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 June 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. 10,572,836 shares of Common Stock outstanding as of June 30, 2004.



Transitional Small Business Disclosure Format (check one);

Yes          No     [X]







1



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Mines Management, Inc.



Index





Part 1 - Financial Information



Item 1. Financial Statements (unaudited)



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

Consolidated Income Statements-Six Months Ended June 30,  2004 and 2003

Consolidated Statement of Cash Flows-Six Months Ended June 30, 2004 and 2003

Consolidated Statements of Stockholders Equity-Six Months Ended June 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





















2



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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     | $ 5,962,426 |                     
|                                                               | Interest receivable           | 19,300      |                     
|                                                               | Prepaid expenses and deposits | 67,668      |                     
|                                                               |                               |             | 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 | 72,410      |                     
|                                                               |                               |             |                     
|                                                               |                               |             |                     
|INVESTMENTS:                                                   |                               |             |                     
|                                                               | Certificates of deposit       | 1,013,457   |                     
|                                                               | Available-for-sale securities | 26,463      |                     
|                                                               |                               |             |                     
|                                                               |                               |             |                     
|                                                               |                               |             |                     
|See accompanying notes to consolidated financial statements.
3

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|Mines Management, Inc. and Subsidiary                          |                                                                 |                                                        |                           
|-------------------------------------------------------------- | --------------------------------------------------------------- | ------------------------------------------------------ | --------------------------
|                                                               |                                                                 |                                                        |                           
|Consolidated Balance Sheets                                    |                                                                 |                                                        |                           
|                                                               |                                                                 |                                                        |                           
|                                                               |                                                                 |                                                        |                           
|                                                               |                                                                 |                                                        |                           
|                                                               |                                                                 |                                                        |                           
|                                                               |                                                                 |                                                        |                           
|Liabilities and Stockholders Equity                           |                                                                 |                                                        |                           
|                                                               |                                                                 |                                                        |                           
|CURRENT LIABILITIES:                                           |                                                                 |                                                        |                           
|                                                               | Accounts payable                                                | $       24,680                                         |                           
|                                                               | State income taxes payable                                      | 800                                                    |                           
|                                                               | Due to officer                                                  | 12,583                                                 |                           
|                                                               | Severance currently payable                                     | 55,000                                                 |                           
|                                                               | Payroll taxes payable                                           | 6,939                                                  |                           
|                                                               |                                                                 |                                                        | Total current liabilities 
|                                                               |                                                                 |                                                        |                           
|OTHER LIABILITIES:                                             |                                                                 |                                                        |                           
|                                                               | Severance payable, long term                                    | 50,000                                                 |                           
|                                                               |                                                                 |                                                        |                           
|                                                               |                                                                 |                                                        | Total liabilities         
|                                                               |                                                                 |                                                        |                           
|COMMITMENTS                                                    |                                                                 |                                                        |                           
|                                                               |                                                                 |                                                        |                           
|STOCKHOLDERS EQUITY:                                          |                                                                 |                                                        |                           
|                                                               | Common stock  100,000,000 shares, $0.01 par value, authorized; |                                                        |                           
|                                                               |                                                                 | 10,572,836 and 8,724,708 shares issued and outstanding | 105,728                   
|                                                               | Preferred stock  10,000,000 shares, no par value,              |                                                        |                           
|                                                               |                                                                 | authorized                                             | -                         
|                                                               | Additional paid-in capital                                      | 11,780,650                                             |                           
|                                                               | Retained earnings (deficit)                                     | (4,417,047)                                            |                           
|                                                               | Accumulated other comprehensive income                          | 15,298                                                 |                           
|                                                               |                                                                 |                                                        | Total stockholders equity
|                                                               |                                                                 |                                                        |                           
|                                                               |                                                                 |                                                        |                           
|                                                               |                                                                 |                                                        |                           
|See accompanying notes to consolidated financial statements.
4



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|Mines Management, Inc. and Subsidiary                                       |                                             |                          |                |                 |                    |                 |                 
|--------------------------------------------------------------------------- | ------------------------------------------- | ------------------------ | -------------- | --------------- | ------------------ | --------------- | ----------------
|Consolidated Statements of Income (unaudited)                               |                                             |                          |                |                 |                    |                 |                 
|                                                                            |                                             |                          |                |                 |                    |                 |                 
|                                                                            |                                             |                          |                |                 | Three Months Ended |                 | Six Months Ended
|                                                                            |                                             |                          |                |                 | June 30,           |                 | June 30,        
|                                                                            |                                             |                          |                |                 | 2004               |                 | 2003            
|REVENUE:                                                                    |                                             |                          |                |                 |                    |                 |                 
|                                                                            | Royalties                                   | $          1,602         |                | $           957 |                    | $         5,493 |                 
|                                                                            |                                             |                          |                |                 |                    |                 |                 
|OPERATING EXPENSES:                                                         |                                             |                          |                |                 |                    |                 |                 
|                                                                            | Depreciation                                | 2,959                    |                | 552             |                    | 5,350           |                 
|                                                                            | Administrative                              | 84,221                   |                | 24,384          |                    | 143,961         |                 
|                                                                            | Legal, accounting, and consulting           | 69,724                   |                | 44,856          |                    | 227,477         |                 
|                                                                            | Miscellaneous                               | 2,584                    |                | -               |                    | 2,839           |                 
|                                                                            | Oil and gas operating                       | 4,366                    |                | 1,061           |                    | 5,393           |                 
|                                                                            | Rent and office                             | 15,996                   |                | 21,146          |                    | 31,797          |                 
|                                                                            | Compensation, directors, officers and staff | 58,164                   |                | 59,158          |                    | 112,477         |                 
|                                                                            | Taxes and licenses                          | 4,596                    |                | 4,776           |                    | 9,162           |                 
|                                                                            | Telephone                                   | 1,003                    |                | 1,566           |                    | 1,855           |                 
|                                                                            | Fees, filing, and licenses                  | 1,912                    |                | 15,381          |                    | 80,669          |                 
|                                                                            | Commissions                                 | -                        |                | 13,860          |                    | -               |                 
|                                                                            | Stock option expense                        | 34,079                   |                | -               |                    | 1,233,079*      |                 
|                                                                            |                                             | Total operating expenses | 279,604        |                 | 186,740            |                 | 1,854,059       
|LOSS FROM OPERATIONS                                                        | (278,002)                                   |                          | (185,783)      |                 | (1,848,566)        |                 | (578,066)       
|OTHER INCOME:                                                               |                                             |                          |                |                 |                    |                 |                 
|                                                                            | Interest                                    |                          | 38,519         |                 | -                  |                 | 47,279          
|                                                                            | Miscellaneous                               | -                        |                | 1,616           |                    | -               |                 
|                                                                            |                                             |                          |                |                 | 38,519             |                 | 1,616           
|                                                                            |                                             |                          |                |                 |                    |                 |                 
|NET LOSS                                                                    |                                             | $   (239,483)            |                | $ (184,167)     |                    | $(1,801,287)    |                 
|                                                                            |                                             |                          |                |                 |                    |                 |                 
|NET LOSS PER SHARE                                                          | $         (0.02)                            |                          | $       (0.03) |                 | $        (0.19)    |                 | $      (0.09)   
|                                                                            |                                             |                          |                |                 |                    |                 |                 
|WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING                                  | 10,479,941                                  |                          | 6,717,918      |                 | 9,243,734          |                 | 6,717,918       
|                                                                            |                                             |                          |                |                 |                    |                 |                 
|*See notes.
See accompanying notes to consolidated financial statements.

5





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|Mines Management, Inc. and Subsidiary                          |                                               |                               |                                    |                       |            |           |                   
|-------------------------------------------------------------- | --------------------------------------------- | ----------------------------- | ---------------------------------- | --------------------- | ---------- | --------- | ------------------
|Consolidated Statements of Cash Flows (unaudited)              |                                               |                               |                                    |                       |            |           |                   
|                                                               |                                               |                               |                                    |                       |            |           | Three Months Ended
|                                                               |                                               |                               |                                    |                       |            |           | June 30,          
|                                                               |                                               |                               |                                    |                       |            |           | 2004              
|Increase (Decrease) in Cash and Cash Equivalents               |                                               |                               |                                    |                       |            |           |                   
|CASH FLOWS FROM OPERATING ACTIVITIES:                          |                                               |                               |                                    |                       |            |           |                   
|                                                               | Net loss                                      |                               |                                    |                       | $(239,483) |           | $(184,167)        
|                                                               | Adjustments to reconcile net loss to net cash |                               |                                    |                       |            |           |                   
|                                                               |                                               | used in operating activities: |                                    |                       |            |           |                   
|                                                               |                                               |                               | Issuance of stock options          | 34,079                |            | -         |                   
|                                                               |                                               |                               | Depreciation                       | 2,958                 |            | 552       |                   
|                                                               |                                               |                               | Changes in assets and liabilities: |                       |            |           |                   
|                                                               |                                               |                               |                                    | Interest receivable   | 5,202      |           | -                 
|                                                               |                                               |                               |                                    | Accounts receivable   | -          |           | (500)             
|                                                               |                                               |                               |                                    | Prepaid expenses      | (52,668)   |           | -                 
|                                                               |                                               |                               |                                    | Accounts payable      | (173,840)  |           | -                 
|                                                               |                                               |                               |                                    | Severance payable     | (20,000)   |           | -                 
|                                                               |                                               |                               |                                    | Payroll taxes payable | 1,022      |           | (1,195)           
|Net cash used in operating activities                          | (442,730)                                     |                               | (185,310)                          |                       | (665,239)  |           | (322,356)         
|CASH FLOWS FROM INVESTING ACTIVITIES:                          |                                               |                               |                                    |                       |            |           |                   
|                                                               | Purchase of office equipment                  | (10,533)                      |                                    | (1,251)               |            | (21,070)  |                   
|                                                               | Purchase of certificates of deposit           | (13,457)                      |                                    | -                     |            | (13,457)  |                   
|                                                               | Increase in mineral properties                | -                             |                                    | -                     |            | -         |                   
|Net cash used in investing activities                          | (23,990)                                      |                               | (1,251)                            |                       | (34,527)   |           | (39,180)          
|CASH FLOWS FROM FINANCING ACTIVITIES:                          |                                               |                               |                                    |                       |            |           |                   
|                                                               | Proceeds from sales of common stock           | 448,353                       |                                    | 784,886               |            | 6,379,555 |                   
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS           | (18,367)                                      |                               | 598,325                            |                       | 5,679,789  |           | 503,350           
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                 | 5,980,793                                     |                               | 168,500                            |                       | 282,637    |           | 263,475           
|CASH AND CASH EQUIVALENTS, END OF PERIOD                       | $5,962,426                                    |                               | $766,825                           |                       | $5,962,426 |           | $ 766,825         
|See accompanying notes to consolidated financial statements.
6



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|Mines Management, Inc. and Subsidiary
Consolidated Statements of Stockholders Equity
Six Months Ended June 30, 2004
|--------------------------------------------------------------------------------------------------------------------
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|BALANCES, DECEMBER 31, 2003                                                                                         
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|Comprehensive loss                                                                                                  
|                                                                                                                    
|BALANCES, JUNE 30, 2004                                                                                             
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|See accompanying notes to consolidated financial statements.
7                                                      









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Mines Management Inc.

Second 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 June 30, 2004, and the results of its operations and its cash flows for the three month periods ended June 30, 2004 and 2003; and the six month periods ending June 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 June 30, 2004, warrants to purchase 635,413 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 purchased.  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.











8



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3.

Investments



The company invested in a Washington Trust Money Market at 1.39% per year, the current balance at June 30, 2004 of $5,531,233.



The Company owns four $103,364.25 certificates of deposit and six $100,000 certificates of deposit for a total of $1,013,457. These investments mature in 2009 and earn at rates from 3.3% to 3.64%.



4.

Stock Options



The Board of Directors granted options 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 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.



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.











































9

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



Managements discussion and analysis (MD&A) for the second 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 six months ended June 30, 2004.



Plan of Operations-Second Quarter Highlights



*

Strong cash position-over $6.9 million

*

Initial meetings with Forest Service and State of Montana to discuss re-permitting Montanore Project

*

Completion of interim revised mine plan for Montanore Project

*

Initiated Investor Relation Program to introduce Mines Management to Institutional Investors

*

Implementation of companys plan to strengthen senior and technical management



In the second quarter 2004, Mines Managements investors exercised warrants adding over four hundred thousand dollars to the company's treasury. This, coupled with a $6.4 million financing in the first quarter gives the company more than $6.9 million in cash and certificates of deposit.  Existing cash reserves should be sufficient working capital for the next twenty-four months of operation.



The company participated in preliminary discussions with the Forest Service and Montana State Department of Environmental Quality in June 2004 to as an initial step toward re-permitting the Montanore Project.  Hiring an experienced Vice President Operations in the third quarter will allow the company to substantially focus on optimizing its mining plan for Montanore and moving through the permitting process.



During the Second Quarter Mines Management completed an interim revised mine plan for the Montanore Silver-Copper Property located in northwestern Montana.  The Montanore, originally discovered by U. S. Borax in the 1980s and further developed by Noranda Minerals at the cost of over $100 million is estimated to contain 260 million ounces of silver and two billion pounds of copper.



In mid-May, the President, Director of Investor Relations and two company Directors participated in the Bell Ringing Ceremony at the American Stock Exchange publicizing the AMEX listing of Mines Management's shares on the exchange.  The company has continued its effort to present the company to the institutional investment community by presentations to major fund managers and investment groups.  In June the President presented the company before the New York Society of Security Analysts.  The company participated in two investor conferences in New York and this Fall will be presenting to investor groups in Las Vegas, New Orleans and San Francisco.



Second Quarter Plans to add to the companys management strength included a successful executive search culminating with the hiring of Mr. Eric Klepfer as Vice President of Operations in late July.  Mr. Klepfer has more than 20 years mining experience with Newmont Gold, Coeur d'Alene Mines and Placer Dome.

10

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Financial Results



Mines Management, Inc. reported a net loss for the second quarter ending June 30, 2004 of $239,483($0.02 per share) versus a loss of $184,167($.03 per share) for the second quarter 2003.  This increase in spending was a result of additional administrative and consultant costs ($84,167) associated with increased activity on the Montanore Project, stock options issued ($34,079) offset by additional interest income of $38,519 and decreased commissions of $13,860.  The year to date loss for the six months ended June 30, 2004 is $1,801,287 includes a stock option expense of $1,233,079 for options granted in 2004, and legal, accounting and consultant fees of $157,753 applicable to the $6,425,000 equity financing completed in the first quarter 2004.



Working capital at June 30, 2004 included cash and short term investments of $6,975,883 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. In the second quarter there was an additional $448,353 in proceeds from stock sales as a result of warrants being exercised.



The company had a total of 10,572,836 shares of common stock issued as of June 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, our management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 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 June 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.

11

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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 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.



Item 5. Other Information



The stock option grant on February 10, 2004 for 650,000 shares of common stock at $6.42 per share 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 stock option grant on June 22, 2004 for 30,000 shares of common stock at $3.95 per share was approved at the Mines Management, Inc. board meeting on June 18, 2004.



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













































12



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Signatures



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    August 12, 2004

Glenn M. Dobbs



/s/ James H. Moore

_____________________

Chief Financial Officer and Treasurer

August 12, 2004

James H. Moore















































13