Positive
Preliminary Economic Assessment Completed for
the Montanore Silver-Copper Project
SPOKANE,
Wash.-December 22, 2010-Mines Management, Inc. (NYSE-Amex:MGN) (TSX:MGT)
is pleased to announce the completion of a Preliminary Economic
Assessment ("PEA") for the Company's wholly owned Montanore
Silver-Copper Project located in the United States. Results of the PEA
illustrate that the economics of the project would be robust in today's
cost and metals price environment and represents a solid economic
foundation upon which to build. An NI 43-101-compliant technical report
will be filed on SEDAR within 45 days.
A mine plan developed by Mines Management, Inc.
("MMI") was audited by Mine and Quarry Engineering Services,
Inc. ("MQes") of San Mateo, California. Cost estimates were
developed by MQes. The mine plan is based on a Measured and Indicated Mineral
Resource of 81.5 million short tons of material grading 2.04 ounces per
short ton ("opt") silver and 0.75% copper, and an Inferred
Mineral Resource of 35.0 million short tons grading 1.85 opt silver and
0.71% copper at a cutoff grade of 1.0 opt silver, previously reported in
an NI 43-101 Technical Report (October 2005) prepared by Mine Development
Associates ("MDA") of Reno, Nevada. Mines Management's estimate
of mineralized material reported pursuant to U.S. Securities and Exchange
Commission rules in its annual report on Form 10-K for the year ended
December 31, 2009, remain unchanged.
The PEA indicates a financially robust
underground mine utilizing conventional grinding and flotation processing
techniques at a nominal throughput of 12,500 short tons per day
('st/d"). At a 5% discount rate, a silver price of US$15.00 per
ounce ("oz") and a copper price of US$3.10 per pound
("lb"), the project's pre-tax Net Present Value
("NPV") is indicated to be US$485 million with an internal rate
of return ("IRR") of 17.4% on an unleveraged 100% equity basis.
Using metals prices as of November 17, 2010, of
US$25.65/oz. silver and US$3.72/lb. copper, the project indicated a
pre-tax NPV of US$1.323 Billion and IRR of 32.3%, at a 5% discount rate
Commenting on the PEA, Company President and
Chief Executive Officer Glenn Dobbs said, "This PEA is the
culmination of analysis and engineering to optimize the mine plan. It
indicates the Montanore mine plan may be quite profitable in today's
commodity environment and could operate at metals prices significantly
below current levels. The favorable economics indicated in the PEA at
this early stage of development underscore the strong case for
advancement through the final steps of the permitting process and
completion of the subsequent underground drilling and evaluation program
for which we have completed surface construction and initiated
underground preparations."
All dollar amounts in this release are stated in
U.S. currency, unless otherwise stated. The disclosure set forth below is
derived from the PEA unless otherwise expressly noted. Average estimates
are assumed over the 15-year life of mine ("LOM") unless otherwise
stated.
PEA
HIGHLIGHTS
Project Parameters:
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Nominal Processing
Rate
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12,500 tons per day
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Average Silver Grade
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1.88 ounces
per ton
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Average Copper Grade
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0.72 %
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Silver Recovery
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86 %
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Copper Recovery
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90 %
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Average Annual Silver Production
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6.4 million ounces
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Average Annual Copper Production
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51.1 million pounds
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Recovery
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50.5%
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Project Economics:
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Long-term
Silver price
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$15.00 per ounce
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Long-term
Copper price
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$3.10 per pound
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Discount rate
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5.0%
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Net Present
Value (NPV)
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$ 485.6 million
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Internal Rate of Return (IRR)
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17.4 %
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Initial Capital Expenditure
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$ 552.3 million
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Capital Cost
Contingency
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20%
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Direct (Onsite)
Operating costs
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$ 22.31 per short ton
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Estimated Life of Mine
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15 years
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Net Cumulative LOM Cash-flow (pre-tax)
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$1.118 Billion
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Direct (Onsite) Operating costs (AgEq)
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$ 4.58 per ounce
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Note: This PEA
is based on measured, indicated and inferred mineral resources that are
considered too speculative geologically to have the economic
considerations applied to them that would enable them to be categorized
as mineral reserves at this time. The cost estimates used in the
preparation of a preliminary assessment are very preliminary and may
increase significantly for actual construction and operations, and there
is no certainty that the preliminary assessment and economics set forth
in the PEA will be realized. Mineral resources that are not mineral
reserves do not have demonstrated economic viability. Direct Onsite
Operating Costs include mining, processing, and G&A costs.
PROJECT DESCRIPTION
The Montanore Silver-Copper Project is 100%
controlled by Mines Management, Inc., subject to a $0.20-per-ton
production royalty. The Montanore deposit underlies portions of Lincoln
and Sanders Counties in northwestern Montana. The Company controls its
mineral rights for the deposit by virtue of extralateral rights
projecting from patented apex claims.
The mineralized zones crop out at the surface
and extend down dip at least 12,000 ft. to the north-northwest. The
mineralization is open ended in the down-dip direction. Mineralization
occurs in two sub-parallel horizons separated by an unmineralized zone.
The average dip is just over 15 degrees. The deposit is controlled on one
side to the southwest by a fault. The width of the main horizon in plan
view is controlled by property boundaries to a maximum of 2,000 ft. The
average thickness for each of the two horizons is 35 ft., depending upon
cutoff.
During mining, the deposit would be accessed
through three declines, each extending approximately 14,000 to 17,000
feet from the east, with processing facilities at the surface.
The project is being advanced under permits
approved by the state of Montana in 1993. Surface facilities have been
constructed in preparation for an underground evaluation and drilling
program that will support a feasibility study. The project is currently
undergoing a NEPA process, following which the Company plans an
underground evaluation program to support a feasibility study.
MINING PLAN
The PEA is based on an underground mining
operation, utilizing conventional grinding and flotation processes. The
deposit would be bulk mined 350 days per year and utilize an inclined
room and pillar mining method producing at a nominal rate of 12,500 short
tons per operating day, although the mine is being permitted for a
throughput of up to 20,000 short tons per day.
Over the 15-year mine life, an estimated 59
million short tons of process feed would be treated at average grades of
1.88 ounces silver per ton and 0.72% copper, yielding a total of 96
million ounces of silver and 767 million pounds of copper. Above average
feed grades of 2.26 opt silver and 0.84% copper would be mined in the
first four years.
Under the current mine plan, forty foot wide
topslices would be mined on strike below the hanging wall contact.
Connection drifts between adjacent top cuts would be mined following the
hanging wall contact at a gradient of 15% forming obliquely angled
permanent stope pillars. Mineralization below the topslice would be mined
by a longhole bench. Based on rock mechanics study recommendation, the
Company plans that a minimum interbed thickness of 50 feet will be
maintained between the mining zones.
Mining at Montanore is planned to be highly
mechanized through the use of large high-tech mining equipment including
modern load-haul-dump units ("LHD") and trucks, and
computer-controlled drilling jumbos. Material flow would consist of
broken ground being hauled from the faces by LHD and truck to grizzlies
centrally located in each mining panel. The material would discharge from
the rock pass, via an apron feeder, onto the pre-crusher conveyor system
to the crusher. Primary crushing would occur underground. The process
feed is then transported via conveyor to the surface for grinding and
flotation.
The deposit is open down dip to the northwest.
Diamond drilling in the northern area of the deposit has suggested a
third mineralized bed might exist. Insufficient data was available to
include this mineralization in resources, however there is potential for
significant expansion of the resource.
METALLURGY AND PROCESSING
The process flowsheet selected for investigation
at the Montanore project uses conventional grinding and flotation
techniques and is broadly similar to that used at copper projects
elsewhere. Process development for the project has concentrated on
initial validation of a basic flow sheet involving crushing, SAG and ball
mill grinding, bulk sulfide flotation, concentrate regrinding, followed
by three cleaner stages. Results have been encouraging, with no fatal
flaws encountered that would require a fundamental change in the process.
INFRASTRUCTURE
Major infrastructure for the project will
include a 230kV electrical transmission line approximately 17 miles in
length, access road and bridge improvements and water treatment
facilities, among other items.
CAPITAL COSTS
Capital costs are based on run of mine ore
delivered to the underground feeders, primary crushing, coarse feed
conveying, process plant and ancillary facilities as defined in the
equipment list contained in the 2006 preliminary capital and operating
cost study.
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Estimated Initial Capital Cost � Summary
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Items
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US$(000�s)
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Total Direct Field Costs
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$ 231,481
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Major Site Access & Infrastructure
Capital Costs*
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232,819
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Total Indirect Field Costs
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34,770
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Contingency
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53,250
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Total Project Capital Costs
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$ 552,320
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* Other capital
project costs have been included for access roads and bridges, a
temporary 34.5kV power line, tailing, 230kV power line, mine development,
equipment and infrastructure, as well as owners environmental and working
capital.
The initial capital cost for the Montanore
project to treat 12,500 st/d of material is estimated at US$552.3 million
(+/-35% accuracy). Ongoing and replacement capital costs and closure
capital are estimated to be an additional US$217.9 million over the life
of mine. Costs are expressed in 2nd quarter, 2010 U.S. dollars.
OPERATING COSTS
The following life-of-mine costs are expected
for the operating phase of the project:
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Estimated Direct Operating Costs
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Items
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Average Unit Cost
US$/st Mill Feed
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Mining
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$ 12.85
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Processing
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7.68
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General & Administration
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1.78
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Total Direct Operating Costs
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$ 22.31
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SENSITIVITY
ANALYSIS
The following sensitivity table demonstrates
that the project has robust economics across a range of silver and copper
price scenarios.
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Effect of Metal Prices on NPV @ 5%
(US$millions)
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Silver Price (US$/oz)
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Copper
Price
(US$per lb)
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$12.00
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$15.00
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$18.00
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$2.50
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67.4
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228.7
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390.0
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$3.10
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324.3
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485.6
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646.9
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$3.70
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581.1
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742.4
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903.7
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Effect of Metal Prices on IRR
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Silver Price (US$/oz)
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Copper
Price
(US$per lb)
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$12.00
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$15.00
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$18.00
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$2.50
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7.1%
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11.5%
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15.3%
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$3.10
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13.8%
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17.4%
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20.7%
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$3.70
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19.3%
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22.5%
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25.4%
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NEXT
STEPS/RECOMMENDATIONS
- <B.PERMITTING:< b>Continue
with completion of permitting process. Remaining steps include
completion of Supplemental Draft Environmental Impact Study
("EIS"), Final EIS, and Record of Decision.
- Evaluation
drilling program: Complete development drifting and
evaluation program, including 50,000 feet of diamond core drilling.
The program would confirm the resource, geological structure and
deposit geometry in the areas of the planned infrastructure and
first mining panels. It would also furnish sample material for
metallurgical testwork, geotechnical and geometallurgical modeling.
This would provide information needed to advance the engineering
development of the project.
- Feasibility
study: Data from evaluation program will support
completion of final feasibility study.
PREPARATION OF PEA AND NI
43-101 TECHNICAL REPORT
The PEA has been prepared
with audit and cost estimation by MQES, and input from Hatch Engineering,
MMI, MDA, McIntosh Engineering, Klepfer Mining Services, among others.
A Technical Report
published in conformance with National Instrument 43-101 will be filed on
SEDAR within 45 days of this press release and will include a summary of
the PEA.
QUALIFIED PERSONS
The PEA was prepared
under the supervision of Mr. Chris Kaye, and Mr. Geoffrey Challiner, each
of whom are "Qualified Persons," as such term is defined in
National Instrument 43-101, and each have read and confirmed that this
news release fairly and accurately reflects the technical contents of the
PEA report. Mr. Steve Ristorcelli, with Mine Development Associates
("MDA"), is a "Qualified Person," as such term is
defined in National Instrument 43-101, and has reviewed the information
with respect to the reported silver and copper resources contained in
this release.
BACKGROUND
The Montanore deposit was
discovered in 1983 by U.S. Borax & Chemical, which conducted
approximately 70,000 feet of diamond core drilling. Mines Management's
mineral claims, which were leased to the operator, overlapped a portion
of the deposit. In 1988, title to the deposit was sold to a consortium
led by Noranda Minerals of Canada. Noranda conducted numerous activities
including completion of project permitting by 1993, 14,000 feet of
development of an evaluation adit, compilation of surface claims and
patenting of mineral claims, among other things. In 2002, Noranda
withdrew from the project due to low metals prices at the time, and
quitclaimed title to the deposit to Mines Management in accordance with
the lease agreement. In 2006, Mines Management acquired Noranda's U.S.
operating companies, along with title to patented lands including the
portal site to the adit and project permits, and initiated excavation of
the portal and reconstruction of site infrastructure in preparation for
resuming the evaluation drilling program. In 2005, Mines Management
initiated the NEPA process, and the Company is currently working toward
completion of supplemental draft and final environmental impact studies.
Mines Management, Inc. is
a U.S.-based mineral exploration company focused on advancement of the
Montanore Silver-Copper Project located in northwestern Montana. The
Montanore project is a large silver-copper project currently undergoing
project permitting and engineering studies, and represents a foundation on
which the Company intends to become a significant precious and base
metals production company. The Company has assembled a team which is
highly experienced in mine development, mineral exploration, and
financing. Further information on Mines Management and its properties is
available on the Company�s website at www.minesmanagement.com, in its 10-K Annual Report dated December 31,
2009, and other documentation generally available on the Securities and
Exchange Commission�s website (www.sec.gov) and on the Canadian website SEDAR (www.sedar.com). Or you can contact the company directly at
the location described below.
Cautionary Note to U.S.
Investors concerning estimates of Measured, Indicated and Inferred
Mineral Resources
This section uses the
terms "Measured Mineral Resources," "Indicated Mineral
Resources" and "Inferred Mineral Resources." We advise
U.S. investors that while those terms are recognized and required by NI
43-101, the Securities and Exchange Commission does not recognize them.
U.S. investors are cautioned not to assume that any part or all of the
mineral deposits in these categories will ever be converted into mineral
reserves. Inferred Mineral Resources have a greater amount of uncertainty
as to their existence and as to their economic and legal feasibility. In
accordance with Canadian rules, estimates of Inferred Mineral Resources cannot
form the basis of feasibility or other economic studies. U.S. investors
are cautioned not to assume that part or all of the Inferred Mineral
Resources exists, or is economically or legally mineable. Disclosure of
"contained ounces" in a Mineral Resource is permitted under
Canadian regulations, however the SEC normally only permits issuers to
report mineralization that does not constitute 'reserves' by SEC
standards as in place tonnage and grade without reference to unit
measures. Accordingly, the information contained in this press release
may not be comparable to similar information made public by U.S.
companies that are not subject to NI 43-101.
FORWARD LOOKING STATEMENTS
Some information
contained in this release may contain forward-looking statements as
defined in the Private Securities Litigation Reform ACT of 1995. These
statements include among other things, comments regarding the results of
the Preliminary Economic Assessment including estimated capital and
operating costs, throughput and process rates, recoveries, production,
NPV and IRR calculations, mining and processing methods, and plans, and
further exploration and evaluation of the Montanore Project including
progress and expectations regarding environmental and permitting
requirements and the process and timing thereof. The use of any of the
words "anticipate," "estimate," "expect,"
"may," "project," "should,"
"would," "believe," and similar expressions are intended
to identify uncertainties. We believe the expectations reflected in those
forward-looking statements are reasonable. However, we cannot assure that
the expectations will prove to be correct. Actual results could differ
materially from those anticipated in these forward-looking statements as
a result of the factors set forth below, and other factors set forth in
documents filed by Mines Management, Inc., with the U.S. Securities and
Exchange Commission and with other regulatory authorities, including the
availability, terms, conditions and timing of required governmental
permits and approvals, the very preliminary cost estimates used in the
preparation of the PEA which may increase significantly for actual
construction and operations, changes in the mine plan, processing or
estimates of mineral resources on which the PEA was based, changes in
worldwide economic and political events affecting the supply of and
demand for silver and copper, and the availability of and cost of
financing for mining projects, volatility in the market price for silver
and copper, financial market conditions and the availability of financing
on acceptable terms or on any terms, uncertainty regarding whether
reserves will be established at Montanore, uncertainties associated with
developing new mines, variations in ore grade and other characteristics
affecting mining, crushing, milling, and smelting and mineral recoveries,
geological, technical, permitting, mining and process problems,
uncertainty regarding future changes in applicable law or implementation
of existing law, the availability of experienced employees, and the
factors discussed under "Risk Factors" in Mines Management,
Inc.'s annual Report on Form 10-K for the period ending December 31,
2009.
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