Table of Contents

 

 

 

**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**WASHINGTON,DC 20549**

 

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

##### ** **

| **x**                                                   | ** ** | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934**  |
|---------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------|
| ** **                                              | ** ** | ** **                                                                                               |
| **For the  quarterly period ended March 31, 2010** |
| ** **                                              | ** ** | ** **                                                                                               |
| **OR**                                                  |
| ** **                                              | ** ** | ** **                                                                                               |
| **o**                                                   | ** ** | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934** |

 

**COMMISSIONFILE NUMBER 001-32074**

 

###### **MINESMANAGEMENT, 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     o         |
|---------------------------------------------------------|--------|-----------------------------------------------------------|
|                                                    |   |                                                      |
| Non-accelerated  filer     o   |   | Smaller  reporting company     x |

 

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 14, 2010,23,100,109 shares of common stock, par value $0.001 per share, were issued andoutstanding.

 

 

##  

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

##  

Informationcontained in or incorporated by reference into this Quarterly Report on Form 10-Qmay contain forward looking statements, as that term is defined in the PrivateSecurities Litigation Reform Act of 1995. The use of any of the words “development”, “anticipate”, “continues”, “estimate”,“expect”, “may”, “project”, “should”, “believe”, or similar expressions areintended to identify such statements. Forward looking statements included in this report relate to, amongother things, comments regarding further exploration and evaluation of theMontanore Project, including planned rehabilitation and extension of the Libbyadit, drilling activities, feasibility determinations, engineering studies,environmental and permitting requirements, process and timing; estimates ofmineralized material and measured, indicated and inferred resources; financingneeds; sources of financing; planned expenditures for the remainder of 2010;potential completion of a bankable feasibility study; the markets for silverand copper; results of the hydrological model and the effects thereof; and thesearch for potential exploration and development opportunities in the mining industry.  We believe the expectations reflected inthose forward looking statements are reasonable.  However, we cannot assure that theexpectations will prove to be correct. Disclosure of important factors that could cause actual results todiffer materially from our expectations, or cautionary statements, are includedunder the heading “Risk Factors” in this report and our Annual Report on Form 10-Kfor the year ended December 31, 2009. Certain cautionary statements are also included elsewhere in this report,including, without limitation, in conjunction with the forward-lookingstatements.  All forward-lookingstatements speak only as of the date made. All subsequent written and oral forward-looking statements attributableto us, or persons acting on our behalf, are expressly qualified in theirentirety by the cautionary statements. Except as required by law, we undertake no obligation to update anyforward-looking statement.  Factors thatcould cause actual results to differ materially from our expectations include,among others, those factors referenced in the “Risk Factors” section of thisreport and our Annual Report on Form 10-K for the year ended December 31,2009 and such things as:

 

·                  Worldwide economic and political eventsaffecting the supply of and demand for silver and copper;

 

·                  Volatility in the market price for silverand copper;

 

·                  Financial market conditions and theavailability and cost of financing , or its availability on terms acceptable tous;

 

·                  Uncertainty regarding whether reserveswill be established at our Montanore Project;

 

·                  Uncertainties associated with developingnew mines;

 

·                  Variations in ore grade and othercharacteristics affecting mining, crushing, milling and smelting and mineralrecoveries;

 

·                  Geological, technical, permitting, miningand processing problems;

 

·                  The availability, terms, conditions andtiming of required governmental permits and approvals, and potential oppositionto the issuance of significant permits;

 

·                  Uncertainty regarding future changes inapplicable laws or implementation of existing laws;

 

·                  The availability of experiencedemployees;

 

·                  The availability of acquisition and otherbusiness opportunities (or the lack thereof) that may be presented and pursuedby us, the ability to finance such acquisitions, and success in integratingsuch acquisitions; and

 

·                  Other factors, many of which are beyondour control.

 

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**MINESMANAGEMENT, INC.**

**FORM 10-Q**

**QUARTERENDED March 31, 2010**

 

**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                                 | 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 5.                                  | Other Information                                                                           | 13       |
| ITEM 6.                                  | Exhibits                                                                                    | 13       |
|                                     |                                                                                        |     |
| SIGNATURES                               |                                                                                        | 14       |

 

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** **

**PART I— FINANCIAL INFORMATION**

** **

**ITEM1.**                                                     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* | *4-10*   |

 

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**MinesManagement, Inc. and Subsidiaries**

**(An Exploration Stage Company)**

**CONDENSED CONSOLIDATED BALANCE SHEETS(UNAUDITED)**

** **
| ** **                                                                                                                                   | ** ** | **March 31,********2010** | ** ** | **December 31,********2009** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------|------------|-----------------------------------|------------|
| ***Assets***                                                                                                                                 |       |                           |       |                              |       |
| *CURRENT ASSETS:*                                                                                                                            |       |                           |       |                              |       |
| Cash  and cash equivalents                                                                                                                   |       | $                              | 4,475,631  |                              | $          | 6,090,169 |   |
| Interest  receivable                                                                                                                         |       | 86,122                         |       | 64,964                            |       |
| Prepaid  expenses and deposits                                                                                                               |       | 106,237                        |       | 168,960                           |       |
| Certificate  of deposit                                                                                                                      |       | 5,000,000                      |       | 5,000,000                         |       |
| Total  current assets                                                                                                                        |       | 9,667,990                      |       | 11,324,093                        |       |
| * *                                                                                                                                     |       |                           |       |                              |       |
| *PROPERTY AND EQUIPMENT:*                                                                                                                    |       |                           |       |                              |       |
| Buildings  and leasehold improvements                                                                                                        |       | 836,454                        |       | 836,454                           |       |
| Equipment                                                                                                                                    |       | 6,450,089                      |       | 6,450,089                         |       |
| Office  equipment                                                                                                                            |       | 326,823                        |       | 320,060                           |       |
|                                                                                                                                         |       | 7,613,366                      |       | 7,606,603                         |       |
| Less  accumulated depreciation                                                                                                               |       | 2,657,742                      |       | 2,417,921                         |       |
|                                                                                                                                         |       | 4,955,624                      |       | 5,188,682                         |       |
| *OTHER ASSETS:*                                                                                                                              |       |                           |       |                              |       |
| Certificates  of deposit                                                                                                                     |       | 1,481,307                      |       | 1,481,307                         |       |
| Available-for-sale  securities                                                                                                               |       | 1,565,035                      |       | 1,245,897                         |       |
| Reclamation deposits                                                                                                                         |       | 1,236,846                      |       | 1,236,846                         |       |
|                                                                                                                                         |       | 4,283,188                      |       | 3,964,050                         |       |
|                                                                                                                                         |       | $                              | 18,906,802 |                              | $          | 20,476,825 |   |
| ***Liabilities and Stockholders’ Equity***                                                                                              |       |                           |       |                              |       |
| *CURRENT LIABILITIES:*                                                                                                                       |       |                           |       |                              |       |
| Accounts  payable                                                                                                                            |       | $                              | 520,916    |                              | $          | 546,030 |   |
| Payroll  and payroll taxes payable                                                                                                           |       | 38,282                         |       | 18,446                            |       |
| Warrant  derivatives                                                                                                                         |       | 1,303,188                      |       | 1,017,844                         |       |
| Total  current liabilities                                                                                                                   |       | 1,862,386                      |       | 1,582,320                         |       |
| * *                                                                                                                                     |       |                           |       |                              |       |
| *LONG-TERM LIABILITIES:*                                                                                                                     |       |                           |       |                              |       |
| Asset  retirement obligation                                                                                                                 |       | 399,748                        |       | 394,899                           |       |
| Total  liabilities                                                                                                                           |       | 2,262,134                      |       | 1,977,219                         |       |
| * *                                                                                                                                     |       |                           |       |                              |       |
| *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; 23,099,335 and  22,944,683 shares issued and outstanding, respectively |       | 23,099                         |       | 22,945                            |       |
|                                                                                                                                         |       |                           |       |                              |       |
| Additional  paid-in capital                                                                                                                  |       | 68,160,958                     |       | 66,908,698                        |       |
| Accumulated  deficit                                                                                                                         |       | (1,117,306                     | )          | (1,117,306                        | )          |
| Deficit  accumulated during the exploration stage                                                                                            |       | (50,160,605                    | )          | (46,734,115                       | )          |
| Accumulated  other comprehensive loss                                                                                                        |       | (261,478                       | )          | (580,616                          | )          |
| Total  stockholders’ equity                                                                                                             |       | 16,644,668                     |       | 18,499,606                        |       |
|                                                                                                                                         |       | $                              | 18,906,802 |                              | $          | 20,476,825 |   |

 

See accompanyingnotes to condensed consolidated financial statements.

 

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**MinesManagement, Inc. and Subsidiaries**

**(AnExploration Stage Company)**

**CONDENSED CONSOLIDATED STATEMENTS OFOPERATIONS (UNAUDITED)**

** **
| ** **                                                        | ** ** | **Three Months Ended********March 31,** | ** ** | **From Inception of  Exploration Stage  August 12, 2002  Through********March 31,** | ** ** |
|-------------------------------------------------------------------|------------|----------------------------------------------|------------|-----------------------------------------------------------------------------------------------|------------|
| ** **                                                        | ** ** | **2010**                                     | ** ** | **2009**                                                                                      | ** ** | **2010** | ** ** |
| *REVENUE:*                                                        |       |                                         |       |                                                                                          |       |   |   |
| Royalties                                                         |       | $                                            | 5,277      |                                                                                          | $          | 2,093 |   | $ | 88,869 |   |
| *OPERATING EXPENSES:*                                             |       |                                         |       |                                                                                          |       |   |   |
| General  and administrative                                       |       | 1,625,657                                    |       | 822,091                                                                                       |       | 22,222,658 |   |
| Technical services                                                |       | 1,031,963                                    |       | 1,564,780                                                                                     |       | 21,353,081 |   |
| Depreciation                                                      |       | 239,822                                      |       | 277,843                                                                                       |       | 2,661,689 |   |
| Legal,  accounting, and consulting                                |       | 263,256                                      |       | 119,470                                                                                       |       | 3,422,540 |   |
| Fees,  filing, and licenses                                       |       | 50,638                                       |       | 45,863                                                                                        |       | 2,088,679 |   |
| Exploration                                                       |       | —                                       |       | —                                                                                        |       | 165,176 |   |
| Impairment of mineral properties                                  |       | —                                       |       | —                                                                                        |       | 504,492 |   |
| Total  operating expenses                                         |       | 3,211,336                                    |       | 2,830,047                                                                                     |       | 52,418,315 |   |
| *LOSS FROM OPERATIONS*                                            |       | (3,206,059                                   | )          | (2,827,954                                                                                    | )          | (52,329,446 | ) |
| *OTHER INCOME (LOSS):*                                            |       |                                         |       |                                                                                          |       |   |   |
| Loss  from warrant derivatives                                    |       | (285,344                                     | )          | (272,217                                                                                      | )          | (826,807 | ) |
| Interest  income, net                                             |       | 64,913                                       |       | 106,391                                                                                       |       | 2,995,648 |   |
|                                                              |       | (220,431                                     | )          | (165,826                                                                                      | )          | 2,168,841 |   |
| *NET LOSS*                                                        |       | $                                            | (3,426,490 | )                                                                                             | $          | (2,993,780 | ) | $ | (50,160,605 | ) |
| *NET LOSS PER SHARE*(basic and diluted)                           |       | $                                            | (0.15      | )                                                                                             | $          | (0.13 | ) |   |   |
| *WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (basic and  diluted)* |       | 23,062,502                                   |       | 22,756,848                                                                                    |       |   |   |

 

See accompanyingnotes to condensed consolidated financial statements.

 

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**Mines Management, Inc. andSubsidiaries**

**(An Exploration Stage Company)**

**CONDENSED CONSOLIDATED STATEMENTS OFCASH 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**                        | ** ** | **2010**                                      | ** ** | **2009**                                                                                 | ** ** | **2010** | ** ** |
| *CASH FLOWS FROM OPERATING ACTIVITIES:*                                      |       |                                          |       |                                                                                     |       |   |   |
|                                                                         |       |                                          |       |                                                                                     |       |   |   |
| Net  loss                                                                    |       | $                                             | (3,426,490 | )                                                                                        | $          | (2,993,780 | ) | $ | (50,160,605 | ) |
| Adjustments  to reconcile net loss to net cash used in operating activities: |       |                                          |       |                                                                                     |       |   |   |
| Stock-based  compensation                                                    |       | 1,187,914                                     |       | 200,992                                                                                  |       | 8,298,634 |   |
| Stock  received for services                                                 |       | —                                        |       | —                                                                                   |       | (11,165 | ) |
| Depreciation                                                                 |       | 239,822                                       |       | 277,843                                                                                  |       | 2,661,689 |   |
| Initial  recognition of asset retirement obligation                          |       | —                                        |       | —                                                                                   |       | 344,187 |   |
| Accretion  of asset retirement obligation                                    |       | 4,849                                         |       | 4,519                                                                                    |       | 55,561 |   |
| Loss  from warrant derivatives                                               |       | 285,344                                       |       | 272,217                                                                                  |       | 826,807 |   |
| Impairment  of mineral properties                                            |       | —                                        |       | —                                                                                   |       | 504,492 |   |
| Changes  in assets and liabilities:                                          |       |                                          |       |                                                                                     |       |   |   |
| Interest  receivable                                                         |       | (21,158                                       | )          | (14,967                                                                                  | )          | (86,122 | ) |
| Prepaid  expenses and deposits                                               |       | 62,723                                        |       | 35,895                                                                                   |       | (166,648 | ) |
| Accounts  payable                                                            |       | (25,114                                       | )          | 213,004                                                                                  |       | 520,752 |   |
| Payroll  and payroll taxes payable                                           |       | 19,836                                        |       | 300                                                                                      |       | 35,102 |   |
| Net  cash used in operating activities                                       |       | (1,672,274                                    | )          | (2,003,977                                                                               | )          | (37,177,316 | ) |
| *CASH FLOWS FROM INVESTING ACTIVITIES:*                                      |       |                                          |       |                                                                                     |       |   |   |
| Purchase  of property and equipment                                          |       | (6,764                                        | )          | (79,525                                                                                  | )          | (7,650,899 | ) |
| Proceeds  from disposition of property and equipment                         |       | —                                        |       | —                                                                                   |       | 35,423 |   |
| Purchase  of certificates of deposit                                         |       | —                                        |       | (51,880                                                                                  | )          | (7,657,241 | ) |
| Purchase  of available-for-sale securities                                   |       | —                                        |       | —                                                                                   |       | (1,815,348 | ) |
| Increase  in mineral properties                                              |       | —                                        |       | —                                                                                   |       | (144,312 | ) |
| Net  cash used in investing activities                                       |       | (6,764                                        | )          | (131,405                                                                                 | )          | (17,232,377 | ) |
| *CASH FLOWS FROM FINANCING ACTIVITIES:*                                      |       |                                          |       |                                                                                     |       |   |   |
| Net  proceeds from sale of common stock                                      |       | 64,500                                        |       | —                                                                                   |       | 58,837,989 |   |
| *NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS*                       |       | (1,614,538                                    | )          | (2,135,382                                                                               | )          | 4,428,296 |   |
| *CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD*                             |       | 6,090,169                                     |       | 15,448,159                                                                               |       | 47,335 |   |
| *CASH AND CASH EQUIVALENTS, END OF PERIOD*                                   |       | $                                             | 4,475,631  |                                                                                     | $          | 13,312,777 |   | $ | 4,475,631 |   |
| *SUPPLEMENTAL INFORMATION:*                                                  |       |                                          |       |                                                                                     |       |   |   |
|                                                                         |       |                                          |       |                                                                                     |       |   |   |
| Interest  paid                                                               |       | $                                             | —     |                                                                                     | $          | 14,904 |   | $ | 65,768 |   |

 

See accompanyingnotes to condensed consolidated financial statements.

 

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** **

**NOTE 1  — ORGANIZATION AND SUMMARY OF SIGNIFICANTACCOUNTING 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 AccountingPolicies:*

##  

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 theinformation and footnotes required by generally accepted accounting principlesfor complete financial statements. In the opinion of the Company’s management,all adjustments (consisting solely of normal recurring accruals) considerednecessary for a fair presentation of the interim financial statements have beenincluded.

 

Thepreparation of financial statements in accordance with U.S. generally acceptedaccounting principles requires the use of estimates and assumptions that affectthe reported amounts of assets and liabilities, disclosure of contingent assetsand liabilities known to exist as of the date the financial statements arepublished, and the reported amounts of revenues and expenses during thereporting period. Uncertainties with respect to such estimates and assumptionsare inherent in the preparation of the Company’s consolidated financialstatements; accordingly, it is possible that the actual results could differfrom these estimates and assumptions, which could have a material effect on thereported amounts of the Company’s consolidated financial position and resultsof operations. Operating results for the three month period ended March 31,2010, are not necessarily indicative of the results that may be expected forthe full year ending December 31, 2010.

 

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, 2009.

 

*(a)*                                  Exploration Stage Enterprise

* *

Sincethe Company is in the exploration stage of operation, the Company’s financialstatements are prepared in accordance with the provisions of ASC 915*Development Stage Enterprises*, as itdevotes substantially all of its efforts to acquiring and exploring mininginterests that management believes should eventually provide sufficient netprofits to sustain the Company’s existence. Until such interests are engaged in commercial production, the Companywill continue to prepare its consolidated financial statements and relateddisclosures in accordance with this standard.

 

*(b)*                                 Mining properties, exploration anddevelopment costs

* *

Allexploration expenditures are expensed as incurred.  Significant property acquisition payments foractive exploration properties are capitalized, including payments to acquire mineralrights.  Once a feasibility study hasbeen completed, approved by management, and a decision is made to put the orebody 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)*                                  Fair value measurements

* *

TheCompany discloses the inputs used to develop the fair value measurements forthe Company’s financial assets and liabilities that are measured at fair valueon a recurring basis as well as the level within the fair value hierarchy inwhich the fair value measurements in their entirety fall.  The three levels of the fair value hierarchyare as follows:

 

Level 1:  Unadjusted quoted market prices in activemarkets for identical assets or liabilities that are accessible at themeasurement date.

 

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Level 2:  Quoted prices in inactive markets foridentical assets or liabilities, quoted prices for similar assets orliabilities in active markets, or other observable inputs either directlyrelated to the asset or liability or derived principally from corroboratedobservable market data.

 

Level 3:  Unobservable inputs due to the fact thatthere is little or no market activity.

 

*(d)*                                 Stock compensation

* *

TheCompany measures and records the costs of employee services received in exchangefor an award of equity instruments based on the grant-date fair value of theaward, recognized over the period during which an employee is required toprovide services in exchange for such award. Compensation cost is recognized for awards granted and for awardsmodified, repurchased or cancelled.  At March 31,2010, the Company had three stock option plans which are described more fullyin note 10.

 

*(e)*                                  Net loss per share

* *

Basicearnings or loss per share is computed on the basis of the weighted averagenumber of shares outstanding during the periods.   Diluted earnings or loss per share iscalculated on the basis of the weighted average number of shares outstandingduring the period plus the effect of potential dilutive shares during theperiod.  Potential dilutive sharesinclude outstanding stock options and warrants. For periods in which a net loss is reported, potential dilutive sharesare excluded because they are antidilutive. Therefore, basic loss per share is the same as diluted loss per sharefor the periods ended March 31, 2010 and 2009.

 

*(f)*                                    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.

 

(g)                                 *Subsequent events*

 

TheCompany evaluated events and transactions subsequent to the balance sheet dateof March 31, 2010 for potential recognition or disclosure in the condensedconsolidated financial statements.  Therewere no subsequent events that require recognition or disclosure in thesefinancial statements.

 

*(h)*                                 New accounting standards

* *

In January 2010,the FASB issued Accounting Standards Update No. 2010-06 (ASU 2010-06), anupdate to ASC 820, “Fair Value Measurements and Disclosures”.  This update provides new disclosures on fairvalue measurements as follows:  (i) theamounts and reasons for significant transfers in and out of Levels 1 and 2 fairvalue measurements, and (ii) the activity in Level 3 fair value measurements,including information about purchases, sales, issuances, and settlements on agross basis rather than as one net number.

 

This update also providesamendments that clarify existing disclosures required in ASC 820 as follows: (1) Fairvalue measurement disclosures for each class of assets and liabilities.  A class is often a subset of assets orliabilities within a line item in the statement of financial position.  (2) Disclosures about valuationtechniques and inputs used to measure fair value for both recurring andnonrecurring fair value measurements are required for fair value measurementsthat fall in either Level 2 or Level 3.

 

The new disclosures andclarifications of existing disclosures are effective for interim and annualreporting periods beginning after December 15, 2009, except for thedisclosures about the activity in Level 3 fair value measurements which areeffective for fiscal years beginning after December 15, 2010, and forinterim periods within those fiscal years. Adoption of this guidance did not have a material impact on ourconsolidated financial statements.

 

**NOTE 2  — CERTIFICATES OF DEPOSIT:**

** **

TheCompany owns two certificates of deposit for a total of $1,481,307.  These investments mature in August 2011and bear interest at the rate of 2.57%. The Company also owns a $5,000,000 certificate of deposit which maturesin June 2010 and bears interest at the rate of 1.49%.

 

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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 3,2011, bears interest at the rate of 1.64% and automatically renewsannually.  This certificate of deposit($1,175,935 at March 31, 2010 and 2009, respectively) is included withreclamation deposits on the Condensed Consolidated Balance Sheets.

 

**NOTE 3  — AVAILABLE-FOR-SALE SECURITIES:**

** **

Available-for-salesecurities are comprised of common stocks which have been valued using quoted marketprices in active markets.  The followingtable summarizes the Company’s available-for-sale securities:

 
| ** **         | ** ** | **March 31,********2010** | ** ** | **December 31,  2009** | ** ** |
|--------------------|------------|--------------------------------|------------|-----------------------------|------------|
| Cost               |       | $                              | 1,826,513  |                        | $          | 1,826,513 |   |
| Unrealized  Gains  |       | 13,169                         |       | 14,080                      |       |
| Unrealized  Losses |       | (274,647                       | )          | (594,696                    | )          |
| Fair  Market Value |       | $                              | 1,565,035  |                        | $          | 1,245,897 |   |

 

TheCompany has one investment in a marketable equity security with a fair marketvalue of $1,540,701 and unrealized losses of $274,647 as of March 31,2010.  The Company has evaluated thisinvestment and does not consider it to be other-than-temporarily impaired.  The fair market value of this investment hasfluctuated in response to the effect of the financial crisis on the commoditiesmarket and is expected to recover.  TheCompany has the ability and intent to hold this investment for a reasonableperiod of time sufficient for a forecasted recovery of fair value.

 

**NOTE 4  —FAIR VALUE MEASUREMENTS:**

 

The following table summarizes the Company’s financial assets andliabilities that were accounted for at fair value on a recurring basis as of March 31,2010, and the fair value calculation input hierarchy level determined to applyto each asset and liability category. Quoted market prices were used to determine the fair value ofavailable-for-sale securities.  See note1 for further discussion on the fair value measurement technique used to valuethe warrant derivatives.  The Company hasno financial assets or liabilities that are measured at fair value on anonrecurring basis.

 
| ** **                    | ** ** | **Balance at   March 31,  2010** | ** ** | **Balance at   December   31, 2009** | ** ** | **Input  Hierarchy********Level** | ** ** |
|-------------------------------|------------|--------------------------------------------|------------|-------------------------------------------|------------|-----------------------------------|------------|
| Assets:                       |       |                                       |       |                                      |       |                              |       |
| Available-for-sale securities |       | $                                          | 1,565,035  |                                      | $          | 1,245,897                         |       | Level 1 |   |
| Liabilities:                  |       |                                       |       |                                      |       |                              |       |
| Warrant derivatives           |       | $                                          | 1,303,188  |                                      | $          | 1,017,844                         |       | Level 3 |   |
| Asset retirement obligation   |       | $                                          | 399,748    |                                      | $          | 394,899                           |       | Level 3 |   |

 

Thefollowing table presents the fair value reconciliation of Level 3 liabilitiesmeasured at fair value during the three months ended March 31, 2010:

 
| ** **           | ** ** | **Warrant   Derivatives** | ** ** | **Asset Retirement  Obligation** | ** ** |
|----------------------|------------|---------------------------|------------|----------------------------------|------------|
| Beginning  balance   |       | $                         | 1,017,844  |                             | $          | 394,899 |   |
| Accretion  expense   |       | —                    |       | 4,849                            |       |
| Loss  on derivatives |       | 285,344                   |       | —                           |       |
| Ending  balance      |       | $                         | 1,303,188  |                             | $          | 399,748 |   |

 

**NOTE 5  — 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.  The following table summarizesactivity in the Company’s ARO.

 
| ** **                  | ** ** | **Three Months  Ended********March 31, 2010** | ** ** | **Year Ended********December 31,  2009** | ** ** |
|-----------------------------|------------|----------------------------------------------------|------------|-----------------------------------------------|------------|
| Balance  January 1,    |       | 394,899                                            |       | 376,233                                       |       |
| Accretion  expense          |       | 4,849                                              |       | 4,519                                         |       |
| Balance  March 31,     |       | 399,748                                            |       | 380,752                                       |       |
| Accretion  expense          |       |                                               |       | 4,625                                         |       |
| Balance  June 30,      |       |                                               |       | 385,377                                       |       |
| Accretion  expense          |       |                                               |       | 4,732                                         |       |
| Balance  September 30, |       |                                               |       | 390,109                                       |       |
| Accretion  expense          |       |                                               |       | 4,790                                         |       |
| Balance  December 31,  |       |                                               |       | 394,899                                       |       |

 

TheCompany has a certificate of deposit which is pledged as security for a Letterof Credit to the Montana Department of Environmental Quality as a reclamationguarantee for the Montanore expansion evaluation program which is discussedfurther in note 2.

 

**NOTE 6  — WARRANT DERIVATIVES:**

** **

EffectiveJanuary 1, 2009, the Company adopted the provisions of ASC 815, *Derivatives and Hedging,*which applies to any freestandingfinancial instruments or embedded features that have the characteristics of aderivative and to any freestanding financial instruments that are potentiallysettled in an entity’s own common stock. As a result of adopting these new provisions, some of the Company’sissued and outstanding common stock purchase warrants previously treated asequity pursuant to the derivative treatment exemption were no longer affordedequity treatment.  As such, effective January 1,2009 the Company reclassified the fair value of these common stock purchasewarrants, which have exercise

 

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pricereset features, from equity to liability status as if these warrants weretreated as a derivative liability since their date of issue.  On January 1, 2009, the Companyreclassified from additional paid-in capital, as a cumulative effectadjustment, $476,381 to beginning retained earnings to recognize the fair valueof the warrants on that date.  TheCompany reported losses from the change in fair value of these warrants of$285,344 and $272,217 in the Condensed Consolidated Statements of Operationsfor the three months ended March 31, 2010 and 2009, respectively.

 

Thesecommon stock purchase warrants were initially issued in connection with ourissuance of common shares in 2004 and 2005 and were not issued with the intentof effectively hedging any future cash flow, fair value of any asset, liabilityor any 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,  2010** | ** ** | **March 31,  2009** | ** ** |
|--------------------------------------------|------------|--------------------------|------------|--------------------------|------------|
| Weighted  average risk-free interest rate  |       | 0.22                     | %          | 0.76                     | %          |
| Weighted  average volatility               |       | 98.62                    | %          | 91.80                    | %          |
| Expected  dividend yield                   |       | —                   |       | —                   |       |
| Weighted  average expected life (in years) |       | 0.5                      |       | 1.4                      |       |

 

Expectedvolatility is based primarily on historical volatility.  Historical volatility was computed usingweekly pricing observations for recent periods that correspond to the lasttwenty-four months.  We believe thismethod produces an estimate that is representative of our expectations offuture volatility over the expected term of these warrants.  We currently have no reason to believe futurevolatility over the expected remaining life of these warrants is likely todiffer materially from historical volatility. The expected life is based on the remaining term of the warrants.  The risk-free interest rate is based on threemonth and six month U.S. Treasury securities.

 

**NOTE 7 — COMPREHENSIVELOSS:**

** **

Forthe three months ended March 31, 2010 and 2009, comprehensive loss was$3,107,352 and $2,674,770, respectively. The difference between net loss and comprehensive loss was due tounrealized gains (losses) on the Company’s marketable securities.

 

**NOTE 8 — CONCENTRATIONOF CREDIT RISK:**

** **

The Companymaintains its cash and cash equivalents in one financial institution.  FDIC deposit insurance has been temporarilyincreased to $250,000 through December 31, 2013.  On January 1, 2014, the limit willreturn to $100,000.  The Company’s totaluninsured bank deposit balance totaled approximately $12,270,000 as of March 31,2010.  To date, the Company has notexperienced a material loss or lack of access to its invested cash or cashequivalents; however, no assurance can be provided that access to the Company’sinvested cash and cash equivalents will not be impacted by adverse conditionsin the financial markets.

 

**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.  These warrants, which we referto as the 2004 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 2007in accordance with the terms of the 2004 warrant agreement.  In January of 2009, the Company extendedthe expiration date of the outstanding warrants to February 10, 2010.  In February of 2010, the Companyextended the expiration date of the 2004 Warrants to June 10, 2010 andreduced the exercise price to $2.56 per share. Cumulative warrants exercised relating to this issue were 148,750 at March 31,2010 and December 31, 2009.

 

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 

 

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warrantsto purchase up to 737,084 shares of common stock at $8.25 per share through October 20,2010, which included 3.75% warrant compensation, or warrants to purchase228,750 common shares, issued to the finder. These warrants, which we refer to as the 2005 Warrants, were repriced at$5.00 per share in April 2007, to $4.00 per share in November 2007,and to $2.56 per share in February 2010, in accordance with theanti-dilution provisions of the 2005 warrant agreement.  To date, no warrants relating to this issuehave 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 ofcommon stock at a price of $5.75 per share. The warrants are listed on the Toronto Stock Exchange and are tradablein US dollars under the symbol MGT.WT.U.

 

Theunderwriters were granted an over-allotment option, exercisable for a period of30 days following the closing, to acquire up to an additional 900,000units.   On May 7, 2007, theunderwriters exercised 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.

 

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 firstproposal and a right to match third-party proposals, to purchase all or anyportion of silver 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.

 

On February 9, 2010, the Company extended the expiration date andreduced the price of the 2004 Warrants described above.  Upon adjustment to the exercise price of the2004 Warrants, the 2005 Warrants were automatically adjusted in accordance withtheir terms to reduce the exercise price and increase the number of commonshares purchasable upon exercise of such warrants.  The following table summarizes exerciseprices and expiration dates of the Company’s outstanding common stock purchasewarrants as of March 31, 2010.

 
| **Number of  Warrants** | ** ** | **Exercise Price** | ** ** | **Expiration Date** | ** **            |
|-------------------------|------------|--------------------|------------|---------------------|-----------------------|
| 362,250                 |       | $                  | 2.56       |                | June 10, 2010    |   |
| 2,375,368               |       | $                  | 2.56       |                | October 20, 2010 |   |
| 3,418,300               |       | $                  | 5.75       |                | April 20, 2012   |   |
| 6,155,918               |       |               |       |                |                  |

 

## *Preferred Stock:*

##  

TheCompany has authorized 10,000,000 shares of no par value preferred stock.  Through March 31, 2010, 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.

 

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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 obtained in May 2008,the 2007 Equity Incentive Plan (the “2007 Plan”), which provides for theissuance of both qualified and nonqualified stock options and restricted sharesto directors, 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.

 

Repricingof stock options is permitted under the terms of the 2007 Plan as approved byshareholders.  Effective January 1,2010, the Company terminated its policy of repricing stock options when themarket price of the stock was $1.00 below the exercise price of the outstandingoption.  The Company may still considerrepricing stock options in the event of significant and sustained adversemarket conditions or other extraordinary events.   Repriced stock options have the same vestingschedule and expiration date as the original options.  There were no stock options repriced during2009 or 2010.  During 2008, the Companyrepriced 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 $-0- and$50,200 for the three months ended March 31, 2010 and 2009, respectively.

 

Asummary of the option activity under the Plans as of March 31, 2010, andchanges during the period then ended, is presented below:

 
| ** **                           | ** ** | **Number of  Options** | ** ** | **Weighted-  Average  Exercise  Price** | ** ** | **Weighted-  Average  Remaining  Contractual  Term** | ** ** | **Aggregate  Intrinsic Value** | ** ** |
|--------------------------------------|------------|------------------------|------------|-----------------------------------------|------------|------------------------------------------------------|------------|--------------------------------|------------|
| Outstanding  at January 1, 2010 |       | 1,666,000              |       | $                                       | 1.39       |                                                 |       |                           |       |   |
| Issued                               |       | 693,000                |       | $                                       | 2.61       |                                                 |       |                           |       |   |
| Exercised                            |       | (220,000               | )          | $                                       | 1.23       |                                                 |       |                           |       |   |
| Outstanding  at March 31, 2010  |       | 2,139,000              |       | $                                       | 1.80       |                                                 | 3.46       |                           | $          | 1,808,090 |   |
| Exercisable  at March 31, 2010  |       | 2,049,000              |       | $                                       | 1.76       |                                                 | 3.48       |                           | $          | 1,782,290 |   |

 

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,** | ** ** |
|--------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                 | ** ** | **2010**                                     | ** ** | **2009(1)** | ** ** |
| Weighted  average risk-free interest rate  |       | 1.39                                         | %          | — |   |
| Weighted  average volatility               |       | 98.44                                        | %          | — |   |
| Expected  dividend yield                   |       | —                                       |       | — |   |
| Weighted  average expected life (in years) |       | 3.56                                         |       | — |   |
| Weighted  average grant-date fair value    |       | $                                            | 1.71       |   | — |   |
|                                            |            |                                              |            |  |  |  |

 

----

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

 

Duringthe three months ended March 31, 2010, there were 220,000 stock optionsexercised with a weighted average exercise price of $1.23.  The total intrinsic value of optionsexercised during the three months ended March 31, 2010 was $284,356.  There were no options exercised during thethree months ended March 31, 2009.

 

Asummary of the status of the Company’s nonvested options as of March 31,2010, and changes during the period then ended, is presented below:

 

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| ** **                         | ** ** | **Number of  Options** | ** ** | **Weighted-  Average  Grant-Date  Fair Value** | ** ** |
|------------------------------------|------------|------------------------|------------|------------------------------------------------|------------|
| Nonvested  at January 1, 2010 |       | 90,000                 |       | $                                              | 1.01       |   |
| Granted                            |       | —                 |       | —                                         |       |
| Vested                             |       | —                 |       | —                                         |       |
| Nonvested  at March 31, 2010  |       | 90,000                 |       | $                                              | 1.01       |   |

 

As of March 31,2010, there was $4,904 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$1,187,914 and $200,992 for the three months ended March 31, 2010 and2009, respectively.  These costs wereincluded in general and administrative expenses and technical services on theCondensed Consolidated Statements of Operations.  Cash received from options exercised underall share-based payment arrangements during the three months ended March 31,2010 and 2009 was $64,500 and $-0-, respectively.

 

**ITEM 2.**                         MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF 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 31,2009, 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.

 

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.

 

## **Overview**

##  

In thefirst quarter of 2010:

 

·                  The U.S. Forest Service (USFS) and theMontana Department of Environmental Quality (DEQ) continued compiling responsesto comments from the public received on the Draft Environmental ImpactStatement (DEIS) for the Montanore Project.

 

·                  The Company’s exploration and corporatedevelopment team continued to examine additional opportunities in North Americaand Latin America.

 

·                  The Company maintained a strong cash andinvestment position at March 31, 2010, with $11.0 million of unrestrictedcash and certificates of deposit.

 

·                  Mines Management entered into anagreement with Mine Quarry Engineering Services to begin preparation of apreliminary economic assessment (PEA) and review and update of our 43-101Canadian Instrument for the Montanore Project in April 2010.

 

·                  The Company continued its program toreduce expenditures and conserve cash pending the completion of permitting.

 

Thenet decrease in cash and cash equivalents for the quarter ended March 31,2010 was approximately $1.6 million.  Management has reviewed the near term spending forecast and implementeda plan to diligently conserve cash where prudent. Given our current cashposition and certificates of deposit of approximately $11.0 million on March 31,2010, we expect to require approximately $10.0 million of external financing in2010 to fund the final phases of the advanced exploration program anddelineation drilling program and completion of a bankable feasibilitystudy.  The Company intends to investigatefinancing opportunities and options from equity and debt financing during thecurrent year.

 

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## **AdvancedExploration and Delineation Drilling Program**

##  

Libby operations in thefirst quarter of 2010 included continued operations on the Montanore site watertreatment system and dewatering of the decline. Water from the decline is being treated on day shift at a rate of 350gallons per minute which equates to approximately 72 gallons per minute ofwater inflow into the decline from the formations.  Monitoring continues to provide data for thehydrological data base that is currently under development through ourhydrology contractor.  We expect that theresulting model will affirm our position on the water issues being consideredby the agencies in the permitting process.

 

A contract was awarded toMine Quarry Engineering Services (MQES) in April to provide an update tothe NI 43-101 report on mineral resources and to carry out work for aPreliminary Economic Assessment (PEA).

 

Engineering and geologywork continues using existing information.  Geology work has concentratedon the basic resource model in support of the NI 43-101 review being done byMQES.  Engineering work is concentratedon the gathering and preparation of supporting documents and summarizinginformation for the MQES PEA study.

 

## **Permittingand Environmental**

##  

In the first quarter of2010, the USFS and the Montana DEQ continued work on addressing commentsgenerated by the public on the DEIS.  This included work sessions with theU.S. Environmental Protection Agency (EPA) and the Army Corps of Engineers(Corps).  In addition, the agencies continued their internal review of thevarious transmission line alternatives and modifications that could addresspublic comments generated.

 

The Company has beenworking closely with the agencies on several key elements of the project thatinvolved hydrology, waste characterization, and water balance/chemical loadingmodel.  The hydrology model predicts mine inflow and the Company expectsthat it is close to consensus with the various agencies on this issue.

 

Hydrologic testscompleted in the Libby decline in 2009 were compiled and incorporated into thehydrologic model.  This information provided an important insight topredicted mine inflow, that was previously modeled with historic data generatedby Noranada Minerals Corporation.

 

The Company continued toexpand the current information on water balances and incorporated an extensivechemical loading model to assist in predicting water quality from variouslocations of the project.  All supplemental information generatedcontinues to support the DEIS characterization and environmental analyses andwere completed to address public comments.

 

While the Companybelieves a final EIS may still be completed in 2010, it can offer no assurancesin respect of the timing of a final EIS because the duration and success of ourpermitting efforts are contingent upon many variables not within ourcontrol.  For example, in the worksessions described above, the EPA submitted comments relating to the MontanoreProject’s hydrologic model, waste characterization and water management.  The Company is working diligently with theUSFS to address these comments but, despite our best efforts, the USFS mayrequire the DEIS to be supplemented.  Anysuch supplemented DEIS would be issued for public notice and comment and wouldlikely delay the completion of a final EIS to 2011.

 

Work continued with theCorps for permitting issues related to the 404 Permit, which is required forthe tailings impoundment.  The Company completed preliminary wetlandmitigation plans that the Corps, along with the EPA, will consider in theiroverall analysis.  The Corps previously determined that the Poormantailings facility alternative was its Least Damaging Preferred Alternative(LDPA) and to address public comments the Corps re-analyzed the variousalternatives considered previously.  It appears that Corps will continueto select the Poorman tailings site as their LDPA.

 

The EIS contractorcontinues to develop responses and text edits to the document that addressespublic comments.  The Company continues to participate in the process andprovide additional technical information when and where needed.

 

## **Financialand 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 inproduction.  The Company continues toexpense all of its expenditures when incurred, with the exception of equipment 

 

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whichis capitalized.  Financial results ofoperations include primarily interest income, general and administrativeexpenses, permitting, project advancement and engineering expenses.

 

**Quarter Ended March 31, 2010**

 

TheCompany reported a net loss for the quarter ended March 31, 2010 of $3.4million, or $0.15 per share, compared to a net loss of $3.0 million, or $0.13per share, for the quarter ended March 31, 2009.  The $0.4 million increase in net loss in thefirst quarter of 2010 is attributable to increases in general andadministrative expenses of $0.8 million over the first quarter of 2009,principally due to the issuance of stock options in January 2010 of $0.9million offset by merger and acquisition consulting fees in 2009 of $0.1million. Technical service expenses were $0.5 million less in 2010 due tosuspending work by our underground mining contractor, Small Mine Development,for site rehabilitation, sump construction and dewatering in April 2009.  Legal and accounting expenses increased by$0.1 million in the first quarter of 2010 over the comparable 2009 period dueto responding to a SEC comment letter, updating the title opinion on theMontanore property and responding to the EPA comments to the draft EIS.

 

## **Liquidity**

##  

Duringthe quarter ended March 31, 2010, the net cash used for operatingactivities was approximately $1.7 million, which consisted largely ofpermitting and technical expenses associated with activities at the MontanoreProject site.  This was offset by $0.1million received from stock option exercises during the first quarter of 2010.

 

We aretaking steps to continue to reduce activity levels, including capitalexpenditures, until the timing of the Record of Decision becomes moreclear.  We anticipate expenditures ofapproximately $4.5 million for the final three quarters of 2010, which willconsist of $0.6 million per quarter for general and administrative expenses and$0.4 million per quarter for ongoing expense for the delineation drilling andmine scoping studies for the Montanore Project, and $0.5 million per quarterfor ongoing permitting and environmental expenses to finalize the EIS. Givenour current cash position and certificates of deposit of approximately $11.0million on March 31, 2010, we expect to require approximately $10.0million of external financing in 2010 to fund the final phases of the advancedexploration program and delineation drilling program and completion of abankable feasibility study.  The Companyintends to investigate financing opportunities and options from equity and debtfinancing during the current year.

 

**Off-Balance Sheet Arrangements**

 

At March 31,2010, 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 RISKAND HEDGING ACTIVITIES

** **

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 securities rated “investment grade” or better.

 

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 theU.S. dollar 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

** **

Ourmanagement, with the participation of Glenn M. Dobbs, the Company’s Presidentand CEO, and James H. Moore, the Company’s Chief Financial Officer andTreasurer, has evaluated the Company’s disclosure controls and procedures as of

 

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March 31,2010.  Based upon this evaluation, theChief Executive Officer and Chief Financial Officer concluded that the Company’sdisclosure controls and procedures are designed and were effective as of March 31,2010 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.

 

As part of our year-endfinancial close and reporting process for 2009, we reevaluated our controlsover the accounting and reporting for property and equipment transactions andredesigned them, which included the development of policies to ensure that theappropriate level of review is performed on all such transactions so that theyare reported properly as capitalized assets or expensed as explorationcosts.  The changes were made during the quarter ended March 31,2010.

 

**PART II— OTHER INFORMATION**

** **

**ITEM1.**                             LEGAL PROCEEDINGS

** **

None.

 

**ITEM 1A.**                    RISKFACTORS

** **

In addition to the other information set forth in this report, youshould carefully consider the factors discussed in ‘‘Risk Factors’’ in ourAnnual Report on Form 10-K for the year ended December 31, 2009,which could materially affect our business, financial condition and/or futureresults.  The risks described in ourAnnual Report on Form 10-K are not the only risks facing us.  Additional risks and uncertainties notcurrently known to us or that we currently deem to be immaterial also maymaterially adversely affect our business, financial condition and/or operatingresults.

 

**ITEM2.**                             UNREGISTERED SALES OF EQUITY SECURITIES AND USE OFPROCEEDS

** **

None.

 

**ITEM3.**                             DEFAULTS UPON SENIOR SECURITIES

** **

None.

 

**ITEM5.**                             OTHER INFORMATION

** **

None.

 

**ITEM6.**                             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) |

 

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# **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 14, 2010  | By:                    |    /s/  Glenn M. Dobbs |
|                    |                   |    Glenn  M. Dobbs |
|                    |                   |    President  and Chief Executive Officer |
|                    |                   |   |
|                    |                   |   |
|                    |                   |   |
| Date: May 14, 2010 | By:                    |    /s/  James H. Moore |
|                    |                   |    James  H. Moore |
|                    |                   |    Chief  Financial Officer |

 

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