Tableof Contents

 

 

 

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,DC 20549**

 

##### **FORM 10-Q**

##### ** **

**x****                            ****QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934**

 

**For the quarterly period ended March 31, 2009**

 

**OR**

 

**o****                               ****TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934**

 

**COMMISSIONFILE NUMBER  000-29786**

 

###### **MINES MANAGEMENT, INC.**

(Exact Name ofRegistrant as Specified in its Charter)

 

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

 

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

 

**(509)838-6050**

(Registrant’sTelephone Number, Including Area Code)

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days.  x Yes o No

 

Indicate by check markwhether the registrant has submitted electronically and posted on its corporateWeb site, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)during the preceding 12 months (or for such shorter period that the registrantwas required to submit and post such files).  Yes o No o

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company. See the definitions of “largeaccelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2of the Exchange Act.

 
| Large accelerated filer o | Accelerated filer x         |
|--------------------------------|----------------------------------|
|                           |                             |
| Non-accelerated filer o   | Smaller reporting company o |

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).  Yes o No x

 

At May 11, 2009,22,864,983 shares of common stock, par value $0.001 per share, were issued andoutstanding.

 

 

##  

----

## Table of Contents

 

## **CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS**

##  

Someinformation contained in or incorporated by reference into this report maycontain forward looking statements, as that term is defined in the PrivateSecurities Litigation Reform Act of 1995. These statements include, among other things, comments regarding furtherexploration and evaluation of the Montanore Project, including plannedrehabilitation and extension of the Libby adit, drilling activities,feasibility determination, engineering studies, environmental and permittingrequirements, process and timing; estimates of mineralized material andmeasured, indicated and inferred resources; financing needs; plannedexpenditures in 2009 and 2010; potential completion of a bankable feasibilitystudy; and the markets for silver and copper. The use of any of the words “development”, “anticipate”, “continues”, “estimate”,“expect”, “may”, “project”, “should”, “believe”, and similar expressions areintended to identify uncertainties.  TheCompany believes the expectations reflected in those forward looking statementsare reasonable.  However, the Companycannot assure that the expectations will prove to be correct.  Actual results could differ materially fromthose anticipated in these forward looking statements as a result of thefactors set forth below and other factors set forth and incorporated byreference into this report:

 

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

 

·                  Volatilityin the market price for silver and copper;

 

·                  Financialmarket conditions and the availability and cost of financing;

 

·                  Uncertaintyregarding whether reserves will be established at Montanore;

 

·                  Uncertaintiesassociated with developing new mines;

 

·                  Variationsin ore 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, and potential opposition to the majority of permits;

 

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

 

·                  Theavailability of experienced employees; and

 

·                  Thefactors discussed under “Risk Factors” in our Form 10-K, for the periodending December 31, 2008.

 

----

Tableof Contents

 

**MINESMANAGEMENT, INC.**

**FORM 10-Q**

**QUARTERENDED March 31, 2009**

** **

**INDEX**

 
| ** **                               | **Page**                                                                                    |
|------------------------------------------|---------------------------------------------------------------------------------------------|
| PART I — FINANCIAL INFORMATION |                                                                                        |
|                                     |                                                                                        |
| ITEM 1.                                  | Financial statements  (unaudited)                                                           | i |
| ITEM 2.                                  | Management’s  Discussion and Analysis of Financial Condition and Results of Operations | 10 |
| ITEM 3.                                  | Quantitative  and Qualitative Disclosures About Market Risk and Hedging Activities          | 12 |
| ITEM 4.                                  | Controls  and Procedures                                                                    | 12 |
|                                     |                                                                                        |   |
| PART II  — OTHER INFORMATION   |                                                                                        |
|                                     |                                                                                        |
| ITEM 1.                                  | Legal  Proceedings                                                                          | 13 |
| ITEM 1A.                                 | Risk Factors                                                                                | 13 |
| ITEM 2.                                  | Unregistered  Sales of Equity Securities and Use of Proceeds                                | 13 |
| ITEM 3.                                  | Defaults  Upon Senior Securities                                                            | 13 |
| ITEM 4.                                  | Submission  of Matters to a Vote of Security Holders                                        | 13 |
| ITEM 5.                                  | Other  Information                                                                          | 13 |
| ITEM 6.                                  | Exhibits                                                                                    | 13 |
|                                     |                                                                                        |   |
| SIGNATURES                               |                                                                                        | 14 |

 

----

Tableof Contents

 

**PART I— FINANCIAL INFORMATION**

** **
| **ITEM  1.            FINANCIAL  STATEMENTS (UNAUDITED)** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------|------------|
| ** **                                                                                                            | ** ** |
| **Contents**                                                                                                          | ** ** |
| ** **                                                                                                            | ** ** |
| ** **                                                                                                            | **Page**   |
|                                                                                                                  |       |
| *FINANCIAL  STATEMENTS:*                                                                                              | * *   |
| * *                                                                                                              | * *   |
| *Condensed consolidated balance sheets*                                                                               | *1*        |
| * *                                                                                                              | * *   |
| *Condensed consolidated statements of  operations*                                                                    | *2*        |
| * *                                                                                                              | * *   |
| *Condensed consolidated statements of cash  flows*                                                                    | *3*        |
| * *                                                                                                              | * *   |
| *Notes to condensed consolidated financial  statements*                                                               | *4-9*      |

 

i

----

Tableof Contents

 

**Mines Management, Inc. andSubsidiaries**

**(An Exploration Stage Company)**

**CONDENSED CONSOLIDATED BALANCE SHEETS(UNAUDITED)**

** **
| ** **                                                                                                     | ** ** | **March 31,  2009** | ** ** | **December 31,  2008** | ** ** |
|----------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| ***Assets***                                                                                                   |       |                     |       |                        |       |
| *CURRENT  ASSETS:*                                                                                             |       |                     |       |                        |       |
| Cash and cash  equivalents                                                                                     |       | $                        | 13,312,777 |                        | $          | 15,448,159 |   |
| Interest  receivable                                                                                           |       | 137,971                  |       | 123,004                     |       |
| Prepaid expenses  and deposits                                                                                 |       | 111,992                  |       | 147,887                     |       |
| Certificates of  deposit                                                                                       |       | 1,420,242                |       | 1,420,242                   |       |
| Restricted  certificate of deposit                                                                             |       | 5,000,000                |       | 5,000,000                   |       |
| Total current  assets                                                                                          |       | 19,982,982               |       | 22,139,292                  |       |
|                                                                                                           |       |                     |       |                        |       |
| *PROPERTY,  PLANT AND EQUIPMENT:*                                                                              |       |                     |       |                        |       |
| Construction in  progress                                                                                      |       | 2,019,790                |       | 1,944,005                   |       |
| Mine buildings  and leasehold improvements                                                                     |       | 836,454                  |       | 836,454                     |       |
| Plant and  equipment                                                                                           |       | 8,075,220                |       | 8,075,220                   |       |
| Office equipment                                                                                               |       | 335,505                  |       | 331,765                     |       |
|                                                                                                           |       | 11,266,969               |       | 11,187,444                  |       |
| Less accumulated  depreciation                                                                                 |       | 1,751,096                |       | 1,473,253                   |       |
|                                                                                                           |       | 9,515,873                |       | 9,714,191                   |       |
| *OTHER  ASSETS:*                                                                                               |       |                     |       |                        |       |
| Available-for-sale  securities                                                                                 |       | 277,555                  |       | 201,782                     |       |
| Reclamation deposits                                                                                           |       | 1,236,846                |       | 1,184,966                   |       |
|                                                                                                           |       | 1,514,401                |       | 1,386,748                   |       |
|                                                                                                           |       | $                        | 31,013,256 |                        | $          | 33,240,231 |   |
| ***Liabilities  and Stockholders’ Equity***                                                               |       |                     |       |                        |       |
| *CURRENT  LIABILITIES:*                                                                                        |       |                     |       |                        |       |
| Accounts payable                                                                                               |       | $                        | 798,969    |                        | $          | 585,965 |   |
| Payroll and  payroll taxes payable                                                                             |       | 34,208                   |       | 33,908                      |       |
| Line of credit                                                                                                 |       | 1,815,231                |       | 1,815,231                   |       |
| Warrant derivatives,  current portion                                                                          |       | 79,695                   |       | —                      |       |
| Total current  liabilities                                                                                     |       | 2,728,103                |       | 2,435,104                   |       |
|                                                                                                           |       |                     |       |                        |       |
| *LONG-TERM  LIABILITIES:*                                                                                      |       |                     |       |                        |       |
| Warrant derivatives                                                                                            |       | 668,903                  |       | —                      |       |
| Asset retirement  obligation                                                                                   |       | 380,752                  |       | 376,233                     |       |
| Total  liabilities                                                                                             |       | 3,777,758                |       | 2,811,337                   |       |
|                                                                                                           |       |                     |       |                        |       |
| *COMMITMENTS  AND CONTINGENCIES*                                                                               |       |                     |       |                        |       |
| * *                                                                                                       |       |                     |       |                        |       |
| *STOCKHOLDERS’  EQUITY:*                                                                                  |       |                     |       |                        |       |
| Preferred stock  — no par value, 10,000,000 shares authorized; -0- shares issued and  outstanding         |       | —                   |       | —                      |       |
| Common stock  —$0.001 par value, 100,000,000 shares authorized; 22,756,848 shares issued  and outstanding |       | 22,757                   |       | 22,757                      |       |
| Additional  paid-in capital                                                                                    |       | 66,720,567               |       | 66,995,956                  |       |
| Accumulated  deficit                                                                                           |       | (1,117,306               | )          | (1,117,306                  | )          |
| Deficit  accumulated during the exploration stage                                                              |       | (36,841,561              | )          | (33,847,781                 | )          |
| Accumulated  other comprehensive loss                                                                          |       | (1,548,959               | )          | (1,624,732                  | )          |
| Total  stockholders’ equity                                                                               |       | 27,235,498               |       | 30,428,894                  |       |
|                                                                                                           |       | $                        | 31,013,256 |                        | $          | 33,240,231 |   |

 

Seeaccompanying notes to condensed consolidated financial statements.

 

1

----

Table of Contents

** **

**MinesManagement, Inc. and Subsidiaries**

**(AnExploration Stage Company)**

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)**

 
| ** **                                                        | ** ** | **Three Months Ended  March 31,** | ** ** | **From Inception of  Exploration Stage  August 12, 2002  Through********March 31,** | ** ** |
|-------------------------------------------------------------------|------------|--------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------|------------|
| ** **                                                        | ** ** | **2009**                                         | ** ** | **2008**                                                                                                          | ** ** | **2009** | ** ** |
| *REVENUE:*                                                        |       |                                             |       |                                                                                                              |       |   |   |
| Royalties                                                         |       | $                                                | 2,093      |                                                                                                              | $          | 3,080 |   | $ | 72,440 |   |
| *OPERATING  EXPENSES:*                                            |       |                                             |       |                                                                                                              |       |   |   |
| General and  administrative                                       |       | 822,091                                          |       | 746,299                                                                                                           |       | 18,470,510 |   |
| Technical services                                                |       | 1,564,780                                        |       | 774,938                                                                                                           |       | 14,108,181 |   |
| Depreciation                                                      |       | 277,843                                          |       | 254,946                                                                                                           |       | 1,739,598 |   |
| Legal,  accounting, and consulting                                |       | 119,470                                          |       | 263,674                                                                                                           |       | 2,492,315 |   |
| Fees, filing,  and licenses                                       |       | 45,863                                           |       | 52,061                                                                                                            |       | 1,867,416 |   |
| Loss from warrant  derivatives                                    |       | 272,217                                          |       | —                                                                                                            |       | 272,217 |   |
| Exploration                                                       |       | —                                           |       | —                                                                                                            |       | 165,176 |   |
| Impairment of mineral properties                                  |       | —                                           |       | —                                                                                                            |       | 504,492 |   |
| Total operating  expenses                                         |       | 3,102,264                                        |       | 2,091,918                                                                                                         |       | 39,619,905 |   |
| *LOSS  FROM OPERATIONS*                                           |       | (3,100,171                                       | )          | (2,088,838                                                                                                        | )          | (39,547,465 | ) |
| *OTHER  INCOME:*                                                  |       |                                             |       |                                                                                                              |       |   |   |
| Interest income                                                   |       | 121,295                                          |       | 283,605                                                                                                           |       | 2,741,334 |   |
| Interest expense                                                  |       | (14,904                                          | )          | (85                                                                                                               | )          | (35,430 | ) |
|                                                              |       | 106,391                                          |       | 283,520                                                                                                           |       | 2,705,904 |   |
| *NET  LOSS*                                                       |       | $                                                | (2,993,780 | )                                                                                                                 | $          | (1,805,318 | ) | $ | (36,841,561 | ) |
| *NET  LOSS PER SHARE (basic and diluted)*                         |       | $                                                | (0.13      | )                                                                                                                 | $          | (0.08 | ) |   |   |
| *WEIGHTED  AVERAGE COMMON SHARES OUTSTANDING (basic and diluted)* |       | 22,756,848                                       |       | 22,415,581                                                                                                        |       |   |   |

 

Seeaccompanying notes to condensed consolidated financial statements.

 

2

----

Tableof Contents

 

** Mines Management, Inc. and Subsidiaries**

**(An Exploration Stage Company)**

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)**

** **
| ** **                                                                         | ** ** | **Three Months Ended  March 31,** | ** ** | **From Inception of  Exploration Stage  August 12, 2002  Through  March 31,** | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------|------------|
| **Increase (Decrease) in Cash and Cash Equivalents** | ** ** | **2009**                                         | ** ** | **2008**                                                                                                    | ** ** | **2009** | ** ** |
| **CASH FLOWS FROM OPERATING ACTIVITIES:**                      | ** ** | ** **                                       | ** ** | ** **                                                                                                  | ** ** | ** ** | ** ** |
| Net loss                                                                           |       | $                                                | (2,993,780 | )                                                                                                           | $          | (1,805,318 | ) | $ | (36,841,561 | ) |
| Adjustments to  reconcile net loss to net cash used in operating activities:       |       |                                             |       |                                                                                                        |       |   |   |
| Stock-based  compensation                                                          |       | 200,992                                          |       | 85,126                                                                                                      |       | 6,941,751 |   |
| Stock received  for services                                                       |       | —                                           |       | —                                                                                                      |       | (11,165 | ) |
| Depreciation                                                                       |       | 277,843                                          |       | 254,946                                                                                                     |       | 1,739,598 |   |
| Accretion of  asset retirement obligation                                          |       | 4,519                                            |       | 18,787                                                                                                      |       | 36,565 |   |
| Loss from  warrant derivatives                                                     |       | 272,217                                          |       | —                                                                                                      |       | 272,217 |   |
| Impairment of  mineral properties                                                  |       | —                                           |       | —                                                                                                      |       | 504,492 |   |
| Changes in  assets and liabilities:                                                |       |                                             |       |                                                                                                        |       |   |   |
| Interest  receivable                                                               |       | (14,967                                          | )          | 31,326                                                                                                      |       | (137,971 | ) |
| Prepaid expenses  and deposits                                                     |       | 35,895                                           |       | 24,379                                                                                                      |       | (172,403 | ) |
| Accounts payable                                                                   |       | 213,004                                          |       | (1,117,682                                                                                                  | )          | 798,805 |   |
| Payroll and  payroll taxes payable                                                 |       | 300                                              |       | (6,123                                                                                                      | )          | 31,028 |   |
| Net cash used in  operating activities                                             |       | (2,003,977                                       | )          | (2,514,559                                                                                                  | )          | (26,838,644 | ) |
| *CASH  FLOWS FROM INVESTING ACTIVITIES:*                                           |       |                                             |       |                                                                                                        |       |   |   |
| Purchase of  property and equipment                                                |       | (3,740                                           | )          | (824,578                                                                                                    | )          | (7,591,288 | ) |
| Proceeds from  disposition of property and equipment                               |       | —                                           |       | 33,154                                                                                                      |       | 35,423 |   |
| Construction in  progress                                                          |       | (75,785                                          | )          | (72,571                                                                                                     | )          | (3,353,582 | ) |
| (Purchase)  maturity of certificates of deposit                                    |       | (51,880                                          | )          | —                                                                                                      |       | (7,596,177 | ) |
| Purchase of  available-for-sale securities                                         |       | —                                           |       | —                                                                                                      |       | (1,815,348 | ) |
| Increase in  mineral properties                                                    |       | —                                           |       | —                                                                                                      |       | (144,312 | ) |
| Net cash used in  investing activities                                             |       | (131,405                                         | )          | (863,995                                                                                                    | )          | (20,465,284 | ) |
| *CASH  FLOWS FROM FINANCING ACTIVITIES:*                                           |       |                                             |       |                                                                                                        |       |   |   |
| Proceeds from  line of credit                                                      |       | —                                           |       | —                                                                                                      |       | 1,815,231 |   |
| Net proceeds  from sale of common stock                                            |       | —                                           |       | 812,000                                                                                                     |       | 58,754,139 |   |
| Net cash  provided by financing activities                                         |       | —                                           |       | 812,000                                                                                                     |       | 60,569,370 |   |
| *NET  INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS*                            |       | (2,135,382                                       | )          | (2,566,554                                                                                                  | )          | 13,265,442 |   |
| *CASH  AND CASH EQUIVALENTS, BEGINNING OF PERIOD*                                  |       | 15,448,159                                       |       | 29,743,372                                                                                                  |       | 47,335 |   |
| *CASH  AND CASH EQUIVALENTS, END OF PERIOD*                                        |       | $                                                | 13,312,777 |                                                                                                        | $          | 27,176,818 |   | $ | 13,312,777 |   |
| *SUPPLEMENTAL  INFORMATION:*                                                       |       |                                             |       |                                                                                                        |       |   |   |
| Interest paid                                                                      |       | $                                                | 14,904     |                                                                                                        | $          | 85 |   | $ | 34,430 |   |
| *SUPPLEMENTAL  DISCLOSURE OF NONCASH INVESTING ACTIVITIES:*                        |       |                                             |       |                                                                                                        |       |   |   |
| Initial  measurement of asset retirement obligation                                |       | $                                                | —     |                                                                                                        | $          | 306,013 |   | $ | 344,187 |   |

 

See accompanyingnotes to condensed consolidated financial statements.

 

3

----

Tableof Contents

 

**NOTE1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:**

 

## *Organization:*

##  

MinesManagement, Inc. (the Company) is an Idaho corporation incorporated in1947.  The Company acquires, explores,and develops mineral properties in North America.

 

## *Summary of Significant Accounting Policies:*

##  

Theseunaudited interim financial statements have been prepared by the Company inaccordance with accounting principles generally accepted in the United Statesof America for interim financial information, as well as the instructions to Form 10-Q.Accordingly, they do not include all of the information and footnotes requiredby generally accepted accounting principles for complete financial statements.In the opinion of the Company’s management, all adjustments (consisting of onlynormal recurring accruals) considered necessary for a fair presentation of theinterim financial statements have been included

 

Thepreparation of financial statements in accordance with accounting principlesgenerally accepted in the United States of America requires the use ofestimates and assumptions that affect the reported amounts of assets andliabilities, disclosure of contingent assets and liabilities known to exist asof the date the financial statements are published, and the reported amounts ofrevenues and expenses during the reporting period. Uncertainties with respectto such estimates and assumptions are inherent in the preparation of theCompany’s consolidated financial statements; accordingly, it is possible thatthe actual results could differ from these estimates and assumptions, whichcould have a material effect on the reported amounts of the Company’sconsolidated financial position and results of operations. Operating resultsfor the three month period ended March 31, 2009, are not necessarilyindicative of the results that may be expected for the full year ending December 31,2009.

 

Forfurther information refer to the consolidated financial statements andfootnotes thereto in the Company’s Annual Report on Form 10-K for the yearended December 31, 2008.

 

*(a)*                                  ExplorationStage Enterprise

* *

Sincethe Company is in the exploration stage of operation, the Company’s financialstatements are prepared in accordance with the provisions of Statement ofFinancial Accounting Standards (SFAS) No. 7 *Accounting for Development Stage Enterprises*, as it devotessubstantially all of its efforts to acquiring and exploring mining intereststhat management believes should eventually provide sufficient net profits tosustain the Company’s existence.  Untilsuch interests are engaged in commercial production, the Company will continueto prepare its consolidated financial statements and related disclosures inaccordance with this standard.

 

*(b)*                                 Miningproperties, exploration and development costs

* *

Allexploration expenditures are expensed as incurred.  Significant property acquisition payments foractive exploration properties are capitalized, including payments to acquiremineral rights.  Once a feasibility studyhas been completed, approved by management, and a decision is made to put theore body into production, expenditures to develop new mines, to define furthermineralization in existing ore bodies, and to expand the capacity of operatingmines, are capitalized and amortized on the units of production basis overproven and probable reserves.  TheCompany charges to operations the allocable portion of capitalized costsattributable to properties sold. Capitalized costs are allocated to properties sold based on theproportion of claims sold to the claims remaining within the project area.

 

*(c)*                                  Stockcompensation

* *

TheCompany measures and records the costs of employee services received inexchange for an award of equity instruments based on the grant-date fair valueof the award, recognized over the period during which an employee is requiredto provide services in exchange for such award. Compensation cost is recognized for awards granted and for awardsmodified, repurchased or cancelled.  At March 31,2009, the Company had three stock option plans which are described more fullyin note 9.

 

4

----

Tableof Contents

 

*(d)*                                 Netloss per share

* *

Basicloss per share is computed on the basis of the weighted average number ofshares outstanding during the periods. Diluted loss per share is calculated on the basis of the weightedaverage number of shares outstanding during the period plus the effect ofpotential dilutive shares during the period. Potential dilutive shares include outstanding stock options andwarrants.  For periods in which a netloss is reported, potential dilutive shares are excluded because they areantidilutive.  Therefore, basic loss pershare is the same as diluted loss per share for the periods ended March 31,2009 and 2008.

 

*(e)*                                  Reclassifications

* *

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

 

*(f)*                                    Newaccounting standards

* *

Effective January 1,2009 we adopted the provisions of Emerging Issues Task Force Issue No. 07-5,“Determining Whether an Instrument (or Embedded Feature) is Indexed to anEntity’s Own Stock” (“EITF 07-5”).  EITF07-5 applies to any freestanding financial instruments or embedded featuresthat have the characteristics of a derivative, as defined by SFAS No. 133,“Accounting for Derivative Instruments and Hedging Activities,” and to anyfreestanding financial instruments that are potentially settled in an entity’sown common stock.  As a result ofadopting EITF 07-5, 1,882,484 of our issued and outstanding common stockpurchase warrants previously treated as equity pursuant to the derivativetreatment exemption were no longer afforded equity treatment.  As such, effective January 1, 2009 wereclassified the fair value of these common stock purchase warrants, which haveexercise price reset features, from equity to liability status as if thesewarrants were treated as a derivative liability since their date of issue.  On January 1, 2009, we reclassified fromadditional paid-in capital, as a cumulative effect adjustment, $476,381 tobeginning retained earnings to recognize the fair value of such warrants onsuch date.  The fair value of thesecommon stock purchase warrants increased to $748,598 as of March 31,2009.  As such, a $272,217 loss from thechange in fair value of these warrants for the three months ended March 31,2009 was included in the Statement of Operations.

 

These common stockpurchase warrants were initially issued in connection with our issuance ofcommon shares in 2004 and 2005 and were not issued with the intent ofeffectively hedging any future cash flow, fair value of any asset, liability orany net investment in a foreign operation. The warrants do not qualify for hedge accounting, and as such, allfuture changes in the fair value of these warrants will be recognized currentlyin earnings until such time as the warrants are exercised or expire.  These common stock purchase warrants do nottrade in an active securities market, and as such, we estimate the fair valueof these warrants using the Black-Scholes option pricing model using thefollowing assumptions:

 
| ** **                                 | ** ** | **March 31,  2009** | ** ** | **January 1,  2009** | ** ** |
|--------------------------------------------|------------|--------------------------|------------|---------------------------|------------|
| Weighted average  risk-free interest rate  |       | 0.76                     | %          | 0.82                      | %          |
| Weighted average  volatility               |       | 91.80                    | %          | 87.77                     | %          |
| Expected  dividend yield                   |       | —                   |       | —                    |       |
| Weighted average  expected life (in years) |       | 1.4                      |       | 1.7                       |       |

 

Expected volatility isbased primarily on historical volatility. Historical volatility was computed using weekly pricing observations forrecent periods that correspond to the last twenty-four months.  We believe this method produces an estimatethat is representative of our expectations of future volatility over theexpected term of these warrants.  Wecurrently have no reason to believe future volatility over the expectedremaining life of these warrants is likely to differ materially from historicalvolatility.  The expected life is basedon the remaining term of the warrants. The risk-free interest rate is based on one-year U.S. Treasurysecurities.

 

**NOTE 2 — PROPERTY, PLANT AND EQUIPMENT:**

 

Constructionhas begun on the underground electrical, pumping, and ventilation systems atthe Libby adit at the Montanore Project. The anticipated cost of these projects is expected to total $2,517,000,with approximately $1,500,000 included in construction in progress as of March 31,2009.  Also included in construction inprogress as of March 31, 2009 is $176,000 

 

5

----

Tableof Contents

 

incosts associated with the construction of a nitrate treatment and removalsystem at the Montanore Project site. The estimated total cost of this project is $1,798,000.

 

Includedin the Company’s construction in progress account is an asset of approximately$344,000 related to an asset retirement obligation associated with the Company’sunderground evaluation program at the Montanore Project, as further describedin note 6.

 

**NOTE 3 — CERTIFICATES OF DEPOSIT:**

 

TheCompany owns six $236,707 certificates of deposit for a total of$1,420,242.  These investments mature in2009 and bear interest at the rate of 4.21%. The Company purchased a $5,000,000 certificate of deposit during 2008which is collateral for the line of credit described in note 5.  This certificate matures in September 2009and bears interest at the rate of 3.54%.

 

TheCompany also has a certificate of deposit pledged as security for a Letter ofCredit to the Montana Department of Environmental Quality as a reclamationguarantee for the Montanore expansion evaluation program.  This certificate matures on January 3,2010, currently bears interest at the rate of 2.57% and automatically renewsannually.  As of March 31, 2009 and December 31,2008, respectively, the $1,175,935 and $1,124,055 certificate of deposit isincluded with reclamation deposits on the Condensed Consolidated BalanceSheets.

 

**NOTE 4 — AVAILABLE-FOR-SALE SECURITIES:**

 

Thefollowing table summarizes the Company’s available-for-sale securities:

 
| ** **         | ** ** | **March 31,  2009** | ** ** | **December 31,  2008** | ** ** |
|--------------------|------------|--------------------------|------------|-----------------------------|------------|
| Cost               |       | $                        | 1,826,513  |                        | $          | 1,826,513 |   |
| Unrealized Gains   |       | 2,163                    |       | 8,263                       |       |
| Unrealized  Losses |       | (1,551,121               | )          | (1,632,994                  | )          |
| Fair Market  Value |       | $                        | 277,555    |                        | $          | 201,782 |   |

 

EffectiveJanuary 1, 2008, the Company adopted the provisions of Statement ofFinancial Accounting Standards No. 157, *FairValue Measurements* (FAS 157) for the financial assets andliabilities measured at fair value on a recurring basis.  FAS 157 establishes a framework for measuringfair value in the form of a fair value hierarchy which prioritizes inputs intovaluation techniques used to measure fair value into three broad levels.  This hierarchy gives the highest priority toquoted prices in active markets (Level 1) and the lowest priority tounobservable inputs (Level 3).  TheCompany’s available-for-sale securities are classified within Level 1 of thefair value hierarchy.  These securitiesare comprised of common stocks which have been valued using quoted prices inactive markets.

 

**NOTE 5 — LINE OF CREDIT:**

 

Inconnection with the acquisition of certain investments during 2008, the Companyentered into a line of credit agreement with a credit limit of $5,000,000bearing interest at a rate equal to the Washington Trust Bank Index Rate whichwas 3.25% at March 31, 2009.  Theline of credit had an outstanding balance of $1,815,231 as of March 31,2009 and December 31, 2008.  Theline of credit matures on September 17, 2009 and is secured by a$5,000,000 certificate of deposit.

 

**NOTE 6 — ASSET RETIREMENT OBLIGATION:**

 

TheCompany has an asset retirement obligation (ARO) associated with itsunderground evaluation program at the Montanore Project.  The ARO resulted from the reclamation andremediation requirements of the Montana Department of Environmental Quality asoutlined in the Company’s permit to carry out the evaluation program.

 

Estimatedreclamation costs were discounted using a credit adjusted risk-free interestrate of 4.78% from the time the Company expects to pay the retirementobligation to the time it incurred the obligation, which is estimated at 25years.  In May 2008, the Companyrevised estimated reclamation costs based on additional work completed at theMontanore Project. The following table summarizes activity in the Company’sARO.

 

6

----

Tableof Contents

 
| ** **                    | ** ** | **Three Months  Ended  March 31, 2009** | ** ** |
|-------------------------------|------------|----------------------------------------------|------------|
| Balance  January 1, 2009 |       | 376,233                                      |       |
| Accretion  expense            |       | 4,519                                        |       |
| Balance  March 31, 2009  |       | 380,752                                      |       |

 

**NOTE 7 — COMPREHENSIVE LOSS:**

 

For thethree months ended March 31, 2009 and 2008, comprehensive loss was$2,674,770 and $1,857,407, respectively. The difference between net loss and comprehensive loss was due tounrealized gains (losses) on the Company’s marketable securities.

 

**NOTE 8 — CONCENTRATION OF CREDIT RISK:**

** **

The Companymaintains its cash and cash equivalents in one financial institution.  In October 2008, the Emergency EconomicStabilization Act of 2008 temporarily increased FDIC insurance from $100,000 to$250,000 per depositor through December 31, 2009.  The Company’s total uninsured bank depositbalance totaled approximately $20,659,000 as of March 31, 2009.  To date, the Company has not experienced amaterial loss or lack of access to its invested cash or cash equivalents; howeverno assurance can be provided that access to the Company’s invested cash andcash equivalents will not be impacted by adverse conditions in the financialmarkets.

 

**NOTE 9 — STOCKHOLDERS’ EQUITY:**

 

## *Common Stock:*

##  

In2004, the Company sold 1,285,000 common shares for $6,425,000 ($5.00 pershare).  The Company paid a cash finder’sfee of 7% of the gross purchase price received in the offering.  In connection with the stock sales, theCompany issued warrants to purchase up to 511,000 shares of common stock at$7.25 per share through February 18, 2009, including 3% warrantcompensation, or warrants to purchase 192,750 common shares, issued to thefinder.  In January of 2009, theCompany extended the expiration date of the outstanding warrants to February 10,2010.  These warrants were repriced to$6.00 per share in October 2005, to $5.00 per share in April 2007,and to $4.00 per share in November 2007 in accordance with the terms ofthe 2004 warrant agreement. Cumulative warrants exercised relating to this issuewere 148,750 at March 31, 2009 and December 31, 2008.

 

In2005, the Company sold 1,016,667 common shares for $6,100,002 ($6.00 pershare).  The Company paid a cash finder’sfee of 7% of the gross purchase price received in the offering.  In connection with the stock sales, theCompany granted warrants to purchase up to 737,084 shares of common stock at$8.25 per share through October 20, 2010, which included 3.75% warrantcompensation, or warrants to purchase 228,750 common shares, issued to thefinder.  These warrants were repriced at$5.00 per share in April 2007, and to $4.00 per share in November 2007,and the number of shares purchasable on exercise of options increased, inaccordance with the anti-dilution provisions of the 2005 warrantagreement.  To date, no warrants relatingto this issue have been exercised.

 

In2005, the Company sold 40,000 common shares for $240,000 ($6.00 per share).

 

On April 20,2007, the Company completed a public offering of 6,000,000 units at a price of$5.00 per unit, resulting in gross proceeds of $30,000,000 ($28,200,000 netproceeds).  Each unit is comprised of oneshare of common stock and one-half of one common stock purchase warrant, witheach full warrant being exercisable for five years to purchase one share of commonstock at a price of $5.75 per share.  Thewarrants are listed on the Toronto Stock Exchange and are tradable in USdollars under the symbol MGT.WT.U. During the year ended December 31, 2008, the Company paidapproximately $241,000 in legal fees directly related to the 2007 common stockoffering.

 

Theunderwriters were granted an over-allotment option, exercisable for a period of30 days following the closing, to acquire up to an additional 900,000 units.  On May 7, 2007, the underwritersexercised the over-allotment option for 836,600 units.  The total offering was therefore 6,836,600units for gross proceeds to the Company of $34,183,000, or $32,124,697 in netproceeds to the Company, after deducting underwriting commissions but beforededucting offering expenses.  To date, nowarrants relating to this issue have been exercised.

 

7

----

Tableof Contents

 

On November 2,2007, the Company sold 2,500,000 common shares at a price of $4.00 per share,resulting in gross proceeds of $10,000,000. In connection with the stock sale, the Company entered into a Right ofFirst Refusal agreement (the “ROFR”) which grants a twenty-year right of first proposaland a right to match third-party proposals, to purchase all or any portion ofsilver mined, produced or recovered by the Company in the State ofMontana.  The ROFR does not apply totrade sales and spot sales in the ordinary course of business or forward sales,in each case, for which no upfront payment is received by the Company.

 

The following table summarizes exercise prices andexpiration dates of outstanding common stock purchase warrants as of March 31,2009.

 
| **Number of  Warrants** | ** ** | **Exercise Price** | ** ** | **Expiration Date** | ** **             |
|-------------------------|------------|--------------------|------------|---------------------|------------------------|
| 362,250                 |       | $                  | 4.00       |                | February 10, 2010 |   |
| 1,520,234               |       | $                  | 4.00       |                | October 20, 2010  |   |
| 3,418,300               |       | $                  | 5.75       |                | April 20, 2012    |   |
| 5,300,784               |       |               |       |                |                   |

 

## *Preferred Stock:*

##  

TheCompany has authorized 10,000,000 shares of no par value preferred stock.  Through March 31, 2009, the Company hadnot issued any preferred stock.

 

**NOTE 10 — STOCK OPTIONS:**

 

Duringthe year ended December 31, 2003, the stockholders of the Company approvedtwo stock-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 could grant options to purchaseup to 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.  The shares are issued from the Company’sauthorized and unissued common stock upon exercise.

 

Underboth 2003 Stock Option Plans, the option exercise price may not be less than100% of the fair market value per share on the date of grant.  Stock options are exercisable within tenyears from the date of the grant of the option. The schedule for vesting of the options granted under both plans is atthe discretion of the Board of Directors.

 

In November 2007,the Board of Directors adopted, subject to shareholder approval, the 2007Equity Incentive Plan (the “2007 Plan”), which provides for the issuance ofboth qualified and nonqualified stock options and restricted shares todirectors, employees and consultants of the Company.  Up to 3,000,000 shares of the Company’sauthorized but unissued common stock are available for issuance under the 2007Plan.

 

TheCompany has a policy of re-pricing stock options when the market price of thestock is $1.00 below the exercise price of the outstanding option.  The newly issued option has the same vestingschedule and expiration date as the option that is cancelled.  During 2008, the Company cancelled and reissued3,452,000 stock options held by 20 employees, including officers and directors.  As a result of the repricing of stockoptions, the Company recognized additional compensation expense of $50,200 and$-0- for the three months ended March 31, 2009 and 2008,respectively.  There were no stockoptions re-priced during 2009.

 

A summary of the option activity under the Plans as of March 31,2009, and changes during the period then ended, is presented below:

 

8

----

Tableof Contents

 
| ** **                           | ** ** | **Number of  Options** | ** ** | **Weighted-  Average  Exercise  Price** | ** ** | **Weighted-  Average  Remaining  Contractual  Term** | ** ** | **Aggregate  Intrinsic Value** | ** ** |
|--------------------------------------|------------|------------------------|------------|-----------------------------------------|------------|------------------------------------------------------|------------|--------------------------------|------------|
| Outstanding at  January 1, 2009 |       | 2,271,000              |       | $                                       | 1.37       |                                                 |       |                           |       |   |
| Forfeited or  expired                |       | (13,000                | )          | $                                       | 2.77       |                                                 |       |                           |       |   |
| Outstanding at  March 31, 2009  |       | 2,258,000              |       | $                                       | 1.36       |                                                 | 2.84       |                           | $          | 1,938,960 |   |
| Exercisable at  March 31, 2009  |       | 1,748,000              |       | $                                       | 1.37       |                                                 | 2.22       |                           | $          | 1,117,660 |   |

 

Thefair value for each option award is estimated at the date of grant using theBlack-Scholes option-pricing model using the assumptions noted in the followingtable.  Volatility for the periodspresented is based on the historical volatility of the Company’s common stockover the expected life of the option. The risk-free rate for periods within the expected term of the option isbased on the U.S. Treasury yield curve in effect at the time of the grant.  The Company does not foresee the payment ofdividends in the near term.

 
| ** **                                 | ** ** | **Three Months Ended  March 31,** | ** ** |
|--------------------------------------------|------------|----------------------------------------|------------|
| ** **                                 | ** ** | **2009(1)**                            | ** ** | **2008** | ** ** |
| Weighted average  risk-free interest rate  |       | —                                 |       | 3.85 | % |
| Weighted average  volatility               |       | —                                 |       | 56.95 | % |
| Expected  dividend yield                   |       | —                                 |       | — |   |
| Weighted average  expected life (in years) |       | —                                 |       | 2.00 |   |

 

----

(1) Nooptions were granted during the period ending March 31, 2009.

 

Theweighted average grant-date fair value of options granted during the periodsending March 31, 2009 and 2008 was $-0- and $1.12.  The total intrinsic value of optionsexercised during the three months ended March 31, 2009 and 2008 was $-0-and $1,311,230, respectively.  There wereno options exercised during the three months ended March 31, 2009.  During the three months ended March 31,2008, there were 520,000 stock options exercised with a weighted averageexercise price of $1.65.

 

Asummary of the status of the Company’s nonvested options as of March 31,2009, and changes during the period then ended, is presented below:

 
| ** **                         | ** ** | **Number of  Options** | ** ** | **Weighted-  Average  Grant-Date  Fair Value** | ** ** |
|------------------------------------|------------|------------------------|------------|------------------------------------------------|------------|
| Nonvested at  January 1, 2009 |       | 510,000                |       | $                                              | 1.33       |   |
| Granted                            |       | —                 |       | —                                         |       |
| Vested                             |       | —                 |       | —                                         |       |
| Nonvested at  March 31, 2009  |       | 510,000                |       | $                                              | 1.33       |   |

 

As of March 31,2009, there was $113,843 of unrecognized compensation cost related to nonvestedshare-based compensation arrangements granted under the Plans.  That cost is expected to be recognized over aweighted-average period of less than one year.

 

Totalcompensation costs recognized for stock-based employee compensation awards was$220,992 and $55,535 for the periods ended March 31, 2009 and 2008,respectively.  Total costs recognized forstock-based compensation awards for services performed by outside parties was$-0- and $29,591 for the periods ended March 31, 2009 and 2008,respectively. These costs were included in general and administrative expensesand technical services on the Statement of Operations.  Cash received from options exercised underall share-based payment arrangements during the periods ended March 31,2009 and 2008 was $-0- and $800,000, respectively.

 

9

----

Tableof Contents

 

**ITEM 2.**                                                 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTSOF OPERATIONS

 

Thefollowing discussion and analysis should be read in conjunction with “Management’sDiscussion and Analysis of Financial Condition and Results of Operations”contained in our Annual Report on Form 10-K for the year ended December 31,2008, as well as with the financial statements and related notes and the otherinformation appearing elsewhere in this report. As used in this report, unless the context otherwise indicates,references to “we,” “our,” the “Company” and “us” refer to Mines Management, Inc.and its subsidiaries collectively.

 

**Overview**

##  

We arean exploration stage company with a large silver-copper project, the MontanoreProject, located in northwestern Montana. The Montanore Silver-Copper Project continues to be the Company’s solefocus.  In addition to its advancedexploration and delineation drilling program, the Company is continuing itsrepermitting efforts with federal and state agencies and its engineeringoptimization review of the Project.

 

In thefirst quarter of 2009:

 

·                  TheU.S. Forest Service and the Montana DEQ issued the draft environmental impactstatement (EIS) for the 90 day public comment period which ends on May 28,2009.

 

·                  SmallMine Development (SMD), the Company’s underground mine contractor, continuedthe excavation of two sumps and placed them into service as part of the aditdewatering system to clarify water before sending it to the water treatmentplant.

 

·                  TheCompany maintained a strong cash and investment position at March 31,2009, with $17.9 million of unrestricted cash, availability under its line ofcredit, and unrestricted certificates of deposit.

 

·                  TheCompany implemented a program to reduce expenditures and conserve cash duringthe current metal price downturn.

 

Thenet cash expenditures for the quarter ended March 31, 2009 was $2.1million for operating and investing activities. Management has reviewed near term spending forecast and implemented aplan to diligently conserve cash where prudent. The Company believes that it hassufficient working capital to complete the rehabilitation of the Libby adit andcommencement of delineation drilling.

 

**Advanced Exploration and Delineation DrillingProgram**

##  

Libby operations in thefirst quarter of 2009 included continued operations on the Montanore site watertreatment system, construction of dewatering sumps, completion of the designwork of the nitrate removal system and continued planning for therehabilitation of the 14,000 foot Libby adit.

 

Small Mine Development,our adit rehabilitation contractor, is currently re-bolting and scaling theentry of the adit.  At of the end of March 2009,it has advanced in excess of 5000 feet. Advance rates are expected to increase as Small Mine Development gainsfamiliarity with our equipment and develops a systematic approach to thework.  Thus far, the ground conditionsappear to be as expected.  Originalprojections had required that welded wire mesh be installed on the ribs downapproximately 5 ft. from the sill.  Afterthe first quarter advance, it now appears that this may not be necessarythroughout the adit.

 

Dewatering is advancingahead of the decline rehabilitation at a rate of approximately 350 gallons perminute through the treatment plant.  Withmore consistent flow, the treatment plant is experiencing a few difficultiesthat were not apparent at the lower flow rates. These challenges are being addressed as they appear and thus far, nonehas had an adverse impact on the ability to keep the dewatering ahead of the rehabilitation.

 

Engineering for the nitrateremoval addition to the water treatment system is complete, but construction ison hold pending receipt of the EIS and Record of Decision (ROD).  Construction of the nitrate system isscheduled to start and be completed prior to beginning to drive the finalsection of the adit to reach the ore body and install drill stations.  The current schedule is to begin construction****of the concrete chambers in the early fallof 2009 or late April/early May of 2010 based on timing of receipt of theROD following completion of the final EIS.

 

10

----

Tableof Contents

 

Engineering and geologywork continues using existing information. Geology confirmation mapping is beginning with the advance of therehabilitation down the decline. Currently, a system is being developed to evaluate the water producingareas as they are encountered.

 

**Permitting and Environmental**

##  

In the firstquarter of 2009, the U.S Forest Services (USFS) and the Montana Department ofEnvironmental Quality (MDEQ) completed the draft environmental impactstatement.  The public notice ofavailability was published and the document was made available for publicreview.  The public comment period ends May 28,2009.  The Company is reviewing the draftenvironmental impact statement (DEIS) and will provide comments prior to thedeadline.  A public meeting was held on April 16,2009 at which the agencies accepted additional comments from the public.

 

The Companycontinues to work with the agencies on other issues during the public commentperiod.  In addition, the Company hasinitiated discussions with the USFS and MDEQ on the selection of the preferredalternative process once the public comment period closes.  Preliminary discussions with the USFS and theU.S. Fish and Wildlife Service were completed in the first quarter of 2009concerning the biological assessment and biological opinion that will be initiatedonce a preferred alternative is selected by the agencies.

 

The Army Corps ofEngineers (ACOE) is evaluating information to determine the Least DamagingPractical Alternative (LDPA) for the tailings impoundment  The ACOE previously considered the PoormanCreek Impoundment alternative as its preliminary LDPA, but is now reviewingcomments provided by the USFS concerning the Little Cherry Creek Impoundmentalternative.  Following review, it willdetermine which alternative will finally be selected as the LDPA.

 

The Companysubmitted a three-dimensional numerical hydrologic model to the agencies aspart of the DEIS comments.  The agenciescompleted a two-dimensional numerical hydrologic model to predictgroundwater/surface water issues.  TheCompany’s model is the next level of technical predictions that can incorporategeology, structures and other important hydrologic features.  The Company anticipates working with theagencies to incorporate the more dynamic numerical model as part of the updateto the final EIS.

 

**Financial and Operating Results**

##  

MinesManagement, Inc. is an exploration stage company with a largesilver-copper project, the Montanore Project, located in northwesternMontana.  None of our properties,including our principal property, the Montanore Project, is currently in production.  The Company continues to expense all of itsexpenditures when incurred, with the exception of equipment and siteinfrastructure, which are capitalized. Financial results of operations include primarily interest income,general and administrative expenses, permitting, project advancement andengineering expenses.

 

**QuarterEnded March 31, 2009**

 

TheCompany reported a net loss for the quarter ended March 31, 2009 of $3.0million, or $0.13 per share, compared to a net loss of $1.8 million, or $0.08per share, for the quarter ended March 31, 2008.  The $1.2 million increase in net loss in thefirst quarter of 2009 is attributable to increases in technical expenses ofapproximately $0.8 million over the first quarter of 2008, principally  due to payments to underground miningcontractor SMD for site rehabilitation, sump construction and dewatering, andfor EIS technical consultants , environmental expenses, and permitting.  General and administrative expenses increased$0.1 million due to the addition of supervisory mine site employees since thefirst quarter of 2008 and normal annual wage increases, offset by decreases of$0.1 million in legal, accounting and consulting expenses in the first quarterof 2009 over the comparable 2008 period. As a result of adopting a new accounting standard, the Company had aloss from the change in fair value of warrants classified as derivative instrumentsof $0.3 million for the quarter ended March 31, 2009.  Interest income also decreased by $0.2million, as the Company’s interest-bearing bank balances declined.

 

**Liquidity**

##  

Duringthe quarter ended March 31, 2009, the net cash used for operatingactivities was $2.0 million, which consisted largely of permitting andtechnical expenses associated with increased activities at the MontanoreProject site.  The net cash used ininvesting activities during the quarter was $0.1 million, for construction inprogress.

 

We aretaking steps to reduce activity levels, including capital expenditures, untilthe timing of the Record of Decision becomes more clear.  We anticipate expenditures of approximately$9.0 million the final three quarters of 2009, which will consist of $1.5million per quarter for general and administrative expenses and $4.5 millionfor ongoing expense of preparation for the delineation drilling program andaddition mine scoping studies.  Given ourcurrent cash position of

 

11

----

Tableof Contents

 

$17.9million on March 31, 2009, we will require approximately $10.0 million ofexternal financing  in 2010 to fund thefinal phases of the advanced exploration program and delineation drillingprogram and completion of a bankable feasibility study.  The Company will investigate financingopportunities and options from equity and debt financing during the currentyear.

 

**Off-Balance Sheet Arrangements**

 

At March 31,2009, we had no existing off-balance sheet arrangements, as defined under SECrules, that have or are reasonably likely to have a material current or futureeffect on our financial condition, revenues or expenses, results of operations,liquidity, capital expenditures or capital resources.

 

**ITEM 3.**                                                 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK AND HEDGINGACTIVITIES

 

All ofour cash balances are held in U.S. dollars and our long term investmentcertificates of deposit are denominated in U.S. dollars in local and nationalbanking institutions.  We manage thetiming of cash required for review of the permitting and engineering of theMontanore Project and for general corporate purposes utilizing our money marketaccount and we invest funds not immediately required in certificates of depositwith 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 includeexpectations with regard to the rate of inflation, the exchange rates of thedollar and other currencies, interest rates, global or regional political,economic or banking crises, and a number of other factors.  If the market price of silver or coppershould decrease, the value of the Company’s Montanore Project could decline andthe Company might not be able to recover its investment in that project.  Any determination to develop or construct amine would be made long before the first revenues from production would bereceived.  Price fluctuations between thetime that such decisions are made and the commencement of production couldaffect the economics of the mine.

 

**ITEM 4.**                                                  CONTROLS AND PROCEDURES

 

GlennM. Dobbs, the Company’s President and CEO, and James H. Moore, the Company’sChief Financial Officer and Treasurer, have evaluated the Company’s disclosurecontrols and procedures as of March 31, 2009.  Based upon this evaluation, the ChiefExecutive Officer and Chief Financial Officer concluded that the Company’sdisclosure controls and procedures are designed and were effective as of March 31,2009 to give reasonable assurances that the information required to bedisclosed in the reports that the Company’s files or submits under theSecurities Exchange Act of 1934, as amended, is recorded, processed, summarizedand reported within the time periods specified in the rules and forms ofthe Securities and Exchange Commission, and that such information is alsoaccumulated and communicated to the Company’s management, including its ChiefExecutive Officer and Chief Financial Officer, as appropriate to allow timelydecisions regarding required disclosure.

 

Therewere no changes in the Company’s internal controls over financial reportingthat occurred during the quarterly period ended March 31, 2009 thatmaterially affected, or are reasonably likely to materially affect, the Company’sinternal control over financial reporting.

 

12

----

Tableof Contents

 

**PART II  — OTHER INFORMATION**

 

**ITEM 1.**                                                     LEGAL PROCEEDINGS

 

None.

 

**ITEM1A.**                                            RISK FACTORS

 

Inaddition to the other information set forth in this report, you shouldcarefully consider the factors discussed in “Risk Factors” in our Annual Reporton Form 10-K for the year ended December 31, 2008, which couldmaterially affect our business, financial condition and/or future results.  The risks described in our Annual Report on Form 10-Kare not the only risks facing us. Additional risks and uncertainties not currently known to us or that wecurrently deem to be immaterial also may materially adversely affect ourbusiness, financial condition and/or operating results.

 

**ITEM 2.**                                                     UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None.

 

**ITEM 3.**                                                     DEFAULTS UPON SENIOR SECURITIES

 

None.

 

**ITEM 4.**                                                     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

None

 

**ITEM 5.**                                                     OTHER INFORMATION

 

None.

 

**ITEM 6.**                                                     EXHIBITS

 
| **Exhibit No.** | ** ** | **Title of Exhibit**                                                                                                |
|----------------------|------------|---------------------------------------------------------------------------------------------------------------------|
|                 |       |                                                                                                                |
| 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) |

 

13

----

Tableof Contents

 

# **SIGNATURES**

 

Pursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on behalf of theundersigned thereunto duly authorized.

 
|                                | MINES MANAGEMENT, INC. |
|-------------------------------------|------------------------|
|                                |                   |   |
|                                |                   |   |
| Date:   May 11, 2009 | By:                    | /s/ Glenn M. Dobbs |
|                                |                   | Glenn M. Dobbs |
|                                |                   | President and Chief  Executive Officer |
|                                |                   |   |
|                                |                   |   |
|                                | By:                    | /s/ James H. Moore |
| Date:  May 11, 2009       |                   | James H. Moore |
|                                |                   | Chief Financial Officer |

 

14

----