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

 

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**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 June 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                     .** |

 

**COMMISSIONFILE NUMBER  000-29786**

**MINES MANAGEMENT, INC.**

(Exact Name of Registrant as Specified in its Charter)

| **IDAHO**                                                       |   | **91-0538859**                        |
|-----------------------------------------------------------------|--------|---------------------------------------|
| (State or Other  Jurisdiction of Incorporation or Organization) |   | (I.R.S. Employer  Identification No.) |
|                                                            |   |                                  |
| **905 W.  Riverside Avenue, Suite 311**                         |   | ** **                            |
| **Spokane,  Washington**                                        |   | **99201**                             |
| (Address Of  Principal Executive Offices)                       |   | (Zip Code)                            |

 

**(509)838-6050**

(Registrant’sTelephone Number, Including Area Code)

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.  **x Yes**    o No

Indicate by checkmark whether the registrant is a large accelerated filer, and acceleratedfiler, or a non-accelerated filer.  See definitionof “accelerated filer and large accelerated filer” in Rule 12b-2 of theExchange Act. (Check one):
| Large accelerated filer o |   | Accelerated filer x |   | Non-accelerated filer o |
|---------------------------|--------|---------------------|--------|-------------------------|

 

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

At August 6, 2007,19,736,067 shares of common stock, par value $0.001 per share, were issued andoutstanding.

SEC1296 (9-05)       Potential persons whoare to respond to the collection of information contained in this form are notrequired to respond unless the form displays a currently valid OMB controlnumber.

 

----

MINES MANAGEMENT,INC.FORM 10-QQUARTER ENDED June 30, 2007

INDEX
| PART I – FINANCIAL INFORMATION (Note final to  match pages) |                                                         |   |
|------------------------------------------------------------------|--------------------------------------------------------------|--------|
|                                                             |                                                         |   |
| ITEM  1.                                                         | FINANCIAL  STATEMENTS                                        |   |   |
|                                                             |                                                         |   |   |
| 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                                                     |   |   |

 

2

----

**Part I – Financial Information**

**Item1. Financial statements (unaudited)**

**MINES MANAGEMENT, INC. ANDSUBSIDIARIES**

#### **Consolidated Financial Statements**

**June 30,2007 and 2006**

3

----

**Mines Management, Inc. andSubsidiaries**

**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**

**Consolidated Balance Sheets (unaudited)**
| ** **                                                                                                                                   | ** **   | **June 30,** | ** **   | **December 31,** | ** **   |      |
|----------------------------------------------------------------------------------------------------------------------------------------------|--------------|-------------------|--------------|-----------------------|--------------|-----------|
| ** **                                                                                                                                   | ** **   | **2007**          | ** **   | **2006**              | ** **   |      |
| ** **                                                                                                                                   | ** **   | ** **        | ** **   | ** **            | ** **   |      |
| ***Assets***                                                                                                                                 |         |              |         |                  |         |      |
| *CURRENT ASSETS:*                                                                                                                            | * *     | * *          | * *     | * *              | * *     |      |
| Cash and cash  equivalents                                                                                                                   |         | $                 | 30,267,134   |                  | $            | 743,652   |   |   |
| Interest  receivable                                                                                                                         |         | 58,697            |         | 64,426                |         |      |
| Prepaid expenses  and deposits                                                                                                               |         | 546,827           |         | 71,118                |         |      |
| Total current  assets                                                                                                                        |         | 30,872,658        |         | 879,196               |         |      |
| * *                                                                                                                                     | * *     | * *          | * *     | * *              | * *     |      |
| *MINERAL PROPERTIES*                                                                                                                         |         | 504,492           |         | 504,492               |         |      |
| * *                                                                                                                                     | * *     | * *          | * *     | * *              | * *     |      |
| *PROPERTY AND EQUIPMENT:*                                                                                                                    | * *     | * *          | * *     | * *              | * *     |      |
| Construction in  progress                                                                                                                    |         | 469,594           |         | —                |         |      |
| Mine buildings  and leasehold improvements                                                                                                   |         | 601,445           |         | 172,535               |         |      |
| Equipment                                                                                                                                    |         | 454,618           |         | 259,914               |         |      |
| Office equipment                                                                                                                             |         | 264,207           |         | 222,514               |         |      |
|                                                                                                                                         |         | 1,789,864         |         | 654,963               |         |      |
| Less accumulated  depreciation                                                                                                               |         | 214,939           |         | 156,280               |         |      |
|                                                                                                                                         |         | 1,574,925         |         | 498,683               |         |      |
| * *                                                                                                                                     | * *     | * *          | * *     | * *              | * *     |      |
| *INVESTMENTS:*                                                                                                                               | * *     | * *          | * *     | * *              | * *     |      |
| Certificates of  deposit                                                                                                                     |         | 2,541,013         |         | 4,370,253             |         |      |
| Available-for-sale  securities                                                                                                               |         | 208,435           |         | 77,844                |         |      |
|                                                                                                                                         |         | 2,749,448         |         | 4,448,097             |         |      |
|                                                                                                                                         |         | $                 | 35,701,523   |                  | $            | 6,330,468 |   |   |
| *** ***                                                                                                                                 | *** *** | *** ***      | *** *** | *** ***          | *** *** |      |
| ***Liabilities  and Stockholders’ Equity***                                                                                             | *** *** | *** ***      | *** *** | *** ***          | *** *** |      |
| *CURRENT LIABILITIES:*                                                                                                                       | * *     | * *          | * *     | * *              | * *     |      |
| Accounts payable                                                                                                                             |         | $                 | 928,439      |                  | $            | 301,667   |   |   |
| Due to officer                                                                                                                               |         | 2,398             |         | 2,398                 |         |      |
| Payroll Payable                                                                                                                              |         | 7,009             |         | —                |         |      |
| Payroll taxes  payable                                                                                                                       |         | 6,550             |         | 3,549                 |         |      |
| Total current  liabilities                                                                                                                   |         | 944,396           |         | 307,614               |         |      |
| * *                                                                                                                                     | * *     | * *          | * *     | * *              | * *     |      |
| *CONTINGENCY & 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                                                                                                                  |         | 54,274,956        |         | 22,268,710            |         |      |   |
| Accumulated  deficit                                                                                                                         |         | (1,117,306        | )            | (1,117,306            | )            |      |
| Deficit  accumulated during the development stage                                                                                            |         | (18,617,529       | )            | (15,208,078           | )            |      |
| Accumulated  other comprehensive income                                                                                                      |         | 197,270           |         | 66,679                |         |      |
|                                                                                                                                         |         |              |         |                  |         |      |
| Total  stockholders’ equity                                                                                                             |         | 34,757,127        |         | 6,022,854             |         |      |
|                                                                                                                                         |         | $                 | 35,701,523   |                  | $            | 6,330,468 |   |   |

 

See accompanyingnotes to consolidated financial statements.

5

----

**MinesManagement, Inc. and Subsidiaries**

**Consolidated Statements of Operations (unaudited)**
| ** **                                                  | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** | **From Inception  August 12, 2002 Through  June 30,** | ** ** |
|-------------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|--------------------------------------------------------------------------------|------------|
| ** **                                                  | ** ** | **2007**                                        | ** ** | **2006**                                      | ** ** | **2007**                                                                       | ** ** | **2006** | ** ** | **2007** | ** ** |
| *REVENUE:*                                                  | * *   | * *                                        | * *   | * *                                      | * *   | * *                                                                       | * *   | * * | * * | * * | * * |
| Royalties                                                   |       | $                                               | 678        |                                          | $          | 2,803                                                                          |       | $ | 2,693 |   | $ | 6,507 |   | $ | 44,192 |   |
| *OPERATING EXPENSES:*                                       | * *   | * *                                        | * *   | * *                                      | * *   | * *                                                                       | * *   | * * | * * | * * | * * |
| Depreciation                                                |       | 30,265                                          |       | 11,421                                        |       | 58,660                                                                         |       | 22,590 |   | 150,926 |   |
| Administrative                                              |       | 338,655                                         |       | 140,515                                       |       | 566,137                                                                        |       | 261,460 |   | 2,548,886 |   |
| Legal,  accounting, and consulting                          |       | 19,917                                          |       | 125,888                                       |       | 295,011                                                                        |       | 162,626 |   | 1,146,755 |   |
| Miscellaneous                                               |       | 2,547                                           |       | 126                                           |       | 10,201                                                                         |       | 1,846 |   | 42,334 |   |
| Exploration                                                 |       | (18,506                                         | )          | —                                        |       | 11,866                                                                         |       | — |   | 165,176 |   |
| Oil and gas  operating                                      |       | 405                                             |       | —                                        |       | 518                                                                            |       | — |   | 12,691 |   |
| Rent and office                                             |       | 111,198                                         |       | 61,810                                        |       | 226,075                                                                        |       | 121,030 |   | 749,282 |   |
| Compensation;  directors, officers and staff                |       | 477,225                                         |       | 175,810                                       |       | 737,938                                                                        |       | 357,523 |   | 2,946,1651 |   |
| Taxes and  licenses                                         |       | 8,640                                           |       | 48,638                                        |       | 57,346                                                                         |       | 62,503 |   | 195,436 |   |
| Telephone                                                   |       | 9,035                                           |       | 5,538                                         |       | 18,493                                                                         |       | 10,647 |   | 70,517 |   |
| Fees, filing, and  licenses                                 |       | 64,871                                          |       | 83,755                                        |       | 177,492                                                                        |       | 246,709 |   | 1,411,788 |   |
| Environmental                                               |       | 42,072                                          |       | 83,986                                        |       | 85,715                                                                         |       | 110,369 |   | 606,543 |   |
| Engineering                                                 |       | 27,833                                          |       | 72,698                                        |       | 36,995                                                                         |       | 278,046 |   | 1,465,405 |   |
| Permitting                                                  |       | 153,024                                         |       | 388,479                                       |       | 1,029,222                                                                      |       | 701,859 |   | 3,578,889 |   |
| Commissions                                                 |       | —                                          |       | —                                        |       | —                                                                         |       | — |   | 68,440 |   |
| Stock options  granted to directors, officers and employees |       | 420,870                                         |       | 392,530                                       |       | 420,870                                                                        |       | 392,530 |   | 3,892,001 |   |
| Stock options  granted for services                         |       | 6,550                                           |       | 11,545                                        |       | 6,550                                                                          |       | 11,545 |   | 607,754 |   |
| Total operating  expenses                                   |       | 1,694,601                                       |       | 1,602,739                                     |       | 3,739,089                                                                      |       | 2,741,283 |   | 19,658,988 |   |
| *LOSS FROM OPERATIONS*                                      |       | (1,693,923                                      | )          | (1,599,936                                    | )          | (3,736,396                                                                     | )          | (2,734,776 | ) | (19,614,796 | ) |
| *OTHER INCOME:*                                             | * *   | * *                                        | * *   | * *                                      | * *   | * *                                                                       | * *   | * * | * * | * * | * * |
| Interest                                                    |       | 129,707                                         |       | 83,571                                        |       | 326,945                                                                        |       | 163,057 |   | 993,809 |   |
| Miscellaneous                                               |       | —                                          |       | —                                        |       | —                                                                         |       | — |   | 3,458 |   |
|                                                        |       | 129,707                                         |       | 83,571                                        |       | 326,945                                                                        |       | 163,057 |   | 997,267 |   |
| *NET LOSS*                                                  |       | $                                               | (1,564,216 | )                                             | $          | (1,516,365                                                                     | )          | $ | (3,409,451 | ) | $ | (2,571,719 | ) | $ | (18,617,529 | ) |
| *NET LOSS PER SHARE*(actual and  fully diluted)             |       | $                                               | (0.09      | )                                             | $          | (0.12                                                                          | )          | $ | (0.22 | ) | $ | (0.20 | ) |   |   |
| *WEIGHTED—AVERAGE COMMON SHARES OUTSTANDING*           |       | 18,008,843                                      |       | 12,825,557                                    |       | 15,443,407                                                                     |       | 12,713,067 |   |   |   |

 

See accompanying notes to consolidated financial statements.

6

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**Mines Management, Inc. andSubsidiaries**

**Consolidated Statements of Stockholders’ Equity(unaudited)   Six Months Ended June 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                                  |       | —                |       | —                              |       | —         |       | —                |       | 47,520                                                 |       | —                                |        | —      |       | — |   | 47,520 |   |
| Revaluation  of stock options                               |       | —                |       | —                              |       | —         |       | —                |       | 379,900                                                |       | —                                |        | —      |       | — |   | 379,900 |   |
| Comprehensive  loss:                                        |       |                  |       |                                |       |           |       |                  |       |                                                   |       |                                  |        |        |       |   |   |   |   |
| Adjustment  to net unrealized gain on marketable securities |       | —                |       | —                              |       | —         |       | —                |       | —                                                 |       | —                                |        | —      |       | 130,591 |   | 130,591 |   |
| Net  loss                                                   |       | —                |       | —                              |       | —         |       | —                |       | —                                                 |       | —                                |        | (3,409,451  | )          | — |   | (3,409,451 | ) |
| Comprehensive  loss                                         |       |                  |       |                                |       |           |       |                  |       |                                                   |       |                                  |        |        |       |   |   | (3,278,860 | ) |
| *BALANCES, JUNE 30, 2007*                                   |       | 19,736,067            |       | $                                   | 19,736     |           | —     |                  | $          | —                                                 |       | $                                     | 54, 274,956 |        | $          | (1,117,306 | ) | $ | (18,617,529 | ) | $ | 197,270 |   | $ | 34,757,127 |   |

 

See accompanying notes to consolidated financial statements.

7

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**Mines Management, Inc. andSubsidiaries**

**Consolidated Statements of Cash Flows (unaudited)**
| ** **                                                                         | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** | **From Inception  August 12, 2002  Through  June 30,** | ** ** |
|------------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|----------------------------------------------------------------------------|------------|
| **Increase (Decrease) in Cash and Cash Equivalents** | ** ** | **2007**                                        | ** ** | **2006**                                      | ** ** | **2007**                                                                   | ** ** | **2006** | ** ** | **2007** | ** ** |
| *CASH FLOWS FROM OPERATING  ACTIVITIES:*                                           |       |                                            |       |                                          |       |                                                                       |       |   |   |   |   |
| Net loss                                                                           |       | $                                               | (1,564,216 | )                                             | $          | (1,516,365                                                                 | )          | $ | (3,409,451 | ) | $ | (2,571,719 | ) | $ | (18,617,529 | ) |
| Adjustments to  reconcile net loss to net cash used in operating activities:       |       |                                            |       |                                          |       |                                                                       |       |   |   |   |   |
| Issuance of  stock options                                                         |       | 427,420                                         |       | 404,075                                       |       | 427,420                                                                    |       | 404,075 |   | 4,499,755 |   |
| Stock received  for services                                                       |       | —                                          |       | —                                        |       | —                                                                     |       | — |   | (11,165 | ) |
| Depreciation                                                                       |       | 30,265                                          |       | 11,421                                        |       | 58,660                                                                     |       | 22,590 |   | 150,926 |   |
| Changes in  assets and liabilities:                                                |       |                                            |       |                                          |       |                                                                       |       |   |   |   |   |
| Interest  receivable                                                               |       | (29,110                                         | )          | (29,349                                       | )          | 5,729                                                                      |       | (31,083 | ) | (58,697 | ) |
| Prepaid expenses  and deposits                                                     |       | (516,041                                        | )          | (46,000                                       | )          | (475,709                                                                   | )          | (30,831 | ) | (546,327 | ) |
| Accounts payable                                                                   |       | 606,759                                         |       | 39,662                                        |       | 626,772                                                                    |       | (79,821 | ) | 930,837 |   |
| Payroll payable                                                                    |       | 7,009                                           |       | —                                        |       | 7,009                                                                      |       | — |   | 7,009 |   |
| Severance  payable                                                                 |       | —                                          |       | —                                        |       | —                                                                     |       | (20,000 | ) | — |   |
| State income  taxes payable                                                        |       | —                                          |       | —                                        |       | —                                                                     |       | — |   | (164 | ) |
| Payroll taxes  payable                                                             |       | 2,106                                           |       | 15,315                                        |       | 3,001                                                                      |       | 2,429 |   | 3,370 |   |
| Net cash used in  operating activities                                             |       | (1,035,808                                      | )          | (1,121,241                                    | )          | (2,756,569                                                                 | )          | (2,304,360 | ) | (13,641,985 | ) |
| *CASH FLOWS FROM INVESTING  ACTIVITIES:*                                           |       |                                            |       |                                          |       |                                                                       |       |   |   |   |   |
| Purchase of  fixed assets                                                          |       | (430,474                                        | )          | (3,500                                        | )          | (665,308                                                                   | )          | (9,102 | ) | (1,254,419 | ) |
| Construction in  Progress                                                          |       | (469,594                                        | )          | —                                        |       | (469,594                                                                   | )          | — |   | (469,594 | ) |
| (Purchase) Sale  of certificates of deposit                                        |       | —                                          |       | (14,336                                       | )          | 1,829,240                                                                  |       | (55,302 | ) | (2,541,013 | ) |
| Increase in  mineral properties                                                    |       | —                                          |       | —                                        |       | —                                                                     |       | — |   | (144,312 | ) |
| Net cash  provided by (used in) investing activities                               |       | (900,068                                        | )          | (17,836                                       | )          | 694,338                                                                    |       | (64,404 | ) | (4,409,338 | ) |
| *CASH FLOWS FROM FINANCING  ACTIVITIES:*                                           |       |                                            |       |                                          |       |                                                                       |       |   |   |   |   |
| Proceeds from  sales of common stock                                               |       | 31,585,713                                      |       | 367,250                                       |       | 31,585,713                                                                 |       | 1,513,750 |   | 48,271,122 |   |
| *NET INCREASE (DECREASE) IN CASH  AND CASH EQUIVALENTS*                            |       | 29,649,837                                      |       | (771,827                                      | )          | 29,523,482                                                                 |       | (855,014 | ) | 30,219,799 |   |
| *CASH AND CASH EQUIVALENTS,  BEGINNING OF PERIOD*                                  |       | 617,297                                         |       | 4,565,107                                     |       | 743,652                                                                    |       | 4,648,294 |   | 47,335 |   |
| *CASH AND CASH EQUIVALENTS, END OF PERIOD*                                         |       | $                                               | 30,267,134 |                                          | $          | 3,793,280                                                                  |       | $ | 30,267,134 |   | $ | 3,793,280 |   | $ | 30,267,134 |   |

 

***Seeaccompanying notes to consolidated financial statements.***

8

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***MinesManagement, Inc. and Subsidiaries***

***Notes to ConsolidatedFinancial Statements***

***NOTE 1 — ORGANIZATIONAND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:***

*Organization:*

Mines Management,Inc. (the Company) is a publicly held Idaho corporation incorporated in1947.  The Company acquires, explores,and develops mineral properties principally in North America.  The Company performed exploration activitiesin South America in 2002.

*Summaryof Significant Accounting Policies:*

a.               Theaccompanying consolidated financial statements include the accounts of MinesManagement, Inc., and its wholly-owned subsidiaries, Newhi, Inc., MontanoreMineral Corporation, and Montmin Corporation. Intercompany balances and transactions have been eliminated.  Newhi, Inc. was formed by the Company for thepurpose 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 issued367,844 shares of its previously unissued common stock.  Also in connection with this merger, theCompany issued 11,117 shares of common stock and paid $4,446 as a finder’sfee.  Montanore Mineral Corporation andMontmin Corporation were acquired in conjunction with a stock transferagreement with Noranda Finance Corporation as described more fully in note 9.

b.              Allexploration expenditures are expensed as incurred.  Significant property acquisition payments foractive exploration properties are capitalized. If no mineable ore body is discovered, previously capitalized costs areexpensed 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 intoproduction, expenditures to develop new mines, to define further mineralizationin existing ore bodies, and to expand the capacity of operating mines, arecapitalized and amortized on the units of production basis over proven andprobable reserves.  Should a property beabandoned, its capitalized costs are charged to operations.  The Company charges to operations theallocable portion of capitalized costs attributable to properties sold.  Capitalized costs are allocated to propertiessold based on the proportion of claims sold to the claims remaining within theproject area.

c.               The Companyevaluates its long-lived assets for impairment when events or changes incircumstances indicate that the related carrying amount may not berecoverable.  If the sum of estimatedfuture net cash flows on an undiscounted basis is less than the carrying amountof the related asset grouping, asset impairment is considered to exist.  The related impairment loss is measured bycomparing estimated future net cash flows on a discounted basis to the carryingamount of the asset.  Changes insignificant assumptions underlying future cash flow estimates may have amaterial effect on the Company’s financial position and results ofoperations.  To date no such impairmentshave been identified.

d.              Property andequipment are stated at cost.  Buildingsand leasehold improvements are depreciated on the straight-line basis over anestimated useful life of 39 years. Machinery and furniture are generally being depreciated using acceleratedmethods over estimated useful lives ranging from 5 to 10 years.

e.               Basic anddiluted loss per share is computed using the weighted average number of sharesoutstanding during the periods (15,443,407 and 12,713,067 for the six monthsended June 30, 2007 and 2006, respectively). Stock options and warrants outstanding are antidilutive and are notconsidered in the computation.

f.                 Cash andcash equivalents include cash on hand, cash in banks, investments incertificates of deposit with original maturities of 90 days or less, and moneymarket funds.

9

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g.              The Company’sfinancial instruments, as defined by Statement of Financial AccountingStandards (SFAS) No. 107, *Disclosuresabout Fair Value of Financial Instruments*, include cash and loanspayable.  All instruments are accountedfor on a historical cost basis, which, due to the short maturity of thesefinancial instruments, approximates fair value at June 30, 2007.

h.              Deferredincome tax is provided for differences between the bases of assets and liabilitiesfor financial and income tax reporting. A deferred tax asset, subject to a valuation allowance, is recognizedfor estimated future tax benefits of tax-basis operating losses being carriedforward.

i.                  Thepreparation of financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date ofthe financial statements and the reported amounts of revenues and expensesduring the reporting period.  Actualresults may differ from those estimates.

j.                  TheCompany has adopted SFAS No. 143, *Accountingfor Asset Retirement Obligations*, which establishes a uniformmethodology for accounting for estimated reclamation and abandonmentcosts.  According to SFAS No. 143,the fair value of a liability for an asset retirement obligation (ARO) will berecognized in the period in which it is incurred if a reasonable estimate offair value can be made.  The ARO iscapitalized as part of the carrying value of the assets to which it isassociated, and depreciated over the useful life of the asset.

In March 2005, the Financial AccountingStandards Board (“FASB”) issued Interpretation (FIN) No. 47, *Accounting for Conditional Asset RetirementObligations*, which clarifies that the term *conditional asset retirement obligation* asused in SFAS No. 143 refers to a legal obligation to perform an assetretirement activity where the timing or method of settlement is conditional ona future event.  Where the obligation toperform the asset retirement activity is unconditional, even though uncertaintyexists about the timing or method of settlement, the entity is required torecognize a liability for the fair value of the conditional retirementobligation if reasonably estimable.  FINNo. 47 also clarifies when an entity would have sufficient information toreasonably estimate fair value.  At June30, 2007, no asset retirement liabilities have been recorded by the Company.

k.               In July2006, FASB issued FASB Interpretation (FIN) No. 48, *Accountingfor Uncertainty in Income Taxes,* an interpretation of SFAS No. 109*, Accounting for Income Taxes*.  FIN No. 48 clarifies the accounting forincome taxes by prescribing the minimum recognition threshold a tax position isrequired to meet before being recognized in the financial statements.  FIN No. 48 also provides guidance onderecognition, measurement, classification, interest and penalties, accountingin interim periods, disclosure, and transition. The interpretation applies to all tax positions related to income taxessubject to SFAS No. 109, *Accounting For IncomeTaxes*.  FIN No. 48 iseffective for fiscal years beginning after December 15, 2006.  Differences between the amounts recognized inthe balance sheets prior to the adoption of FIN No. 48 and the amounts reportedafter adoption should be accounted for as cumulative-effect adjustment recordedto the beginning balance of retained earnings. The Company does not expect the adoption of this statement to have amaterial effect on its financial condition, results of operations, or cashflows.

10

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l.                  In September2006, FASB issued SFAS No. 157, *Fair Value Measurements*.  SFAS No. 157 defines fair value, establishesa framework for measuring fair value under accounting principles generallyaccepted in the United States of America, and expands disclosures about fairvalue measurements.  SFAS No. 157 is effectivefor financial statements issued in respect of fiscal years beginning afterNovember 15, 2007.  The Company iscurrently evaluating the impact the adoption of this statement could have onits financial condition, results of operations, and cash flows.

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

n.              TheCompany uses the “modified prospective method” of transition as described underSFAS No. 148, *Accounting for Stock-BasedCompensation—Transition and Disclosure*, to account for the costs ofemployee services received in exchange for an award of equity instruments.  Under this method of transition, the costsrecognized in the financial statements for the quarters ended June 30, 2007 and2006 are the same as if they had been based on their fair values at the grantdate.  The Company recognized stock-basedcompensation of $427,420 and $404,075 for the quarters ended June 30, 2007 and2006, respectively.

o.              For purposesof calculating the fair value of options, volatility for the three yearspresented is based on the historical volatility of the Company’s Common Stockover a two year period.  The Company doesnot foresee the payment of dividends in the near term.  The fair value for these options wasestimated at the date of grant using the Black-Scholes option-pricing modelwith the following assumptions:
|                                            | ** ** | **Quarters Ended** | ** ** |
|--------------------------------------------|------------|-------------------------|------------|
| ** **                                 | ** ** | **June 30**        | ** ** |
| ** **                                 | ** ** | **2007**                | ** ** | **2006** | ** ** | **2005** | ** ** |
|                                       |       |                    |       |   |   |   |   |
| Weighted average  risk-free interest rate  |       | 4.76                    | %          | 5.16 | % | 3.61 | % |
|                                       |       |                    |       |   |   |   |   |
| Weighted average  volatility               |       | 54.84                   | %          | 61.96 | % | 72.87 | % |
|                                       |       |                    |       |   |   |   |   |
| Expected  dividend yield                   |       | —                  |       | — |   | — |   |
|                                       |       |                    |       |   |   |   |   |
| Weighted average  expected life (in years) |       | 2.00                    |       | 2.00 |   | 2.00 |   |

 

AtJune 30, 2007, the Company had two stock option plans, which are described morefully in note 6.

11

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***NOTE 2 — STOCKHOLDERS’EQUITY:***

*Common Stock:*

*In 2003, the Company sold 1,152,007 common shares for$1,267,207 ($1.10 per share).  Inconnection with the stock sales, the Company granted warrants to purchase up to1,152,007 common shares at $1.20 per share through two years from the date ofissue.  Cumulative warrants exercisedrelating to this issue at December 31, 2006, 2005, and 2004, were 1,152,007,1,152,007, and 573,640 shares, respectively.*

In 2004, theCompany sold 1,285,000 common shares for $6,425,000 ($5.00 per share).  In connection with the stock sales, theCompany granted warrants to purchase up to 511,000 common stock shares at $7.25per share through five years from the initial exercise date.  The Company paid a cash finder’s fee of 7% ofthe gross offering funds received in the offering.  The finder also received 3% warrantcompensation or warrants to purchase 192,750 common shares at $7.25 per sharethrough February 18, 2009.  Thesewarrants were repriced at $6.00 per share in October 2005 and to $5.00 pershare in April 2007 in accordance with the terms of the 2004 warrant agreement.Cumulative warrants exercised relating to this issue at December 31, 2006,2005, and 2004, were 145,750, 40,000, and -0-, respectively.

In 2005, theCompany sold 1,016,667 common shares for $6,100,002 ($6.00 per share).  In connection with the stock sales, theCompany granted warrants to purchase up to 737,084 common stock shares at $8.25per share through five years from the initial exercise date.  To date, no warrants have beenexercised.  The Company paid a cashfinder’s fee of 7% of the gross offering funds received in the offering.  The finder also received a 3.75% warrantcompensation or warrants to purchase 228,750 common shares at $8.25 per sharethrough October 20, 2010.  These warrantswere repriced at $5.00 per share in April 2007 in accordance with the terms ofthe 2005 warrant agreement.

In 2005, theCompany also sold an additional 40,000 common shares for $240,000 ($6.00 pershare).

On April 20, 2007 the Company completed a public offering of 6,000,000units at a price of $5.00 per unit, resulting in gross proceeds of $30,000,000($28,200,000 net proceeds).  Each unit iscomprised of one share of common stock and one-half of one common stockpurchase warrant, with each full warrant being exercisable for five years topurchase one share of common stock at a price of $5.75 per share.  The warrants are listed on the TSX and aretradable in US dollars under the symbol MGT.GT.U.

The underwriters were granted an over-allotment option, exercisable fora period of 30 days following the closing, to acquire up to an additional900,000 units.   On May 7, 2007, theCompany received notice that the underwriters had elected to exercise theover-allotment option for 836,600 units. 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 June 30, 2007, the Company had notissued any of the authorized preferred stock.

12

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***NOTE 3 — MININGPROPERTIES:***

Miningproperties are comprised of acquisition, exploration, and development costsrelated to the Montanore property in northwestern Montana and the Advance andIroquois properties in the Northport region of northeastern Washington, asshown below:
|            | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
|------------|------------|-------------------|------------|-----------------------|------------|
| ** ** | ** ** | **2007**          | ** ** | **2006**              | ** ** |
|       |       |              |       |                  |       |
| Montanore  |       | $                 | 278,519    |                  | $          | 278,519 |   |
| Advance    |       | 2,139             |       | 2,139                 |       |
| Iroquois   |       | 223,834           |       | 223,834               |       |
|       |       |              |       |                  |       |
|       |       | $                 | 504,492    |                  | $          | 504,492 |   |

 

***The Montanore property is located in northwestern Montanaand includes 18 mining claims covering 355 acres plus one 5-acre patented millsite.  In August 2002, the Companyacquired a controlling interest in the Montanore silver and copper deposit inSanders County, Montana.  The Companyreceived a quitclaim deed from Noranda Mineral Corp. (Noranda) when Norandaelected to withdraw from the project. 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.  In December 2002, the Company received aquitclaim deed to all intellectual property connected with studies that Norandacarried out on the project.***

The Advanceproperty consists of 720 acres of patented mineral rights.  Although the Company does not own theoverlying surface rights to its patented mineral rights, it does have right ofaccess to explore and mine.

The Iroquoisproperty consists of 64 acres of patented mineral and surface rights and 15unpatented mining claims containing 300 acres.

***NOTE4 —CONSTRUCTION IN PROGRESS:***

The Company is in the process of constructing additional office spacein Libby, Montana.  This project isapproximately 50% complete and has an estimated cost of $132,000.  Construction has also begun on theunderground electrical and pumping systems at the Libby adit.  The anticipated cost of these projects totals$1,125,100 with approximately $404,200 included in construction in progress asof June 30, 2007.

13

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***NOTE 5 — INVESTMENTS:***

The Company owns a $111,549 certificate of depositwhich matures in September 2008 and has an interest rate of 3.64%.  The Company also owns a $1,124,055certificate of deposit which is security for a Letter of Credit to the MontanaDEQ for the reclamation guarantee for the Montanore expansion evaluationprogram.  This certificate matures inJanuary 2008 and will automatically renew annually.  It currently earns a rate of 5.28%.  The Company owns six $217,568 certificates ofdeposit for a total of $1,305,409.  Theseinvestments mature in 2009 and earn rates of 4.21%.

The Company owns 45,000 free-trading shares ofBitterroot Resources, Ltd. (BTT), a public Canadian corporation traded on theToronto Venture Exchange.  The shares areheld as “available for sale.”  Thisinvestment is being recorded at fair market value with a correspondingadjustment to stockholders’ equity.  The45,000 free-trading shares at June 30, 2007 and December 31, 2006 had amarket value of $24,121 and $28,213 U.S. funds, respectively.  The Company also owns 196,000 free-tradingshares of Centram Exploration Ltd., a public Canadian corporation traded on theToronto Venture Exchange.  The shares areheld as “available for sale.”  The shareswere received in year 2002 in exchange for administrative services provided bythe Company.  The 196,000 free-tradingshares at June 30, 2007 and December 31, 2006 had a market value of $184,314and $49,631 U.S. funds, respectively.

***NOTE 6 — STOCK OPTIONS:***

During the yearended December 31, 2003, the stockholders 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 StockOption Plan, the Company may grant options to purchase up to 1,200,000 sharesof common stock.  Under the 2003Consultant Stock Compensation Plan the Company may grant options to purchase upto 400,000 shares of common stock. During 2004, the Company increased the maximum number of common sharesavailable under the 2003 Stock Option Plan and the 2003 Consultant StockCompensation Plan to 3,000,000 and 700,000 shares, respectively.

Options grantedunder the 2003 plans are granted at an exercise price of not less than 100% ofthe fair market value per share on the date of grant.  Stock options are exercisable within tenyears from the date of the grant of the option. Vesting of the options granted under both plans is at the prerogative ofthe Board of Directors.  The Company hasa policy of re-pricing all incentive stock options as market conditions allow.

14

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At June 30, 2007, thefollowing 2003 plan options were outstanding:
| **Exercise  Prices**                | ** ** | **Number of  Options** | ** ** | **Weighted  Average  Exercise Price** | ** ** | **Remaining  Contractual  Life  (in years)** | ** ** | **Number  Exercisable** | ** ** |
|-------------------------------------|------------|-----------------------------|------------|--------------------------------------------|------------|---------------------------------------------------|------------|-------------------------|------------|
|                                |       |                        |       |                                       |       |                                              |       |                    |       |
| $     1.60 |       |                        | 500,000    |                                       | $          | 1.60                                              |       | .68                     |       | 500,000 |   |
| 1.85                                |       |                        | 100,000    |                                       | 1.85       |                                              | 1.16       |                    | 100,000    |   |
| 3.95                                |       |                        | 20,000     |                                       | 3.95       |                                              | 1.84       |                    | 20,000     |   |
| 4.65                                |       |                        | 475,000    |                                       | 4.65       |                                              | 1.98       |                    | 475,000    |   |
| 3.75                                |       |                        | 220,000    |                                       | 3.75       |                                              | 2.17       |                    | 120,000    |   |
| 3.93                                |       |                        | 155,000    |                                       | 3.93       |                                              | 2.59       |                    | 155,000    |   |
| 4.01                                |       |                        | 214,000    |                                       | 4.01       |                                              | 0.33       |                    | 214,000    |   |
| 3.90                                |       |                        | 5,000      |                                       | 3.90       |                                              | 3.89       |                    | 5,000      |   |
| 3.90                                |       |                        | 175,000    |                                       | 3.90       |                                              | 3.95       |                    | 175,000    |   |
| 3.90                                |       |                        | 30,000     |                                       | 3.90       |                                              | 4.23       |                    | 10,000     |   |
| 3.90                                |       |                        | 100,000    |                                       | 3.90       |                                              | 3.46       |                    | 100,000    |   |
| 3.90                                |       |                        | 200,000    |                                       | 3.90       |                                              | 4.03       |                    | —     |   |
| 4.34                                |       |                        | 30,000     |                                       | 4.34       |                                              | 4.34       |                    | 10,000     |   |
| 3.79                                |       |                        | 18,000     |                                       | 3.79       |                                              | 4.96       |                    | 18,000     |   |
| 3.33                                |       |                        | 30,000     |                                       | 3.33       |                                              | 5.00       |                    | 10,000     |   |
|                                |       |                        |       |                                       |       |                                              |       |                    |       |   |
| Subtotal                            |       | 2,272,000                   |       | $                                          | 3.46       |                                              |       |                    | 1,912,000  |   |

 

During January2005, the Company issued 214,000 stock options to an individual as compensationfor the performance of marketing services. The options have an exercise priceof $4.01 and vested 25% at the time of issuance, 25% in 60 days thereafter andthe remaining balance on May 28, 2005. In January 2007, the option agreement was extended nine months by theBoard of Directors to October 27, 2007.

During February2005, the Company issued 205,000 stock options to directors and employees.  The options have an exercise price of $3.93and vested immediately.  The optionsexpire five years from issuance.

During June 2005,the Company issued 25,000 stock options to an individual as compensation forthe performance of consulting services. The options have an exercise price of $5.70 and vested immediately.  During May 2007and October 2006, the optionswere cancelled and replaced by the same number of stock options at an exerciseprice of $3.90 and $5.01 per share representing the stock price as of the closeof trading on May 16, 2007 and October 3, 2006, respectively. These optionsexpire five years from issuance.

During June 2005,the Company issued 25,000 stock options to an individual as compensation forthe performance of consulting services. The options had an exercise price of $5.99 per share, representing theshare price at the close of trading on June 6, 2005, and vested 40% at thetime of grant (June 6, 2005), and 20% each on June 6 of 2006, 2007, and2008.  During September 2005, the optionswere cancelled and replaced by the same number of stock options at an exerciseprice of $4.92 per share representing the stock price as of the close oftrading on September 7, 2005. During September 2006, the remaining outstanding options were forfeited.

15

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

During June 2006,the Company issued 170,000 stock options to officers, directors, and employeesand 5,000 stock options to an individual as compensation for the performance ofconsulting services.  The options had anexercise price of $6.20 and vested immediately. The options expire five years from issuance.  During May 2007and October 2006, the optionswere cancelled and replaced by the same number of stock options at an exerciseprice of $3.90 and $5.01 per share representing the stock price as of the closeof trading on May 16, 2007 and October 3, 2006, respectively.

During July andSeptember 2006, the Company issued 200,000 stock options to directors and 30,000to the new Project Engineer for the Montanore Project.  The options had exercise prices of $6.42 and$6.21, respectively.  The options issuedto the directors vest over a two year period, 20,000 on July 9, 2007 and 20,000on July 9, 2008 for each director.  Forthe options issued to the new employee, 10,000 vested immediately, while theremaining 20,000 vest over a two year period, 10,000 on September 20, 2007 and10,000 on September 20, 2008. During May 2007 and October 2006, the optionswere cancelled and replaced by the same number of stock options at an exerciseprice of $3.90 and $5.01 per share representing the stock price as of the closeof trading on May 16, 2007 and October 3, 2006, respectively.

During April andJune 2007, the Company issued 30,000 stock options to each of two newemployees.  The options had exerciseprices of $4.34 and $3.33, respectively. For each employee, 10,000 options vested immediately while the remaining20,000 options vest over a two year period; 10,000 in April of 2008 and 2009respectively, and 10,000 in June 2008 and 2009, respectively.  The Company issued an additional 18,000options to other employees in June 2007. These options had an exercise price of $3.79 and vested immediately.

For purposes ofcalculating the fair value of options, volatility for the two years presentedis based on the historical volatility of the Company’s Common Stock over a twoyear period.  The Company does notforesee the payment of dividends in the near term.  The fair value for these options wasestimated at the date of grant using the Black-Scholes option-pricing modelwith the following assumptions:

16

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|                                            | ** ** | **Quarters Ended** | ** ** |
|--------------------------------------------|------------|-------------------------|------------|
| ** **                                 | ** ** | **June 30**        | ** ** |
| ** **                                 | ** ** | **2007**                | ** ** | **2006** | ** ** | **2005** | ** ** |
|                                       |       |                    |       |   |   |   |   |
| Weighted average  risk-free interest rate  |       | 4.76                    | %          | 5.16 | % | 3.61 | % |
|                                       |       |                    |       |   |   |   |   |
| Weighted average  volatility               |       | 54.84                   | %          | 61.96 | % | 72.87 | % |
|                                       |       |                    |       |   |   |   |   |
| Expected  dividend yield                   |       | —                  |       | — |   | — |   |
|                                       |       |                    |       |   |   |   |   |
| Weighted average  expected life (in years) |       | 2.00                    |       | 2.00 |   | 2.00 |   |
|                                       |       |                    |       |   |   |   |   |
| Weighted average fair  value (in dollars)  |       | 1.30                    |       | 2.31 |   | 2.23 |   |

 

The following summarizesoption activity for the quarters presented:
| ** **                    | ** ** | **Shares  Under Option** | ** ** | **Weighted-Average  Exercise Price  Per Share** | ** ** |
|-------------------------------|------------|-------------------------------|------------|-----------------------------------------------------------|------------|
| Balance, at  January 1, 2006  |       | 2,088,500                     |       | $                                                         | 3.48       |   |
| Issued                        |       | —                        |       | —                                                    |       |
| Exercised                     |       | (188,374                      | )          | 2.92                                                      |       |
| Forfeited (Cashless Purchase) |       | (11,126                       | )          | 4.65                                                      |       |
| Balance, at  March 31, 2006   |       | 1,889,000                     |       | 3.53                                                      |       |
| Issued                        |       | 175,000                       |       | 6.20                                                      |       |
| Exercised                     |       | (85,000                       | )          | 4.32                                                      |       |
| Forfeited                     |       | —                        |       | —                                                    |       |
| Balance at June  30, 2006     |       | 1,979,000                     |       | 3.73                                                      |       |
|                          |       |                          |       |                                                      |       |
| Balance at  January 1, 2007   |       | 2,194,000                     |       | 3.70                                                      |       |
| Issued                        |       | —                        |       | —                                                    |       |
| Exercised                     |       | —                        |       | —                                                    |       |
| Forfeited                     |       | —                        |       | —                                                    |       |
| Balance at March  31, 2007    |       | 2,194,000                     |       | 3.70                                                      |       |
| Issued                        |       | 78,000                        |       | 3.82                                                      |       |
| Exercised                     |       | —                        |       | —                                                    |       |
| Forfeited                     |       | —                        |       | —                                                    |       |
| Balance at June 30,  2007     |       | 2,272,000                     |       | $                                                         | 3.46       |   |

 

The options outstandingat June 30, 2007, have a remaining contractual life of approximately two years.

17

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

The Companymaintains its cash and cash equivalents in one financial institution.  Balances are insured by the Federal DepositInsurance Corporation up to $100,000 per institution.

***NOTE8 — DEFERRED INCOME TAX:***

At June 30, 2007, and December 31, 2006, the Companyhad deferred tax assets that were fully reserved by valuation allowances.  Following are the components of such assetsand allowances:
|                                    | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
|------------------------------------|------------|-------------------|------------|-----------------------|------------|
| ** **                         | ** ** | **2007**          | ** ** | **2006**              | ** ** |
| Deferred tax  assets arising from: |       |              |       |                  |       |
| Net operating loss carryforwards   |       | $                 | 2,375,000  |                  | $          | 1,770,000 |   |
| Stock option compensation          |       | 675,000           |       | 610,000               |       |
| Accrued severance compensation     |       | 0                 |       | 0                     |       |
|                               |       | 3,050,000         |       | 2,380,000             |       |
| Less valuation allowance           |       | 3,050,000         |       | 2,380,000             |       |
|                               |       |              |       |                  |       |
| Net deferred tax  assets           |       | $                 | —     |                  | $          | — |   |

 

For the periods presented, the effective income tax rate differed fromthe expected rate because of the effects of annual changes in the deferred taxasset valuation allowance.  Changes inthe deferred tax asset valuation allowance for the periods ended June 30, 2007and December 31, 2006 relate only to corresponding changes in deferred taxassets for those periods.

At June 30, 2007, the Company had federal tax-basis net operatingloss carryforwards totaling approximately $15,400,000 which will expire invarious amounts from 2008 through 2027.

***NOTE9 — CONTINGENCY:***

On August 11, 2005, Mines Management was named as a co-defendant in alawsuit filed by Montana Reserves Company (“MRC”) in the Superior Court of theState of Washington in Spokane County, Washington.  Named as co-defendants are Noranda Minerals,Normin Corp., Mines Management 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 to MRC pursuant to a Royalty Agreement betweenNoranda and MRC in respect to the Montanore property.  Management does not believe that the outcomeof this lawsuit will have a material adverse effect.

***NOTE10 —COMMITMENTS:***

The Company ordered primary mobile mine equipment and a water treatmentplant with a purchase price of $3,530,400. As of June 30, 2007, the Company had deposits totaling $410,780 towardthe purchase of these items.

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***NOTE11 — BUSINESS COMBINATION:***

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.  NorandaMinerals Corporation and Normin Corporation are Delaware corporationsregistered to do business in Montana.  Atthe same time, Newhi submitted a $30,000 cash bond to the Montana Department ofEnvironmental Quality (DEQ) to replace Noranda’s previous bond.  Subsequently, the official names of thecompanies where changed to Montanore Mineral Corporation and MontminCorporation, respectively.  The existingMontana State Hard Rock Permit #00150 and MPDES permit MT-00320279 stayed inplace with Montanore Mineral Corporation, formerly known as Noranda MineralsCorporation, which is now owned by Newhi, Inc., a wholly-owned subsidiary ofthe Company.  The Company has filed amotion for summary judgment; a hearing on that motion is scheduled for lateSeptember 2007.

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**Item 2.  Management’s Discussion and Analysis ofFinancial Condition and Results of Operations**

The Montanoreproject continues to be the Company’s main focus and, in addition to theplanned advanced exploration and delineation drilling program, the Company iscontinuing its repermitting efforts with applicable federal and state agenciesand its optimization review of the Project. During the second quarter of 2007, the Company closed an offering of itsequity securities for gross proceeds to the Company of US$34,183,000, orUS$32,125,000 in net proceeds after deducting underwriting commissions butbefore deducting offering expenses.   Asa result, management believes that the Company has sufficient funds on hand tofinance the first three phases of its advanced exploration and delineationprogram at the Montanore Project, which it expects to complete during the nexttwo years.

**Overview**

In the second quarter of 2007, the Company

·                       Completed a $34.2 million public offering ofequity.

·                       Established a strong cash position with $32.3million at June 30, 2007.

·                       Initiated preparations for the advancedexploration and delineation drilling program by:

·                  Ordering a $1 million water treatment plantand building;

·                  Hiring additional staff at the Libby aditsite to support initiation of underground activities at the  Libby adit, including dewatering,rehabilitation, advancement, drifting, and delineation drilling;

·                  Placing a $2.8 million order for Sandvikunderground mining 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 second quarter, theCompany initiated its two-year advanced exploration and delineation drillingprogram at the Montanore Project site. The Company expects to dewater and rehabilitate the Libby adit, and thenadvance the adit approximately 3,000 feet toward the middle of the mineraldeposit.  The Company plans an additional10,000 feet of development drifting to provide drill access to differentportions of the deposit, construction of drill stations, and diamond coredrilling of approximately 50 holes totaling approximately 45,000 feet. Theobjectives of the advanced exploration and delineation program are to:

·                       Expand the known higher gradeintercepts of the Montanore deposit;

·                       Develop additional informationabout the deposit;

·                       Further assess and define themineralized zone; and

·                       Provideadditional geotechnical, hydrological, and other data.

The Companyexpects that results of the drilling program, if successful, would provide datato support the completion of a bankable feasibility study, allowing the Companyto convert a portion of its mineralized material/resource estimates intoreserves.

The net cashexpenditures for operating activities for the quarter ending June 30, 2007 was$1.6 million.  The Company believes thatthe recently completed financing provides sufficient working capital forrehabilitation of the Libby adit and commencement of the delineation drillingprogram over the next two years.  Inorder to complete the planned program through bankable feasibility, the Companywould need an additional $10 million in external financing.

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**AdvancedExploration and Delineation Drilling Program**

During thesecond quarter of 2007, the Company initiated the first stage of its plannedadvanced exploration and delineation drilling program, during which it expectsto dewater and rehabilitate the Libby adit. Delivery of a $1 million water treatment plant, through which the waterdischarged from the adit will be filtered, is expected to be delivered duringthe third quarter of 2007, following which commissioning and startup is expectedto occur.  Also during the secondquarter, additional staff, including a chief geologist and two projectengineers were hired, and the construction of additional office space in Libbywas initiated in preparation for commencement of dewatering and rehabilitationof the adit.  Eight full time employeesare on staff for the project as of June 30, 2007.

The Companyexpects to begin rehabilitation activities shortly after dewateringbegins.   These activities areanticipated to include scaling the back of the adit, installing new roof boltsand extending utilities into the adit; including electricity, piping,ventilation and dewatering infrastructure.

In preparationfor commencement of the planned second stage of the program, the Company hasordered primary mobile mine equipment, including a roof bolter, a twin boomjumbo face drill, one four cubic yard LHD unit, one six cubic-yard LHD unit,and two underground twenty-four cubic yard trucks, all of which are expected tobe delivered during 2007.  The Company expectscapital expenditures of $12 million during the remainder of 2007 for equipmentand activities related to the advancement of the drilling program.  This stage is expected to include advancementof the Libby adit by 3,000 feet towards the middle of the deposit, commencementof 10,000 feet of development drifting and establishment of drill stations,

Also in thesecond quarter, the Company performed quality control and assurance review ofits initial revised mine model.  TheCompany expects to confirm the accuracy of this model by inputting the datagathered during the delineation drilling program, which, if the Company issuccessful in obtaining the permits necessary to support further development ofthe Montanore Project is expected to support a bankable feasibility study.

**Permittingand Environmental**

During thesecond quarter of 2007, the Company continued to work closely with the U.S.Forest Service (USFS) and Montana Department of Environmental Quality (MDEQ) onthe draft environmental impact statement (EIS). Chapter 2 of the EIS (ProposedAction) was completed in draft form and submitted to the agencies for review bythe Company’s third party EIS contractor in late July 2007.  In addition, the Company participated in thediscussion and development of proposed alternatives for placement of tailings,plant site and portal locations that will be assessed and analyzed as part ofthe overall EIS review.

The Companyalso continues to work with the State of Montana on additional technicaldetails related to the MPDES discharge permit, transmission line, and otherstate authorizations required for the Project. Once the draft EIS is completed, the Company will update its permitapplications to match the agencies’ preferred alternatives, and will includethe 404 permit application submittal to the Army Corps of Engineers.

The USFS andMDEQ have advised the Company that they now expect to begin internal review ofthe completed draft EIS in October 2007. The Company has submitted comments tothe agencies on ways to improve this schedule. Once the agencies have completedtheir review, the draft EIS and draft permits will be provided to the publicfor review and comment. The agencies may consider public comments in preparingthe final EIS and final permits.  Whenthe public review process is concluded, the agencies would proceed to determinethe form of the final EIS and permits and would issue a joint Record ofDecision setting forth their decisions on our proposed plan of operations andhard rock mining program.  The agencieshave not set a preliminary schedule to issue the final EIS and Record ofDecision.  Management expects that thenumber of comments received will determine the schedule but does not expect aRecord of Decision before the end of the fourth quarter of 2008.

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**Financialand Operating Results**

MinesManagement is an exploration stage company with a large silver-copper project,the Montanore Project, located in northwest Montana.  The Company continues to expense all of itsexpenditures and has no revenues from mining operations.  Financial results of operations includeprimarily interest income, general and administrative expenses, permitting,project advancement and engineering expenses and other miscellaneous.

**Quarter Ended June 30, 2007**

The Companyreported a net loss for the quarter ended June 30, 2007 of $1.6 million or$0.09 per share compared to a $1.5 million loss or $0.12 per share for thequarter ended June 30, 2006.  The $0.1million increase in net loss was attributed to a $0.1 million increase in thesecond quarter in legal, accounting, financing, and administrative expensesrelated to increased investor relations activities, and a $0.3 million increasein employee compensation as a result of bonuses, salary increases, and theaddition of four new employees, offset by a $0.3 million decrease inexpenditures at the Montanore Project in the second quarter of 2007 forpermitting, engineering, and environmental analysis, compared to the secondquarter of 2006.  Project spendingdecreased in the second quarter of 2007 as the Company reduced its permittingactivities as it focused on obtaining financing for the delineation drillingprogram.

**Six MonthsEnded June 30, 2007**

The net lossfor the six months ended June 30, 2007 was $3.4 million or $0.22 per share versusa loss of $2.6 million or $0.20 per share for the six months ended June 30,2006.  The $0.8 million increase in netloss for the six months ended June 30, 2007 compared to the six months endedJune 30, 2006 is largely attributed to a $0.5 million increase in legal,accounting and administrative expenses related to the increased cost ofimplementing Sarbanes-Oxley internal control procedures, investor relationsactivities related to the public offering; increased compensation expense of$0.4 million and a $0.1 million increase in equipment rental costs at theMontanore site.  These increasedexpenditures were offset by an increase of $0.2 million in interest income forthe first half of the year.

**Liquidity**

For the quarter ended June 30, 2007, the net cash used for operatingactivities was $1.0 million, which consisted largely of legal and accountingexpenses associated with the public offering. The net cash provided by financing activities for the quarter was $31.6million from the public offering completed during the quarter. The net cashused in investing activities during the quarter was $0.9 million on procurementof fixed assets and construction in progress. The net increase in cash on hand at the end of the second quarter 2007versus year-end 2006 was $29.7 million.

For the six months ended June 30, 2007 the net cash from financingactivities was $31.6 million from the public offering.  The net increase in cash on hand at the endof the half year ending 2007 versus 2006 was $29.5 million.

The Company anticipatesspending approximately $12 million from cash and investments on hand during thefinal two quarters of 2007 for activities and equipment purchases related tothe advanced exploration and delineation drilling program and the MontanoreProject permitting. The Company believes that the recently completedfinancing provides sufficient working capital for rehabilitation of the Libbyadit and commencement of the delineation drilling program which will take placeover the next two years.  The Company willneed an additional $10 million in external financing in order to complete theplanned program through completion of a bankable feasibility study, which is anecessary prerequisite to development and production at Montanore.

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**ForwardLooking Statements**

Someinformation contained in or incorporated by reference into this report maycontain forward looking statements. These statements include comments regarding Montanore Projectpermitting, the commencement and completion of activities related to the plannedrehabilitation of the Libby adit and delineation drilling program, the hiringof additional staff, and the markets for silver and copper.  The use of any of the words “development”, “anticipate”,“continues”, “estimate”, “expect”, “may”, “project”, “should”, “believe”, andsimilar expressions are intended to identify uncertainties.  The Company believes the expectationsreflected in those forward looking statements are reasonable.  However, the Company cannot assure that theexpectations will prove to be correct. Actual results could differ materially from those anticipated in theseforward looking statements as a result of the factors set forth below and otherfactors set forth and incorporated by reference into this report:

·                       Worldwide economic and politicalevents affecting the supply of and demand for silver and copper

·                       Volatility in the market pricefor silver and copper

·                       Financial market conditions andthe availability of financing on acceptable terms

·                       Uncertainties associated withdeveloping new mines

·                       Variations in ore grade andother characteristics affecting mining, crushing, milling and smelting andmineral recoveries

·                       Geological, technical,permitting, mining and processing problems

·                       The availability, terms,conditions and timing of required governmental permits and approvals

·                       Uncertainty regarding futurechanges in applicable law or implementation of existing law

·                       The availability of experiencedemployees

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

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**Item 3.  Quantitative and Qualitative DisclosuresAbout 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.  We manage the timing of cash required forreview of the permitting, and engineering of the Montanore Project and forgeneral corporate purposes utilizing our money market account and invest fundsnot immediately required in investments, currently in certificates of depositwith varying maturitiesand fixed early retirement costs of three months interest.  Our policy is to invest only in governmentand corporate grade securities rated “investment grade” 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 includedexpectations with regard to the rate of inflation, the exchange rates of the dollar and othercurrencies, interest rates, global or regional political, economic or bankingcrises, and a number of other factors. If the market price of silver or copper should decrease, the value ofthe Company’s Montanore Project could decline and the Company might not be ableto recover its investment in that project. Any determination to develop or construct a mine would be made longbefore the first revenues from production would be received.  Price fluctuations between the time that suchdecisions are made and the commencement of production could affect theeconomics of the mine.

**Item 4.  Controls and Procedures**

Glenn M.Dobbs, MMI’s President and CEO, and James H. Moore, MMI’s Chief FinancialOfficer and Treasurer, have evaluated MMI’s disclosure controls and proceduresas of June 30, 2007.  Based upon thisevaluation, the Chief Executive Officer and Chief Financial Officer concludedthat MMI’s disclosure controls and procedures are designed and were effectiveas of June 30, 2007 to give reasonable assurances that the information requiredto be disclosed in the reports that MMI files or submits under the Exchange Actof 1934, as amended, is recorded, processed, summarized and reported, withinthe time periods specified in the rules and forms of the Securities andExchange Commission, and that such information is also accumulated andcommunicated to MMI’s management, including its Chief Executive Officer andChief Financial Officer.

There were nochanges in MMI’s internal controls or, to the knowledge of the management ofMMI, any other changes that materially affect, or are reasonably likely tomaterially affect, MMI’s internal control over financial reporting.

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**PARTII.   OTHER INFORMATION**

**Item1.  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 inconnection with the conveyance of the Montanore property from Noranda to Newhi,and challenges the computation of a net proceeds royalty payable to MRC pursuant to a RoyaltyAgreement between Noranda and MRC in respect to the Montanore property.  Management does not believe that the outcomeof this lawsuit will have a material adverse effect on Mines Management’sbusiness or results of operations. TheCompany has filed a motion for summary judgment; a hearing on that motion isscheduled for late September 2007.

**Item 1a.  Risk Factors**

There are nomaterial changes from the risk factors previously disclosed in the Company’sAnnual Report on Form 10-K, as amended, for the year ending December 31, 2006.

**Item 2.  UnregisteredSales of Equity Securities and Use of Proceeds**

None

**Item3.  Defaults Upon Senior Securities**

None

**Item4.  Submission of Matters to a Vote ofSecurity Holders**

At the Company’sannual meeting of shareholders, which was held on June 15, 2007, theshareholders of the Company approved the election of Mr. Jerry Pogue and Mr.Robert Russell, to serve on the Company’s board of directors until the annualmeeting of shareholders to be held in 2010. Voting results are as follows:
|                       | ** ** | **For**    | ** ** | **Against** | ** ** | **Withheld** | ** ** |
|-----------------------|------------|------------|------------|-------------|------------|--------------|------------|
| **Jerry  G. Pogue**   |       | 11,774,235 |       | 0           |       | 180,642      |       |
| **Robert L. Russell** |       | 11,740,409 |       | 0           |       | 214,468      |       |

 

**Item5.  Other Information**

Departure of Directors orPrincipal Officers; Election of Directors; Appointment of Principal Officers;Compensatory Arrangements of Certain Officers.

On August 4, 2007,the Company’s employment contract with Eric C. Klepfer, Vice President,Operations, expired.  Mr. Klepfer will continue to have primaryresponsibility for permitting of the Montanore Project andengineering and oversight of the Company’s advanced exploration anddelineation drilling program through his consulting firm, Klepfer MiningServices, LLC.  The parties are in the final stages of completing adefinitive consulting agreement for the ongoing provision of thoseservices, upon execution of which Mr. Klepfer will resign as anofficer of the Company.

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On August 7,2007, the Company entered into executive employment agreements with each ofGlenn M. Dobbs, its President and Chief Executive Officer, James H. Moore, itsChief Financial Officer and Douglas Dobbs, its Vice President, CorporateDevelopment and Investor Relations.

Glenn M. DobbsEmployment Agreement

Under theterms of Mr. Dobbs’ agreement, which supersedes and replaces Mr. Dobbs’ currentemployment agreement with the Company, Mr. Dobbs will serve as President andChief Executive Officer of the Company and will receive a base salary at therate of $300,000.00 per annum, The Company will provide Mr. Dobbs with medicaland dental insurance and he will be entitled to participate in all other Companyemployee benefit plans.

In the eventthat Mr. Dobbs is terminated or resigns other than for cause or as a result ofhis death or disability, or voluntarily resigns for good reason within one (1)year following a change in control, he will be entitled to receive a lump sumpayment equal to three (3) times his then-effective annual salary plus annualbonus, if any, during the year preceding the change in control. Mr. Dobbs willalso be reimbursed by the Company to the extent that any excise tax is imposedon a payment received by him under the change in control provisions of theagreement.

Thisdescription is qualified in its entirety by reference to Mr. Dobbs’ employmentagreement, which is filed as Exhibit 10.1 to this Form 10-Q and incorporatedherein by reference.

James H. MooreEmployment Agreement

Under theterms of Mr. Moore’s agreement, which supersedes and replaces Mr. Moore’scurrent employment agreement with the Company, Mr. Moore will serve as ChiefFinancial Officer of the Company and will receive a base salary at the rate of$200,000.00 per annum, The Company will provide Mr. Moore with medical anddental insurance and he will be entitled to participate in all other Companyemployee benefit plans.

In the eventthat Mr. Moore is terminated or resigns other than for cause or as a result ofhis death or disability, or voluntarily resigns for good reason within one (1)year following a change in control, he will be entitled to receive a lump sumpayment equal to three (3) times his then-effective annual salary plus annualbonus, if any, during the year preceding the change in control. Mr. Moore willalso be reimbursed by the Company to the extent that any excise tax was imposedon a payment received by him under the change in control provisions of theagreement.

Thisdescription is qualified in its entirety by reference to Mr. Moore’s employmentagreement, which is filed as Exhibit 10.2 to this Form 10-Q and incorporatedherein by reference.

Douglas DobbsEmployment Agreement

Under theterms of Mr. Dobbs’ agreement, Mr. Dobbs will serve as Vice President,Corporate Development and Investor Relations of the Company and will receive abase salary at the rate of $150,000.00 per annum, The Company will provide Mr.Dobbs with medical and dental insurance and he will be entitled to participatein all other Company employee benefit plans.

In the eventthat Mr. Dobbs is terminated or resigns other than for cause or as a result ofhis death or disability, or voluntarily resigns for good reason within one (1)year following a change in control, he will be entitled to receive a lump sumpayment equal to two (2) times his then-effective annual salary plus annualbonus, if any, during the year preceding the change in control. Mr. Dobbs willalso be reimbursed by the Company to the extent that any excise tax was imposedon a payment received by him under the change in control provisions of theagreement.

Thisdescription is qualified in its entirety by reference to Mr. Dobbs’ employmentagreement, which is filed as Exhibit 10.3 to this Form 10-Q and incorporatedherein by reference.

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**Item 6.  Exhibits**

(a)                               Exhibits:
| 10.1   | Employment  Agreement, dated as of August 7, 2007, by and between Mines Management, Inc.  and Glenn M. Dobbs.  |
|--------|----------------------------------------------------------------------------------------------------------------|
|   |                                                                                                           |
| 10.2   | Employment  Agreement, dated as of August 7, 2007, by and between Mines Management, Inc.  and James H. Moore.  |
|   |                                                                                                           |
| 10.3   | Employment  Agreement, dated as of August 7, 2007, by and between Mines Management, Inc.  and Douglas Dobbs.   |
|   |                                                                                                           |
| 31.1   | Certification of  Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act                    |
|   |                                                                                                           |
| 31.2   | Certification of  Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act                    |
|   |                                                                                                           |
| 32.1   | Certification of  Chief Executive Officer pursuant to 18 U.S.C., 1350 (Section 906 of the  Sarbanes-Oxley Act) |
|   |                                                                                                           |
| 32.2   | Certification of  Chief Financial Officer pursuant to 18 U.S.C., 1350 (Section 906 of the  Sarbanes-Oxley Act) |

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**SIGNATURES**

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

 

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**EXHIBITINDEX**
| Exhibit No. | ** ** | **Description**                                                                                               |
|-------------|------------|---------------------------------------------------------------------------------------------------------------|
|        |       |                                                                                                          |
| 10.1        |       | Employment Agreement, dated as of August 7, 2007, by  and between Mines Management, Inc. and Glenn M. Dobbs.  |
|        |       |                                                                                                          |
| 10.2        |       | Employment Agreement, dated as of August 7, 2007, by  and between Mines Management, Inc. and James H. Moore.  |
|        |       |                                                                                                          |
| 10.3        |       | Employment Agreement, dated as of August 7, 2007, by  and between Mines Management, Inc. and Douglas Dobbs.   |
|        |       |                                                                                                          |
| 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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