Mines
Management Files Technical Report For
Montanore Silver-Copper Project
NI 43-101 Technical Report in Support of
Preliminary Economic Assessment For Montanore
Silver-Copper Project filed on SEDAR
SPOKANE, Wash.-
February 3, 2011 - Mines Management, Inc. ("MMI") (NYSE-Amex:
"MGN") (TSX: "MGT") has filed on SEDAR a Technical
Report entitled "Technical Report: Preliminary Economic Assessment,
Montanore Project, Montana, USA prepared for Mines Management Inc."
("Technical Report") dated February 3, 2011, in support of a
Preliminary Economic Assessment ("PEA") for the Company's wholly
owned Montanore Silver-Copper Project in compliance with Canadian
National Instrument 43-101. ("NI 43-101"). The Technical Report
was prepared by Mine and Quarry Engineering Services, Inc. of San Mateo,
California ("MQes"). MMI previously announced the PEA results
set forth below on December 22, 2010.
A mine plan developed by MMI was audited by
MQes. 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 dated October
2005 prepared by Mine Development Associates ("MDA") of Reno,
Nevada. MDA's estimate reported by MMI of estimated 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, remains
unchanged.
The PEA indicates the potential for 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.
All dollar amounts in this release are stated in
U.S. currency, unless otherwise stated. The disclosure set forth below is
derived from the Technical Report unless otherwise expressly noted.
Average estimates are assumed over the 15-year life of mine ("LOM")
unless otherwise stated.
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.
TECHNICAL
REPORT HIGHLIGHTS
Project Parameters:
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Nominal Processing
Rate
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12,500 short
tons per day
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Average Silver Grade
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1.88 ounces
per short 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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Mining Extraction of Resources
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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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Estimated 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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Estimated 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 Undiscounted LOM Cash-flow (pre-tax)
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$1.118 billion
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Direct (Onsite) Operating costs (AgEq in plant
feed)
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$ 4.58 per ounce AgEq
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Note: The
Technical Report 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. Mineral prices used to
calculate silver equivalency were US$15.00 per ounce of silver and
US$3.10 per pound of copper. 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
Technical Report 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 a silver and copper
deficient zone. The average dip is just over 15 degrees in the up dip area,
increasing to an average of 24 degrees in the northwestern, down dip
area. 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 15,000 to 17,000 feet from the east, with processing
facilities at the surface.
Mineralized Material Estimate in Accordance
with U.S. SEC Industry Guide 7
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Short Tons
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Silver Grade (Ounces per short ton)
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Copper Grade
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Cut-off (Silver Ounces per short ton)
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Mineralized Material
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81,506,000
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2.04
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0.75%
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1.0
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Resource Estimate in Accordance with Canadian
NI 43-101
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Measured
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4,026,000
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1.85
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0.74%
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1.0
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Indicated
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77,480,000
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2.05
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0.75%
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1.0
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Inferred
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35,080,000
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1.85
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0.71%
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1.0
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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 Technical Report 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 top slice would be
mined by a longhole bench. Based on rock mechanics study recommendations,
MMI 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 would
then be 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
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 material
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$217.9 million over the life
of mine. Costs are expressed in 2nd quarter, 2010 U.S. dollars.
OPERATING COSTS
The following life-of-mine costs are expected
for the operating phase of the project:
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Estimated
Direct Operating Costs
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Average
Unit Cost
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Items
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US$/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 (Onsite) 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$/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$/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
- Permitting: 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 a final feasibility study.
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.
QUALIFIED PERSONS
The Technical Report in
support of the PEA was prepared under the supervision of Mr. Chris Kaye,
and Mr. Geoffrey Challiner, each of whom is an independent
"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
Technical Report . Mr. Steve Ristorcelli, with Mine Development
Associates ("MDA"), also an independent Qualified Person, 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, MMI initiated the NEPA
process, and 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 MMI intends to become a significant precious and base metals
production company. MMI has assembled a team which is highly experienced
in mine development, mineral exploration, and financing. Further
information on MMI 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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