Mines Management releases quarterly financials

Mines Management Inc., owner of the Montanore Mine project in Lincoln County, has raised sufficient cash to continue operations into early 2016, according to the company’s Nov. 16 filing with the United States Securities and Exchange Commission.

The company’s 10-Q report, a comprehensive financial report required quarterly by all public companies, indicates the company sustained operating losses of $1,044,409 during the three-month period ending Sept. 30, 2015, nearly $500,000 less than the losses reported for the same period one year ago. The company’s cumulative 2015 loss through Sept. 30 was $3,792,146. During the first three quarters of 2014, Mines Management Inc. reported a loss of $4,884,857.

The reduction in losses, company chief executive officer Glenn Dobbs said, was due primarily to aggressive cost reduction measures.

“The company has worked hard to reduce costs over the past year,” he said. “Those areas of savings are pretty well outlined in the 10-Q.”

According to the report, the cost savings stemmed from reductions in administrative and technical expenses, along with decreases in depreciation of certain assets.

“The most significant factors contributing to the $0.6 million decrease in operating expenses include: (i) a $.01 million decrease in general and administrative expenses, primarily due to decreased stock compensation costs and the absence of costs during 2015 associated with the special shareholder meeting pertaining to the financing the company completed in July of 2014, (ii) a $0.2 million decrease in technical services primarily associated with a reduction in fees paid to contractors and consultants working on the Environmental Impact Study as well as a decrease in the cost of baseline studies associated with the EIS during 2015 and (iii) a $0.2 million decrease in depreciation as a result of assets reaching the end of their depreciable lives and limited acquisitions of property and equipment during the past few years,” the report read.

Two areas of concern were detailed in the report: The company’s liquidity and non-compliance with New York Stock Exchange policies which could result in the delisting of Mines Management Inc. stock by the exchange if the company fails to regain compliance by Dec. 31, 2015. 

“The company currently does not have enough cash on hand to fund ongoing operating expenses through the first quarter of 2016,” the report read. “Operating expenses are estimated at $1.0 million for the fourth quarter of 2015, consisting of approximately $0.6 million for ongoing operations, legal and general administrative expenses and $0.4 million for permitting, environmental, engineering and geologic studies for the Montanore project. Additional financing will be required for the company to continue its business and operations.”

In response to the immediate short-term cash crunch, the company liquidated more than $1.6 million worth of equipment in October 2015. Added to the company’s cash and cash equivalents balance of $343,664 as of Sept. 30, 2015, the asset liquidation left the company with roughly $2 million available to sustain operations.

“The company has raised enough cash to carry it through the better part of the first quarter, 2016, maybe longer,” Dobbs said. “At this point we’ve sold surplus equipment but have retained equipment to maintain the adit and infrastructure and have no plans to sell additional equipment.”

The cash may be enough to sustain current operations, but it is not sufficient for the company to carry the Montanore project to fruitition. According to the report, the company will need between $25 million and $30 million in additional financing to complete the evaluation phase at Montanore.

“The company still must obtain external financing of approximately $25 million to $30 million to complete the evaluation drilling program at the Montanore project and a definite feasibility study,” the report read.

Dobbs said he is continually working with other mining and finance companies to secure the financing necessary to complete the project and he is confident of the eventual success of the project.

“As a matter of course, and as we’ve done in the past, we continue to talk with other mining companies and financial institutions regarding our ongoing financial requirements,” he said. “We are confident in our ability to come to agreements that will provide financing sufficient to continue to move the Montanore project forward. The Montanore is a large project with considerable appeal to quasi-mining companies focused in silver-streaming, conventional mining-finance houses, private equity institutions and of course to other mining companies. In spite of depressed commodity markets every serious mining company is jockeying for position they hope will enable them to perform ahead of the field once the commodity markets turn around. Mines Management is seeking a financing arrangement most beneficial to the company when that happens.”

The Montanore project is in the final phase of its evaluation permitting and a Record of Decision is expected on the project from the United States Forest Service before the end of January 2016.