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

 

**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**WASHINGTON, DC 20549**

 

**FORM 10-Q**

 
| **(MARK ONE)**                                                                                                                                                                                                                                                                                                                                                                | ** ** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------|
| ** **                                                                                                                                                                                                                                                                                                                                                                    | ** ** | ** ** |
| **x****      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED September 30,  2007.**                                                                                                                                                                                          |
| ** **                                                                                                                                                                                                                                                                                                                                                                    | ** ** | ** ** |
| **o****       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.**

(Exact Name of Registrant as Specified in itsCharter)

 

| **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’s Telephone Number, IncludingArea Code)

 

Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days. **x Yes**    oNo

 

Indicate by check mark whether the registrant is a large acceleratedfiler, and accelerated filer, or a non-accelerated filer. See definition of“accelerated filer and large accelerated filer” in Rule 12b-2 of the ExchangeAct. (Check one):

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

 

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

 

At November 6, 2007, 22,236,067 shares of common stock, par value$0.001 per share, were issued and outstanding.

 

SEC 1296 (9-05)            Potentialpersons who are to respond to the collection of information contained in thisform are not required to respond unless the form displays a currently valid OMBcontrol number.

 

 

----

 

MINES MANAGEMENT, INC.

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2007

 

INDEX

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

 

2

----

 

# **PARTI – FINANCIAL INFORMATION**

# ** **

## **ITEM1. FINANCIAL STATEMENTS (UNAUDITED)**

## ** **

**MINES MANAGEMENT, INC.**

**AND SUBSIDIARIES**

 

#### **Consolidated Financial Statements**

#### ** **

**September 30, 2007 and 2006**

 

3

----

 

**MinesManagement, Inc. and Subsidiaries**

 

**Contents**

** **
| *FINANCIAL STATEMENTS:*                                 | * * | * * |
|---------------------------------------------------------|----------|----------|
| * *                                                | * * | * * |
| *Consolidated balance sheets*                           | * * | * * |
| * *                                                | * * | * * |
| *Consolidated  statements of operations*                | * * | * * |
| * *                                                | * * | * * |
| *Consolidated  statements of stockholders’ equity* | * * | * * |
| * *                                                | * * | * * |
| *Consolidated  statements of cash flows*                | * * | * * |
| * *                                                | * * | * * |
| *Notes to  consolidated financial statements*           | * * | * * |

 

4

----

 

**MinesManagement, Inc. and Subsidiaries**

 

**ConsolidatedBalance Sheets****(unaudited)**

 
| ** **                                                                                                                                   | ** ** | **September 30,********2007** | ** ** | **December 31,********2006** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------|------------|-----------------------------------|------------|
| ** **                                                                                                                                   | ** ** | ** **                         | ** ** | ** **                        | ** ** |
| ***Assets***                                                                                                                                 |       |                               |       |                              |       |
| *CURRENT ASSETS:*                                                                                                                            |       |                               |       |                              |       |
| Cash and cash equivalents                                                                                                                    |       | $                                  | 26,286,391 |                              | $          | 743,652 |   |
| Interest receivable                                                                                                                          |       | 50,681                             |       | 64,426                            |       |
| Prepaid expenses and deposits                                                                                                                |       | 414,618                            |       | 71,118                            |       |
| Total current assets                                                                                                                         |       | 26,751,690                         |       | 879,196                           |       |
|                                                                                                                                         |       |                               |       |                              |       |
| *MINERAL PROPERTIES*                                                                                                                         |       | 504,492                            |       | 504,492                           |       |
|                                                                                                                                         |       |                               |       |                              |       |
| *PROPERTY AND EQUIPMENT:*                                                                                                                    |       |                               |       |                              |       |
| Construction in progress                                                                                                                     |       | 1,773,654                          |       | —                            |       |
| Mine buildings and leasehold improvements                                                                                                    |       | 794,641                            |       | 172,535                           |       |
| Equipment                                                                                                                                    |       | 2,297,341                          |       | 259,914                           |       |
| Office equipment                                                                                                                             |       | 290,206                            |       | 222,514                           |       |
|                                                                                                                                         |       | 5,155,842                          |       | 654,963                           |       |
| Less accumulated depreciation                                                                                                                |       | 297,733                            |       | 156,280                           |       |
|                                                                                                                                         |       | 4,858,109                          |       | 498,683                           |       |
|                                                                                                                                         |       |                               |       |                              |       |
| *INVESTMENTS:*                                                                                                                               |       |                               |       |                              |       |
| Certificates of deposit                                                                                                                      |       | 2,601,276                          |       | 4,370,253                         |       |
| Available-for-sale securities                                                                                                                |       | 213,075                            |       | 77,844                            |       |
|                                                                                                                                         |       | 2,814,351                          |       | 4,448,097                         |       |
|                                                                                                                                         |       | $                                  | 34,928,642 |                              | $          | 6,330,468 |   |
|                                                                                                                                         |       |                               |       |                              |       |
| ***Liabilities and Stockholders’ Equity***                                                                                              |       |                               |       |                              |       |
| *CURRENT LIABILITIES:*                                                                                                                       |       |                               |       |                              |       |
| Accounts payable                                                                                                                             |       | $                                  | 1,662,377  |                              | $          | 301,667 |   |
| Due to officer                                                                                                                               |       | 2,398                              |       | 2,398                             |       |
| Payroll payable                                                                                                                              |       | 4,552                              |       | —                            |       |
| Payroll taxes payable                                                                                                                        |       | 8,031                              |       | 3,549                             |       |
| Total current liabilities                                                                                                                    |       | 1,677,358                          |       | 307,614                           |       |
|                                                                                                                                         |       |                               |       |                              |       |
| *CONTINGENCIES & COMMITMENTS*                                                                                                            |       |                               |       |                              |       |
|                                                                                                                                         |       |                               |       |                              |       |
| *STOCKHOLDERS’ EQUITY:*                                                                                                                 |       |                               |       |                              |       |
| Common stock – 100,000,000 shares, $0.001  par value authorized; 19,736,067 and 12,849,467 shares issued and  outstanding, respectively |       | 19,736                             |       | 12,849                            |       |
| Preferred stock – 10,000,000 shares, no par  value, authorized; -0- shares issued and outstanding                                       |       | —                             |       | —                            |       |
| Additional paid-in capital                                                                                                                   |       | 54,503,656                         |       | 22,268,710                        |       |
| Accumulated deficit                                                                                                                          |       | (1,117,306                         | )          | (1,117,306                        | )          |
| Deficit accumulated during the development  stage                                                                                            |       | (20,356,712                        | )          | (15,208,078                       | )          |
| Accumulated other comprehensive income                                                                                                       |       | 201,910                            |       | 66,679                            |       |
| Total stockholders’ equity                                                                                                              |       | 33,251,284                         |       | 6,022,854                         |       |
|                                                                                                                                         |       | $                                  | 34,928,642 |                              | $          | 6,330,468 |   |

 

See accompanying notes to consolidatedfinancial statements.

 

5

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**MinesManagement, Inc. and Subsidiaries**

 

**Consolidated Statements of Operations****(unaudited)**

 
| ** **                                                  | ** ** | **Three Months Ended********September 30,** | ** **  | **Nine Months Ended  September 30,** | ** ** | **From Inception  August 12, 2002 Through********September 30,** | ** ** |
|-------------------------------------------------------------|------------|------------------------------------------------------------|-------------|-----------------------------------------------------|------------|-------------------------------------------------------------------------------------------|------------|
| ** **                                                  | ** ** | **2007**                                                   | ** **  | **2006**                                            | ** ** | **2007**                                                                                  | ** ** | **2006** | ** ** | **2007** | ** ** |
| *REVENUE:*                                                  |       |                                                       |        |                                                |       |                                                                                      |       |   |   |   |   |
| Royalties                                                   |       | $                                                          |  2,277 |                                                | $          |  3,269                                                                               |       | $ |  4,970 |   | $ |  9,776 |   | $ |  46,469 |   |
| *OPERATING EXPENSES:*                                       |       |                                                       |        |                                                |       |                                                                                      |       |   |   |   |   |
| Depreciation                                                |       | 82,793                                                     |        | 17,247                                              |       | 141,453                                                                                   |       | 39,837 |   | 233,719 |   |
| Administrative                                              |       | 307,907                                                    |        | 125,154                                             |       | 874,044                                                                                   |       | 386,614 |   | 2,856,793 |   |
| Legal, accounting, and consulting                           |       | 246,004                                                    |        | 176,807                                             |       | 541,015                                                                                   |       | 339,433 |   | 1,392,759 |   |
| Miscellaneous                                               |       | 3,424                                                      |        | 1,756                                               |       | 13,625                                                                                    |       | 3,602 |   | 45,758 |   |
| Exploration                                                 |       | —                                                     |        | 78,614                                              |       | 11,866                                                                                    |       | 78,614 |   | 165,176 |   |
| Oil and gas operating                                       |       | 279                                                        |        | —                                              |       | 797                                                                                       |       | — |   | 12,970 |   |
| Rent and office                                             |       | 133,895                                                    |        | 104,487                                             |       | 359,970                                                                                   |       | 225,517 |   | 883,177 |   |
| Compensation; directors, officers and staff                 |       | 410,194                                                    |        | 268,393                                             |       | 1,148,132                                                                                 |       | 625,916 |   | 3,356,359 |   |
| Taxes and licenses                                          |       | 22,789                                                     |        | (20,320                                             | )          | 80,135                                                                                    |       | 42,183 |   | 218,225 |   |
| Telephone                                                   |       | 11,361                                                     |        | 5,791                                               |       | 29,854                                                                                    |       | 16,438 |   | 81,878 |   |
| Fees, filing, and licenses                                  |       | 148,971                                                    |        | 268,016                                             |       | 326,463                                                                                   |       | 514,725 |   | 1,560,759 |   |
| Environmental                                               |       | 96,486                                                     |        | 67,336                                              |       | 182,201                                                                                   |       | 177,705 |   | 703,029 |   |
| Engineering                                                 |       | 22,960                                                     |        | 54,085                                              |       | 59,955                                                                                    |       | 332,131 |   | 1,488,365 |   |
| Permitting                                                  |       | 433,059                                                    |        | 351,729                                             |       | 1,462,281                                                                                 |       | 1,053,588 |   | 4,011,948 |   |
| Commissions                                                 |       | —                                                     |        | —                                              |       | —                                                                                    |       | — |   | 68,440 |   |
| Stock options granted to directors,  officers and employees |       | 228,700                                                    |        | —                                              |       | 649,570                                                                                   |       | 392,530 |   | 4,120,701 |   |
| Stock options granted for services                          |       | —                                                     |        | 18,200                                              |       | 6,550                                                                                     |       | 29,745 |   | 607,754 |   |
| Total operating expenses                                    |       | 2,148,822                                                  |        | 1,517,295                                           |       | 5,887,911                                                                                 |       | 4,258,578 |   | 21,807,810 |   |
| *LOSS FROM OPERATIONS*                                      |       | (2,146,545                                                 | )           | (1,514,026                                          | )          | (5,882,941                                                                                | )          | (4,248,802 | ) | (21,761,341 | ) |
| *OTHER INCOME:*                                             |       |                                                       |        |                                                |       |                                                                                      |       |   |   |   |   |
| Interest                                                    |       | 407,362                                                    |        | 74,676                                              |       | 734,307                                                                                   |       | 237,733 |   | 1,401,171 |   |
| Miscellaneous                                               |       | —                                                     |        | —                                              |       | —                                                                                    |       | — |   | 3,458 |   |
|                                                        |       | 407,362                                                    |        | 74,676                                              |       | 734,307                                                                                   |       | 237,733 |   | 1,404,629 |   |
| *NET LOSS*                                                  |       | $                                                          | (1,739,183  | )                                                   | $          | (1,439,350                                                                                | )          | $ | (5,148,634 | ) | $ | (4,011,069 | ) | $ | (20,356,712 | ) |
| *NET LOSS PER SHARE*(actual  and fully diluted)             |       | $                                                          | (0.09       | )                                                   | $          | (0.11                                                                                     | )          | $ | (0.30 | ) | $ | (0.31 | ) |   |   |
| *WEIGHTED AVERAGE COMMON SHARES OUTSTANDING*                |       | 19,736,067                                                 |        | 12,849,467                                          |       | 16,923,168                                                                                |       | 12,759,033 |   |   |   |

 

See accompanying notes to consolidated financial statements.

 

6

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**Mines Management, Inc. and Subsidiaries**

 
| **Consolidated Statements of Stockholders’****Equity (unaudited)** | ** ** | **From inception (August 12, 2002) through September 30, 2007** |
|-------------------------------------------------------------------------|------------|-----------------------------------------------------------------|

 
| ** **                                                  | ** ** | **Common Stock** | ** ** | **Issuable Common Stock** | ** ** | **Additional** | ** ** | **Accumulated** | ** ** | **Deficit  Accumulated  During the  Development** | ** ** | **Accumulated  Other  Comprehensive** | ** **  | ** **  | ** ** |
|-------------------------------------------------------------|------------|-----------------------|------------|-------------------------------------|------------|----------------|------------|-----------------|------------|--------------------------------------------------------|------------|---------------------------------------|-------------|-------------|------------|
| ** **                                                  | ** ** | **Shares**            | ** ** | **Amount**                          | ** ** | **Shares**     | ** ** | **Amount**      | ** ** | **Paid-in Capital**                               | ** ** | **Deficit**                           | ** **  | **Stage**   | ** ** | **Income** | ** ** | **Total** | ** ** |
| *BALANCES,  AUGUST 12, 2002 (INCEPTION)*                    |       | 5,316,956             |       | $                                   | 5,317      |           | 90,000     |            | $          | 22,500                                                 |       | $                                     | 1,495,998   |        | $          | (1,117,306 | ) | $ | — |   | $ | 846 |   | $ | 407,355 |   |
| Common stock  issued for cash                               |       | 5,169,312             |       | 5,130                               |       | —         |       | —          |       | 14,152,615                                             |       | —                                |        | —      |       | — |   | 14,157,745 |   |
| Common stock  issued to directors                           |       | 375,000               |       | 375                                 |       | —         |       | —          |       | 149,625                                                |       | —                                |        | —      |       | — |   | 150,000 |   |
| Common stock  issued for services                           |       | 5,000                 |       | 5                                   |       | —         |       | —          |       | 1,995                                                  |       | —                                |        | —      |       | — |   | 2,000 |   |
| Issuable common  stock issued                               |       | 90,000                |       | 90                                  |       | (90,000        | )          | (22,500         | )          | 22,410                                                 |       | —                                |        | —      |       | — |   | — |   |
| Exercise of stock  options                                  |       | 1,181,462             |       | 1,181                               |       | —         |       | —          |       | 957,548                                                |       | —                                |        | —      |       | — |   | 958,729 |   |
| Exercise of stock  warrants                                 |       | 684,117               |       | 724                                 |       | —         |       | —          |       | 1,568,359                                              |       | —                                |        | —      |       | — |   | 1,569,083 |   |
| Issuance of stock  options                                  |       | —                |       | —                              |       | —         |       | —          |       | 3,900,257                                              |       | —                                |        | —      |       | — |   | 3,900,257 |   |
| Issuance of stock  for Heidelberg shares                    |       | 27,620                |       | 27                                  |       | —         |       | —          |       | (27                                                    | )          | —                                |        | —      |       | — |   | — |   |
| Revaluation of  stock options                               |       | —                |       | —                              |       | —         |       | —          |       | 19,930                                                 |       | —                                |        | —      |       | — |   | 19,930 |   |
| Comprehensive  loss:                                        |       |                  |       |                                |       |           |       |            |       |                                                   |       |                                  |        |        |       |   |   |   |   |
| Adjustment to net  unrealized gain on marketable securities |       | —                |       | —                              |       | —         |       | —          |       | —                                                 |       | —                                |        | —      |       | 65,833 |   | 65,833 |   |
| Net loss                                                    |       | —                |       | —                              |       | —         |       | —          |       | —                                                 |       | —                                |        | (15,208,078 | )          | — |   | (15,208,078 | ) |
| Comprehensive  loss                                         |       |                  |       |                                |       |           |       |            |       |                                                   |       |                                  |        |        |       |   |   | (15,142,245 | ) |
| *BALANCES,  DECEMBER 31, 2006*                         |       | 12,849,467            |       | 12,849                              |       | —         |       | —          |       | 22,268,710                                             |       | (1,117,306                            | )           | (15,208,078 | )          | 66,679 |   | 6,022,854 |   |
| Common Stock  issued for cash                               |       | 6,886,600             |       | 6,887                               |       | —         |       | —          |       | 31,578,826                                             |       | —                                |        | —      |       | — |   | 31,585,713 |   |
| Issuance of stock  options                                  |       | —                |       | —                              |       | —         |       | —          |       | 203,020                                                |       | —                                |        | —      |       | — |   | 203,020 |   |
| Revaluation of  stock options                               |       | —                |       | —                              |       | —         |       | —          |       | 453,100                                                |       | —                                |        | —      |       | — |   | 453,100 |   |
| Comprehensive  loss:                                        |       |                  |       |                                |       |           |       |            |       |                                                   |       |                                  |        |        |       |   |   |   |   |
| Adjustment to net  unrealized gain on marketable securities |       | —                |       | —                              |       | —         |       | —          |       | —                                                 |       | —                                |        | —      |       | 135,231 |   | 135,231 |   |
| Net loss                                                    |       | —                |       | —                              |       | —         |       | —          |       | —                                                 |       | —                                |        | (5,148,634  | )          | — |   | (5,148,634 | ) |
| Comprehensive  loss                                         |       |                  |       |                                |       |           |       |            |       |                                                   |       |                                  |        |        |       |   |   | (5,013,403 | ) |
| *BALANCES,  SEPTEMBER 30, 2007*                             |       | 19,736,067            |       | $                                   | 19,736     |           | —     |            | $          | —                                                 |       | $                                     | 54, 503,656 |        | $          | (1,117,306 | ) | $ | (20,356,712 | ) | $ | 201,910 |   | $ | 33,251,284 |   |

 

See accompanying notes to consolidated financial statements.

 

7

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**Mines Management, Inc. and Subsidiaries**

** **

**Consolidated Statements of Cash Flows****(unaudited)**

 
| ** **                                                                           | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** | **From Inception  August 12, 2002  Through  September 30,** | ** ** |
|--------------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------------------------------------|------------|
| ** **                                                                           | ** ** | **2007**                                             | ** ** | **2006**                                            | ** ** | **2007**                                                                        | ** ** | **2006** | ** ** | **2007** | ** ** |
| ***Increase (Decrease) in Cash and Cash Equivalents*** | ** ** | ** **                                           | ** ** | ** **                                          | ** ** | ** **                                                                      | ** ** | ** ** | ** ** | ** ** | ** ** |
| *CASH FLOWS FROM OPERATING ACTIVITIES:*                                              | ** ** | ** **                                           | ** ** | ** **                                          | ** ** | ** **                                                                      | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net loss                                                                             |       | $                                                    | (1,739,183 | )                                                   | $          | (1,439,350                                                                      | )          | $ | (5,148,634 | ) | $ | (4,011,069 | ) | $ | (20,356,712 | ) |
| Adjustments to reconcile net loss to net  cash used in  operating activities:        |       |                                                 |       |                                                |       |                                                                            |       |   |   |   |   |
| Issuance of stock options                                                            |       | 228,700                                              |       | —                                              |       | 656,120                                                                         |       | 392,530 |   | 4,728,455 |   |
| Stock received for services                                                          |       | —                                               |       | 18,200                                              |       | —                                                                          |       | 29,745 |   | (11,165 | ) |
| Depreciation                                                                         |       | 82,793                                               |       | 17,247                                              |       | 141,453                                                                         |       | 39,837 |   | 233,719 |   |
| Changes in assets and liabilities:                                                   |       |                                                 |       |                                                |       |                                                                            |       |   |   |   |   |
| Interest receivable                                                                  |       | 8,016                                                |       | 111,865                                             |       | 13,745                                                                          |       | 80,782 |   | (50,681 | ) |
| Prepaid expenses and deposits                                                        |       | 132,209                                              |       | (84,305                                             | )          | (343,500                                                                        | )          | (115,136 | ) | (414,118 | ) |
| Accounts payable                                                                     |       | 733,938                                              |       | (4,189                                              | )          | 1,360,710                                                                       |       | (84,010 | ) | 1,664,775 |   |
| Payroll payable                                                                      |       | (2,457                                               | )          | —                                              |       | 4,552                                                                           |       | — |   | 4,552 |   |
| Severance payable                                                                    |       | —                                               |       | —                                              |       | —                                                                          |       | (20,000 | ) | — |   |
| State income taxes payable                                                           |       | —                                               |       | —                                              |       | —                                                                          |       | — |   | (164 | ) |
| Payroll taxes payable                                                                |       | 1,481                                                |       | (15,775                                             | )          | 4,482                                                                           |       | (13,346 | ) | 4,851 |   |
| Net cash used in operating activities                                                |       | (554,503                                             | )          | (1,396,307                                          | )          | (3,311,072                                                                      | )          | (3,700,667 | ) | (14,196,488 | ) |
| *CASH FLOWS FROM INVESTING ACTIVITIES:*                                              |       |                                                 |       |                                                |       |                                                                            |       |   |   |   |   |
| Purchase of fixed assets                                                             |       | (2,061,917                                           | )          | (120,026                                            | )          | (2,727,225                                                                      | )          | (129,128 | ) | (3,316,336 | ) |
| Construction in Progress                                                             |       | (1,304,060                                           | )          | —                                              |       | (1,773,654                                                                      | )          | — |   | (1,773,654 | ) |
| (Purchase) Sale of certificates of deposit                                           |       | (60,263                                              | )          | (156,258                                            | )          | 1,768,977                                                                       |       | (211,560 | ) | (2,601,276 | ) |
| Increase in mineral properties                                                       |       | —                                               |       | —                                              |       | —                                                                          |       | — |   | (144,312 | ) |
| Net cash used in investing activities                                                |       | (3,426,240                                           | )          | (276,284                                            | )          | (2,731,902                                                                      | )          | (340,688 | ) | (7,835,578 | ) |
| *CASH FLOWS FROM FINANCING ACTIVITIES:*                                              |       |                                                 |       |                                                |       |                                                                            |       |   |   |   |   |
| Proceeds from sales of common stock                                                  |       | —                                               |       | —                                              |       | 31,585,713                                                                      |       | 1,513,750 |   | 48,271,122 |   |
| *NET INCREASE (DECREASE) IN CASH AND CASH  EQUIVALENTS*                              |       | (3,980,743                                           | )          | (1,672,591                                          | )          | 25,542,739                                                                      |       | (2,527,605 | ) | 26,239,056 |   |
| *CASH AND CASH EQUIVALENTS, BEGINNING OF  PERIOD*                                    |       | 30,267,134                                           |       | 3,793,280                                           |       | 743,652                                                                         |       | 4,648,294 |   | 47,335 |   |
| *CASH AND CASH EQUIVALENTS, END OF PERIOD*                                           |       | $                                                    | 26,286,391 |                                                | $          | 2,120,689                                                                       |       | $ | 26,286,391 |   | $ | 2,120,689 |   | $ | 26,286,391 |   |

 

See accompanying notes to consolidated financial statements.

 

8

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**Mines Management, Inc. andSubsidiaries**

 

**Notes toConsolidated Financial Statements**

 

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

 

*Organization:*

 

Mines Management, Inc.(the Company) is a publicly held Idaho corporation incorporated in 1947. TheCompany acquires, explores, and develops mineral properties principally inNorth America. The Company performed exploration activities in South America in2002.

 

*Summaryof Significant Accounting Policies:*

 
| a.     | The  accompanying consolidated financial statements include the accounts of Mines  Management, Inc., and its wholly-owned subsidiaries, Newhi, Inc., Montanore  Mineral Corporation, and Montmin Corporation. Intercompany balances and  transactions have been eliminated. Newhi, Inc. was formed by the Company for  the purpose of merger with Heidelberg Silver Mining Company, Inc. In the  merger, completed on April 15, 1988, Heidelberg Silver Mining Company,  Inc. was merged into Newhi, Inc. To effect the merger, the Company issued  367,844 shares of its previously unissued common stock. Also in connection  with this merger, the Company issued 11,117 shares of common stock and paid  $4,446 as a finder’s fee. Montanore Mineral Corporation and Montmin  Corporation were acquired in conjunction with a stock transfer agreement with  Noranda Finance Corporation as described more fully in note 10.                                                                         |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| b.     | All  exploration expenditures are expensed as incurred. Significant property  acquisition payments for active exploration properties are capitalized. If no  mineable ore body is discovered, previously capitalized costs are expensed in  the period the property is abandoned. Once a feasibility study has been  completed, approved by management, and a decision is made to put the ore body  into production, expenditures to develop new mines, to define further  mineralization in existing ore bodies, and to expand the capacity of  operating mines, are capitalized and amortized on the units of production  basis over proven and probable reserves. Should a property be abandoned, its capitalized  costs are charged to operations. The Company charges to operations the  allocable portion of capitalized costs attributable to properties sold.  Capitalized costs are allocated to properties sold based on the proportion of  claims sold to the claims remaining within the project area. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| c.     | The  Company evaluates its long-lived assets for impairment when events or changes  in circumstances indicate that the related carrying amount may not be  recoverable. If the sum of estimated future net cash flows on an undiscounted  basis is less than the carrying amount of the related asset grouping, asset  impairment is considered to exist. The related impairment loss is measured by  comparing estimated future net cash flows on a discounted basis to the  carrying amount of the asset. Changes in significant assumptions underlying  future cash flow estimates may have a material effect on the Company’s  financial position and results of operations. To date no such impairments  have been identified.                                                                                                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| d.     | Property  and equipment are stated at cost. Buildings and leasehold improvements are  depreciated on the straight-line basis over an estimated useful life of 39  years. Machinery and furniture are generally depreciated using accelerated  methods over estimated useful lives ranging from 5 to 10 years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| e.     | Basic  and diluted loss per share is computed using the weighted average number of  shares outstanding during the periods. Stock options and warrants outstanding  are antidilutive and are not considered in the computation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| f.     | Cash  and cash equivalents include cash on hand, cash in banks, investments in  certificates of deposit with original maturities of 90 days or less, and  money market funds.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

 

9

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| g.     | The  Company’s financial instruments, as defined by Statement of Financial  Accounting Standards (SFAS) No. 107, *Disclosures  about Fair Value of Financial Instruments*, include cash and loans  payable. All instruments are accounted for on a historical cost basis, which,  due to the short maturity of these financial instruments, approximates fair  value at September 30, 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| h.     | Deferred  income tax is provided for differences between the bases of assets and  liabilities for financial and income tax reporting. A deferred tax asset,  subject to a valuation allowance, is recognized for estimated future tax  benefits of tax-basis operating losses being carried forward.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| i.     | The  preparation of financial statements in conformity with accounting principles  generally accepted in the United States of America requires management to  make estimates and assumptions that affect the reported amounts of assets and  liabilities, the disclosure of contingent assets and liabilities at the date  of the financial statements, and the reported amounts of revenues and  expenses during the reporting period. Actual results may differ from those  estimates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| j.     | The Company has adopted SFAS No. 143, *Accounting for Asset Retirement Obligations*,  which establishes a uniform methodology for accounting for estimated reclamation  and abandonment costs. According to SFAS No. 143, the fair value of a  liability for an asset retirement obligation (ARO) will be recognized in the  period in which it is incurred if a reasonable estimate of fair value can be  made. The ARO is capitalized as part of the carrying value of the assets to  which it is associated, and depreciated over the useful life of the asset.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | In March 2005, the Financial Accounting  Standards Board (“FASB”) issued Interpretation (FIN) No. 47, *Accounting for Conditional Asset Retirement  Obligations*, which clarifies that the term *conditional asset retirement obligation*  as used in SFAS No. 143 refers to a legal obligation to perform an asset  retirement activity where the timing or method of settlement is conditional  on a future event. Where the obligation to perform the asset retirement  activity is unconditional, even though uncertainty exists about the timing or  method of settlement, the entity is required to recognize a liability for the  fair value of the conditional retirement obligation if reasonably estimable.  FIN No. 47 also clarifies when an entity would have sufficient  information to reasonably estimate fair value. At September 30, 2007, no  asset retirement liabilities have been recorded by the Company.                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| k.     | In  July 2006, FASB issued FASB Interpretation (FIN) No. 48, *Accounting  for Uncertainty in Income Taxes,* an interpretation of SFAS No. 109*, Accounting for Income Taxes*. FIN No. 48 clarifies the  accounting for income taxes by prescribing the minimum recognition threshold  a tax position is required to meet before being recognized in the financial  statements. FIN No. 48 also provides guidance on derecognition, measurement,  classification, interest and penalties, accounting in interim periods,  disclosure, and transition. The interpretation applies to all tax positions  related to income taxes subject to SFAS No. 109, *Accounting  For Income Taxes*. FIN No. 48 is effective for fiscal years  beginning after December 15, 2006. Differences between the amounts recognized  in the balance sheets prior to the adoption of FIN No. 48 and the amounts  reported after adoption should be accounted for as cumulative-effect  adjustment recorded to the beginning balance of retained earnings. The  Company does not expect the adoption of this statement to have a material  effect on its financial condition, results of operations, or cash flows. |

 

10

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| l.     | In  September 2006, FASB issued SFAS No. 157, *Fair Value Measurements*.  SFAS No. 157 defines fair value, establishes a framework for measuring fair  value under accounting principles generally accepted in the United States of  America, and expands disclosures about fair value measurements. SFAS No. 157  is effective for financial statements issued in respect of fiscal years  beginning after November 15, 2007. The Company is currently evaluating the  impact the adoption of this statement could have on its financial condition,  results of operations, and cash flows.                                                                       |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| m.     | Certain  amounts in the prior-period financial statements have been reclassified for  comparative purposes to conform to current period presentation with no effect  on previously reported net loss.                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| n.     | The Company uses the “modified  prospective method” of transition as described under SFAS No. 148, *Accounting for Stock-Based Compensation—Transition  and Disclosure*, to account for the costs of employee services  received in exchange for an award of equity instruments. Under this method of  transition, the costs recognized in the financial statements for the quarters  ended September 30, 2007 and 2006 are the same as if they had been based on  their fair values at the grant date. The Company recognized stock-based  compensation of $228,700 and $18,200 for the quarters ended September 30,  2007 and 2006, respectively. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| o.     | For  purposes of calculating the fair value of options issued and vested during  the period, volatility for the three years presented is based on the  historical volatility of the Company’s common stock over a two year period.  The Company does not foresee the payment of dividends in the near term. The  fair value for these options was estimated at the date of grant using the  Black-Scholes option-pricing model with the following assumptions:                                                                                                                                                                                                |

 
| ** **                                 | ** ** | **Quarters Ended  September 30,** | ** ** |
|--------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                 | ** ** | **2007**                                    | ** ** | **2006** | ** ** | **2005** | ** ** |
| Weighted  average risk-free interest rate  |       | 4.77                                        | %          | 4.71 | % | 3.87 | % |
| Weighted  average volatility               |       | 53.39                                       | %          | 58.91 | % | 70.40 | % |
| Expected  dividend yield                   |       | —                                      |       | — |   | — |   |
| Weighted  average expected life (in years) |       | 2.00                                        |       | 2.00 |   | 2.00 |   |

 

At September 30, 2007, the Company hadtwo stock option plans, which are described more fully in note 6.

 

***NOTE 2 — STOCKHOLDERS’EQUITY:***

*** ***

*Common Stock:*

* *

*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 grantedwarrants to purchase up to 1,152,007 common shares at $1.20 per share throughtwo years from the date of issue. Cumulative warrants exercised relating tothis issue at December 31, 2006, 2005, and 2004, were 1,152,007, 1,152,007, and573,640 shares, respectively.*

 

In 2004, the Company sold1,285,000 common shares for $6,425,000 ($5.00 per share). In connection withthe stock sales, the Company granted warrants to purchase up to 511,000 sharesof common stock at $7.25 per share through five years from the initial exercisedate. The Company paid a cash finder’s fee of 7% of the gross purchase pricereceived in the offering. The finder also received 3% warrant compensation, orwarrants to purchase 192,750 common shares at $7.25 per share through February18, 2009. These warrants were repriced at $6.00 per share in October 2005 andto $5.00 per share in April 2007 in accordance with the terms of the 2004warrant agreement.

 

11

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Cumulative warrantsexercised relating to this issue at December 31, 2006, 2005, and 2004, were145,750, 40,000, and -0-, respectively.

 

In 2005, the Company sold1,016,667 common shares for $6,100,002 ($6.00 per share). In connection withthe stock sales, the Company granted warrants to purchase up to 737,084 sharesof common stock at $8.25 per share through five years from the initial exercisedate. To date, no warrants have been exercised. The Company paid a cash finder’sfee of 7% of the gross purchase price received in the offering. The finder alsoreceived a 3.75% warrant compensation, or warrants to purchase 228,750 commonshares at $8.25 per share through October 20, 2010. These warrants wererepriced at $5.00 per share in April 2007 in accordance with the terms of the2005 warrant agreement.

 

In 2005, the Company sold40,000 common shares for $240,000 ($6.00 per share).

 

OnApril 20, 2007 the Company completed a public offering of 6,000,000 units at aprice of $5.00 per unit, resulting in gross proceeds of $30,000,000($28,200,000 net proceeds). Each unit is comprised of one share of common stockand one-half of one common stock purchase warrant, with each full warrant beingexercisable for five years to purchase one share of common stock at a price of$5.75 per share. The warrants are listed on the TSX and are tradable in USdollars under the symbol MGT.GT.U.

 

Theunderwriters were granted an over-allotment option, exercisable for a period of30 days following the closing, to acquire up to an additional 900,000 units. OnMay 7, 2007, the underwriters exercised the over-allotment option for 836,600units. The total offering was therefore 6,836,600 units for grossproceeds to the Company of $34,183,000, or $32,124,697 in net proceeds to theCompany, after deducting underwriting commissions but before deducting offeringexpenses.

 

*Preferred Stock:*

* *

The Company hasauthorized 10,000,000 shares of no par value preferred stock. Through September30, 2007, the Company had not issued any preferred stock.

 

***NOTE 3 — MININGPROPERTIES:***

*** ***

Mineral properties arecomprised of acquisition, exploration, and development costs related to theMontanore property in northwestern Montana and the Advance and Iroquoisproperties in the Northport region of northeastern Washington, as shown below:

 
| ** ** | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|------------|------------|------------------------|------------|-----------------------|------------|
| ** ** | ** ** | **2007**               | ** ** | **2006**              | ** ** |
| Montanore  |       | $                      | 278,519    |                  | $          | 278,519 |   |
| Advance    |       | 2,139                  |       | 2,139                 |       |
| Iroquois   |       | 223,834                |       | 223,834               |       |
|       |       | $                      | 504,492    |                  | $          | 504,492 |   |

 

***TheMontanore property is located in northwestern Montana and includes 18 miningclaims covering 355 acres plus one 5-acre patented mill site. In August 2002,the Company acquired a controlling interest in the Montanore silver and copperdeposit in Sanders County, Montana. The Company received a quitclaim deed fromNoranda Mineral Corp. (Noranda) when Noranda elected to withdraw from theproject. The mineral rights acquired by the Company are subject to a $0.20 perton royalty, and a 5% net profits royalty which would commence after theoperator has recovered all of its exploration and development costs. InDecember 2002, the Company received a quitclaim deed to all intellectualproperty connected with studies that Noranda carried out on the project.***

 

12

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The Advance propertyconsists of 720 acres of patented mineral rights. Although the Company does notown the overlying surface rights to its patented mineral rights, it does haveright of access to explore and mine.

 

The Iroquois propertyconsists of 64 acres of patented mineral and surface rights and 15 unpatentedmining claims containing 300 acres.

 

***NOTE 4 —CONSTRUCTION INPROGRESS:***

*** ***

TheCompany is in the process of constructing a water treatment plant at theproposed Montanore mine site in Libby, Montana. This project was approximately95% complete as of September 30, 2007 and has an estimated total cost of$740,000. The water treatment plant was completed by October 31, 2007.

 

Constructionhas also begun on the underground electrical and pumping systems at the Libbyadit at the Montanore project. The anticipated cost of these projects isexpected to total $1,125,100, with approximately $1,040,000 included inconstruction in progress as of September 30, 2007.

 

***NOTE 5 — INVESTMENTS:***

*** ***

The Company owns a$115,684 certificate of deposit which matures in September 2008 and has aninterest rate of 3.64%. The Company also owns a $1,124,055 certificate ofdeposit which is pledged as security for a Letter of Credit to the MontanaDepartment of Environmental Quality for the reclamation guarantee for theMontanore expansion evaluation program. This certificate matures in January2008 and will automatically renew annually. It currently earns a rate of 5.28%.The Company owns six $226,923 certificates of deposit for a total of $1,361,537.These investments mature in 2009 and earn rates of 4.21%.

 

The Company owns 45,000free-trading shares of Bitterroot Resources, Ltd. (BTT), a public Canadiancorporation traded on the Toronto Venture Exchange. The shares are held as “availablefor sale.”  This investment is beingrecorded at fair market value with a corresponding adjustment to stockholders’equity. The 45,000 free-trading shares had a market value of $16,267 and$28,213 at September 30, 2007 and December 31, 2006, respectively. TheCompany also owns 196,000 free-trading shares of Centram Exploration Ltd., apublic Canadian corporation traded on the Toronto Venture Exchange. The sharesare held as “available for sale.”  Theshares were received in year 2002 in exchange for administrative servicesprovided by the Company. The 196,000 free-trading shares had a market value of$196,808 and $49,631 at September 30, 2007 and December 31, 2006, respectively.

 

***NOTE 6 — STOCK OPTIONS:***

*** ***

During the year endedDecember 31, 2003, the shareholders of the Company approved twostock-based compensation plans – the 2003 Stock Option Plan (which includesboth qualified and nonqualified options) and the 2003 Consultant StockCompensation Plan. Under the 2003 Stock Option Plan, the Company may grantoptions to purchase up to 1,200,000 shares of common stock. Under the 2003Consultant Stock Compensation Plan, the Company may grant options to purchaseup to 400,000 shares of common stock. During 2004, the Company increased themaximum number of common shares available under the 2003 Stock Option Plan andthe 2003 Consultant Stock Compensation Plan to 3,000,000 and 700,000 shares,respectively.

 

Under both 2003 StockOption Plans, the option exercise price may not be less than 100% of the fairmarket value per share on the date of grant. Stock options are exercisablewithin ten years from the date of the grant of the option. Vesting of theoptions granted under both plans is at the discretion of the Board of Directors.The Company has a policy of re-pricing all incentive stock options as marketconditions allow.

 

13

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At September 30, 2007,the following 2003 plan options were outstanding under the 2003 Stock OptionPlans:

 
| ** **   | ** ** | ** **    | ** ** | ** **         | ** ** | **Remaining**   | ** ** | ** **      | ** ** |
|--------------|------------|---------------|------------|--------------------|------------|-----------------|------------|-----------------|------------|
| ** **   | ** ** | ** **    | ** ** | **Weighted**       | ** ** | **Contractual** | ** ** | ** **      | ** ** |
| **Exercise** | ** ** | **Number of** | ** ** | **Average**        | ** ** | **Life**        | ** ** | **Number**      | ** ** |
| **Prices**   | ** ** | **Options**   | ** ** | **Exercise Price** | ** ** | **(in years)**  | ** ** | **Exercisable** | ** ** |
| $            | 1.60       |          | 500,000    |               | $          | 1.60            |       | .43             |       | 500,000 |   |
| 1.85         |       | 100,000       |       | 1.85               |       | 0.91            |       | 100,000         |       |
| 2.82         |       | 20,000        |       | 2.82               |       | 1.59            |       | 20,000          |       |
| 3.33         |       | 475,000       |       | 3.33               |       | 1.73            |       | 475,000         |       |
| 3.75         |       | 120,000       |       | 3.75               |       | 0.10            |       | 120,000         |       |
| 2.82         |       | 155,000       |       | 2.82               |       | 2.34            |       | 155,000         |       |
| 4.01         |       | 214,000       |       | 4.01               |       | 0.07            |       | 214,000         |       |
| 5.70         |       | 5,000         |       | 5.70               |       | 2.71            |       | 5,000           |       |
| 2.82         |       | 5,000         |       | 2.82               |       | 0.10            |       | 5,000           |       |
| 2.82         |       | 145,000       |       | 2.82               |       | 3.70            |       | 145,000         |       |
| 2.82         |       | 25,000        |       | 2.82               |       | 0.10            |       | 25,000          |       |
| 6.20         |       | 5,000         |       | 6.20               |       | 0.42            |       | 5,000           |       |
| 2.82         |       | 30,000        |       | 2.82               |       | 0.42            |       | 20,000          |       |
| 2.82         |       | 100,000       |       | 2.82               |       | 3.21            |       | 100,000         |       |
| 2.82         |       | 200,000       |       | 2.82               |       | 4.78            |       | 100,000         |       |
| 3.33         |       | 30,000        |       | 3.33               |       | 4.58            |       | 10,000          |       |
| 3.79         |       | 18,000        |       | 3.79               |       | 4.71            |       | 18,000          |       |
| 3.33         |       | 30,000        |       | 3.33               |       | 4.75            |       | 10,000          |       |
| 3.30         |       | 30,000        |       | 3.30               |       | 4.96            |       | 10,000          |       |
| Subtotal     |       | 2,207,000     |       | $                  | 2.82       |            |       |            | 2,037,000  |   |
|              |            |               |            |                    |            |                 |            |                 |            |  |  |

 

During January 2005, theCompany issued 214,000 stock options to an individual as compensation for theperformance of marketing services. The options have an exercise price of $4.01and vested 25% at the time of issuance, 25% in 60 days thereafter and theremaining balance on May 28, 2005. In January 2007, the option agreementwas extended nine months by the Board of Directors to October 27, 2007.

 

During February 2005, theCompany issued 205,000 stock options to directors and employees. The optionshad an exercise price of $3.93 and vested immediately. During August 2007, theoptions were cancelled and replaced by the same number of stock options at anexercise price of $2.82 per share representing the stock price as of the closeof trading on August 16, 2007. The options expire five years fromissuance.

 

During June 2005, theCompany issued 5,000 stock options to an individual as compensation for theperformance of consulting services. The options have an exercise price of $5.70per share and vested immediately. These options expire five years fromissuance.

 

During June 2005, theCompany issued 25,000 stock options to an individual as compensation for theperformance of consulting services. The options had an exercise price of $5.99per share, representing the share price at the close of trading on June 6,2005, and vested 40% at the time of grant (June 6, 2005), and 20% each onJune 6 of 2006, 2007, and 2008. During September 2005, the options werecancelled and replaced by the same number of

 

14

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stock options at anexercise price of $4.92 per share representing the stock price as of the closeof trading on September 7, 2005. During September 2006, the remainingoutstanding options were forfeited.

 

During December 2005, theCompany issued 100,000 stock options to an officer. The options had an exerciseprice of $6.34 per share, representing the share price at the close of tradingon December 13, 2005, and vested 50% at the time of issuance(December 13, 2005), and 50% on December 13, 2006. During August andMay of 2007 and October 2006, the options were cancelled and replaced by thesame number of stock options at an exercise price of $2.82, $3.90 and $5.01 pershare representing the stock price as of the close of trading on August 16,2007, May 16, 2007 and October 3, 2006, respectively.

 

During June 2006, theCompany issued 170,000 stock options to officers, directors, and employees and5,000 stock options to an individual as compensation for the performance ofconsulting services. The options had an exercise price of $6.20 and vestedimmediately. The options expire five years from issuance. During August and Mayof 2007 and October 2006, the options were cancelled and replaced by the samenumber of stock options at an exercise price of $2.82, $3.90 and $5.01 pershare representing the stock price as of the close of trading on August 16,2007, May 16, 2007 and October 3, 2006, respectively.

 

During July and September2006, the Company issued 200,000 stock options to directors and 30,000 to thenew Project Engineer for the Montanore Project. The options had exercise pricesof $6.42 and $6.21, respectively. The options issued to the directors vest overa two year period, 20,000 on July 9, 2007 and 20,000 on July 9, 2008 for eachdirector. For the options issued to the new employee, 10,000 vestedimmediately, while the remaining 20,000 vest over a two year period, 10,000 onSeptember 20, 2007 and 10,000 on September 20, 2008. During August and May of2007 and October 2006, the options were cancelled and replaced by the samenumber of stock options at an exercise price of $2.82, $3.90 and $5.01 pershare representing the stock price as of the close of trading on August 16,2007, May 16, 2007 and October 3, 2006, respectively.

 

During April 2007, theCompany issued 30,000 stock options to a new employee. The options had anexercise price of $4.34 and 10,000 options vested immediately while theremaining 20,000 options vest over a two year period; 10,000 in April 2008 and2009, respectively. During July 2007, the options were cancelled and replacedby the same number of stock options at an exercise price of $3.33 per sharerepresenting the stock price as of the close of trading on July 6, 2007.

 

During September and June2007, the Company issued 30,000 stock options to each of two new employees. Theoptions had exercise prices of $3.30 and $3.33, respectively. For eachemployee, 10,000 options vested immediately while the remaining 20,000 optionsvest over a two year period; 10,000 in September 2008 and 2009, respectively,and 10,000 in June 2008 and 2009, respectively. The Company issued anadditional 18,000 options to other employees in June 2007. These options had anexercise price of $3.79 and were fully vested at the date of grant.

 

For purposes ofcalculating the fair value of options, volatility for the two quarterspresented is based on the historical volatility of the Company’s Common Stockover a two year period. The Company does not foresee the payment of dividendsin the near term. The fair value for these options was estimated at the date ofgrant using the Black-Scholes option-pricing model with the followingassumptions:

 

15

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| ** **                                 | ** ** | **Quarters Ended  September 30,** | ** ** |
|--------------------------------------------|------------|-----------------------------------|------------|
| ** **                                 | ** ** | **2007**                          | ** ** | **2006** | ** ** | **2005** | ** ** |
|                                       |       |                              |       |   |   |   |   |
| Weighted  average risk-free interest rate  |       | 4.77                              | %          | 4.71 | % | 3.87 | % |
|                                       |       |                              |       |   |   |   |   |
| Weighted  average volatility               |       | 53.39                             | %          | 58.91 | % | 70.41 | % |
|                                       |       |                              |       |   |   |   |   |
| Expected  dividend yield                   |       | —                            |       | — |   | — |   |
|                                       |       |                              |       |   |   |   |   |
| Weighted  average expected life (in years) |       | 2.00                              |       | 2.00 |   | 2.00 |   |
|                                       |       |                              |       |   |   |   |   |
| Weighted  average fair value (in dollars)  |       | 1.30                              |       | 1.82 |   | 1.99 |   |

 

The followingsummarizes option activity for the quarters presented:

 
| ** **                     | ** ** | ** **            | ** ** | **Weighted-Average**    | ** ** |
|--------------------------------|------------|-----------------------|------------|-------------------------|------------|
| ** **                     | ** ** | **Shares**            | ** ** | **Exercise Price** | ** ** |
| ** **                     | ** ** | **Under Option** | ** ** | **Per Share**      | ** ** |
|                           |       |                  |       |                    |       |
| Balance,  at June 30, 2006     |       | 1,979,000             |       | 3.73                    |       |
| Issued                         |       | 230,000               |       | 6.39                    |       |
| Exercised                      |       | —                |       | —                  |       |
| Forfeited                      |       | —                |       | —                  |       |
| Balance  at September 30, 2006 |       | 2,209,000             |       | 4.01                    |       |
|                           |       |                  |       |                    |       |
| Balance  at June 30, 2007      |       | 2,277,000             |       | 3.46                    |       |
| Issued                         |       | 30,000                |       | 3.30                    |       |
| Exercised                      |       | —                |       | —                  |       |
| Forfeited                      |       | (100,000              | )          | 3.75                    |       |
| Balance  at September 30, 2007 |       | 2,207,000             |       | $                       | 2.82       |   |
|                                |            |                       |            |                         |            |  |

 

The options outstandingat September 30, 2007, have a remaining contractual life of approximately twoyears.

 

16

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***NOTE7 — CONCENTRATION OF CREDIT RISK:***

 

The Company maintains itscash and cash equivalents in one financial institution. Balances are insured bythe Federal Deposit Insurance Corporation up to $100,000.

 

***NOTE 8 — DEFERRED INCOMETAX:***

 

AtSeptember 30, 2007, and December 31, 2006, the Company had deferred tax assetsthat were fully reserved by valuation allowances. Following are the componentsof such assets and allowances:

 
| ** **                         | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                         | ** ** | **2007**               | ** ** | **2006**              | ** ** |
| Deferred  tax assets arising from: |       |                   |       |                  |       |
| Net  operating loss carryforwards  |       | $                      | 2,540,000  |                  | $          | 1,770,000 |   |
| Stock  option compensation         |       | 709,000                |       | 610,000               |       |
|                               |       | 3,249,000              |       | 2,380,000             |       |
| Less  valuation allowance          |       | 3,249,000              |       | 2,380,000             |       |
|                               |       |                   |       |                  |       |
| Net  deferred tax assets           |       | $                      | —     |                  | $          | — |   |

 

Forthe periods presented, the effective income tax rate differed from the expectedrate because of the effects of changes in the deferred tax asset valuationallowance. Changes in the deferred tax asset valuation allowance for theperiods ended September 30, 2007 and December 31, 2006 relate only tocorresponding changes in deferred tax assets for those periods.

 

AtSeptember 30, 2007, the Company had federal tax-basis net operating losscarryforwards totaling approximately $16,930,000 which will expire in variousamounts from 2008 through 2027.

 

***NOTE 9 —COMMITMENTS:***

*** ***

TheCompany hs ordered primary mobile mine equipment with a purchase price of$1,700,000 and a water treatment plant with a purchase price of $650,000. As ofSeptember 30, 2007, the Company had deposits totaling $372,600 toward thepurchase of these items.

 

***NOTE 10 — BUSINESSCOMBINATION:***

*** ***

OnMay 31, 2006, Noranda Finance Corporation and Newhi, Inc. executed a stocktransfer agreement by which all issued and outstanding shares of capital stockfor both Noranda Minerals Corporation and Normin Corporation have beentransferred to Newhi, Inc. Noranda Minerals Corporation and Normin Corporationare Delaware corporations registered to do business in Montana. At the sametime, Newhi submitted a $30,000 cash bond to the Montana Department ofEnvironmental Quality to replace Noranda’s previous bond. Subsequently, the officialnames of the companies were changed to Montanore Mineral Corporation andMontmin Corporation, respectively. The existing Montana State Hard Rock Permit#00150 and MPDES permit MT-00320279 stayed in place and is now held byMontanore Mineral Corporation, formerly known as Noranda Minerals Corporation,which is owned by Newhi, Inc., a wholly-owned subsidiary of the Company.

 

17

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***NOTE11 — SUBSEQUENT EVENTS:***

*** ***

OnAugust 11, 2005, Mines Management was named as a co-defendant along withNoranda Minerals, Normin Corp. and Newhi, Inc. in a lawsuit filed by MontanaReserves Company (MRC) in the Superior Court of the State of Washington inSpokane County, Washington. The action seeks damages in connection with theconveyance of the Montanore property from Noranda to Newhi, and challenges thecomputation of a net proceeds royalty payable to MRC pursuant to a RoyaltyAgreement between Noranda and MRC in respect to the Montanore property. OnOctober 18, 2007, the Company agreed to purchase the net proceeds royalty fromMRC for $500,000 cash, in consideration of the dismissal with prejudice of allclaims. The settlement agreement was executed on November 6, 2007.

 

OnNovember 5, 2007, the Company sold 2,500,000 shares of its common stock toSilver Wheaton Corp. at $4.00 per share in a private placement transaction. Inconnection with the transaction, the Company entered into a Right of FirstRefusal Agreement, granting Silver Wheaton Corp. a right of first refusal topurchase all or any portion of the silver produced, mined or recovered fromproperties owned by the Company in Montana for a period of twenty years.Following the transaction, Silver Wheaton Corp. owns approximately 11% of theissued and outstanding shares of the Company.

 

18

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| **ITEM 2.** | **MANAGEMENT’S DISCUSSION AND  ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS** |
|-------------|-------------------------------------------------------------------------------------------------|

 

Advancing theMontanore Silver-Copper Project continues to be the Company’s main focus. Inaddition to its planned advanced exploration and delineation drilling program,the Company is continuing its repermitting efforts with federal and stateagencies and its optimization review of the Project. During the third quarterof 2007, construction and installation of a water treatment plant was the mainactivity at the Montanore Project site, with testing and commissioning of theplant scheduled for early November 2007. 

 

**Overview**

 

In the thirdquarter of 2007, the Company:

 

•                       Maintained a strong cash position with $26.3million at September 30, 2007.

 

•                       Continued preparations for the advancedexploration and delineation drilling program by:

 

a)              Commenced installation and construction ofthe water treatment plant and building, which was completed as of October 31,2007;

 

b)             Hiring additional staff at the Project siteto support initiation of underground activities at the Libby adit, which willinclude dewatering, rehabilitation, advancement, drifting, and delineationdrilling; and

 

c)              Receiving shipments of underground mining andsurface equipment.

 

•                       Advanced the permitting process by workingclosely with state and federal agencies to provide technical and otherinformation in support of the preparation of the draft environmental impactstatement.

 

During the third quarter, our progress at theProject site included the installation of a water treatment plant andconstruction of the initial ventilation support structure in preparation forthe commencement of rehabilitation activities in the Libby adit.

 

The Company expects to start the dewateringand rehabilitation of the Libby adit late in the fourth quarter of 2007, oncethe final approval of the Environmental Assessment for road use is received. Followingdewatering and rehabilitation, the Company expects to advance the aditapproximately 3,000 feet toward the middle of the mineral deposit over the nexteighteen months. The Company plans an additional 10,000 feet of developmentdrifting to provide drill access to different portions of the deposit,construction of drill stations, and diamond core drilling of approximately 50holes totaling approximately 45,000 feet. The objectives of the advancedexploration and delineation drilling program are to:

 

•                  Expand the known higher gradeintercepts of the Montanore deposit;

 

•                  Develop additional information aboutthe deposit;

 

•                  Further assess and define themineralized zone; and

 

•                  Provide additional geotechnical,hydrological, and other data.

 

The Company expects that results of thedrilling program, if successful, would provide data to support the completionof a bankable feasibility study, allowing the Company to convert a portion ofits mineralized material/resource estimates into reserves.

 

The net cash expenditures for the quarterending September 30, 2007 were $3.4 million for the purchase of equipment andconstruction of the water treatment plant and other infrastructure and $0.6million for

 

19

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operating activities. The Company believes that it has sufficientworking capital for rehabilitation of the Libby adit and commencement of thedelineation drilling program.

 

**Advanced Exploration and Delineation DrillingProgram**

 

During thethird quarter of 2007, the Company continued to advance toward the commencementof exploration and delineation drilling activities at the Libby adit site. Thewater treatment plant components were delivered during the quarter andinstallation of the plant was completed October 31, 2007, with testing andstartup activities beginning on November 1, 2007. Other activitiesincluded the delivery of major mine equipment, pump stations, power loadcenters and other key equipment necessary for the delineation drilling program.Installation of the ventilation duct work was completed for the first severalhundred feet of the adit. Technical staff and site personnel numbers remainedrelatively constant with an electrician and general labor added to the sitestaffing.

 

The Companyexpects to begin rehabilitation activities at the Libby adit once the approvalof the environmental assessment (EA) is received from the U.S. Forest Service(USFS) and dewatering commences. The EA is scheduled to be approved in earlyDecember 2007.

 

Majorequipment for the rehabilitation stage of the program is either on site orscheduled for delivery in the fourth quarter of 2007 or early in the firstquarter of 2008. Costs for the major equipment are within budget, and it isstill anticipated that expenditures through the end of 2007 will beapproximately $6.5 million for equipment and activities related to thepreparation for commencement of the drilling program.

 

During thethird quarter, we also advanced the geologic model for the project, and it isexpected that the updated model will be completed in the fourth quarter. TheLibby site engineering and geologist staff continue to focus their efforts onoptimization of the current proposed mine plan. During the fourth quarter of2007, the Company expects to initiate discussions and solicit proposals fromoutside engineering firms on the task of updating the current cost study to abankable feasibility study by incorporating the results of the delineationdrilling program.

 

**Permittingand Environmental**

 

The Companycontinued work with the U.S. Forest Service and the Montana Department ofEnvironmental Quality in the third quarter of 2007 on the final stages of thedraft Environmental Impact Statement (EIS). It is anticipated that thepreliminary draft will be issued to the agencies for internal review early inNovember. This preliminary draft EIS will be reviewed for content and thenjointly edited to produce the draft EIS which will be submitted for publiccomment. The agencies’ schedule indicates the completion of the draft EIS byApril 2008.

 

The Companyalso continues to work with the State of Montana to develop the 404 permitapplication, which will establish allowable discharge levels, and collectbaseline environmental information to support our permit applications. Formalpermit applications will be submitted concurrently with the submission of thedraft EIS for public comment.

 

**Financial and Operating Results**

 

MinesManagement is an exploration stage company with a large silver-copper project,the Montanore Project, located in northwestern Montana. The Company continuesto expense all of its expenditures and has no revenues from mining operations. Financialresults of operations include primarily interest income, general andadministrative expenses, permitting, project advancement and engineeringexpenses.

 

**QuarterEnded September 30, 2007**

 

The Companyreported a net loss for the quarter ended September 30, 2007 of $1.7 million,or $0.09 per share, compared to a net loss of $1.4 million, or $0.11 per share,for the quarter ended September 30, 2006.

 

20

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The $0.3 million increase in net loss wasattributed to a $0.3 million increase in the third quarter of 2007 in legal,accounting, financing, and administrative expenses related to increasedinvestor relations activities in support of the Montanore Project, and a$0.2 million increase in employee compensation as a result of salaryincreases and the addition of thirteen new employees, offset by a $0.3 millionincrease in interest income received in the third quarter of 2007 compared tothe third quarter of 2006 from earnings on the $32.1 million net proceeds ofthe Company’s public offering in April 2007. Overall Project spending alsoincreased in the third quarter of 2007 compared to the third quarter of 2006 asa result of increased permitting activities and site preparation for thedelineation drilling program.

 

**NineMonths Ended September 30, 2007**

 

The Companyreported a net loss for the nine months ended September 30, 2007 of $5.1million or $0.30 per share compared to a net loss of $4.0 million, or $0.21 pershare, for the nine months ended September 30, 2006. The $1.1 million increasein net loss for the nine months ended September 30, 2007 compared to the ninemonths ended September 30, 2006 is largely attributable to a $0.3 millionincrease in legal, accounting and administrative expenses related to theincreased cost of implementing additional Sarbanes-Oxley internal controlprocedures and investor relations activities related to the public offeringcompleted in April 2007; increased compensation expense of $0.5 million, a net$0.3 million increase in all other activities and a $0.3 million increase instock option expense due to new hires and repricing of options in accordancewith Company policy. These increased expenditures of $1.6 million were offsetby an increase of $0.5 million in interest income for the first nine months of2007 from earnings on the proceeds of the Company’s public offering in April2007.

 

**Liquidity**

 

During the quarter ended September 30, 2007, the net cash used foroperating activities was $0.5 million, which consisted largely of permittingand administrative expenses associated with increased activities at theMontanore Project. The net cash used in investing activities during the quarterwas $3.4 million for procurement of equipment and construction in progress.

 

For the nine months ended September 30, 2007, the net cash fromfinancing activities was $31.6 million, consisting of proceeds from the publicoffering completed in April 2007. The net cash on hand at the end of the firstnine months of 2007 was $26.2 million, compared to $2 million at end ofthe first nine months of 2006.

 

The Companyanticipates spending approximately $6.5 million from cash and investments onhand during the final quarter of 2007 for activities and equipment purchasesrelated to the advanced exploration and delineation drilling program andrepermitting efforts at the Montanore Project. The Company believes thatit has sufficient working capital for rehabilitation of the Libby adit andcommencement of the delineation drilling program which will take place over thenext two years.

 

The Companycompleted a $10 million private placement of its common stock onNovember 5, 2007. The proceeds of that transaction are expected to be usedfor working capital and general corporate purposes, including advancement ofthe Montanore Project and potential acquisitions.

 

**Forward Looking Statements**

 

Someinformation contained in or incorporated by reference into this report maycontain forward looking statements. These statements include comments regardingfurther exploration and evaluation of the Montanore Project, including plannedrehabilitation and extension of the Libby Adit, drilling activities,feasibility determination, engineering studies, environmental and permittingrequirements, process and timing, and estimates of mineralized material andmeasured, indicated and inferred resource; financing needs; plannedexpenditures in 2007 and 2008; potential completion of a bankable feasibilitystudy; the use of proceeds received from the Company’s recent private placementtransaction and the markets for silver and copper. The use of any of the words “development”,“anticipate”, “continues”, “estimate”, “expect”, “may”, “project”, “should”, “believe”,and similar expressions are intended to identify uncertainties. The Companybelieves the expectations reflected in those forward looking statements are

 

21

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reasonable. However, the Company cannotassure that the expectations will prove to be correct. Actual results coulddiffer materially from those anticipated in these forward looking statements asa result of the factors set forth below and other factors set forth andincorporated by reference into this report:

 

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

•                       Volatilityin the market price for silver and copper

•                       Financialmarket conditions and the availability of financing on acceptable terms

•                       Uncertaintiesassociated with developing new mines

•                       Variationsin ore grade and other characteristics affecting mining, crushing, milling andsmelting and mineral recoveries

•                       Geological,technical, permitting, mining and processing problems

•                       Theavailability, terms, conditions and timing of required governmental permits andapprovals, and potential opposition to the majority of permits

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

•                       Theavailability of experienced employees

•                       Thefactors discussed under “Risk Factors” in our Form 10-K, as amended, for theperiod ending December 31, 2006.

 
| **ITEM 3.** | **QUANTITATIVE AND QUALITATIVE  DISCLOSURES ABOUT MARKET RISK AND HEDGING ACTIVITIES** |
|-------------|----------------------------------------------------------------------------------------|

 

All of our cash balances are held in U.S. dollars and our long terminvestment certificates of deposit  aredenominated in U.S. dollars in local and national banking institutions. Wemanage the timing of cash required for review of the permitting and engineeringof the Montanore Project and for general corporate purposes utilizing our moneymarket account and we invest funds not immediately required in certificates ofdeposit with varyingmaturities and fixed early retirement costs of three months interest. Ourpolicy is to invest only in government and corporate grade securities rated “investmentgrade” or better.

 

The market prices of base and precious metals such as silver and copperfluctuate widely and are affected by numerous factors beyond the control of anymining company. These factors included expectations with regard to the rate ofinflation, the exchangerates of the dollar and other currencies, interest rates, global or regionalpolitical, economic or banking crises, and a number of other factors. If themarket price of silver or copper should decrease, the value of the Company’sMontanore Project could decline and the Company might not be able to recoverits 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 the time that such decisions are made andthe commencement of production could affect the economics of the mine.

 

**ITEM 4.****                             CONTROLSAND PROCEDURES**

 

Glenn M.Dobbs, the Company’s President and CEO, and James H. Moore, the Company’s ChiefFinancial Officer and Treasurer, have evaluated the Company’s disclosurecontrols and procedures as of September 30, 2007. Based upon this evaluation,the Chief Executive Officer and Chief Financial Officer concluded that theCompany’s disclosure controls and procedures are designed and were effective asof September 30, 2007 to give reasonable assurances that the informationrequired to be disclosed in the reports that the Company’s files or submitsunder the Securities Exchange Act of 1934, as amended, is recorded, processed,summarized and reported within the time periods specified in the rules andforms of the Securities and Exchange Commission, and that such information isalso accumulated and communicated to the Company’s management, including itsChief Executive Officer and Chief Financial Officer.

 

There were nochanges in the Company’s internal controls or, to the knowledge of themanagement of the Company, any other changes that materially affect, or arereasonably likely to materially affect, the Company’s internal control overfinancial reporting.

 

22

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# **PART II — OTHER INFORMATION**

# ** **

## **ITEM 1.**                                                 LEGAL PROCEEDINGS

## ** **

On August 11,2005, Mines Management was named as a co-defendant in a lawsuit filed byMontana Reserves Company (MRC) in the Superior Court in Spokane CountyWashington. Named as co-defendants are Noranda Minerals, Normin Corp., MinesManagement and Newhi, Inc. The action seeks damages in connection with the conveyance of theMontanore property from Noranda to Newhi, and challenges the computation of anet proceeds royalty payable toMRC pursuant to a Royalty Agreement between Noranda and MRC in respect to theMontanore property. On October 18, 2007, the Company agreed to purchasethe net proceeds royalty from MRC for $500,000 in consideration of thedismissal with prejudice of its claim against the Company. The settlementagreement was executed on November 6, 2007.

 

### **ITEM 1A.RISK FACTORS**

###  

Except asnoted below, there are no material changes from the risk factors previously disclosedin the Company’s Annual Report on Form 10-K, as amended, for the year endingDecember 31, 2006.

 

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

## ** **

None

 

## **ITEM 3.**                                                 DEFAULTS UPON SENIOR SECURITIES

## ** **

None

 

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

## ** **

None

 

## **ITEM 5.**                                                 OTHER INFORMATION

## ** **

On November 5, 2007, the Company completeda private placement of 2,500,000 shares of its common stock (the “Shares”) toSilver Wheaton Corp. at $4.00 per share, for a total purchase price of $10 million.As a material inducement to purchase the Shares, the Company has granted SilverWheaton a twenty-year right of first refusal to purchase any silver stream thatthe Company elects to sell from its Montana properties.

 

## **ITEM 6.**                                                 EXHIBITS

## ** **

|   | 4.1    | Subscription Agreement, dated November 2, 2007, between Mines  Management, Inc. and Silver Wheaton Corp.           |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                    |
|   | 4.2    | Registration Rights Agreement, dated November 2, 2007, between  Mines Management, Inc. and Silver Wheaton Corp.    |
|   |   |                                                                                                                    |
|   | 10.1   | Right of First Refusal Agreement, dated November 2, 2007,  between Mines Management, Inc. and Silver Wheaton Corp. |
|   |   |                                                                                                                    |
|   | 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)           |

 

23

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32.2                          Certificationof Chief Financial Officer pursuant to 18 U.S.C., 1350 (Section 906 of theSarbanes-Oxley Act)

 

24

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# **SIGNATURES**

# ** **

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on behalf of the undersigned thereunto dulyauthorized.

 

 
|   Date:   November 8, 2007 | By:    | /s/  Glenn M. Dobbs                                                            |   |
|--------------------------------------|--------|--------------------------------------------------------------------------------|--------|
|                                 |   |   Glenn M.  Dobbs    President and Chief Executive Officer |
|                                 |   |
|                                 |   |
|   Date:   November 8, 2007 | By:    | /s/  James H. Moore                                                            |   |
|                                 |   |   James H.  Moore    Chief Financial Officer               |

 

----

 

**EXHIBITINDEX**

 
|   | 4.1    | Subscription Agreement, dated November 2, 2007, between Mines  Management, Inc. and Silver Wheaton Corp.           |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                    |
|   | 4.2    | Registration Rights Agreement, dated November 2, 2007, between  Mines Management, Inc. and Silver Wheaton Corp.    |
|   |   |                                                                                                                    |
|   | 10.1   | Right of First Refusal Agreement, dated November 2, 2007,  between Mines Management, Inc. and Silver Wheaton Corp. |
|   |   |                                                                                                                    |
|   | 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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