (DECREASE) IN CASH                   |                                               |                               |                                    |                               |                                       |              
|                                                  | AND CASH EQUIVALENTS                          | (3,272,854)                   |                                    | (643,743)                     |                                       | 2,406,935    
|CASH AND CASH EQUIVALENTS,                        |                                               |                               |                                    |                               |                                       |              
|                                                  | BEGINNING OF PERIOD                           | 5,962,426                     |                                    | 766,825                       |                                       | 282,637      
|CASH AND CASH EQUIVALENTS,                        |                                               |                               |                                    |                               |                                       |              
|                                                  | END OF PERIOD                                 | $  2,689,572                  |                                    | $    123,082                  |                                       | $  2,689,572 

See accompanying notes to consolidated financial statements.

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Mines Management Inc.

Third Quarter 2004 Financial Reports



Notes to Unaudited Interim Consolidated Financial Statements



1.

General



In the opinion of management, the accompanying unaudited interim consolidated balance sheet, consolidated income statement, and consolidated cash flows contain all adjustments, consisting only of normal recurring accruals, necessary to present fairly, in all material respects, the financial position of Mines Management, Inc. as of September 30, 2004, and the results of its operations and its cash flows for the three month periods ended September 30, 2004 and 2003; and the nine month periods ending September 30, 2004 and 2003.



These consolidated financial statements should be read in conjunction with the Companys audited consolidated financial statements and related notes included in the Companys annual report on form 10-KSBA (the 2003 10-KSBA) to shareholders for the year ended December 31, 2003.



The financial statements are prepared using the same accounting policies and methods of application as those disclosed in the notes to the Companys audited financial statements for the year ended December 31, 2003.  These statements are prepared in accordance with accounting principles generally accepted in the United States.  All amounts are stated in U.S. dollars.



2.

Stockholders Equity



In 2003, the Company sold 1,152,007 common shares for $1,267,207 ($1.10 per share).  In connection with the stock sales, the Company granted warrants to purchase up to 1,152,007 common shares at $1.20 per share through two years from the date of issue.  During 2004, warrants for 373,638 shares have been exercised.



At September 30, 2004, warrants to purchase 645,413 common shares at $1.20 per share were outstanding.



In 2004, the company sold 1,285,000 shares for $6,425,000 ($5.00 per share).  In connection with the stock sales, the Company granted warrants to purchase up to 511,000 common stock shares at $7.25 per share through five years from the initial exercise date. To date no warrants have been exercised.  The Company paid a cash Finders Fee of seven percent (7%) of the gross offering funds received in the Offering.  The Finder also, received 3% warrant compensation.  The warrant calculation translates to 30,000 warrants for each $1 million raised.









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3.

Investments



The company invested in a Washington Trust Money Market at 1.39% per year, the current balance at September 30, 2004 of $2,628,100



The Company owns four $103,364 certificates of deposit and six $103,717 certificates of deposit for a total of $1,035,758. These investments mature in 2008 and earn at rates from 3.3% to 3.64%.  The Company purchased ten $200,000 certificates of deposit and ten $100,000 certificates of deposit for a total of $3,000,000.  These investments mature in 2009 and earn at rates of 4.21 and 4.0 respectively.  All of these instruments can be liquidated on demand to the bank(s) at a cost of ninety days interest.



4.

Stock Options



The Board of Directors granted an option to purchase 650,000 common shares at an exercise price of $6.42 per share representing the share price at the close of trading on February 10, 2004 under the 2003 Stock Option Plan.  The company has a policy of re-pricing all incentive stock options as market conditions allow.  As a result the above stock option grants on February 10, 2004 were cancelled and replaced by the same number of stock options at an exercise price of $4.65 per share representing the stock price as of the close of trading on May 3, 2004. This was passed by Unanimous Written Consent by the Board of Directors on May 3, 2004.  The Board of Directors granted options to purchase 30,000 common shares at an exercise price of $3.95 on June 22, 2004, 25,000 were granted to James H. Moore the Chief Financial Officer and 5000 granted to a senior administrative person.  On August 30, 2004, the Board of Directors granted Eric Klepfer, Vice President of Operations, an option to purchase 250,000 shares  at the market ending price on that day of $5.71.  The Options vest, in whole or in part, according to the following schedule:



100,000 on the date of grant

25,000 upon filing of Plan of Operations with USFS

25,000 six months after filing Plan of Operations

100,000 upon receipt of Record of Decision from USFS



The fair market value of each grant is estimated at the grant date using the Black-Scholes option-pricing model with the following weighted average assumptions:  dividend rate of 0%; price volatility of 72.5 %; risk free interest rate of 1.27 %; and expected life of 1 year.



---



Item 2.  Management Discussion and Analysis of Financial Conditions or Plan of Operation



Managements discussion and analysis (MD&A) for the third quarter focuses on significant factors that affected Mines Management's performance and such factors that may affect its performance in the future.  The MD&A should be read in conjunction with the unaudited  financial statements for the three months and nine months ended September 30, 2004.



Plan of Operations-Third Quarter Highlights

*

Strong cash position-over $6.75 million

*

Submitted Montanore project general description to State and Federal Agencies

*

Initiated engineering firm selection for preliminary Montanore mine planning

*

Investor Relations

*

Financial Results



In the third quarter 2004, Mines Managements cash position remains strong at over $6.75 million.  In August, the company invested $3.0 million from the money market account that was earning 1.37% interest and purchased certificates of deposit yielding from 4.0% to 4.21%.  The net cash consumption during the third quarter was $221,555.  The company has sufficient working capital for the next twenty four months of operations.



Environmental and Permitting



Mines Management has been working closely with the regulatory agencies concerning the re-permitting of the Montanore Project.  The company recently submitted a Project General Description to the State and Federal agencies and met to initiate the re-permitting process.



Mines Management is working with the key agencies on a Memorandum of Understanding that will outline the project tasks, respective responsibilities, and review the proposed schedule for the project.  The company is initiating data collection and specific design assessments necessary to supplement and support the agency review process.  For the agencies to approve the project, the U.S. Forest Service will have to complete a National Environmental Policy Act (NEPA) environmental review and analyses prior to making a decision.



The State of Montana also has a similar review called the Montana Environmental Policy Act (MEPA).  The State and the U.S. Forest will work cooperatively on the environmental review.



---

Mines Management will be completing all the necessary applications, submittals, and support data necessary during the permit review and approval process.  The company intends to submit a Plan of Operations to the U.S. Forest Service and Montana Department of Environmental Quality (MDEQ) initially with the remaining permit applications staged, as appropriate, throughout the permitting process.



The company has the benefit of a substantial data set generated for the project during the 1992 Decision issued by the U.S. Forest Service and MDEQ.



Engineering



Mines Management is currently evaluating mine engineering firms to initiate preliminary mine planning activities for the project.  Their focus will include optimization opportunities, trade-off studies and other similar reviews to enhance current project economics.  These studies will be necessary to support permitting efforts and advancing the project production estimates; and will ultimately include project construction and production schedules, capital and operating costs, and other key information to support the development of the project.



Considerable design work by Noranda Mineral Inc. and U.S. Borax during their project tenure will be used where applicable to streamline the engineering design effort.



Investor Relations



The Investor Relations activities for the third quarter consisted of ongoing market development with both the institutional and retail investor markets.  The company participated in investment conferences during the quarter including the Las Vegas Gold Show and the second annual Silver Summit in Coeur dAlene, Idaho.



Financial Results



Mines Management is a development stage company and as such has no income from mining activities in the immediate future.  The Company reported a net loss for the third quarter ending September 30, 2004 of ($450,562) ($0.04 per share) versus a loss of ($451,613) ($0.06 per share) for the third quarter 2003.  This slight decrease in spending included additional administrative and consultant costs of $102,057 associated with increased activity on the Montanore Project, increased filing fees of $55,230, and an increase in miscellaneous other expenses of $40,628, offset by interest income of $30,528, a decrease in commissions of $41,250 and a lower stock option expense of $127,188.  The year to date loss for the nine months ended September 30, 2004 is $2,251,849 compares to a loss of $1,026,445 for the comparable 2003 nine month period. This increased loss includes expensing stock option grants at the fair market value of $1,397,291 for options granted in 2004, and legal, accounting and consultant fees of $291,772 applicable to the $6,425,000 equity financing completed in the first quarter 2004 and increased expenses for the start of re-permitting for the Montanore Project.





Working capital at September 30, 2004 included cash and short term investments of $6,754,328 an increase from $1,336,897 on December 31, 2003. The improvement in working capital is primarily a result of the common stock financing in the first quarter with gross proceeds of $6,425,000 and additional proceeds from stock sales as a result of warrants being exercised during the year.



The company had a total of 10,577,840 shares of common stock issued as of September 30, 2004.



Item 3. Controls and Procedures



An evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO), of the effectiveness of the design and operation of our disclosures and procedures.  Based on that evaluation, management, concluded that disclosure controls and procedures were effective as of September 30, 2004, ensuring that all material information required to be filled in this quarterly report has been made known to them in a timely fashion.



There has been no change in our internal control over financial reporting during the quarter ended September 30, 2004 that has materially affected , or is reasonably likely to materially affect, our internal control over financial reporting.



Part IIOther Information



Items deleted are not applicable



Item 1.  Legal Proceedings



None



Item 2.  Changes in Securities



Mines Management, Inc. completed a common stock financing in February 2004, from which it has received gross proceeds of $6,425,000. Pursuant to a securities purchase agreement dated February 3, 2004, and subscription agreement dated February 13, 2004, investors purchased 1,285,000 shares of the Companys common stock at a purchase price of $5.00 per share.  The investors also received warrants to purchase 511,000 of common stock at $7.25 per share.



The issuance of such securities was exempt from registration under the Securities Act of 1933, as amended (the Securities Act), pursuant to Section 4(2) thereof.  Pursuant to a registration rights agreement, the Company agreed to undertake to file a S-3 registration statement with the SEC covering the shares issued to the investors and the warrant shares, if the warrants are exercised.  This registration was effective May 18, 2004.

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Item 5. Other Information



On August 30, 2004 the Board of Directors by unaminous consent approved the hiring of Eric Klepfer as Vice President of Operations.   Mr. Klepfer was granted an option to purchase 250,000 shares @ $5.71/share the market price at the end of that day.

The options vest, 100,000 immediately and the balance prorate based upon achievement of certain permitting milestones.



Item 6.  Exhibits



31.1--Certification required by Rule 13a-14(a) or Rule 15d-14(a). Dobbs

31.2--Certification required by Rule 13a-14(a) or Rule 15d-14(a). Moore

32.1--Certification required by Rule 13a-14(a) or Rule 15d-14(b) and section 906 of the Sarbanes-Oxley Act of 2002,  18 U.S.C. Section 1350, Dobbs

32.2--Certification required by Rule 13a-14(a) or Rule 15d-14(b) and section 906 of the Sarbanes-Oxley Act of 2002,  18 U.S.C. Section 1350, Moore



In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.













Mines Management, Inc.

(Registrant)



Signature

Title

Date



/s/ Glenn M. Dobbs

_____________________

President, Chief Executive Officer and Director   October 29, 2004

Glenn M. Dobbs



/s/ James H. Moore

_____________________

Chief Financial Officer and Treasurer                 October 29, 2004

James H. Moore