Mines Management liquidates assets

Mines Management Inc. announced the sale of $1.25 million worth of construction equipment last week. According to a press release issued Oct. 9, the cash raised from the liquidation will be used to cover operational expenses and to complete the permitting process at the Montanore Mine project near Libby.

“We are pleased to have raised the additional cash that will enable ongoing Montanore operations,” Mines Management Chairman and Chief Executive Officer Glenn Dobbs said in the statement. “We remain focused on completion of the final record of decision by the permitting agencies, and pursuing strategic alternatives to provide financial resources for completion of an evaluation/feasibility study at the project. Montanore is a highly desirable project. Our objective is to continue moving the project forward in anticipation of an eventual turnaround in commodities financial markets.”

Mines Management Inc. reported operating expenses of $1.2 million for the quarter ending June 30, 2015, which was $600,000 lower than expenses reported in the same quarter of 2014. The company reported $1.1 million in cash and cash equivalents available as of June 30, 2015, which is not expected to be enough to fund ongoing operations through the end of the year.

“We do not currently have enough cash on hand to fund ongoing operating expenses, estimated at approximately $2.2 million for the final two quarters of 2015, consisting of approximately $.6 million in each quarter for ongoing operating, legal and general administrative expenses and $.6 and $.4 million in the third and fourth quarters, respectively, for permitting, environmental, engineering and geologic studies for the Montanore project,” company president Douglas Dobbs wrote in a press release dated Aug. 21, 2015. “Additional financing will be required for the company to continue its business and operations. Accordingly, the company is seeking financing and may consider a joint venture on the Montanore project or other strategic alternatives. There can be no assurance that the company will be successful in obtaining financing or entering into another type of transaction that will permit it to continue its business, or that the terms of any such financing or transaction would not make future financings or transactions more difficult or otherwise limit the company’s flexibility or opportunities in the future.”

Glenn Dobbs said the decision to sell equipment was a better alternative than attempting to acquire additional financing in capital markets.

“In light of currently very tight capital markets we made the decision to sell surplus equipment rather than go into difficult capital markets at this time,” Dobbs said. “It is anticipated that surplus equipment sales will provide sufficient capital to carry the company through completion of permitting and to resumption of work on the Libby Adit at which time we would anticipate going back to the capital markets for additional financing to complete the two-year program, estimated to cost approximately $30 million.”

The most recent estimates indicate the United States Forest Service will likely publish notice of the final Environmental Impact Statement for the Montanore project  by the end of 2015. There is a mandatory 30-day waiting period between the publication of notice and the signing of the final record of decision by the Forest Service. Once the final record of decision is signed, Mines Management will need to acquire the first 500 of an estimated 6,700 acres of property to be used for mitigation efforts. Dobbs said the land is currently tied up, but hasn’t yet been purchased by the company. He didn’t specify the cost of the property acquisition, but the Oct. 9 press release indicates the company does not have the funds available for expenses into next year, when the acquisition would be required, which will likely prompt additional liquidation.

“Management believes that the funds raised from the equipment sale are sufficient to sustain the company’s business and operations through the end of November 2015, and potentially further with additional asset sales,” Douglas Dobbs wrote in the release. “Additional external funding will be required for the company to continue its business and operations. Accordingly, the company is seeking external financing and considering strategic alternatives.”

The exact nature and terms of the external financing and strategic alternatives was not disclosed, but last year the company entered into a financing arrangement with Alpha Capital Anstalt which provided $3.6 million in exchange for 4,000 shares of covertible preferred stock. Preferred stock entitles an owner to a higher level of access to a company’s assets, and in the case of insolvency, preferred stock holders are paid before holders of common stock. At the time of the financing arrangement, University of Montana professor of finance Keith Jacobs labeled the move “risky.”

Dobbs said the convertible preferred equity financing is commonly used in a number of industries and dismissed the risk.

“A great deal was made, by an anti-mining nut from north Idaho over the ratchet provision, but it’s nothing more than a provision that allows the investor to convert his shares at a price lower than the stipulated conversion price should the company do another financing at a price below that conversion price.”

Mines Management stock closed at $.31 on the New York Stock Exchange Thursday, Oct. 15, down $.43 from the 52-week high of $.74 per share. The company is currently operating under a compliance plan with the New York Stock Exchange because the company is below certain market listing standards.

“Mines Management Inc. announced today that on Sept. 21, 2015, it received notice from the NYSE MKT LLC stating that the exchange had accepted the company’s compliance plan and granted the company an extension until Sept. 30, 2015, to regain compliance with Section 1003(a)(iv) or to make progress consistent with the plan, and until Dec. 31, 2016, to regain compliance with Section 1003(a)(i), Section 1003(a)(ii) and Section 1003(a)(iii). The company will be subject to periodic review by exchange staff during the compliance plan period. Failure to make progress consistent with the plan or to regain compliance with the continued listing standards by the end of the extension period could result in the company being delisted from the NYSE MKT,” Douglas Dobbs wrote in a Sept. 23 press release.