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TABLE OF CONTENTS
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2012
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                to

Commission file number 001-32047

MINES MANAGEMENT, INC.
(Exact Name of Registrant as Specified in its Charter)

Idaho (State of Incorporation or Organization)	91-0538859 (I.R.S. Employer Identification No.)
905 W. Riverside Avenue, Suite 311 Spokane, Washington (Address of principal executive offices)	99201 (Zip Code)

(509) 838-6050
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, $0.001 par value Preferred Stock Purchase Rights	NYSE MKT

Securities registered pursuant to Section 12(g) of the Act:

         Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o    No ý

         Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o    No ý

         Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

         Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý    No o

         Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

         Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated Filer o Accelerated Filer o Non-accelerated Filer o
(Do not check if a
smaller reporting company) Smaller reporting company ý

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

         The aggregate market value of the voting and non-voting common equity held by non-affiliates as of June 30, 2012, was approximately $35.9 million based on the closing price of the Common Stock on the NYSE MKT LLC of $1.35 per share. The number of shares of our common stock outstanding as of March 29, 2013 was 28,999,752.

DOCUMENTS INCORPORATED BY REFERENCE

         Certain information required for Items 10, 11, 12, 13 and 14 of Part III of this Annual Report on Form 10-K is incorporated by reference to the Registrant's Definitive Proxy Statement for the 2013 Annual Meeting of Stockholders to be filed no later than April 30, 2013.

TABLE OF CONTENTS

		PAGE
PART I			8
ITEM 1.	BUSINESS		8
ITEM 1A.	RISK FACTORS		11
ITEM 1B.	UNRESOLVED STAFF COMMENTS		20
ITEM 2.	PROPERTIES		20
ITEM 3.	LEGAL PROCEEDINGS		28
ITEM 4.	MINE SAFETY DISCLOSURES		28
PART II			28
ITEM 5.	MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES		28
ITEM 6.	SELECTED FINANCIAL DATA		29
ITEM 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		30
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		32
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA		33
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE		51
ITEM 9A.	CONTROLS AND PROCEDURES		51
ITEM 9B.	OTHER INFORMATION		52
PART III			53
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE		53
ITEM 11.	EXECUTIVE COMPENSATION		53
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS		53
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE		53
ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES		53
PART IV			53
ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES		53

FORWARD LOOKING STATEMENTS

        Some information contained in or incorporated by reference into this Annual Report on Form 10-K may contain forward looking statements as defined in the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included in this Annual Report that address activities, events or developments that we expect or anticipate will or may occur in the future are forward-looking statements. These include, but are not limited to, the following:

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comments regarding further exploration and evaluation of the Montanore Project, including drilling activities, feasibility determinations, including those in the Preliminary Economic Assessment, engineering and environmental studies, environmental, reclamation and permitting requirements and the process and timing and the costs associated with the foregoing;

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the process and timing associated with the permitting process, including the issuance of biological opinions, a final environmental impact statement and a record of decision and completion of wetland mitigation plans;

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estimates of mineralized material;

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financing needs, including the financing required to fund the final phases of the advanced exploration and delineation drilling program and bankable feasibility study;

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sources of financing;

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the sufficiency of working capital to complete the rehabilitation of the Libby adit and commence delineation drilling;

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planned expenditures and cash requirements for 2013;

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efforts to reduce costs, including reducing manpower;

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results of the hydrological model and the effects thereof;

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the search for potential exploration and development opportunities in the mining industry and the chance of success of any exploration project;

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the possibility of challenges by environmental groups or others to our permitting efforts or planned exploration, development or mining activities;

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potential completion of a bankable feasibility study and the costs associated therewith; and

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markets for silver and copper.

        The use of any of the words "anticipate," "estimate," "expect," "may," "project," "should," "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 this report:

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the availability of experienced employees;

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uncertainties associated with developing new mines or mining operations;

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the absence of any history of production;

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the history of losses, which we expect to continue for the foreseeable future;

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uncertainties associated with acquiring new mining properties, including uncertainties regarding the availability of properties or companies to be acquired, the ability to negotiate acquisitions on acceptable terms or to otherwise accomplish such acquisitions, the ability to finance such

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acquisitions on acceptable terms, and the ability to manage acquired assets or to achieve the goals of the acquisition;

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the absence of proven or probable reserves, and uncertainty regarding whether reserves will be established at our Montanore Project;

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the speculative nature of exploration for mineral resources, including variations in ore grade and other characteristics affecting mining and mineral recoveries which involves substantial expenditures and is frequently non-productive;

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the need for additional financing to complete the underground evaluation program and to develop the Montanore Project;

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financial market conditions and the availability of financing, or its availability on terms acceptable to us;

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the availability, terms, conditions, costs, timing of, or delays in receiving required governmental permits and approvals;

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the competitive nature of the mining industry;

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risks inherent in the mining process, including geological, technical, permitting, mining and processing problems;

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worldwide economic and political events affecting the supply of and demand for silver and copper and volatility in the market price for silver and copper;

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ongoing reclamation obligations on the Montanore Project properties;

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significant government regulation of mining activities;

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uncertainty regarding changes in mining or environmental laws that could increase costs and impair our ability to develop our properties;

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environmental risks;

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uncertainty regarding title to some of our properties;

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anti-takeover provisions in our articles of incorporation and bylaws and under Idaho law, which may enable our incumbent management to retain control of us and discourage or prevent a change of control that may be beneficial to our stockholders;

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the volatility of the market price of our common stock;

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the intention not to pay any cash dividends in the foreseeable future;

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the potential depressive effect of the recent issuance of common stock on the market price of our common stock;

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future dilution of shareholders by the exercise of options, and the depressive effect on the stock price of the existence of a significant number of outstanding options;

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obligations under a long-term contract to sell our silver production;

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the factors discussed under "Risk Factors" in this Annual Report on Form 10-K for the period ending December 31, 2012.

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        For a more detailed discussion of such risks and other important factors that could cause actual results to differ materially from those in such forward-looking statements, please see the section entitled "Item 1A. Risk Factors" contained in this Annual Report on Form 10-K for the period ending December 31, 2012. Although we have attempted to identify important factors that could cause actual results to differ materially from those described in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that these statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in the statements. Except as required by law (e.g. information contained in our subsequent reports filed with the SEC on Forms 10-K, 10-Q and 8-K and any amendments thereto), we assume no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

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GLOSSARY OF TERMS

Guide 7 Definitions
Mineralized material	The term "mineralized material" refers to material that is not included in reserves as it does not meet all of the criteria for adequate demonstration of economic or legal extraction.
Reserves	The term "reserves" refers to that part of a mineral deposit which could be economically and legally extracted or produced.
Non-reserves	The term "non-reserves" refers to mineralized material that is not included in reserves as it does not meet all of the criteria for adequate demonstration of economic or legal extraction.
Exploration stage	An "exploration stage" prospect is one which is not in either the development or production stage.
Development stage	A "development stage" project is one which is undergoing preparation of an established commercially mineable deposit for extraction but which is not yet in production. This stage occurs after completion of a feasibility study.
Production stage	A "production stage" project is one actively engaged in the process of extraction and beneficiation of mineral reserves to produce a marketable metal or mineral product.
Additional Definitions
Adit	A horizontal tunnel or drive, open to the surface at one end, which is used as an entrance to a mine.
Axis	Intersection of the axial plane of a fold with a particular bed; axial line.
Bankable feasibility study	A comprehensive study of a mineral deposit in which all geological, engineering, legal, operating, economic, social, environmental and other relevant factors are considered in sufficient detail that it could reasonably serve as the basis for a final decision by a financial institution to finance the development of the deposit for mineral production.
Bornite	An isometric mineral, 1[Cu5 FeS4]; metallic; brownish bronze tarnishing to iridescent blue and purple; in hypogene and contact metamorphic deposits and mafic rocks; a valuable source of copper.
Chalcocite	A monoclinic mineral, 96[Cu2 S]; pseudohexagonal, metallic gray-black with blue to green tarnish; a secondary vein mineral; an important source of copper.
Development	Work carried out for the purpose of opening up a mineral deposit and making the actual ore extraction possible.
Dip	The angle at which a vein, structure or rock bed is inclined from the horizontal as measured at right angles to the strike.

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Drift	A horizontal underground opening that follows along the length of a vein or rock formation as opposed to a cross-cut which crosses the rock formation.
Exploration	Work involved in searching for ore, usually by drilling or driving a drift.
Galena	A sulphide mineral of lead, being a common lead ore mineral.
Grade	The average assay of a ton of ore, reflecting metal content.
Horizon	In geology, any given definite position or interval in the stratigraphic column or the scheme of stratigraphic classification; generally used in a relative sense.
Host rock	The rock surrounding an ore deposit.
Interbed	Occurring between distinct rock layers or strata.
Lode	A vein of mineral ore deposited between clearly demarcated layers of rock.
Metasediment	A sedimentary rock which shows evidence of having been subjected to metamorphism.
Mineral	A naturally occurring homogeneous substance having definite physical properties and chemical composition and, if formed under favorable conditions, a definite crystal form.
Mineralization	The presence of economic minerals in a specific area or geological formation.
Ore	Material that can be mined and processed that provides a positive cash flow.
Patented mining claim	A patented mining claim is one for which the federal government of the United States has passed its title to the claimant, making it private land. A person may mine and remove minerals from a mining claim without a mineral patent. However, a mineral patent gives the owner exclusive title to the locatable minerals. It also gives the owner title to the surface and other resources.
Precambrian	All geologic time before the Paleozoic era.
Prospect	A mining property, the value of which has not been determined by exploration.
Quartzite	A metamorphic rock formed by the transformation of a sandstone rock by heat and pressure.
Reclamation	The restoration of a site after mining or exploration activity is completed.
Recovery	The percentage of valuable metal in the ore that is recovered by metallurgical treatment.

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Siltite	An indurated silt having the texture and composition of shale but lacking its fine lamination or fissility; a massive mudstone in which the silt predominates over clay; a nonfissile silt shale. It tends to be flaggy, containing hard, durable, generally thin layers, and often showing various primary current structures.
Stope	An excavation in the form of steps made by the mining of ore from steeply inclined or vertical veins.
Stratabound	A situation in which mineralization is essentially contained in or confined to a particular sedimentary or volcanic unit.
Stratigraphy	The branch of geology which studies the formation, composition, sequence and correlation of the stratified rock as parts of the earth's crust.
Strike	The direction, or bearing from true north, of a vein or rock formation measured on a horizontal surface.
Sulfide	A compound of bivalent sulfur with an electropositive element or group, especially a binary compound of sulfur with a metal.
Tailings	Material rejected from a mill after the recoverable valuable minerals have been extracted.
Trend	The direction, in the horizontal plane, or a linear geological feature (for example, an ore zone), measured from true north.
Unpatented mining claim	A parcel of property located on federal lands pursuant to the General Mining Law of 1872 and the requirements of the state in which the unpatented claim is located, the paramount title of which remains with the federal government of the United States. The holder of a valid, unpatented lode mining claim is granted certain rights including the right to explore and mine such claim under the General Mining Law.
Vein	A mineralized zone having a more or less regular development in length, width and depth, which clearly separates it from neighboring rock.

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PART I

ITEM 1.    BUSINESS.

Overview

        Mines Management, Inc. (together with its subsidiaries, "MMI," "Mines Management," the "Company," "we," "our," "ours," or "us"), is engaged in the business of acquiring and exploring, and if exploration is successful, developing mineral properties, primarily those containing silver and associated base and precious metals. The Company was incorporated under the laws of the State of Idaho on February 20, 1947. The Company's executive offices are located at 905 W. Riverside, Suite 311, Spokane, Washington 99201.

        The Company's principal mineral property interest, the Montanore Project, is held by its wholly owned subsidiaries, Newhi, Inc. and Montanore Minerals Corp. The Company's properties, including the Montanore property, are currently in the exploration stage; none of its properties are currently in production. The Company has commenced re-permitting of the Montanore Project and is determining its feasibility for development.

        The Montanore Project is located in northwestern Montana, and from 1988 to 2002 was owned by Noranda Minerals Corporation ("Noranda"). During that time the project received an approved environmental impact statement ("EIS") and all of its primary environmental permits. From 1988 to 2002 the Company held royalty rights to a portion of the deposit. In 2002, Noranda announced that it was abandoning the project, and subsequently transferred to the Company by quitclaim deed the patented and unpatented mining claims that control the mineral rights, and all drill core and intellectual property including geologic, environmental and engineering studies, relating to the Montanore Project.

        In May 2006, we acquired two Noranda subsidiaries that held title to the property providing access to the 14,000 foot Libby adit and related permits. We obtained permit revisions that allowed us to reopen the Libby adit and to dewater and rehabilitate the adit. The Libby adit, when extended, will provide access to the Montanore deposit for our planned underground exploration and delineation drilling program. We submitted revisions to the operating permit that allowed us to reopen the Libby adit in 2006 and to proceed with dewatering and rehabilitation of the adit. In March 2008, we obtained authorization from the State of Montana to resume the exploration activities started by the previous owner. Until the environmental review process for the Montanore Project is complete, however, we are prohibited from conducting exploration activities at the Libby adit.

        Since 2003, we have spent approximately $61.9 million on evaluation and updating of data, including that originating from previous owners, permitting activities, acquisition of equipment, construction of site infrastructure, and development and construction of a dewatering system. As currently planned, the advanced exploration and delineation drilling program includes the following:

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Development and advancement of the Libby adit by 3,000 feet to access the Montanore deposit;

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Drifting of approximately 10,000 feet and establishment of drill stations; and

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Diamond core drilling of approximately 50 holes totaling approximately 50,000 feet.

        Results of the drilling program, if successful, would provide data to support the completion of a bankable feasibility study and further optimization of the mine plan. The advanced exploration and delineation drilling program, through completion of a bankable feasibility study, is expected to cost an additional $20.0 to $25.0 million.

        Before we are able to advance the Montanore Project, we must obtain the requisite project approvals and permits from the U.S. Forest Service ("USFS"), the State of Montana Department of Environmental Quality ("MDEQ"), the U.S. Fish and Wildlife Service, and the Army Corps of

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Engineers. A draft environmental impact statement was issued by the USFS and the MDEQ in the first quarter of 2009. After the comment period expired, it was determined by the agencies that a supplemental draft environmental impact statement was necessary and this was completed in September 2011. The public comment period for the supplemental draft environmental impact statement closed in December 2011. The agencies are addressing the final comments with completion scheduled for the third or fourth quarter of 2013. We anticipate that the permits could be issued in the first quarter of 2014, based on the current published schedule on the USFS website. Until these permits have been received, we will not be able to proceed with the underground evaluation program.

        On April 5, 2012, we entered into an Exploration Earn-In Agreement with Estrella Gold Corporation pursuant to which we could acquire 75% of the La Estrella silver and gold exploration property in Peru, approximately 230 kilometers southeast of Lima. La Estrella is an advanced exploration stage project which contains an epithermal, volcanic-hosted gold-silver system with associated base-metal mineralization. The terms of the agreement allow the Company through its subsidiary, Minera Montanore Peru, SAC, to earn 75% of the La Estrella property by expending $5.0 million on exploration activities and making annual cash payments to Estrella of $0.1 million on the first anniversary of execution of the agreement and $0.2 million on each of the following anniversaries of such execution until the earn-in has been completed.

Competition

        There is aggressive competition within the minerals industry to discover and acquire properties considered to have commercial potential. When we wish to acquire an exploration project, we typically compete with other entities, most of which have greater resources than we do. In addition, we compete with others in efforts to obtain financing to explore and develop mineral properties.

Employees

        As of March 29, 2013, the Company had seven employees located in Spokane, Washington and six employees in Libby, Montana. The Company plans to add additional engineering, geological, and operating staff at Libby as the development of the Montanore Project progresses. Outside consultants and contractors are engaged from time to time to perform tasks involved in re-permitting the Montanore Project and advancing the adit rehabilitation and drifting. The Company expects to continue to rely on consultants from time to time, to provide these services.

Regulation

        The Company's activities in the United States are subject to numerous federal, state, and local laws and regulations governing exploration, labor standards, occupational health and mine safety, control of toxic substances, and other matters involving environmental protection and taxation. These laws are continually changing and, in general, are becoming more restrictive. We have made, and expect to make in the future, significant expenditures to comply with such laws and regulations. Changes to local, state or federal laws and regulations in the jurisdictions where we operate could require additional capital expenditures and result in an increase in our costs. Although we are unable to predict what additional legislation, if any, might be proposed or enacted, additional regulatory requirements could impact the economics of our projects.

        For more information regarding the regulations to which we are subject and the risks associated therewith, see "Permitting and Environmental" under Item 2 "Properties" and Item 1A "Risk Factors."

Available Information

        We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission ("SEC"). You may access and read our filings without charge

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through the SEC's website, at www.sec.gov. You may also read and copy any document we file at the SEC's Public Reference Room located at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room.

        We also make our public reports available through our website, www.minesmanagement.com, as soon as practicable after we file or furnish them to the SEC. You may also request copies of the documents, at no cost, by telephone at (509) 838-6050 or by mail at Mines Management, Inc., 905 W. Riverside Avenue, Suite 311, Spokane, Washington 99201. The information on our website is not part of this Annual Report on Form 10-K.

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ITEM 1A.    RISK FACTORS.

Our business, operations, and financial condition are subject to various risks. In addition to historical information, the information in this Annual Report on Form 10-K contains "forward-looking" statements about our future business and performance. Our actual operating results and financial performance may be very different from what we expect as of the date of this report. The risks below address some of the factors that may affect our future operating results and financial performance.

We have no proven or probable reserves.

        We are currently in the exploration stage and have no proven or probable reserves, as those terms are defined by the SEC, on any of our properties, including the Montanore Project. The mineralized material identified to date in respect of the Montanore Project has not demonstrated economic viability and we cannot provide any assurance that mineral reserves with economic viability will be identified on that property.

        In order to demonstrate the existence of proven or probable reserves under SEC guidelines, it would be necessary for the Company to advance the exploration of the Montanore Project by significant additional delineation drilling to demonstrate the existence of sufficient mineralized material with satisfactory continuity. If successful, the results of this drilling program would provide the basis for a feasibility study demonstrating with reasonable certainty that the mineralized material can be economically extracted and produced. We do not currently have sufficient data to support a feasibility study of the Montanore Project, and in order to perform the drilling to support such feasibility study, we must first obtain the necessary permits to continue our exploration efforts. It is possible that, even if we obtain sufficient geologic data to support a feasibility study on the Montanore Project, the data will lead us to conclude that none of the identified mineral deposits can be economically and legally extracted or produced. If we cannot adequately confirm or discover any mineral reserves of precious metals on the Montanore property, we may not be able to generate any revenues.

        Even if we discover mineral reserves on the Montanore property in the future that can be economically developed, the initial capital costs associated with development and production of any reserves found is such that we might not be profitable for a significant time after the initiation of any development or production. The commercial viability of a mineral deposit once discovered is dependent on a number of factors beyond our control, including particular attributes of the deposit such as size, grade and proximity to infrastructure, as well as metal prices. In addition, development of a project as significant as Montanore will likely require significant debt financing, the terms of which could contribute to a delay of profitability.

We will require additional financing to complete our exploratory drilling program at the Montanore Project, which we may be unable to obtain.

        We are an exploration stage mining company and currently do not have sufficient capital to fully fund the activities needed to establish the economic feasibility of the Montanore Project. We have approximately $11.8 million of cash, cash equivalents and certificates of deposit on hand as of December 31, 2012. We anticipate that our expenses in 2013 will be approximately $1.5 million for regulatory permitting activities and $5.0 million of general and administrative expenses, assuming that permitting is not completed until the end of 2013. We estimate that, following the completion of permitting, the costs of completing the exploratory drilling program will be approximately $20 to $25 million, plus general and administrative expenses during the period in which the drilling program is being conducted. Uncertainties surrounding the exploratory drilling program and, in particular, the permitting process could require the project to take longer and cause costs to increase. Our cash on hand will not be sufficient to complete the exploratory drilling program and prepare the bankable feasibility study, and additional financing will be required. We cannot guarantee that we would be able

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to obtain any such additional financing on commercially reasonable terms or at all, nor can we guarantee that we would be able to fund the activities required to complete a bankable feasibility study. Additional equity funding could be dilutive to existing stockholders. If we fail to obtain the necessary financing when needed, we may not be able to execute our planned activities and we may be forced to abandon exploration and development of, or to sell our interest in, the Montanore Project, which would have a material adverse effect on our growth strategy, results of operations and financial condition.

Even if our exploration efforts at Montanore are successful, we may not be able to raise the funds necessary to develop the Montanore Project.

        If our exploration efforts at Montanore are successful, our current estimates indicate that we would be required to raise approximately $550 million in external financing to develop and construct the Montanore Project. Sources of external financing could include bank borrowings and debt and equity offerings. Even if a bankable feasibility study is completed, commodity prices, the then-current state of financial markets or other factors may make financing for the development of the Montanore Project unavailable. Financing has become significantly more difficult to obtain in the current market environment. There can be no assurance that we will commence production at Montanore or generate sufficient revenues to meet our obligations as they become due or obtain necessary financing on acceptable terms, if at all, and we may not be able to secure the financing necessary to begin or sustain production at the Montanore Project. If we cannot adequately finance our exploration of the Montanore property and its subsequent development, we will not be able to generate any revenues. In addition, should we incur significant losses in future periods, we may be unable to continue as a going concern, and realization of assets and settlement of liabilities in other than the normal course of business may be at amounts significantly different than those included in our periodic reports.

We may not be able to obtain permits required for development of the Montanore Project.

        In the ordinary course of business, mining companies are required to seek governmental permits for expansion of existing operations or for the commencement of new operations. We are required to obtain numerous permits for the Montanore Project. Obtaining the necessary governmental permits has been, and continues to be, a complex and time-consuming process involving numerous jurisdictions and often involving public hearings and costly undertakings. We have been engaged in renewing or pursuing permits since early 2005, and, under the most favorable timing, could have permits in place by the end of 2013. However, the process is controlled by the governmental agencies, and throughout the permitting process these agencies have repeatedly missed anticipated deadlines. Obtaining required permits for the Montanore Project may be more difficult due to its location within the Cabinet Wilderness Area, and its proximity to core habitat of certain protected species, including the grizzly bear and bull trout. In addition, a third party is seeking to permit another mining operation near the Montanore Project and if that effort were successful, the impact of that operation on the environment and on wildlife in the area would have to be taken into consideration in our permitting determinations and could make those determinations more difficult. Private political groups purportedly dedicated to protection of the environment have been active in opposing permitting of projects in and near the Cabinet Wilderness Area.

        Mining projects require the evaluation of environmental impacts for air, water, vegetation, wildlife, cultural, historical, geological, geotechnical, geochemical, soil and socioeconomic conditions. Permits are required for, among other things, storm-water discharge; air quality; wetland disturbance; dam safety (for water storage and/or tailing storage); septic and sewage; and water rights appropriation, and compliance must be demonstrated with the Endangered Species Act and the National Historical Preservation Act. An EIS is required before we could commence mine development or mining activities. Baseline environmental conditions are the basis on which direct and indirect impacts of the

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Montanore Project are evaluated and based on which potential mitigation measures would be proposed. If the Montanore Project were found to significantly adversely impact the baseline conditions, we could incur significant additional costs to avoid or mitigate the adverse impact, and delays in the Montanore Project could result.

        The duration and success of our efforts to re-permit are contingent upon many variables not within our control. There can be no assurance that we will obtain all necessary permits and, if obtained, that the permitting costs involved will not exceed available funds. Permitting costs through 2012 have been approximately $38 million, and it is possible that the costs and delays associated with the compliance with such standards and regulations could become such that we would not have sufficient funds to proceed with the further exploration, development or operation of a mine at the Montanore Project.

We have a history of losses and we expect losses to continue.

        As an exploration stage company that has no production history, we have incurred losses since our inception and we expect to continue to incur additional losses for the foreseeable future. For the fiscal years ended December 31, 2012 and 2011, we incurred losses of $8.2 million and $5.6 million, respectively. As of December 31, 2012, we had a deficit accumulated during the exploration stage of $71.2 million. There can be no assurance that we will achieve or sustain profitability in the future.

We have no recent history of production.

        We have no recent history of producing silver or other metals and the process of achieving production has many uncertainties. The development of our Montanore Project would require that we establish reserves, obtain approximately $550 million of financing, and construct and operate a mine, processing plant, and related infrastructure. During this process, we would be subject to all of the risks associated with establishing a new mining operation and business enterprise. We may never successfully establish mining operations, and any operations may never achieve profitability.

The exploration of mineral properties is highly speculative in nature, involves substantial expenditures and is frequently non-productive.

        Mineral exploration is highly speculative in nature and is frequently non-productive. Substantial expenditures are required to:

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establish ore reserves through drilling and metallurgical and other testing techniques;

•

determine metal content and metallurgical recovery processes to extract metal from the ore; and

•

design mining and processing facilities.

        If we discover ore at the Montanore Project or at the La Estrella Property, we expect that it would be several additional years from the initial phases of exploration until production is possible. During this time, the economic feasibility of production could change as a result of changes in commodity prices, inflation or other issues. As a result of these uncertainties, there can be no assurance that our exploration programs will result in proven and probable reserves in sufficient quantities to justify commercial operations at the Montanore Project or at any other exploration project.

Operation of a mine at the Montanore site will depend on our ability to recruit and retain qualified employees.

        If our exploration efforts at Montanore site are successful and we are able to raise the necessary external financing to develop and construct the Montanore Project, our ability to conduct mining operations will depend in part upon our ability to attract, compensate and retain a sufficient number of qualified employees, including executive officers, managers, employees and other personnel

13

knowledgeable about the mining business. Qualified individuals of the requisite caliber and number needed to fill these positions may be in short supply in areas near the Montanore Project, and the challenges in attracting and relocating qualified employees to the Montanore site may be considerable. If we are unable to hire and retain employees to operate the mine, any planned commencement of mining operations in the future would be delayed. Furthermore, increases in labor costs due to the competition for qualified employees and hiring employees represented by labor unions could render mining operations at Montanore uneconomical. Any such delays or any increases in labor costs could have a material adverse effect on our business and financial condition.

Our future profitability, if any, and our ability to finance the development of the Montanore Project, will be affected by changes in the prices of metals.

        If we establish reserves, our ability to obtain a favorable feasibility study for the Montanore Project and obtain financing for the development of a mine, as well as our profitability and long-term viability will depend, in large part, on the market prices of silver and copper. The market prices for these metals are volatile and are affected by numerous factors beyond our control, including:

•

global or regional consumption patterns;

•

supply of, and demand for, silver and copper;

•

speculative activities and producer hedging activities;

•

expectations for inflation;

•

political and economic conditions; and

•

supply of, and demand for, consumables required for production.

        The aggregate effect of these factors on metals prices is impossible for us to predict. Future weakness in the global economy and decreases in metals prices could adversely affect our ability to finance the exploration and development of the Company's properties, which would have a material adverse effect on our financial condition and results of operations and cash flows. There can be no assurance that metals prices will not decline. During the five-year period ended December 31, 2012, the high and low settlement prices for silver and copper were approximately $48.70 and $8.88 per ounce of silver and $4.62 and $1.24 per pound of copper.

We are subject to significant governmental regulations.

        Our operations and exploration and development activities are subject to extensive federal, state, and local laws and regulations governing various matters, including:

•

environmental protection;

•

management and use of toxic substances and explosives;

•

management of natural resources;

•

exploration and development of mines, production and post-closure reclamation;

•

taxation;

•

labor standards and occupational health and safety, including mine safety; and

•

historic and cultural preservation.

        Failure to comply with applicable laws and regulations may result in civil or criminal fines or penalties or enforcement actions, including orders issued by regulatory or judicial authorities enjoining or curtailing operations or requiring corrective measures, installation of additional equipment or

14

remedial actions, any of which could result in us incurring significant expenditures. We may also be required to compensate private parties suffering loss or damage by reason of a breach of such laws, regulations or permitting requirements. It is also possible that future laws and regulations, or a more stringent enforcement of current laws and regulations by governmental authorities, could cause additional expense, capital expenditures, restrictions on or suspensions of any future operations and delays in the exploration of our properties.

Changes in mining or environmental laws could increase costs and impair our ability to develop our properties.

        From time to time the U.S. Congress may consider revisions in its mining and environmental laws. It remains unclear to what extent new legislation may affect existing mining claims or operations. The effect of any such revisions on our operations cannot be determined conclusively until such revision is enacted; however, such legislation could materially increase costs on properties located on federal lands, such as the Montanore property, and such revision could also impair our ability to develop the Montanore Project and to explore and develop other mineral projects.

We are subject to environmental risks.

        Mineral exploration and mining is subject to potential risks and liabilities associated with pollution of the environment and the disposal of waste products occurring as a result of mineral exploration and production. Insurance against environmental risk (including potential liability for pollution or other hazards as a result of the disposal of waste products occurring from exploration and production) is not generally available to us (or to other companies in the minerals industry) at a reasonable price. To the extent that we become subject to environmental liabilities, the satisfaction of those liabilities would reduce funds otherwise available to us and could have a material adverse effect on us. Laws and regulations intended to ensure the protection of the environment are constantly changing, and are generally becoming more restrictive.

The mining industry is intensely competitive.

        The mining industry is intensely competitive. We may be at a competitive disadvantage because we must compete with other individuals and companies, many of which have greater financial resources, operational experience and technical capabilities than we do. Increased competition could adversely affect our ability to attract necessary capital funding or acquire suitable properties or prospects for mineral exploration in the future.

Our future success is subject to risks inherent in the mining industry.

        Our future mining operations, if any, would be subject to all of the hazards and risks normally incident to developing and operating mining properties. These risks include:

•

insufficient ore reserves;

•

fluctuations in metal prices and increase in production costs that may make mining of reserves uneconomic;

•

significant environmental and other regulatory restrictions;

•

labor disputes;

•

geological problems;

•

failure of underground stopes and/or surface dams;

•

force majeure events; and

15

•

the risk of injury to persons, property or the environment.

We have ongoing reclamation obligations on the Montanore Project properties.

        Although we have posted bonds with the State of Montana to cover expected future mine reclamation costs, there is no guarantee that the amount of these bonds will satisfy the environmental regulations and requirements in effect at the time of reclamation. Should government regulators determine that additional reclamation work is required, we may be required to fund this work, which could have a material adverse effect on our financial position.

The title to some of our properties may be uncertain or defective.

        Although the Montanore deposit is held by patented mining claims, a significant portion of our holdings consist of unpatented lode and millsite claims. Certain of our United States mineral and surface use rights consist of "unpatented" mining and millsite claims created and maintained in accordance with the U.S. General Mining Law of 1872, or the General Mining Law. Unpatented mining and millsite claims are unique U.S. property interests, and are generally considered to be subject to greater title risk than other real property interests because the validity of unpatented mining and millsite claims is often uncertain. This uncertainty arises, in part, out of the complex federal and state laws and regulations that supplement the General Mining Law. Also, unpatented mining and millsite claims and related rights, including rights to use the surface, are subject to possible challenges by third parties or contests by the federal government. The validity of an unpatented mining or millsite claim, in terms of both its location and its maintenance, is dependent on strict compliance with a complex body of federal and state statutory and decisional law. In addition, there are few public records that definitively control the issues of validity and ownership of unpatented mining and millsite claims. We have not filed a patent application for any of our unpatented mining and millsite claims that are located on federal public lands in the United States and, under current law and possible future legislation to change the General Mining Law, patents may be difficult to obtain. The Company has obtained a title opinion on some of the patented mining claims covering the Montanore deposit, but not on all of its patented mining claims. The Company has not obtained title opinions on any of its unpatented mining or millsite claims.

        Our ability to conduct exploration, development, mining and related activities may also be impacted by administrative actions taken by federal agencies. With respect to unpatented millsites, for example, the ability to use millsites and their validity has been subject to greater uncertainty since 1997. In November of 1997, the Secretary of the Interior (appointed by President Clinton) approved a Solicitor's Opinion which concluded that the General Mining Law imposed a limitation that only a single five-acre millsite may be claimed or used in connection with each associated and valid unpatented or patented lode mining claim. Subsequently, however, on October 7, 2003, the new Secretary of the Interior (appointed by President Bush) approved an Opinion by the Deputy Solicitor which concluded that the mining laws do not impose a limitation that only a single five-acre millsite may be claimed in connection with each associated unpatented or patented lode mining claim. Current federal regulations do not include the millsite limitation. There can be no assurance, however, that the Department of the Interior will not seek to re-impose the millsite limitation at some point in the future.

        In addition, in 2009, a consortium of environmental groups filed a lawsuit in the U.S. District Court for the District of Columbia against the Department of the Interior, the Department of Agriculture, the Bureau of Land Management, or BLM, and the USFS, asking the court to order the BLM and USFS to adopt the five-acre millsite limitation. That lawsuit also asks the court to order the BLM and the USFS to require mining claimants to pay fair market value for their use of the surface of federal lands where those claimants have not demonstrated the validity of their unpatented mining claims and millsites. If the plaintiffs in that lawsuit prevailed, that could have an adverse impact on our

16

ability to use our unpatented millsites for facilities ancillary to our mining activities, and could significantly increase the cost of using federal lands at the Montanore Project for such ancillary facilities.

        In recent years, the U.S. Congress has considered a number of proposed amendments to the General Mining Law, as well as legislation that would make comprehensive changes to the law. Although no such legislation has been adopted to date, there can be no assurance that such legislation will not be adopted in the future. If adopted, such legislation, if it included concepts that have been part of previous legislative proposals, could, among other things, (i) adopt the millsite limitation discussed above, (ii) impose time limits on the effectiveness of plans of operation that may not coincide with mine life, (iii) impose more stringent environmental compliance and reclamation requirements, (iv) establish a mechanism that would allow states, localities and Native American tribes to petition for the withdrawal of identified tracts of federal land from the operation of the General Mining Law, (v) allow for administrative determinations that mining would not be allowed in situations where undue degradation of the federal lands in question could not be prevented, and (vi) impose royalties on silver and copper production from unpatented mining claims located on federal lands or impose fees on production from patented mining claims. Further, it could have an adverse impact on earnings from our operations, could reduce estimates of any reserves we may establish and could curtail our future exploration and development activity on federal lands or patented claims.

        While we have no reason to believe that title to any of our properties is in doubt, title to mining properties is subject to potential claims by third parties claiming an interest in them. For example, in September 2007, we filed a declaratory judgment action, Mines Management, Inc., Newhi, Inc. and Montanore Minerals Corp. v. Tracie Fus et al., Cause No. DV 07-248 in Montana Nineteenth Judicial District Court, Lincoln County. In this action we sought a Court judgment against certain of the defendants that the unpatented mining claims of such defendants allegedly located above portions of our adit and overlapping certain of our patented and unpatented mining claims, mill sites and tunnel sites are invalid. The defendants then asserted trespass claims against us relating to our use of certain of our mining claims, millsites and the adit. The parties participated in a mediation in 2009 which resulted in a settlement with seven of the ten defendants. Subsequently, however, one of the defendants claimed that a settlement had not been reached. In mid-March 2013 the Court issued an order (i) enforcing the settlement with seven of the ten defendants, (ii) enjoining us from trespassing on certain mining claims owned by one of the defendants, and (iii) finding that the mining claim of another defendant is valid and superior to certain of our claims. The claims with respect to which we were enjoined from trespass do not overlap the adit. The mining claim that the Court determined was valid and superior to certain of our claims overlaps portions of the adit and portions of certain of our patented claims and tunnel sites. Although we may appeal portions of this order when it becomes a final order, we do not believe that this order affects our ability to use the adit or to conduct exploration and development operations as currently planned once we have obtained the required permits.

We are obligated by a right of first refusal agreement relating to our future silver production that may affect the willingness of third parties to enter into silver purchase agreements with us.

        In November 2007, we entered into a Right of First Refusal agreement with a significant stockholder that granted to that stockholder a 20-year right of first proposal and a right to match third-party proposals to purchase a silver stream, i.e. all or any portion of silver mined, produced or recovered by us in the State of Montana. The right does not apply to trade sales and spot sales in the ordinary course of business or forward sales. The existence of this agreement may make other potential buyers less likely to negotiate with us to purchase silver we produce since they would be subject to the aforementioned right of first refusal.

17

The market price of our common stock is subject to volatility and could decline significantly.

        Our common stock is listed on the NYSE MKT LLC ("NYSE MKT") and the Toronto Stock Exchange, or TSX. Securities of small-cap companies such as ours have experienced substantial volatility in the past, often based on factors unrelated to the financial performance or prospects of the companies involved. These factors include macroeconomic developments in North America and globally and market perceptions of the attractiveness of particular industries. This volatility has been exacerbated in recent years because of global economic and political disruptions and natural disasters. Our share price is also likely to be significantly affected by short-term changes in silver and copper prices or in our liquidity, financial condition or results of operations as reflected in our quarterly earnings reports. Over the last three years, the closing price of our common shares as reported on the NYSE MKT has fluctuated from a low of $0.90 per share to a high of $4.30 per share. Other factors unrelated to our performance that could have an effect on the price of our common stock include the following:

•

volatility in metal prices;

•

the extent of analyst coverage available to investors concerning our business is limited because investment banks with research capabilities do not typically follow our securities or the securities of other exploration or developmental companies;

•

the trading volume and general market interest in our securities could affect an investor's ability to trade significant numbers of shares of our common stock;

•

the relatively small size of the public float will limit the ability of some institutions to invest in our securities;

•

a substantial decline in our stock price that persists for a significant period of time could cause our securities to be delisted from the NYSE MKT and the TSX, further reducing market liquidity; and

•

news reports relating to trends in our industry or general economic conditions.

        As a result of any of these factors, the market price of our common stock at any given point in time might not accurately reflect our long-term value. Securities class action litigation often has been brought against companies following periods of volatility in the market price of their securities. We could in the future be the target of similar litigation. Securities litigation could result in substantial costs and damages and divert management's attention and resources.

Our shareholders are subject to future dilution by the exercise of options, and the existence of a significant number of options could depress the price of our common stock.

        As of December 31, 2012, we had 28,999,752 shares outstanding. As of that date, there were options outstanding to purchase up to 3,622,000 shares of common stock at a weighted average exercise price of $1.81 per share. There are 3,383,000 additional shares of common stock (640,000 in the Consultant Stock Compensation Plan, 40,000 in the 2003 Equity Incentive Plan, 159,000 in the 2007 Equity Incentive Plan, and 2,544,000 in the 2012 Equity Incentive Plan) available for issuance under our stock option plans. If we issue additional options or warrants, or if currently outstanding options to purchase our common stock are exercised, the investments of our shareholders would be further diluted. In addition, the potential for exercise of a significant number of options can have a depressive effect on the market price for our common stock.

The issuance of additional common stock may negatively impact the trading price of our common stock.

        We have issued equity securities in the past, most recently in March 2011, and may continue to issue equity securities to finance our activities in the future, including to finance future acquisitions, or

18

as consideration for acquisitions of businesses or assets. In addition, outstanding options to purchase our common stock may be exercised and additional options and warrants may be issued, resulting in the issuance of additional shares of common stock. The issuance by us of additional shares of common stock would result in dilution to our stockholders, and even the perception that such an issuance may occur could have a negative impact on the trading price of our common stock.

Anti-takeover provisions in our articles of incorporation, our bylaws and under Idaho law may enable our incumbent management to retain control of us and discourage or prevent a change of control that may be beneficial to our shareholders.

        Certain provisions of the Company's articles of incorporation and bylaws and of Idaho law could discourage, delay or prevent a merger, acquisition, or other change of control that shareholders may consider favorable, including transactions in which shareholders might otherwise receive a premium for their shares of common stock in the company. Specifically, the Company's articles of incorporation divide the board of directors into three classes having staggered terms of office. This may prevent or frustrate attempts by our shareholders to replace or remove management. The Company has also implemented a shareholders rights plan, sometimes called a "poison pill", which would substantially reduce or eliminate the expected economic benefit to an acquirer from acquiring us in a manner or on terms not approved by our board of directors. In addition, our board of directors is able to issue a new series of preferred stock from time to time without stockholder approval that could affect the voting power of our common stock and have dividend and liquidation preferences that could negatively affect the value of our common stock. These and other impediments to a third party acquisition or change of control could limit the price investors are willing to pay in the future for shares of our common stock. Our board of directors has also approved employment agreements with certain of our executive officers that include change of control provisions that provide severance benefits in the event that their employment terminates involuntarily without cause or for good reason within twelve months after a change of control of the Company. These agreements could affect the consummation of and the terms of a third party acquisition. We are also subject to provisions of Idaho law that could have the effect of delaying, deferring or preventing a change in control of our company. One of these provisions prevents us from engaging in a business combination with any interested shareholder for a period of three years from the date the person becomes an interested shareholder, unless specified conditions are satisfied.

There are differences in U.S. and Canadian requirements for reporting of resources and mineralization, and we utilized the Canadian mining industry reporting standards for reporting of resources in our recent Preliminary Economic Assessment, or PEA. Some information required by Canadian reporting is not permitted under SEC guidelines.

        The mineralization figures presented in this Annual Report on Form 10-K are based upon estimates made by independent geologists. U.S. reporting requirements for disclosure of mineral properties are governed by SEC Industry Guide 7. Although we are a U.S. company traded on the NYSE MKT, we also report in Canada estimates of resources that are prepared in accordance with Canadian standards because we are also traded on the TSX and are thus subject to Canadian reporting requirements. These resource estimates were prepared in accordance with standards of the Canadian Institute of Mining, Metallurgy and Petroleum referred to in Canadian National Instrument 43-101, commonly known as NI 43-101. In early 2011, we completed a Preliminary Economic Assessment, or PEA, that was prepared in accordance with NI 43-101 reporting standards. The reporting standards required by NI 43-101 are different from the standards permitted to report reserve and resource estimates in reports and other materials filed with the SEC. Accordingly, information concerning descriptions of mineralization contained in our public filings with the SEC may not be comparable to information, including the PEA, we file with Canadian securities authorities.

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        Under NI 43-101, we report in Canada measured, indicated and inferred resources, measurements which are not permitted in filings made with the SEC by issuers incorporated in the United States. Under SEC rules, mineralization may not be classified as a "reserve" unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. U.S. investors are cautioned not to assume that all or any part of measured or indicated resources will ever be converted into reserves. Further, "inferred resources" have a great amount of uncertainty as to their existence and as to whether they can be mined legally or economically. In accordance with Canadian rules, estimates of inferred mineral resources cannot form the basis of a feasibility study or other economic evaluations, but they were considered in the PEA. Accordingly, U.S. investors should not place undue reliance on the PEA, and should not assume that all or any part of measured mineral resources, indicated mineral resources, or inferred mineral resource will ever be upgraded to a higher category.

Acquisitions and business integration issues will expose us to risks.

        We may, in the future, engage in targeted acquisitions. Any acquisition that we make may change our business and operations, and may expose us to new geographic, political, operating, financial, governmental, environmental and geological risks. Our success in acquisition activities depends on our ability to identify suitable acquisition candidates, negotiate acceptable terms for any such acquisition and successfully integrate the acquired operations. Any acquisition would be accompanied by risks. We may expend considerable resources on pursuing an acquisition candidate, including on due diligence and negotiations, and we may ultimately not prove successful in completing the acquisition. Even if successful in completing the acquisition, the acquisition may present problems. For example, there may be significant decreases in commodity prices after we have committed to complete the transaction and have established the purchase price or exchange ratio; a material ore body may prove to be below expectations; we may have difficulty integrating and assimilating the operations and personnel of any acquired companies, realizing anticipated synergies and maximizing the financial and strategic position of the combined enterprise and maintaining uniform standards, policies and controls across the organization; the integration of the acquired business or assets may disrupt our ongoing business and our relationships with employees, customers, suppliers and contractors; and the acquired business or assets may have unknown liabilities which may be significant. If we choose to use equity securities as consideration for such an acquisition, our existing stockholders may suffer substantial dilution. Alternatively, we may choose to finance any such acquisition with existing resources which could materially affect our liquidity and the availability of funds to invest in the Montanore Project. There can be no assurance that we would be successful in overcoming these risks or any other problems encountered in connection with any acquisition.

We do not intend to pay any cash dividends in the foreseeable future.

        We have never paid cash dividends and we intend to retain our earnings, if any, to finance the growth and development of our business. Any return on an investment in our common stock will come from the appreciation, if any, in the value of our common stock.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

        None.

ITEM 2.    PROPERTIES.

        The significant properties in which the Company has an interest are described below.

Montanore Property

        The Montanore Project is located in Sanders and Lincoln Counties in northwestern Montana and consists of ten patented mining claims and 825 unpatented mining claims owned by the Company. The unpatented mining claims are held subject to a $140 per claim annual maintenance fee paid to the federal government.

20

        The Company's ownership of the Montanore deposit stems primarily from its ownership of two patented mining claims, identified as HR 133 and HR 134, which cover the surface outcrop or "apex" of the gently dipping mineralized beds. According to U.S. mining law, the holders of claims covering the apex of a dipping, tabular deposit own the minerals to depth, even if the deposit passes from beneath the apex claim. For the Company's claims at Montanore, these "extralateral rights" have been confirmed by the U.S. Secretaries of Agriculture and Interior and upheld in U.S. District Court. In addition to the patented apex claims, the Company owns unpatented claims located along the fault which bounds the southwestern margin of the deposit and extends outside of the western border of the Cabinet Wilderness Area.

        The Company's property holdings for operational access and infrastructure support for the Montanore Project are located to the east of the deposit, south of the town of Libby, and are accessed from Libby by about 16 miles of secondary road up Libby Creek. The apex of the deposit can be reached from Noxon, the nearest town, by taking State Highway 200 about 2 miles to the east and then north about 5 miles on a secondary graveled road to the junction of the west and east forks of Rock Creek. From this point it is about a 4-mile hike up a Jeep trail behind a locked USFS gate to the deposit outcrop. The deposit outcrops near the border of, and other than the outcrop that occurs on the patented claims HR 133 and HR 134, lies entirely within the Cabinet Wilderness Area. Because any future mining of the deposit would take place underground and the Company has access to the deposit from outside the Cabinet Wilderness Area (our patented mining claims and certain other mineral rights predate the wilderness area designation), we do not believe that any future mining or associated surface activity would have a material impact on the wilderness area.

        On May 31, 2006, the Company acquired the State Hard Rock Operating Permit 150 that covers certain exploration activities and the Montana Pollution Discharge Elimination System ("MPDES") water discharge permit for the Montanore Project as well as title to properties providing access to the portal of the Libby adit. The 14,000 foot Libby adit was constructed in the early 1990s by previous operators. The adit stops approximately 3,000 feet short of the deposit. The Libby adit, when extended, will provide access to the Montanore deposit for a planned underground exploration and delineation drilling program. Prior to our activity in 2006, there were no plant, equipment, subsurface improvements or equipment other than the Libby adit, which was plugged and in reclamation. During the third quarter of 2006, the Company reopened the adit and completed initial water testing to determine the treatment method for water discharged from the adit.

Non-Reserves—Mineralized Material

        Non-Reserves Reported in the United States.    The estimate of mineralized material set forth below was prepared by Mine Development Associates, or MDA, of Reno, Nevada in October 2005. The estimate was prepared in accordance with SEC Industry Guide 7.

Mineralized Material Estimate in accordance with U.S. SEC Industry Guide 7

	Tons		Silver Grade (Ounces per ton)		Copper Grade			Cutoff Grade (Silver ounces per ton)
Mineralized Material		81,506,000		2.04		0.75	%		1.0

"Mineralized material" as used in this Annual Report on Form 10-K, although permissible under SEC's Industry Guide 7, does not indicate "reserves" by SEC standards. We cannot be certain that any part of the mineralized material at Montanore will ever be confirmed or converted into SEC Industry Guide 7 compliant "reserves." Investors are cautioned not to assume that all or any part of the mineralized material will ever be confirmed or converted into reserves or that mineralized material can be economically or legally extracted.

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Geology

        The Montanore Project contains a strata-bound silver-copper deposit occurring in the Revett Formation, which is part of an extensive series of Precambrian-aged metasedimentary rocks belonging to the Belt Supergroup. The Revett Formation has been subdivided into three members (upper, middle and lower) based on the contained amounts of quartzite, silty quartzite and siltite. The lower Revett, which hosts the mineralized horizons, is composed primarily of quartzite with lesser interbeds of siltite and silty quartzite.

        The silver-copper mineralization at Montanore is strata-bound in the upper portions of the lower Revett Formation. Copper and silver values are carried predominately in the minerals bornite, chalcocite, chalcopyrite and native silver in variable proportions and concentrations. Sulfide content of the mineralized rock rarely exceeds 3% to 4% and is commonly 1% to 2%.

        The mineralized zone crops out at the surface and extends down dip at least 12,000 ft to the north-northwest. The mineralization is open ended in the down dip direction. Mineralization occurs in at least two sub-parallel horizons separated by a silver- and copper-deficient zone containing low-grade lead in the form of galena. The two horizons are identified as the B1 for the upper zone and the B for the lower and more extensive zone. Both zones dip to the northwest between 15 degrees and 30 degrees, with an average of just over 15 degrees. The width of the main (B) horizon, in plan view, is defined by a fault on one side and a fold axis on the other, and varies from 804 feet to 3,540 feet. The property boundaries, however, limit the controlled portion of the deposit to a maximum of 2,000 feet. The average thickness for each of the two horizons is 35 feet, depending upon cutoff.

History and Development

        The Montanore Project was owned by Noranda Minerals Corporation between 1988 and 2002. During that time, the project received a Record of Decision ("ROD") approving a plan of operations from the USFS and the State of Montana, as well as all other permits required for the project, allowing Noranda to proceed with full operations, but the project was never put into operation. From 1988 to 2002, the Company held royalty rights to a portion of the deposit. In 2002, Noranda announced that it was withdrawing from the project, and subsequently transferred to us by quitclaim deed the patented and unpatented mining claims that control the mineral rights, and all drill core and intellectual property, including geologic, environmental and engineering studies, relating to the Montanore Project.

        In May 2006, we acquired two Noranda subsidiaries that held title to the Montanore property, providing access to the 14,000 foot Libby adit which, when extended, will provide access to the Montanore deposit. Through this acquisition, we also received the Hard Rock Operating Permit 150 that covers certain exploration activities and the MPDES water discharge permit for the Montanore Project. The 14,000 foot Libby adit was constructed in the early 1990s by previous operators. The adit stops approximately 3,000 feet short of the deposit. Prior to our activity in 2006, there were no plant, equipment, subsurface improvements or equipment other than the Libby adit, which was plugged and in reclamation. During the third quarter of 2006, we reopened the adit and completed initial water testing to determine the treatment method for water discharged from the adit. The necessary permit revisions were received in November 2006 to undertake an underground evaluation drilling program. We own water rights associated with the Montanore property that are believed to be sufficient for proposed mining activities. In the fourth quarter of 2006, we purchased generators to provide power for the initial evaluation drilling program and erected a warehouse building and shop at the Libby adit site, along with an office and employee change facility.

        In January 2007, we established a $1.124 million stand-by letter of credit to satisfy reclamation bonding requirements related to our planned exploration at the Libby adit. In 2007, we completed the construction of site infrastructure to support our planned underground evaluation program at the Montanore Project including a $1.5 million water treatment plant to process all water pumped out of

22

the adit and a dry storage structure for inventory. We also acquired an initial fleet of surface and underground heavy equipment.

        In 2008 and 2009, we continued the testing and installation of the adit dewatering system in preparation for the planned 3,000 foot extension and initiation of the drilling program and installed sumps that allowed us to test most of the mining equipment that will be used during the adit advancement and future development activities. We dewatered the adit in 2009. Engineering and geology work also continued during 2008 and 2009.

        The decline has been in a standby mode since the second quarter 2009, pending completion of the environmental review process. Operations at the Libby adit are limited to maintaining the water level at the 7,400 foot level in the adit and treating the water pumped from the adit.

Advanced Exploration and Delineation Drilling Program

        The objectives of our underground evaluation drilling program are to:

•

expand the known higher grade intercepts of the Montanore deposit;

•

develop additional information about the deposit;

•

further assess and define the mineralized zone; and

•

provide additional geotechnical, hydrological and other data.

The stages of the advanced exploration and delineation drilling program, and activities undertaken to date in each stage, are set out below. We expect that, following completion of permitting, Stages 2, 3 and 4 would take approximately 18 months.

Stage 1—Dewatering and Adit Rehabilitation

        The construction of water pumping and treatment facilities and the addition of generators to provide power for the underground exploration program are described above. In addition, we have worked to rehabilitate the adit which involves, among other things, sealing the walls, installing new roof bolts and extending power, ventilation and dewatering infrastructure in the adit. To date, infrastructure placed in the decline includes a refuge chamber, mine power center and temporary pump station, along with the previously installed sumps and pumping system at the 700 foot location. As previously noted, the adit is now on care and maintenance until the environmental review process is complete. We are prohibited from doing further work in the adit until the USFS approves an operating plan for Montanore. Total costs for Stage 1 activities are projected at approximately $7.3 million, of which approximately $6.3 million had been spent by December 31, 2012.

Stage 2—Advancement of Adit, Drifting and Establishment of Drill Stations

        Once the permitting process is complete and the adit rehabilitation completed, the Company plans to advance the adit approximately 3,000 feet towards the middle of the deposit. Upon reaching the deposit, we intend to commence approximately 6,000 feet of development drifting and establishing drill stations, which will be necessary to provide drill access. We estimate that Stage 2 will cost approximately $5.0 million.

Stage 3—Phase I Delineation Drilling

        In Stage 3 of the advanced exploration and delineation drilling program, we expect to commence approximately 25,000 feet of diamond core drilling. We expect to spend approximately $0.5 million on Phase I delineation drilling. We also expect to spend approximately $12.7 million (in addition to

23

amounts set forth above) during Stages 1, 2 and 3 on site operating and capital costs, optimization studies and general corporate support.

Stage 4—Phase II Drilling and Bankable Feasibility Study

        During this stage, we anticipate completing an additional 25,000 feet of diamond core drilling, undertaking additional metallurgical and geotechnical testing and analysis, and if the results of our exploration are successful, preparing for and completing a bankable feasibility study at an estimated cost, with site operating and capital costs, of approximately $10.0 million. A feasibility study and report would provide the basis for financing the development of the project, currently estimated to be approximately $550 million.

Permitting and Environmental

        Approval by regulatory agencies will be required before the Montanore Project can proceed with exploration and project development. The agencies that are involved with the major permits include the U.S. Forest Service ("USFS"), Montana Department of Environmental Quality ("MDEQ"), U.S. Army Corps of Engineers ("USACE"), and the U.S. Fish and Wildlife Service ("USFWS"). There are other permits required, such as water rights, which will involve other agencies. Effort continued in 2012 towards obtaining the necessary approvals from these agencies.

        In 2012 the USFS and MDEQ continued to develop the final environmental impact statement ("FEIS") that assesses the environmental impacts of the Montanore Project including wetlands mitigation and water quality analyses. The agencies completed a draft environmental impact statement in March 2009 and, following comments from the environmental protection agency and public comments, required submission of a supplemental draft environmental impact statement which was completed in September 2011. Public comment on the supplemental draft environmental impact statement was completed in December 2011. In working to develop the FEIS, the USFS and MDEQ are incorporating public comments, as well as updated analyses and new technical data generated by the environmental impact contractor and the Company, and are preparing updates to monitoring requirements and mitigation for each of the alternatives analyzed. During 2012, the Company continued to provide technical information to support this process.

        As part of the permitting process, the USFS must prepare a biological assessment ("BA") for both terrestrial and aquatic life. The USFWS reviews these reports in connection with its biological opinion ("BO") addressing the impact of the Project on threatened and endangered species, including grizzly bear and bull trout. The initial BA was prepared by the USFS and submitted to the USFWS in 2011. The USFWS provided general comments to the USFS early in 2012. The issuance of biological opinions is required prior to the completion of a record of decision, which is required for issuance of permits for our underground drilling program.

        Also as part of the development of the FEIS and determination of the agencies' preferred alternatives, the USACE must complete an analysis of potential Project discharges of dredged or fill material into water of the United States, including wetlands. These discharges are regulated by section 404 of the Clean Water Act which requires a permit before dredged or fill material may be discharged and is required for construction of the tailings facility. In 2012, the USACE advanced their process by completing a jurisdictional determination on the proposed tailings impoundment site. This process required extensive aquatic habitat data. The Company completed a conceptual mitigation plan for aquatic resources affected by the proposed tailings impoundment and continues to work with the USACE to advance the mitigation plan. During 2012, the Company also provided extensive technical analyses for alternative tailings impoundment areas and the feasibility of each site in connection with the 404 analysis.

24

        During 2012, project monitoring activities were expanded as well, to establish baseline conditions prior to the initiation of project development activities. The increased monitoring activities are tied to projected agency requirements prior to or during initial project development activities that will be incorporated into the FEIS.

        Under Montana regulations, new projects or amendments must go through a non-degradation review pertaining to water quality. The Project went through the process in 1993 when it was approved by the previous operator. The Company maintains this provision is not required since Permit 150 has remained active since issuance and it went through the non-degradation review process at that time. MDEQ has provided its proposal to review the project under this regulatory provision.

        Also during 2012, the Company developed water rights applications which request authorization for beneficial use of water resources and submitted them to the State of Montana. Submittal of these applications could not be accomplished until the DEIS and SDEIS were completed and the preferred alternative was selected by the agencies. These applications are pending comment from the agencies.

Engineering

        In May 2006, McIntosh Engineering and Hatch Ltd. completed a Cost Update Study and generated a draft report for the Montanore Project. This report included engineering optimization, engineering review, cost updates, mine planning, and other aspects of the project. The report also provided additional optimization opportunities that will be evaluated as part of the on-going internal engineering work currently underway.

        As part of the mine planning effort, we assembled all of the geologic information developed by Noranda and another previous owner and incorporated the information into the Vulcan mine modeling package. This 3-dimensional geologic model is a critical first step in further evaluating mine planning activities and projection of ore zones. This information was also used to develop the underground drilling targets for the evaluation drilling program.

Preliminary Economic Assessment

        On December 22, 2010, we announced the completion of a Preliminary Economic Assessment ("PEA") for the Montanore Project. The PEA was prepared to provide guidance on the potential viability of the Montanore Project and the basis for the continuation of exploration activities. Because of the uncertainties associated with any mineral deposit that, like the Montanore Project, does not have reserves, the PEA should not be relied on to value the Montanore Project, nor should it be considered to be a feasibility or pre-feasibility study.

        The PEA did not update the mineral resource analysis of the Montanore deposit completed in October 2005 by Mine Development Associates ("MDA Report"). Mineralized material, as set forth in the MDA Report, is 81.5 million short tons of material grading 2.04 oz/short ton silver and 0.75% copper with a cutoff grade of 1.0 oz/short ton silver.

        The PEA assumed pricing of the estimated Montanore resources based on a three year trailing average at August 16, 2010 (i.e. $3.10 per lb. for copper and $15.00 per ounce for silver) and developed cost estimates for development of the Montanore Project. Initial capital costs for the project were estimated to be $552.3 million (with a ± 35% accuracy). The PEA assumed that the project would utilize conventional grinding and flotation processing techniques at a processing rate of 12,500 short tons per day.

        The PEA concluded that the Montanore Project demonstrates favorable economic potential which justifies commencement of a resource evaluation program and subsequent pre-feasibility study.

25

        On February 3, 2011, the PEA was filed in Canada in accordance with Canadian National Instrument 43-101—Standards of Disclosure for Mineral Projects. The technical report summarizing the results of the PEA was prepared by or under the supervision of Mr. Chris Kaye and Mr. Geoffrey Challiner of Mine and Quarry Engineering Services, Inc. of San Mateo, California, each of whom is an independent "Qualified Person," as such term is defined in Canadian National Instrument 43-101. The PEA filed in Canada is not part of this Annual Report on Form 10-K.

Grizzly Bear Study

        The University of Washington's Center for Conservation Biology developed DNA techniques that uses scat for various wildlife species studies. The DNA method analyzes scat to identify the type of animal and each individual. In 2008 the Company, at a cost of approximately $0.4 million, hired the University of Washington's Center for Conservation Biology to develop a study plan for the grizzly bear recovery area (Cabinet Yaak Ecosystem) where the Montanore Project is located. A small portion of the ecosystem was inventoried using dogs trained to mark on bear scat. The University of Washington scope of work was to complete the field work and provide the DNA findings. This work was completed in 2009 and a report issued. The results showed 18 grizzly bear scat samples were collected and 9 out of the 18 samples were from different individual grizzly bears.

        Dr. Ed Kline, a contract biologist working on the Montanore Project analyzed the results of the University of Washington Study. Based on the eight individual grizzly bears identified without any duplications in the data set, Dr. Kline concluded the minimum population in the Cabinet Ecosystem was likely significantly underestimated by agencies. Rather than the 11 to 13 bears claimed by the agencies, the data suggests a population of 30 to 40. Since the 2009 study and Dr. Kline's analysis of the data, the agency's estimated grizzly bear population has increased to approximately this range.

USGS Grizzly Bear Hair Snag Survey

        Based, in part, on the grizzly bear scat study and analysis by Dr. Kline, Lincoln County initiated a cooperative program to better understand the grizzly bear populations. Population estimates completed by the agency has been limited due to funding and other issues. The County enlisted funding from public and private parties, including the Company, to support a two year extensive hair snag survey. The study will cost slightly more than $1.0 million with the Company contributing $0.2 million towards the work. Two seasons of hair have been collected from the Cabinet Yaak Ecosystem to provide a high quality population estimate, and are currently undergoing DNA analysis.

Hydrology Study

        As a result of conflicting opinions about how water flows from the top of mountains to the bottom, at a cost of approximately $0.4 million the Company in 2010 commissioned AMEC Geomatrix of Helena, Montana to develop a 3 dimensional numerical model to predict dewatering rates and possible areas of effects. The model uses a finite element code called FEFLOW. AMEC Geomatrix staff incorporated FEFLOW into a numerical model to represent the hydrologic conditions associated with the deposit. The model is a "tool" to help the permitting agencies assess the potential effects associated with mine dewatering. Monitoring can be developed that targets these potential areas to collect more detailed hydrologic information to assist in mine planning and update the hydrologic model predictions.

        Development of the model was initiated after the issuance of the draft environmental impact statement in 2010 and replaces a less sophisticated two-dimensional model prepared by the agency.

26

Description of Royalties on our Patented Mining Claims

        Under the HR 133 and HR 134 patented mining claims, which cover the Montanore deposit, we are required to pay a production payment royalty of twenty cents ($.20) per ton of ore extracted and milled therefrom, pursuant to (i) that Amendment to Purchase and Sale Agreement dated September 6, 1988, between Atlantic Goldfields Inc. and Montana Reserves Company, and (ii) that Amendment to Purchase and Sale Agreement dated September 6, 1988, between Jascan Resources Inc. and Montana Reserves Company, a former joint venture partner with Noranda. The royalty is payable with respect to the amount of resources included in an independent feasibility study prepared for project financing purposes, is payable at six month intervals following the commencement of commercial production as defined in the referenced agreements, and terminates when the resource as defined in the feasibility study has been mined and milled.

Other Properties

        The Company also owns certain patented and unpatented mining claims on zinc properties in northern Washington State, referred to as the Iroquois and Advance properties. No mining activities have been conducted on these properties since the 1960s. In December 2007, we completed an impairment analysis of the carrying values of the Iroquois and Advance properties to assess their immediate development potential. In connection with that evaluation, we wrote off the capitalized costs associated with the properties in the amount of $0.2 million which had been recorded in connection with mining activity that occurred in the 1950s. We continue to hold the real property, mining claims, and patented claims underlying the Iroquois and Advance properties; however, such property, mining claims, and patented claims do not have any book value in our consolidated financial statements. We also generate minor income from a working interest royalty, acquired more than 40 years ago, in several producing oil wells located in Kansas.

Exploration Earn-In Agreement

        On April 5, 2012, we entered into an Exploration Earn-In Agreement with Estrella Gold Corporation ("Estrella") pursuant to which we could acquire 75% of the La Estrella silver and gold exploration property in central Peru. La Estrella is an advanced exploration stage project which contains an epithermal, volcanic-hosted gold-silver system with associated base-metal mineralization. The property consists of 2300 hectares in which the mineralized area is fairly centrally situated, extending north-south for over 2000 meters, and east-west over 500 meters. The mineralized zone is from 100 meters to 200 meters thick, and extends in a moderately west-dipping tabular zone to depths of greater than 350 meters.

        The terms of the agreement allow the Company to earn 75% of the La Estrella property by expending $5.0 million on exploration activities and making annual cash payments to Estrella of $0.1 million prior to the end of the first agreement year ending on February 28, 2013 and $0.2 million prior to the end of each subsequent agreement year until the earn-in has been completed. The Company is also required to expend a minimum of $0.5 million in exploration and development expenditures in each of the first and second agreement years in order to maintain its rights under the Earn-In Agreement. As of December 31, 2012, the Company had met the first year's exploration and development expenditure requirements. The Company may terminate the Earn-In Agreement at any time without penalty, subject to reclamation and other customary obligations.

        Our 2012 exploration program consisted of a ten person camp constructed in May, which supported an eight hole, 2697 meter diamond drill campaign beginning in early June and ending mid-August. All drill samples were washed, measured, logged, and cut on site. Samples for assay were bagged on site and transported by registered vehicles to ALS Global facilities in Callao, Peru, where

27

they were assessed for gold by 30 gram fire assay with AA finish (Method AA25) and for silver by four-acid digestion and AA Spectroscopy (Method AA62).

        The program demonstrated continuous mineralization in seven of the eight holes. Based on these results, combined with a subsequent 3D IP/Res Survey conducted by Val d'Or Geophysics Peru, the Company decided to continue the program into a second year.

ITEM 3.    LEGAL PROCEEDINGS.

        In September 2007, we filed a declaratory judgment action, Mines Management, Inc., Newhi, Inc. and Montanore Minerals Corp. v. Tracie Fus et al., Cause No. DV 07-248 in Montana Nineteenth Judicial District Court, Lincoln County. In this action we sought a Court judgment against certain of the defendants that the unpatented mining claims of such defendants allegedly located above portions of our adit and overlapping certain of our patented and unpatented mining claims, mill sites and tunnel sites are invalid. The defendants then asserted trespass claims against us relating to our use of certain of our mining claims, millsites and the adit. The parties participated in a mediation in 2009 which resulted in a settlement with seven of the ten defendants. Subsequently, however, one of the defendants claimed that a settlement had not been reached. In mid-March 2013 the Court issued an order (i) enforcing the settlement with seven of the ten defendants, (ii) enjoining us from trespassing on certain mining claims owned by one of the defendants, and (iii) finding that the mining claim of another defendant is valid and superior to certain of our claims. The claims with respect to which we were enjoined from trespass do not overlap the adit. The mining claim that the Court determined was valid and superior to certain of our claims overlaps portions of the adit and portions of certain of our patented claims and tunnel sites. Although we may appeal portions of this order when it becomes a final order, we do not believe that this order affects our ability to use the adit or to conduct exploration and development operations as currently planned once we have obtained the required permits.

ITEM 4.    MINE SAFETY DISCLOSURES

        Not applicable.

PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES.

        Our common stock commenced trading on the AMEX MKT LLC (NYSE MKT") under the symbol, "MGN," on March 24, 2004. On January 10, 2006, the Company's common stock began trading on the Toronto Stock Exchange (TSX) under the symbol "MGT."

        The following table shows the high and low closing sales prices for our common stock for each quarter since January 1, 2011. The quotations reflect inter-dealer prices, without retail mark-up,

28

mark-down or commission and may not represent actual transactions. On March 28, 2013, the closing price of the Company's common stock was $0.95 on the NYSE MKT and CDN $0.96 on the TSX.

	NYSE MKT				Toronto Stock Exchange
Fiscal Year	High		Low		High		Low
	($)				(CDN$)
2013:
First Quarter (through March 28, 2013)		1.25		0.95		1.24		0.96
2012:
Fourth Quarter		1.54		0.90		1.49		0.91
Third Quarter		1.68		1.19		1.63		1.18
Second Quarter		1.77		1.15		1.68		1.16
First Quarter		2.20		1.66		2.21		1.68
2011:
Fourth Quarter		2.82		1.42		2.75		1.51
Third Quarter		2.36		1.40		2.24		1.44
Second Quarter		3.18		1.92		3.06		1.90
First Quarter		4.30		2.34		4.04		2.32

        As of March 28, 2013 there were approximately 550 certificate shareholders of record of our common stock and approximately 5,000 shareholders whose shares are held through banks, brokerage firms or other institutions.

        The Company has never paid a dividend and anticipates that future earnings, if any, will be retained to finance growth and development of our business.

Unregistered Sales of Equity Securities

        Not applicable.

Securities Authorized for Issuance Under Equity Compensation Plans

        The following information is provided as of December 31, 2012:

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted-average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a)) (c)
Equity compensation plans approved by shareholders		3,622,000	$	1.81		3,383,000
Equity compensation plans not approved by shareholders		—		—		—
Total		3,622,000	$	1.81		3,383,000

ITEM 6.    SELECTED FINANCIAL DATA.

        Not applicable.

29

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

        The following discussion and analysis is provided as a supplement to, and should be read in conjunction with, our financial statements, the accompanying notes ("Notes") and other information appearing in this Annual Report on Form 10-K. As used in this Annual Report on form 10-K, unless the context otherwise indicates, references to the "Company," "we," "our," "ours," and "us" refer to Mines Management, Inc. and its subsidiaries collectively.

Overview

Recent Events

•

The Biological Consultation between the U.S. Forest Service ("USFS") and the U.S. Fish and Wildlife Service ("USFWS") was initiated in March 2013, and is expected to be completed in the third quarter of 2013.

•

The Company executed an Exploration Earn-In Agreement with Estrella Gold Corporporation, for an option to acquire 75% of the La Estrella gold and silver exploration property located in central Peru. The results of the initial core drilling were encouraging and the Company has extended the gold and silver mineralized zones and plans to continue exploration throughout 2013.

•

The USFS and the Montana Environmental Quality ("MDEQ") issued the completed Supplemental Draft Environmental Impact Study in late September 2011 and the comment period concluded on December 21, 2011. During 2012, the USFS and MDEQ incorporated the responses into the Final Environmental Impact Statement.

•

The Company continued meeting in 2012 with federal and state agencies, members of congress, Montana legislators, local Lincoln County Commissioners and City of Libby officials, business leaders and community members in an effort to keep them informed of the project's status.

•

The Company continues to control expenditures and conserve cash pending the completion of permitting.

•

Cash and investment position remained strong at $11.8 million as of December 31, 2012.

        As of December 31, 2012, the balance of our cash and unrestricted certificates of deposit remained strong at over $11.8 million. Our net cash expenditures for operating activities for 2012 totaled $7.2 million. Cash outlays were less than projected due to delays in the USFS approval of our EIS and the cessation of adit rehabilitation. In 2013, we plan to continue to focus on planning for our exploration and delineation drilling program at the Montanore Project pending the final permitting approvals. Our current cash position should be sufficient to complete the permitting process and initiate the adit rehabilitation and drill station development. Additional external financing will be required to complete the evaluation drilling program and a bankable feasibility study. Development activities could be deferred if the permitting process is delayed or if commodity prices make the project difficult to finance or increase the cost of such financing.

30

Financial and Operating Results

        We reported a net loss for the year ended December 31, 2012 of $8.2 million or $0.28 per share compared to a loss of $5.6 million or $0.20 per share for the year ended December 31, 2011. The following table summarizes expenses and other income by category and year:

	2012			2011
	(millions)
Montanore Project Expense	$	2.7		$	2.9
Estrella Project Expense	$	1.2		$	0.0
Administrative Expense	$	3.4		$	3.9
Depreciation	$	1.0		$	1.0
Non Cash Stock Option Expense	$	0.3		$	1.6
Other Income	$	(0.4	)	$	(3.8	)

        Montanore Project Expense includes exploration, fees, filing and licenses, and technical services, including environmental, engineering and permitting expense. Montanore Project Expense decreased by $0.2 million during 2012 compared to 2011 because of the following items: (i) $0.1 million decrease in compensation paid to the general manager of the project who retired in February 2012, and (ii) $0.1 million reduction in listing fees paid to the NYSE MKT and TSX for the public offering completed during 2011.

        There were no Estrella project expenses during 2011 because the drilling program did not begin until 2012. Estrella project expenses included drilling and related technical services.

        Administrative Expense, which includes general overhead and office expense, legal, accounting, compensation, rent, taxes, and investor relations expense, decreased in 2012 by $0.5 million. This decrease included the following items: (i) a decrease in investor and public relations expenditures of $0.2 million, (ii) a decrease in expenditures related to the evaluation of mineral properties of $0.2 million, and (iii) a decrease in salaries and bonuses of $0.1 million.

        Non-Cash Stock Option Expense (which is included in general and administrative and technical services expenses in our statement of operations) decreased by $1.3 million during 2012 because the number of options granted and the fair value of options granted during 2012 was lower than those granted during 2011.

        We had Other Income of $0.4 million and $3.8 million in 2012 and 2011, respectively. Other income in 2012 includes a gain from the change in fair value of our derivative liability of $0.4 million and a minor amount of interest income. Other income in 2011 includes a gain from the change in fair value of our derivative liability of $1.7 million, a gain on the sale of marketable securities of $2.0 million, and interest income of $0.1 million.

Liquidity and Capital Resources

        As of December 31, 2012, our aggregate cash, short term investments, and long term investments totaled $11.8 million compared to $18.7 million at December 31, 2011. Cash flows provided by financing activities were $0.3 million in proceeds from stock options exercised during 2012 compared to $15.3 million in 2011 primarily from the public offering completed during the year. The net cash used in operating activities during 2012 was $7.2 million, which consisted primarily of permitting, environmental, exploration, engineering expenses for the Montanore Project, the Estrella exploration program and general and administrative expenses, compared with $6.9 million of cash used in operating activities in 2011. Cash provided by investing activities for 2011 was $3.8 million of proceeds from the sale of marketable securities compared with an insignificant amount derived from investing activity for 2012. The net decrease in cash and cash equivalents for the year ending December 31, 2012 was $6.9 million.

31

        We anticipate expenditures in 2013 of approximately $6.2 million, consisting of (i) $1.2 million in each quarter for ongoing operating and general administrative expenses, (ii) $0.3 million in each quarter for permitting, engineering and geologic studies to finalize our permitting of the Montanore Project, and (iii) $0.25 million on exploration at La Estrella during 2013. We should have enough cash on hand to fund ongoing environmental, engineering, permitting and general administrative expenses for years 2013 and 2014. Additional financing, however, will be required to complete the evaluation drilling program and a bankable feasibility study and increased exploration efforts at the La Estrella property in 2014 based on current year drilling results.

Off Balance Sheet Arrangements

        We have no off balance sheet arrangements.

Table of Contractual Obligations

        Not applicable.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

        Not applicable.

32

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

        The consolidated financial statements for the years ended December 31, 2012 and 2011 are included in this Annual Report on Form 10-K as set forth below.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	34
FINANCIAL STATEMENTS:
Consolidated balance sheets	35
Consolidated statements of operations	36
Consolidated statements of comprehensive loss	37
Consolidated statements of stockholders' equity	38
Consolidated statements of cash flows	39
Notes to consolidated financial statements	40 - 50

33

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders of
Mines Management, Inc. and Subsidiaries

        We have audited the accompanying consolidated balance sheets of Mines Management, Inc. and subsidiaries (the Company) as of December 31, 2012 and 2011, and the related consolidated statements of operations, comprehensive loss, stockholders' equity, and cash flows for the years then ended and for the period from inception of the exploration stage (August 12, 2002) through December 31, 2012. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Mines Management, Inc. and subsidiaries as of December 31, 2012 and 2011, and the consolidated results of their operations and their cash flows for the years then ended and for the period from the inception of the exploration stage (August 12, 2002) through December 31, 2012 in conformity with U.S. generally accepted accounting principles.

/s/ Tanner LLC

Salt Lake City, Utah

April 1, 2013

34

Mines Management, Inc. and Subsidiaries (An Exploration Stage Company)

CONSOLIDATED BALANCE SHEETS

	December 31,
	2012			2011
Assets
CURRENT ASSETS:
Cash and cash equivalents	$	10,246,073		$	17,121,800
Interest receivable		7,815			13,702
Prepaid expenses and deposits		250,892			207,285
Certificates of deposit		1,559,361			1,559,361
Total current assets		12,064,141			18,902,148
PROPERTY AND EQUIPMENT:
Buildings and leasehold improvements		836,454			836,454
Equipment		6,450,089			6,450,089
Office equipment		344,939			330,356
		7,631,482			7,616,899
Less accumulated depreciation		5,392,684			4,438,799
		2,238,798			3,178,100
OTHER ASSETS:
Available-for-sale securities		19,633			13,276
Reclamation deposits		1,184,966			1,236,846
		1,204,599			1,250,122
	$	15,507,538		$	23,330,370
Liabilities and Stockholders' Equity
CURRENT LIABILITIES:
Accounts payable	$	495,326		$	370,723
Payroll and payroll taxes payable		17,874			17,631
Warrant derivatives		—			357,977
Total current liabilities		513,200			746,331
LONG-TERM LIABILITIES:
Asset retirement obligation		456,823			435,171
Total liabilities		970,023			1,181,502
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock—no par value, 10,000,000 shares authorized; -0- shares issued and outstanding		—			—
Common stock—$0.001 par value, 100,000,000 shares authorized; 28,999,752 and 28,739,110 shares issued and outstanding, respectively		29,000			28,739
Additional paid-in capital		86,805,769			86,224,400
Accumulated deficit		(1,117,306	)		(1,117,306	)
Deficit accumulated during the exploration stage		(71,188,416	)		(62,989,076	)
Accumulated other comprehensive income		8,468			2,111
Total stockholders' equity		14,537,515			22,148,868
	$	15,507,538		$	23,330,370

See accompanying notes to consolidated financial statements.

35

Mines Management, Inc. and Subsidiaries (An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS

							From Inception of Exploration Stage August 12, 2002 Through December 31, 2012
	Years Ended December 31,
	2012			2011
REVENUE:
Royalties	$	31,233		$	19,640		$	151,304
OPERATING EXPENSES:
General and administrative		3,219,702			4,801,994			32,941,257
Technical services and exploration		3,857,609			2,801,655			30,804,485
Depreciation		972,155			1,008,302			5,424,737
Legal, accounting, and consulting		418,677			543,946			4,664,539
Fees, filing, and licenses		178,511			297,037			2,745,329
Impairment of mineral properties		—			—			504,492
Total operating expenses		8,646,654			9,452,934			77,084,839
LOSS FROM OPERATIONS		(8,615,421	)		(9,433,294	)		(76,933,535	)
OTHER INCOME:
Gain from warrant derivatives		357,977			1,718,265			476,381
Gain on sale of available-for-sale securities		—			2,005,904			2,005,904
Interest income, net		58,104			123,694			3,262,834
Total other income		416,081			3,847,863			5,745,119
NET LOSS	$	(8,199,340	)	$	(5,585,431	)	$	(71,188,416	)
NET LOSS PER SHARE (basic and diluted)	$	(0.28	)	$	(0.20	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (basic and diluted)		28,946,272			27,700,144

See accompanying notes to consolidated financial statements.

36

Mines Management, Inc. and Subsidiaries (An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

							From Inception of Exploration Stage August 12, 2002 Through December 31, 2012
	Years Ended December 31,
	2012			2011
Net loss	$	(8,199,340	)	$	(5,585,431	)		(71,188,416	)
Reclassification to realized gain upon sale of marketable securities		—			(2,005,904	)		(2,005,904	)
Adjustment to net unrealized gain on marketable securities		6,357			113,534			2,013,526
COMPREHENSIVE LOSS	$	(8,192,983	)	$	(7,477,801	)		(71,180,794	)

See accompanying notes to condensed consolidated financial statements.

37

Mines Management, Inc. and Subsidiaries (An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FROM INCEPTION (AUGUST 12, 2002) THROUGH DECEMBER 31, 2012

					Issuable Common Stock												Deficit Accumulated During the Exploration Stage
	Common Stock																			Accumulated Other Comprehensive Income
											Additional Paid-in Capital			Accumulated Deficit
	Shares		Amount		Shares			Amount															Total
BALANCES, AUGUST 12, 2002 (Inception of exploration stage)		5,316,956	$	5,317		90,000		$	22,500		$	1,495,998		$	(1,117,306	)	$	—		$	846		$	407,355
Issuable common stock issued		90,000		90		(90,000	)		(22,500	)		22,410			—			—			—			—
Common stock issued for cash		14,515,912		14,517		—			—			55,400,354			—			—			—			55,414,871
Exercise of stock options and warrants		3,011,067		3,011		—			—			3,850,660			—			—			—			3,853,671
Stock-based compensation		380,000		380		—			—			8,935,116			—			—			—			8,935,496
Issuance of stock for Heidelberg shares		28,162		27		—			—			(27	)		—			—			—			—
Cumulative adjustment for warrant derivative		—		—		—			—			(476,381	)		—			—			—			(476,381	)
Adjustment to net unrealized loss on marketable securities		—		—		—			—			—			—			—			1,893,635			1,893,635
Net loss		—		—		—			—			—			—			(57,403,645	)		—			(57,403,645	)
BALANCES, DECEMBER 31, 2010		23,342,097		23,342		—			—			69,228,130			(1,117,306	)		(57,403,645	)		1,894,481			12,625,002
Exercise of stock options and warrants		277,013		277		—			—			296,897			—			—			—			297,174
Stock-based compensation		—		—		—			—			1,664,173			—			—			—			1,664,173
Issuance of stock for Heidelberg shares		5,120,000		5,120		—			—			15,035,200			—			—			—			15,040,320
Adjustment to net unrealized gain on marketable securities		—		—		—			—			—			—			—			113,534			113,534
Reclassification to realized gain upon sale of marketable securities		—		—		—			—			—			—			—			(2,005,904	)		(2,005,904	)
Net loss		—		—		—			—			—			—			(5,585,431	)		—			(5,585,431	)
BALANCES, DECEMBER 31, 2011		28,739,110		28,739		—			—			86,224,400			(1,117,306	)		(62,989,076	)		2,111			22,148,868
Exercise of stock options and warrants		260,642		261		—			—			275,139			—			—			—			275,400
Stock-based compensation		—		—		—			—			306,230			—			—			—			306,230
Adjustment to net unrealized gain on marketable securities		—		—		—			—			—			—			—			6,357			6,357
Net loss		—		—		—			—			—			—			(8,199,340	)		—			(8,199,340	)
BALANCES, DECEMBER 31, 2012		28,999,752	$	29,000		—		$	—		$	86,805,769		$	(1,117,306	)	$	(71,188,416	)	$	8,468		$	14,537,515

See accompanying notes to consolidated financial statements.

38

Mines Management, Inc. and Subsidiaries (An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

							From Inception of Exploration Stage August 12, 2002 Through December 31, 2012
	Years Ended December 31,
	2012			2011
Increase (Decrease) in Cash and Cash Equivalents
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(8,199,340	)	$	(5,585,431	)	$	(71,188,416	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		306,230			1,664,173			10,905,899
Stock received for services		—			—			(11,165	)
Depreciation		972,155			1,008,302			5,424,737
Initial measurement of asset retirement obligation		—			—			344,187
Accretion of asset retirement obligation		21,652			20,570			112,636
Gain on sale of available-for-sale investments		—			(2,005,904	)		(2,005,904	)
Loss (gain) from warrant derivatives		(357,977	)		(1,718,265	)		(476,381	)
Impairment of mineral properties		—			—			504,492
Changes in assets and liabilities:
Interest receivable		5,887			19,336			(7,815	)
Prepaid expenses and deposits		(43,607	)		(32,004	)		(311,303	)
Accounts payable		124,603			(232,207	)		495,162
Payroll and payroll taxes payable		243			(2,792	)		14,694
Net cash used in operating activities		(7,170,154	)		(6,864,222	)		(56,199,177	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(32,853	)		—			(7,697,121	)
Proceeds from disposition of property and equipment		—			—			35,423
Proceeds (purchase) of certificates of deposit		51,880			(39,564	)		(2,683,415	)
Net proceeds from sale of available-for-sale securities		—			3,821,252			2,005,904
Increase in mineral properties		—			—			(144,312	)
Net cash provided by (used in) investing activities		19,027			3,781,688			(8,483,521	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of common stock		275,400			15,337,494			74,881,436
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(6,875,727	)		12,254,960			10,198,738
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		17,121,800			4,866,840			47,335
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	10,246,073		$	17,121,800		$	10,246,073
SUPPLEMENTAL INFORMATION:
Interest paid	$	—		$	—		$	65,768
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
Unrealized gains on available-for-sale securities	$	6,357		$	113,534		$	7,622

See accompanying notes to consolidated financial statements.

39

NOTE 1—ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization:

        Mines Management, Inc. (the "Company") is a publicly held Idaho corporation incorporated in 1947. The Company acquires, explores, and develops mineral properties in North and South America.

Summary of Significant Accounting Policies:

a.

Principles of consolidation

        The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and include the accounts of Mines Management, Inc., and its wholly-owned subsidiaries, Newhi, Inc., Montanore Minerals Corp., Montmin Resources Corp., and Minera Montanore Peru, SAC. Intercompany balances and transactions have been eliminated.

b.

Exploration stage enterprise

        Since the Company is in the exploration stage of operation, the Company's financial statements are prepared in accordance with the provisions of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 915 Development Stage Enterprises, as it devotes substantially all of its efforts to acquiring and exploring mining interests that management believes should eventually provide sufficient net profits to sustain the Company's existence. Until such interests are engaged in commercial production, the Company will continue to prepare its consolidated financial statements and related disclosures in accordance with this standard.

        Financial statements issued by an exploration stage enterprise present financial position, changes in financial position, and results of operations in conformity with U.S. GAAP applicable to established operating enterprises and include the following additional information: (1) cumulative net losses reported as "deficit accumulated during exploration stage" in the stockholders' equity section of the consolidated balance sheets; (2) cumulative amounts from the inception of the exploration stage included on the consolidated statements of operations, statements of cash flows, and statements of stockholders' equity.

c.

Cash and cash equivalents

        Cash and cash equivalents include cash on hand, cash in banks, investments in certificates of deposit with original maturities of 90 days or less, and money market funds.

d.

Available for sale securities

        Available-for-sale securities are recorded at fair value, with unrealized gains or losses recorded as a component of equity, unless a decline in value of the security is considered other than temporary. Realized gains and losses and other than temporary impairments are recorded in the statement of operations.

e.

Property and equipment

        Property and equipment are stated at cost less accumulated depreciation. Buildings and leasehold improvements are depreciated on the straight-line basis over an estimated useful life of 39 years. Plant and equipment and office equipment are generally depreciated on a straight-line basis over estimated useful lives ranging from 5 to 10 years. When assets are retired or sold, the costs and related

40

NOTE 1—ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

allowances for depreciation are eliminated from the accounts and any resulting gain or loss is reflected in the statement of operations.

f.

Mining properties, exploration and development costs

        All exploration expenditures, including costs to acquire stationary equipment for use in exploration activities that have no significant alternative future use, are expensed as incurred. Significant property acquisition payments for active exploration properties are capitalized, including payments to acquire mineral rights. Once a feasibility study has been completed, approved by management, and a decision is made to put the ore body into production, expenditures to develop new mines, to define further mineralization in existing ore bodies, and to expand the capacity of operating mines, are capitalized and amortized on the units of production basis over proven and probable reserves. The Company charges to operations the allocable portion of capitalized costs attributable to properties sold. Capitalized costs are allocated to properties sold based on the proportion of claims sold to the claims remaining within the project area.

g.

Asset impairment

        The Company evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amount may not be recoverable. If the sum of estimated future net cash flows on an undiscounted basis is less than the carrying amount of the related asset grouping, asset impairment is considered to exist. The related impairment loss is measured as the amount by which the carrying amount of the asset exceeds its fair value. Changes in significant assumptions underlying future cash flow estimates may have a material effect on the Company's financial position and results of operations.

h.

Fair value measurements

        The Company discloses the inputs used to develop the fair value measurements for the Company's financial assets and liabilities that are measured at fair value on a recurring basis as well as the level within the fair value hierarchy in which the fair value measurements in their entirety fall. The three levels of the fair value hierarchy are as follows:

Level 1:    Unadjusted quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date.

Level 2:    Quoted prices in inactive markets for identical assets or liabilities, quoted prices for similar assets or liabilities in active markets, or other observable inputs either directly related to the asset or liability or derived principally from corroborated observable market data.

Level 3:    Unobservable inputs due to the fact that there is little or no market activity.

i.

Asset retirement obligations

        A liability is recognized for the present value of estimated environmental remediation (asset retirement obligation), in the period in which the liability is incurred if a reasonable estimate of fair value can be made. The offsetting balance is charged to expense as an exploration cost if the liability is incurred during the exploration stage of the related mining project or as an asset if the related mining project is in production. Adjustments are made to the liability for changes resulting from passage of time and changes to either the timing or amount of the original present value estimate underlying the

41

NOTE 1—ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

obligation. The Company has an asset retirement obligation associated with its underground evaluation program at the Montanore Project, described more fully in note 7.

j.

Deferred income taxes

        Deferred income tax is provided for differences between the basis of assets and liabilities for financial and income tax reporting. A deferred tax asset, subject to a valuation allowance, is recognized for estimated future tax benefits of tax-basis operating losses being carried forward. Uncertain tax positions are evaluated in a two-step process, whereby (1) it is determined whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the largest amount of tax benefit that is greater than fifty percent likely to be realized upon ultimate settlement with the related tax authority would be recognized. If income tax related interest and penalties were to be assessed, the Company would charge interest to interest expense, and penalties to general and administrative expense.

k.

Stock based compensation

        The Company measures and records the costs of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award, recognized over the period during which an employee is required to provide services in exchange for such award. Compensation cost is recognized for awards granted and for awards modified, repurchased or cancelled.

l.

Net loss per share

        Basic earnings or loss per share is computed on the basis of the weighted average number of shares outstanding during the periods. Diluted earnings or loss per share is calculated on the basis of the weighted average number of shares outstanding during the period plus the effect of potential dilutive shares during the period. Potential dilutive shares include outstanding stock options and warrants. For periods in which a net loss is reported, potential dilutive shares are excluded because they are antidilutive. Therefore, basic loss per share is the same as diluted loss per share for the years ended December 31, 2012 and 2011.

n.

Assumptions and use of estimates

        The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Significant areas requiring the use of management assumptions and estimates relate to asset impairments, including long-lived assets and investments, asset retirement obligations, and valuation of stock based compensation and warrant derivatives. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Company's consolidated financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions, which could have a material effect on the reported amounts of the Company's consolidated financial position and results of operations.

42

NOTE 1—ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

o.

Recent accounting pronouncements

        In June 2011, the FASB issued guidance regarding the presentation of comprehensive income (loss). The new standard requires the presentation of comprehensive income (loss), the components of net income (loss) and the components of other comprehensive income (loss) either in a single continuous statement of comprehensive income (loss) or in two separate but consecutive statements. The entity is also required to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statements where the components of net income and the components of other comprehensive income are presented. The updated guidance is effective on a retrospective basis for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011. The Company adopted the provisions of this guidance effective January 1, 2012.

        In February 2013, the FASB issued guidance related to items reclassified from accumulated other comprehensive income. The new standard requires either in a single note or parenthetically on the face of the financial statements: (i) the effect of significant amounts reclassified from each component of accumulated other comprehensive income based on its sources and (ii) the income statement line items affected by the reclassification. The standard is effective January 1, 2013, with early adoption permitted. We do not expect this guidance to have a significant impact on our consolidated financial position, results of operations or cash flows.

p.

Subsequent events

        The Company evaluated events and transactions subsequent to the balance sheet date of December 31, 2012, for potential recognition or disclosure in the condensed consolidated financial statements.

NOTE 2—MINING PROPERTIES

Montanore:

        The Montanore property is located in northwestern Montana and includes 355 acres plus one 5-acre patented mill site. In August 2002, the Company acquired a controlling interest in the Montanore silver and copper deposit in Sanders County, Montana. The Company received a quitclaim deed from Noranda Mineral Corp. ("Noranda") when Noranda elected to withdraw from the project. In December 2002, the Company received a quitclaim deed to all intellectual property connected with studies that Noranda carried out on the project.

Advance and Iroquois:

        The Advance and Iroquois properties are located in northern Washington State. The Advance property consists of 720 acres of patented mineral rights. Although the Company does not own the overlying surface rights to its patented mineral rights, it does have right of access to explore and mine. The Iroquois property consists of 62 acres of patented mineral and surface rights and 15 unpatented mining claims containing 300 acres.

NOTE 3—CERTIFICATES OF DEPOSIT

        The Company owned two certificates of deposit for a total of $1,559,361 as of December 31, 2012 and 2011. These investments mature in August 2013 and bear interest at the rate of 0.30%.

43

NOTE 3—CERTIFICATES OF DEPOSIT (Continued)

        The Company also has a certificate of deposit pledged as security for a letter of credit to the Montana Department of Environmental Quality as a reclamation guarantee for the Montanore expansion evaluation program. This certificate of deposit was in the amount of $1,124,055 and $1,175,935 as of December 31, 2012 and 2011, respectively. It bears interest at the rate of 0.55% as of December 31, 2012 and had a maturity date of January 3, 2013. This certificate of deposit renews automatically each year and is included with reclamation deposits on the Consolidated Balance Sheets for the years ended December 31, 2012 and 2011. The certificate was renewed on January 3, 2013 in the amount of $1,124,055 bearing interest at the rate of 0.45% and expires on January 3, 2014.

NOTE 4—AVAILABLE-FOR-SALE SECURITIES

        Available-for-sale securities are comprised of common stocks which have been valued using quoted market prices in active markets. The following table summarizes the Company's available-for-sale securities:

	December 31, 2012		December 31, 2011
Cost	$	11,165	$	11,165
Unrealized Gains		8,468		2,111
Fair Market Value	$	19,633	$	13,276

        The Company sold one investment in marketable equity securities during March 2011. Proceeds from the sale were $3,821,252 and the realized gain from the sale was $2,005,904. No securities were sold during 2012.

NOTE 5—FAIR VALUE MEASUREMENTS

        The following table summarizes the Company's financial assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 2012 and 2011, and the fair value calculation input hierarchy level determined to apply to each asset and liability category. Quoted market prices were used to determine the fair value of available-for-sale securities. See note 6 for further discussion on the fair value measurement technique used to value the warrant derivatives. The Company has no financial assets or liabilities that are measured at fair value on a nonrecurring basis.

	Balance at December 31, 2012		Balance at December 31, 2011		Input Hierarchy Level
Assets:
Available-for-sale securities	$	19,633	$	13,276	Level 1
Liabilities:
Warrant derivatives		—	$	357,977	Level 3
Asset retirement obligation	$	456,823	$	435,171	Level 3

44

NOTE 5—FAIR VALUE MEASUREMENTS (Continued)

        The following table presents the fair value reconciliation of Level 3 liabilities measured at fair value during the year ended December 31, 2012:

	Warrant Derivatives			Asset Retirement Obligation
Balance January 1, 2012	$	357,977		$	435,171
Accretion expense		—			21,652
Gain on derivatives		(357,977	)		—
Balance December 31, 2012		—		$	456,823

NOTE 6—WARRANT DERIVATIVES

        The Company had common share purchase warrants with exercise price reset features which qualified for treatment as a derivative liability. These warrants expired on April 20, 2012. The warrants did not qualify for hedge accounting, and as such, all changes in the fair value of the warrants were recognized in earnings until they expired. The Company reported a gain from the change in fair value of the warrants of $357,977 and $1,718,265 in the Consolidated Statements of Operations for the years ended December 31, 2012 and 2011, respectively.

        These common share purchase warrants did not trade in an active securities market, and as such, we estimated the fair value of these warrants using the Black-Scholes option pricing model using the following assumptions:

	December 31, 2012		December 31, 2011
Weighted average risk-free interest rate		—		0.02	%
Weighted average volatility		—		79.04	%
Expected dividend yield		—		—
Weighted average expected life (in years)		—		0.3

        Expected volatility was based primarily on historical volatility. Historical volatility was computed using weekly pricing observations for recent periods. The Company believed this method produced an estimate that was representative of its expectations of future volatility over the expected term of these warrants. The expected life was based on the remaining term of the warrants. The risk-free interest rate was based on three-month U.S. Treasury securities.

NOTE 7—ASSET RETIREMENT OBLIGATIONS

        The Company has an asset retirement obligation ("ARO") associated with its underground evaluation program at the Montanore Project. The ARO resulted from the reclamation and remediation requirements of the Montana Department of Environmental Quality as outlined in the Company's permit to carry out the evaluation program.

        Estimated reclamation costs were discounted using a credit adjusted risk-free interest rate of 4.78% from the time the Company expects to pay the retirement obligation to the time it incurred the

45

NOTE 7—ASSET RETIREMENT OBLIGATIONS (Continued)

obligation, which is estimated at 25 years. The following table summarizes activity in the Company's ARO.

	Year Ended December 31, 2012		Year Ended December 31, 2011
Balance January 1,	$	435,171	$	414,601
Accretion expense		21,652		20,570
Balance December 31,	$	456,823	$	435,171

        The Company has a certificate of deposit which is pledged as security for a Letter of Credit to the Montana Department of Environmental Quality as a reclamation guarantee for the Montanore expansion evaluation program which is discussed further in note 3.

NOTE 8—CONCENTRATION OF CREDIT RISK

        The Company maintains its cash and cash equivalents in one financial institution. Balances are insured by the Federal Deposit Insurance Corporation up to $250,000. The Company's total uninsured bank deposit balance totals approximately $12,690,000 as of December 31, 2012. To date, the Company has not experienced a material loss or lack of access to its invested cash or cash equivalents; however, no assurance can be provided that access to the Company's invested cash and cash equivalents will not be impacted by adverse conditions in the financial markets.

NOTE 9—STOCKHOLDERS' EQUITY

Common Shares:

        On March 8, 2011, the Company completed a public offering of 4,800,000 shares of common stock at a price of $3.15 per share, resulting in gross proceeds of $15,120,000 ($14,212,800 in net proceeds after deducting underwriting commissions and a corporate finance fee but before deducting offering expenses). The underwriters were granted an over-allotment option to purchase an additional 720,000 shares exercisable for a period of 30 days following the closing. On April 4, 2011, the underwriters exercised the over-allotment option for 320,000 shares of common stock at a price of $3.15 per share. The gross proceeds resulting from the exercise of the over-allotment option were $1,008,000 ($947,520 in net proceeds after deducting underwriting commissions and a corporate finance fee but before deducting offering expenses). Therefore, the total offering was 5,120,000 shares of common stock, resulting in aggregate net proceeds of $15,160,320 before deducting offering expenses.

        On April 20, 2007, the Company completed a public offering of 6,000,000 units at a price of $5.00 per unit. Each unit was comprised of one share of common stock and one-half of one common stock purchase warrant, with each full warrant being exercisable to purchase one share of common stock at a price of $5.75 per share. No warrants related to this offering were exercised before they expired on April 20, 2012.

        On November 2, 2007, the Company sold 2,500,000 common shares at a price of $4.00 per share in a private placement to one investor. In connection with the stock sale, the Company entered into a Right of First Refusal agreement (the "ROFR") which grants a twenty-year right of first proposal and a right to match third-party proposals, to purchase all or any portion of silver mined, produced or recovered by the Company in the State of Montana. The ROFR does not apply to trade sales and spot sales in the ordinary course of business or to forward sales, in each case, for which no upfront payment is received by the Company.

46

NOTE 9—STOCKHOLDERS' EQUITY (Continued)

        In October 2005, the Company sold 1,016,667 common shares at a price of $6.00 per share. In connection with the stock sales, the Company granted warrants to purchase up to 737,084 shares of common stock at $8.25 per share. During the term of the warrants, the exercise price of the warrants was reduced to $2.56 per share and the number of common shares issuable upon exercise increased to 2,375,368 shares to comply with the anti-dilution provisions of the warrant agreement. The warrants expired on April 20, 2012. During the years ended December 31, 2012 and 2011, 0 and 101,435 warrants were exercised for gross proceeds of $0 and $144,474, respectively. Cumulative warrants exercised relating to this issue were 269,620 as of December 31, 2012 and 2011.

Preferred Shares:

        The Company has authorized 10,000,000 shares of no par value preferred stock. Through December 31, 2012, the Company had not issued any preferred shares.

NOTE 10—STOCK OPTIONS

        The Company has four equity incentive plans: the 2003 Stock Option Plan (which includes both qualified and nonqualified options), the 2003 Consultant Stock Compensation Plan, the 2007 Equity Incentive Plan, and the 2012 Equity Incentive Plan (collectively, the "Plans"). Under all of the equity incentive plans, the option exercise price may not be less than 100% of the fair market value per share on the date of grant, the stock options are exercisable within ten years from the date of the grant of the option, and the vesting schedule of the options is at the discretion of the Board of Directors.

        Under the 2003 Stock Option Plan and Consultant Stock Compensation Plan, the Company may grant options to purchase up to 3,000,000 shares and 700,000 shares of authorized and unissued common stock, respectively. Under the 2007 Equity Incentive Plan (the "2007 Plan"), which provides for the issuance of both qualified and nonqualified stock options and restricted shares to directors, employees and consultants of the Company, the Company may issue up to 3,000,000 shares of the Company's authorized but unissued common stock.

        The Board of Directors authorized the Company to establish the 2012 Equity Incentive Plan ("2012 Plan") which was approved by the shareholders in June 2012. The Company may grant options to purchase up to 3,000,000 common shares, bought on the market or otherwise, at the discretion of the Board. The 2012 Plan provides for the issuance of incentive stock options to employees and nonqualified stock options to directors, employees and consultants of the Company. No participant is eligible to be granted more than 200,000 common shares during any calendar year.

        A summary of the option activity under the Plans as of December 31, 2012, and changes during the year then ended, is presented below:

	Number of Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2012		3,601,000		$	1.86
Granted		456,000		$	1.19
Exercised		(265,000	)	$	1.06
Forfeited or expired		(170,000	)	$	2.53
Outstanding and exercisable at December 31, 2012		3,622,000		$	1.81		2.83	$	20,000

47

NOTE 10—STOCK OPTIONS (Continued)

        The fair value for each option award is estimated at the date of grant using the Black-Scholes option-pricing model using the assumptions noted in the following table. Volatility for the years presented is based on the historical volatility of the Company's common stock over the expected life of the option. The risk-free rate for periods within the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. The Company does not foresee the payment of dividends in the near term.

	Years Ended December 31,
	2012			2011
Weighted average risk-free interest rate		0.30	%		0.63	%
Weighted average volatility		72.33	%		86.39	%
Expected dividend yield		—			—
Weighted average expected life (in years)		3.0			3.5
Weighted average grant-date fair value	$	0.56		$	1.19

        During the years ended December 31, 2012 and 2011, there were 265,000 and 303,000 options exercised with a weighted average exercise price of $1.06 and $1.57, respectively. The total intrinsic value of the options exercised during the years ended December 31, 2012 and 2011 was $212,522 and $218,293, respectively.

        A summary of the status of the Company's nonvested options as of December 31, 2012 and changes during the year then ended is presented below:

	Number of Options			Weighted- Average Grant-Date Fair Value
Nonvested at January 1, 2012		730,000		$	1.18
Expired		(80,000	)	$	0.99
Vested		(650,000	)	$	1.20
Nonvested at December 31, 2012		—			—

        As of December 31, 2012, there was no unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plans.

        Total compensation costs recognized for stock-based employee compensation awards was $306,230 and $1,664,173 for the years ended December 31, 2012 and 2011, respectively. These costs were included in general and administrative and technical services expenses on the Statements of Operations. Total costs recognized for stock-based compensation awards for services performed by outside parties were $0 and $40,500 for the years ended December 31, 2012 and 2011, respectively. Cash received from options exercised under all share-based payment arrangements for the years ended December 31, 2012 and 2011 was $275,400 and $64,500, respectively.

48

NOTE 11—DEFERRED INCOME TAX

        As of December 31, 2012 and 2011, the Company had net deferred tax assets that were fully reserved by valuation allowances. Following are the components of such assets and allowances:

	Years Ended December 31,
	2012			2011
Deferred tax assets:
Net operating loss carryforwards	$	20,340,000		$	18,270,000
Stock-based compensation		650,000			710,000
Property, plant and equipment		1,250,000			1,250,000
Asset retirement obligation		160,000			150,000
Warrant derivatives		—			120,000
Total deferred tax assets		22,400,000			20,500,000
Deferred tax liabilities:
Property, plant and equipment		480,000			570,000
Net deferred tax asset before valuation allowance		21,920,000			19,930,000
Less valuation allowance		(21,920,000	)		(19,930,000	)
Net deferred tax assets	$	—		$	—

        For the periods presented, the effective income tax rate differed from the expected rate because of the effects of changes in the deferred tax asset valuation allowance. Changes in the deferred tax asset valuation allowance for the years ended December 31, 2012 and 2011 relate only to corresponding changes in deferred tax assets for those periods.

        As of December 31, 2012, the Company had federal tax-basis net operating loss carryforwards totaling approximately $59,800,000 which will expire in various amounts from 2013 through 2032. The Company is subject to examination of its income tax filings in the United States and various state jurisdictions for the 2009 through 2012 tax years. Within each of these jurisdictions the Company has examined its material tax positions and determined that they would more likely than not be sustained.

NOTE 12—COMMITMENTS

Operating Leases:

        The Company leases office space and equipment. The following is a schedule by years of future minimum rental payments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of December 31, 2012.

Year ending December 31:
2013		47,000
2014		48,500
2015		50,000
2016		8,500
Total minimum payments required	$	154,000

Employment Agreements:

        The Company has employment agreements with certain executives. The agreements include a provision for severance pay equal to a multiple of each executive's salary. To receive severance, termination must be without cause and cannot be a result of death or disability. Additionally, severance

49

NOTE 12—COMMITMENTS (Continued)

must be paid if the executive resigns for good reason within one year following a change in control of the Company. As of December 31, 2012, the potential aggregate liability for severance pay under the agreements is $2,600,000.

Royalties on Patented Mining Claims:

        Two of the Company's patented mining claims, which cover the Montanore deposit, are burdened by a production payment obligation of $0.20 per ton of ore extracted and milled therefrom. The calculation and timing of the production payment are specifically defined by a Purchase and Sale Agreement.

Exploration Earn-In Agreement

        The Company entered into an Exploration Earn-In Agreement with Estrella Gold Corporation ("Estrella") on April 5, 2012, pursuant to which the Company could acquire 75% of the Estrella gold and silver exploration property located in central Peru by expending $5,000,000 on exploration activities. Under the terms of the agreement, the Company is required to make annual cash payments to Estrella of $100,000 prior to the end of the first agreement year ending on February 28, 2013, and $200,000 prior to the end of each subsequent agreement year until the earn-in has been completed. The Company is also required to expend a minimum of $500,000 in exploration and development expenditures in each of the first and second agreement years. The Company may terminate this agreement at any time during the earn-in period, however, a minimum of $350,000 in exploration and development expenses was required during the first year of the agreement regardless of whether or not the agreement is terminated. As of December 31, 2012, the Company had met the first year's exploration and development expenditure requirements. During February 2013, the Company made the required $100,000 cash payment prior to the end of the first agreement year and continued the Exploration Earn-In Agreement into the second year.

50

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

        None.

ITEM 9A.    CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

        We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized and reported within the time period specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to the Company's management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required financial disclosure.

        The management of the Company, under the supervision and with the participation of the Company's Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the Company's disclosure controls and procedures, pursuant to Exchange Act Rules 13a-15(e) or 15d-15(e) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by this Annual Report.

Management's Report on Internal Control over Financial Reporting

        The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

•

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets,

•

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company, and

•

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        Management has assessed the effectiveness of its internal control over financial reporting as of December 31, 2012. In making its assessment of the effectiveness of internal control over financial reporting, management used the criteria described in "Internal Control—Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission.

51

        Based on its assessment using those criteria, management concluded that the Company maintained effective internal control over financial reporting as of December 31, 2012.

Changes in Internal Control over Financial Reporting

        There were no changes in the Company's internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 that occurred during the year ended December 31, 2012 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

ITEM 9B.    OTHER INFORMATION.

        None.

52

PART III

        In accordance with General Instruction G(3), the information required by Part III is hereby incorporated by reference from our proxy statement for our 2013 annual shareholders' meeting to be filed pursuant to Regulation 14A (the "2013 Proxy Statement") not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

        Information relating to this item will be included in the 2013 Proxy Statement and is incorporated by reference in this Annual Report on Form 10-K.

ITEM 11.    EXECUTIVE COMPENSATION.

        Information relating to this item will be included in the 2013 Proxy Statement and is incorporated by reference in this Annual Report on Form 10-K.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

        Information relating to this item will be included in the 2013 Proxy Statement and is incorporated by reference in this Annual Report on Form 10-K.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

        Information relating to this item will be included in the 2013 Proxy Statement and is incorporated by reference in this Annual Report on Form 10-K.

ITEM 14.    PRINCIPAL ACCOUNTING FEES AND SERVICES.

        Information relating to this item will be included in the 2013 Proxy Statement and is incorporated by reference in this Annual Report on Form 10-K.

PART IV

ITEM 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

(a)   Documents filed as part of this Annual Report on Form 10-K or incorporated by reference:

(1)

Our consolidated financial statements beginning on page 35 of this report.



(2)

Financial Statement Schedules (omitted because they are either not required, are not applicable, or the required information is disclosed in the notes to the financial statements or related notes).



(3)

The following exhibits are filed with this Annual Report on Form 10-K or incorporated by reference.

53

EXHIBITS

Exhibit Number		Description of Exhibits
	1.1	Underwriting Agreement dated March 3, 2011 between Mines Management, Inc. and Roth Capital Partners, LLC.(17)
	3.1	Articles of Incorporation of Mines Management, Inc., as amended.(1)(2)
	3.2	Articles of Amendment to the Articles of Incorporation of Mines Management, Inc.(3)
	3.3	Bylaws of Mines Management, Inc.(4)
	3.4	First Amendment to Bylaws of Mines Management, Inc. (5)
	4.1	Specimen of Certificate of Common Stock, par value $0.001(6)
	4.2	Securities Purchase Agreement dated October 21, 2005(7)
	4.3	Form of Warrant issued pursuant to the Securities Purchase Agreement.(7)
	4.4	Registration Rights Agreement dated October 21, 2005(7)
	4.5	Warrant Agreement dated April 16, 2007 between Mines Management, Inc. and Computershare Shareholder Services, Inc. and Computershare Trust Company, N.A.(8)
	4.6	Subscription Agreement dated November 2, 2007 between Mines Management, Inc. and Silver Wheaton Corp.(9)
	4.7	Registration Rights Agreement dated November 2, 2007 between Mines Management, Inc. and Silver Wheaton Corp.(9)
	4.8	Amendment No. 1 to Registration Rights Agreement dated March 12, 2008 between Mines Management, Inc. and Silver Wheaton Corp.(10)
	10.1	Right of First Refusal Agreement dated November 2, 2007 between Mines Management, Inc. and Silver Wheaton Corp.(9)
	10.2	Employment Agreement dated December 28, 2011 between Mines Management, Inc. and Douglas Dobbs.(11)
	10.3	Employment Agreement dated December 28, 2011 between Mines Management, Inc. and Glenn M. Dobbs.(11)
	10.4	Employment Agreement dated December 28, 2011 between Mines Management, Inc. and James H. Moore.(11)
	10.5	Employment Agreement dated May 7, 2007 between Mines Management, Inc. and Nicole Altenburg*
	10.6	Mines Management, Inc., 2003 Stock Option Plan, as amended.(12)(13)
	10.7	Mines Management, Inc., 2003 Consultant Stock Compensation Plan, as amended.(12)(13)
	10.8	Mines Management, Inc. 2007 Equity Incentive Plan.(14)
	10.9	Mines Management, Inc. 2012 Equity Incentive Plan (18)
	10.10	Rights Agreement, dated June 18, 2009, between Mines Management, Inc. and Computershare Trust Company, N.A.(15)
	10.11	Exploration Earn-In Agreement dated March 2, 2012 between Estrella Gold Corporation, Mines Management, Inc. and Minera Montanore Peru S.A.C.*

54

Exhibit Number		Description of Exhibits
	14	Code of Ethics.(16)
	21	Subsidiaries of the Registrant.*
	23.1	Consent of Tanner LLC.*
	23.2	Consent of Mine Development Associates, Inc.*
	23.3	Consent of Mine and Quarry Engineering Services, Inc.*
	31.1	Certification of Chief Executive Officer of Periodic Report pursuant to Rule 13a-14(a) and Rule 15d-14(a)(Section 302 of the Sarbanes-Oxley Act of 2002).*
	31.2	Certification of Chief Financial Officer of Periodic Report pursuant to Rule 13a-14(a) and Rule 15d-14(a)(Section 302 of the Sarbanes-Oxley Act of 2002).*
	32.1	Certificate of Principal Executive Officer pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002).*
	32.2	Certificate of Principal Financial Officer pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002).*
	101	The following financial information from Mines Management, Inc.'s Annual Report on form 10-K for the year ended December 31, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets at December 31, 2012 and December 31, 2011; (ii) Consolidated Statements of Operations for the years ended December 31, 2012 and December 31, 2011, and from inception through December 31, 2012; (iii) Consolidated Statements of Comprehensive Loss for the years ended December 31, 2012 and December 31, 2011, and from inception through December 31, 2012; (iv) Consolidated Statements of Stockholders' Equity from inception through December 31, 2012; (v) Consolidated Statements of Cash Flows for the years ended December 31, 2012 and December 31, 2011, and from inception through December 31, 2012; and (vi) Notes to Consolidated Financial Statements, detail tagged.**

*

Filed herewith.

**

Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of any registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject to liability under those sections.

(1)

Incorporated by reference to Form 10SB12G filed November 12, 1998.

(2)

Incorporated by reference to Form 10-Q filed August 12, 2005.

(3)

Incorporated by reference to Form 8-K filed June 19, 2009.

(4)

Incorporated by reference to Form 10SB12G filed November 12, 1998.

(5)

Incorporated by reference to Form 8-K filed April 21, 2009.

(6)

Incorporated by reference to Form S-3 filed June 12, 2006.

(7)

Incorporated by reference to Form 8-K filed October 24, 2005.

(8)

Incorporated by reference to Form 8-K filed April 20, 2007.

(9)

Incorporated by reference to Form 10-Q filed November 8, 2007.

55

(10)

Incorporated by reference to Form 10-K filed March 17, 2008.

(11)

Incorporated by reference to Form 8-K filed December 30, 2011.

(12)

Incorporated by reference to Form S-8 filed April 24, 2003.

(13)

Incorporated by reference to Form S-8 filed June 10, 2005.

(14)

Incorporated by reference to Proxy Statement on Schedule 14A filed April 21, 2008.

(15)

Incorporated by reference to Form 8-K filed June 19, 2009.

(16)

Incorporated by reference to Form 8-K filed December 8, 2008.

(17)

Incorporated by reference to Form 8-K filed March 3, 2011.

(18)

Incorporated by reference to Proxy Statement on Schedule 14A filed April 30, 2012.

56

SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed April 1, 2013 on its behalf by the undersigned, thereunto duly authorized.

MINES MANAGEMENT, INC. Registrant
By:	/s/ GLENN M. DOBBS
	By:	Glenn M. Dobbs
		Chief Executive Officer and Chairman

        Pursuant to the requirements of the Securities Act of 1934, this Report has been signed by the following persons on behalf of the Registrant, in the capacities and on the dates indicated.

Signature	Title	Date
/s/ GLENN M. DOBBS Glenn M. Dobbs	Chief Executive Officer and Chairman (Principal Executive Officer)	April 1, 2013
/s/ ROY G. FRANKLIN Roy G. Franklin	Director	April 1, 2013
/s/ ROBERT L. RUSSELL Robert L. Russell	Director	April 1, 2013
/s/ JERRY POGUE Jerry Pogue	Director	April 1, 2013
/s/ RUSSELL C. BABCOCK Russell C. Babcock	Director	April 1, 2013
/s/ NICOLE ALTENBURG Nicole Altenburg	Principal Financial Officer (Principal Financial and Accounting Officer)	April 1, 2013

57

EXHIBIT INDEX

Exhibit Number		Description of Exhibits
	1.1	Underwriting Agreement dated March 3, 2011 between Mines Management, Inc. and Roth Capital Partners, LLC.(17)
	3.1	Articles of Incorporation of Mines Management, Inc., as amended.(1)(2)
	3.2	Articles of Amendment to the Articles of Incorporation of Mines Management, Inc.(3)
	3.3	Bylaws of Mines Management, Inc.(4)
	3.4	First Amendment to Bylaws of Mines Management, Inc.(5)
	4.1	Specimen of Certificate of Common Stock, par value $0.001(6)
	4.2	Securities Purchase Agreement dated October 21, 2005(7)
	4.3	Form of Warrant issued pursuant to the Securities Purchase Agreement.(7)
	4.4	Registration Rights Agreement dated October 21, 2005(7)
	4.5	Warrant Agreement dated April 16, 2007 between Mines Management, Inc. and Computershare Shareholder Services, Inc. and Computershare Trust Company, N.A.(8)
	4.6	Subscription Agreement dated November 2, 2007 between Mines Management, Inc. and Silver Wheaton Corp.(9)
	4.7	Registration Rights Agreement dated November 2, 2007 between Mines Management, Inc. and Silver Wheaton Corp.(9)
	4.8	Amendment No. 1 to Registration Rights Agreement dated March 12, 2008 between Mines Management, Inc. and Silver Wheaton Corp.(10)
	10.1	Right of First Refusal Agreement dated November 2, 2007 between Mines Management, Inc. and Silver Wheaton Corp.(9)
	10.2	Employment Agreement dated December 28, 2011 between Mines Management, Inc. and Douglas Dobbs.(11)
	10.3	Employment Agreement dated December 28, 2011 between Mines Management, Inc. and Glenn M. Dobbs.(11)
	10.4	Employment Agreement dated December 28, 2011 between Mines Management, Inc. and James H. Moore.(11)
	10.5	Employment Agreement dated May 7, 2007 between Mines Management, Inc. and Nicole Altenburg*
	10.6	Mines Management, Inc., 2003 Stock Option Plan, as amended.(12)(13)
	10.7	Mines Management, Inc., 2003 Consultant Stock Compensation Plan, as amended.(12)(13)
	10.8	Mines Management, Inc. 2007 Equity Incentive Plan.(14)
	10.9	Mines Management, Inc. 2012 Equity Incentive Plan(18)
	10.10	Rights Agreement, dated June 18, 2009, between Mines Management, Inc. and Computershare Trust Company, N.A.(15)
	10.11	Exploration Earn-In Agreement dated March 2, 2012 between Estrella Gold Corporation, Mines Management, Inc. and Minera Montanore Peru S.A.C.*
	14	Code of Ethics.(16)
	21	Subsidiaries of the Registrant.*

Exhibit Number		Description of Exhibits
	23.1	Consent of Tanner LLC.*
	23.2	Consent of Mine Development Associates, Inc.*
	23.3	Consent of Mine and Quarry Engineering Services, Inc.*
	31.1	Certification of Chief Executive Officer of Periodic Report pursuant to Rule 13a-14(a) and Rule 15d-14(a)(Section 302 of the Sarbanes-Oxley Act of 2002).*
	31.2	Certification of Chief Financial Officer of Periodic Report pursuant to Rule 13a-14(a) and Rule 15d-14(a)(Section 302 of the Sarbanes-Oxley Act of 2002).*
	32.1	Certificate of Principal Executive Officer pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002).*
	32.2	Certificate of Principal Financial Officer pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002).*
	101	The following financial information from Mines Management, Inc.'s Annual Report on form 10-K for the year ended December 31, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets at December 31, 2012 and December 31, 2011; (ii) Consolidated Statements of Operations for the years ended December 31, 2012 and December 31, 2011, and from inception through December 31, 2012; (iii) Consolidated Statements of Comprehensive Loss for the years ended December 31, 2012 and December 31, 2011, and from inception through December 31, 2012; (iv) Consolidated Statements of Stockholders' Equity from inception through December 31, 2012; (v) Consolidated Statements of Cash Flows for the years ended December 31, 2012 and December 31, 2011, and from inception through December 31, 2012; and (vi) Notes to Consolidated Financial Statements, detail tagged.**

*

Filed herewith.

**

Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of any registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject to liability under those sections.

(1)

Incorporated by reference to Form 10SB12G filed November 12, 1998.

(2)

Incorporated by reference to Form 10-Q filed August 12, 2005.

(3)

Incorporated by reference to Form 8-K filed June 19, 2009.

(4)

Incorporated by reference to Form 10SB12G filed November 12, 1998.

(5)

Incorporated by reference to Form 8-K filed April 21, 2009.

(6)

Incorporated by reference to Form S-3 filed June 12, 2006.

(7)

Incorporated by reference to Form 8-K filed October 24, 2005.

(8)

Incorporated by reference to Form 8-K filed April 20, 2007.

(9)

Incorporated by reference to Form 10-Q filed November 8, 2007.

(10)

Incorporated by reference to Form 10-K filed March 17, 2008.

(11)

Incorporated by reference to Form 8-K filed December 30, 2011.

(12)

Incorporated by reference to Form S-8 filed April 24, 2003.

(13)

Incorporated by reference to Form S-8 filed June 10, 2005.

(14)

Incorporated by reference to Proxy Statement of Schedule 14A filed April 21, 2008.

(15)

Incorporated by reference to Form 8-K filed June 19, 2009.

(16)

Incorporated by reference to Form 8-K filed December 8, 2008.

(17)

Incorporated by reference to Form 8-K filed March 3, 2011.

(18)

Incorporated by reference to Proxy Statement on Schedule 14A filed April 30, 2012.

EX-10.5

Exhibit 10.5

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (“Agreement”) made as of May 7, 2007 between Mines Management, Inc., an Idaho corporation (the “Company”), and Nicole Altenburg (Executive), residing at 9911 S. Gardner Rd., Cheney, WA 99004.

W I T N E S S E T H   T H A T:

WHEREAS, the Company desires to hire the Executive as the Controller for the Company and upon and subject to the terms herein provided; and

WHEREAS, the Executive has represented that he has the requisite experience and competence to perform Controller function for the Company; and

WHEREAS, the Company desires to be assured that Executive will not compete with the Company for the period and within the geographical areas hereinafter specified; and

WHEREAS, Executive is willing to agree not to compete with the Company in exchange for the opportunity to be employed by the Company; and

WHEREAS, Executive is willing to agree to be employed by the Company for the period and upon and subject to the terms herein provided;

NOW, THEREFORE, in consideration of the premises, the parties hereto covenant and agree as follows:

Section 1.          Term of Employment; Compensation.  The Company agrees to employ Nicole Altenburg from the date hereof, May 7, 2007, in the full time capacity of Corporate Controller, with the responsibilities normally associated with such position, and employment shall continue until terminated as hereafter provided.  The Company will pay Employee for his services at an annual rate of seventy two thousand dollars ($72,000.00), payable in arrears, in equal installments, in accordance with standard Company practice, but in any event not less often than monthly, subject only to such payroll and withholding deductions as are required by law.  The Executive’s performance will be evaluated annually.  Executive shall also be entitled to participate in all employee benefit plans of the Company on the same terms and conditions as other employees similarly situated, subject to the Company’s right, in any event, to modify or terminate such plan.  The Company shall pay Executive’s individual medical and dental insurance premiums and shall provide paid monthly parking.  In addition, Ms. Altenburg shall eligible for Incentive Stock Options as granted by the Board of Directors and recommended by the Compensation Committee.  Initially you will be granted 30,000 Stock Options with 10,000 vested immediately, 10,000 vesting one year from issue date, and final 10,000 two years from issue date.  (see schedule A)

Section 2.          Office and Duties.  Executive shall have the usual duties of a corporate controller and shall have responsibility to provide financial and accounting services, to supervise various administrative functions as assigned for the Company, to participate in the management and direction of the Company’s compliance and disclosure within US GAAP accounting principles and shall perform such specific other tasks consistent with the position as a member of

management, as may from time to time be assigned to the Executive by the Chief Financial Officer of the Company.  Executive’s primary duties initially will focus on SEC reporting and compliance, maintenance and oversight of corporate governance programs as mandated by the Sarbannes-Oxley Act and the rules and regulations of the Securities and Exchange Commission relating to such Act, the Controller Function, Asset Management and Preservation, and corporate reporting..  Executive shall devote substantially all of his business time, labor, skill, undivided attention, and best ability to the performance of his duties hereunder in a manner that will faithfully and diligently further the business and interests of the Company.  This work will be performed on a Monday thru Thursday work week.  The Executive shall not directly or indirectly pursue any other business activity, without the Company’s prior written consent.  Executive agrees that she will travel to whatever extent is reasonably necessary in the conduct of the Company’s business.

Section 3.          Expenses.  Executive shall be entitled to reimbursement for expenses incurred in connection with the performance of her duties hereunder upon receipt of vouchers in accordance with such procedures as the Company has heretofore or may hereafter establish.

Section 4.          Vacation During Employment.  Executive shall be entitled to such reasonable vacations as may be allowed by the Company in accordance with general practices to be established, but in any event not less three weeks of vacation during each twelve (12) month period plus usual statutory and other public holidays, the timing of such vacation to be mutually agreed upon between the Executive and the Company.  The Company recommends that all employees should take vacation, but if duties of the Executive prevent him from taking said vacation, the Executive shall be paid for any unused vacation at the end of each year.  Unused vacation time will not be accrued and carried from year to year.  Note:  the employee will be eligible for two weeks vacation in 2007 and three week thereafter, starting January 1, 2008.

Section 5.          Additional Benefits.  Nothing herein contained shall preclude Executive, to the extent she is otherwise eligible, from participation in all group insurance programs or other fringe benefit plans that the Company may hereafter in its sole and absolute discretion make available generally to its employees.

Section 6.          Termination of Employment.  Notwithstanding any other provision of this Agreement, Executive’s employment may be terminated:

(a)           At any time, without cause, by the Chief Financial Officer of the Company.  In the event the Executive’s employment is so terminated, or is deemed to have been terminated pursuant to 6(e) (Change of Control) herein, without cause, any stock options granted but not vested shall vest immediately.  All payments are subject to all normal Federal and State payroll taxes.  Substantially similar health related benefits as provided by the Company will also continue for a period of 24 months.

(b)           By the Company upon thirty (30) days’ notice to Executive if he should be prevented by illness, accident, or other disability (mental or physical) from discharging his duties hereunder for one or more periods totaling three (3) months during any consecutive twelve (12) month period.  The Executive’s stock options granted shall vest

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immediately and shall be exercisable by the Executive in accordance with the terms of the Stock Option Plan.

(c)           In the event of Executive’s death during the term of his employment, the Company’s obligation to pay further compensation hereunder shall cease forthwith, except that Employee’s legal representative shall be entitled to receive his fixed compensation for the period of three months after the month in which such death shall have occurred.  The Executive’s stock options shall vest immediately and shall be exercisable by the Executive’s heirs, trust, executors, administrators or personal representatives in accordance with the terms of the Stock Option Plan.

(d)           By the Company, for cause, as defined herein.  In the event of termination for cause the Employer may terminate the Executive immediately.  Executive shall not be entitled to receive any salary or benefits from and after the date of termination for cause.

For purposes of this Agreement, the term “for cause” shall mean termination by the Company of Executive due to:  (i) engaging in illegal conduct including fraud or embezzlement; (ii) being convicted of a felony; (iii) engagement in substance abuse which impairs Executive’s ability to perform the duties and obligations of his employment or causes harm to the reputation of the Company; (iv) the willful breach of Executive’s duties to the Company; or (v) if the Executive engages in conduct which in the sole opinion of management of the Company is deemed to be detrimental to the Company.

Any monies owed by the Company to the Executive up to the date of termination shall be paid to the Executive.  Executive shall be entitled to no further compensation.

(e)           In the event of a Change of Control, the Executive’s employment shall be deemed to have been terminated without cause and the Company shall be obligated to pay the Executive the amount of severance payments equal to twenty four (24) months salary.

(f)            For the purpose of paragraph 6(e) “Change in Control” shall mean an Ownership Change Event (an Ownership Change Event shall be deemed to have occurred if any of the following occurs with respect to the Company:  (i) the direct or indirect sale or exchange in a single or series of related transactions by the shareholders of the Company of more than fifty percent (50%) of the voting stock of the Company; (ii) a merger or consolidation in which the Company is a party; (iii) the sale, exchange, or transfer of all or substantially all of the assets of the Company; or (iv) a liquidation or dissolution of the Company or a series of related Ownership Change Events (collectively, a “Transaction”) wherein the shareholders of the Company immediately before the Transaction do not retain immediately after the Transaction, in substantially the same proportions as their ownership of shares of the Company’s voting stock immediately before the Transaction, direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the outstanding voting securities of the Company or, in the case of a Transaction involving the sale, exchange, or transfer of all or substantially all of the assets of the Company, the corporation or other business entity to which the assets of the Company were transferred (the “Transferee”), as the case may

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be.  For purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting securities of one or more corporations or other business entities which own the Company or the Transferee, as the case may be, either directly or through one or more subsidiary corporations or other business entities.  The Board shall have the right to determine whether multiple sales or exchanges of the voting securities of the Company or multiple Ownership Change Events are related, and its determination shall be final, binding and conclusive.  Notwithstanding the preceding sentence, a Change in Control shall not include a distribution or transaction in which the voting stock of the Company or a Parent or Subsidiary is distributed to the shareholders of a Parent of such entity.  Any change in ownership resulting from an underwritten public offering of the Common Stock or the stock of any Parent or Subsidiary shall not be deemed a change in control for any purpose hereunder.

Section 7.          Proprietary Information.  Executive hereby grants to the Company all right, title, and interest in and to any information concerning discoveries; methods; business plans and practices; enterprises; explorations; mining information; plant design, location, or operation; or any other information affecting the business operations of the Company and any invention, discovery, or improvement conceived or reduced to practice in connection with the services performed hereunder (“Proprietary Information”).  Executive will keep signed, witnessed, and dated written records of all such inventions, discoveries, or improvements; will furnish the Company promptly with complete information in respect thereof, and will do all things necessary to protect the interests of the Company therein.

Section 8.          Confidentiality.  Executive shall not, either during the period of his employment with the Company or for a period of two years thereafter, reveal or disclose to any person outside the Company or use for his own benefit, without the Company’s specific written authorization, whether by private communication or by public address or publication or otherwise, any information not already lawfully available to the public concerning any Proprietary Information, whether or not supplied by the Company, and whether or not made, developed, and/or conceived by Executive or by others in the employ of the Company.  All originals and copies of any of the foregoing, relating to the business of the Company, however and whenever produced, shall be the sole property of the Company, not to be removed from the premises or custody of the Company without in each instance first obtaining written consent or authorization of the Company.  Upon the termination of Executive’s employment in any manner or for any reason, Executive shall promptly surrender to the Company all copies of any of the foregoing, together with any other documents, materials, data, information, and equipment belonging to or relating to the Company’s business and in his possession, custody, or control, and Executive shall not thereafter retain or deliver to any other person, any of the foregoing or any summary or memorandum thereof.

Section 9.          Notices.  All notices and other communications hereunder shall be in writing and shall be deemed to have been given when delivered or three (3) days after mailing if mailed by first-class, registered, or certified mail, postage prepaid, addressed (a) if to Executive, Nicole Altenburg, 9911 S. Gardner Rd. Cheney, WA 99004, and (b) if to the Company, James H. Moore, CFO, Mines Management, Inc. 905 W.  Riverside Ave.  Suite 311, Spokane, WA 99201,

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or to such other person(s) or address(es) as the Company shall have furnished to Employee in writing.

Section 10.       Assignability.  If the Company shall be merged with, or consolidated into, any other corporation, or in the event that it shall sell and transfer substantially all of its assets to another corporation, the terms of this Agreement shall inure to the benefit of, and be assumed by, the corporation resulting from such merger or consolidation, or to which the Company’s assets shall be sold and transferred.  This Agreement shall not be assignable by Executive, but it shall be binding upon and to the extent provided in Section 6 shall inure to the benefit of, her heirs, executors, administrators, and legal representatives.

Section 11.       Entire Agreement.  This Agreement contains the entire agreement between the Company and Executive with respect to the subject matter thereof and there have been no oral or other agreements of any kind whatsoever as a condition precedent or inducement to the signing of this Agreement or otherwise concerning this Agreement or the subject matter hereof.

Section 12.       Expenses.  Each party shall pay its own expenses incident to the performance or enforcement of this Agreement, including all fees and expenses of its counsel for all activities of such counsel undertaken pursuant to this Agreement, except as otherwise herein specifically provided.

Section 13.       Equitable Relief.  Executive recognizes and agrees that the Company’s remedy at law for any breach of the provisions of Sections 7 or 8 hereof would be inadequate, and he agrees that for breach of such provisions, the Company shall, in addition to such other remedies as may be available to it at law or in equity or as provided in this Agreement, be entitled to injunctive relief and to enforce its rights by an action for specific performance to the extent permitted by law.  If Executive engages in any activities prohibited by this Agreement, he agrees to pay over to the Company all compensation, remunerations, or moneys or property of any sort received in connection with such activities; such payment shall not impair any rights or remedies of the Company or obligations or liabilities of Executive that such parties may have under this Agreement or applicable law.

Section 14.       Waivers and Further Agreements.  Any waiver of any terms or conditions of this Agreement shall not operate as a waiver of any other breach of such terms or conditions or any other term or condition, nor shall any failure to enforce any provision hereof operate as a waiver of such provision or of any other provision hereof, unless it, by its own terms, explicitly provides to the contrary, shall be construed to effect a continuing waiver of the provision being waived and no such waiver in any instance shall constitute a waiver in any other instance or for any other purpose or impair the right of the party against whom such waiver is claimed in all other instances or for all other purposes to require full compliance with such provision.  Each of the parties hereto agrees to execute all such further instruments and documents and to take all such further action as the other party may reasonably require in order to effectuate the terms and purposes of this Agreement.

Section 15.       Amendments.  This Agreement may not be amended, nor shall any waiver, change, modification, consent, or discharge be effected except by an instrument in writing

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executed by or on behalf of the party against whom enforcement of any waiver, change, modification, consent, or discharge is sought.

Section 16.       Severability.  If any provision of this Agreement shall be held or deemed to be, or shall in fact be, invalid, inoperative, or unenforceable as applied to any particular case in any jurisdiction or jurisdictions, or in all jurisdictions or in all cases, because of the conflict of any provision with any constitution or statute or rule of public policy or for any other reason, such circumstance shall not have the effect of rendering the provision or provisions in question, invalid, inoperative, or unenforceable in any other jurisdiction or in any other case or circumstance or of rendering any other provision or provisions herein contained invalid, inoperative, or unenforceable to the extent that such other provisions are not themselves actually in conflict with such constitution, statute, or rule of public policy, but this Agreement shall be reformed and construed in any such jurisdiction or case as if such invalid, inoperative, or unenforceable provision had never been contained herein and such provision reformed so that it would be valid, operative, and enforceable to the maximum extent permitted in such jurisdiction or in such case.

Section 17.       Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument, and in pleading or proving any provision of this Agreement, it shall not be necessary to produce more than one of such counterparts.

Section 18.       Section Headings.  The headings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.

Section 19.       General Provisions.

(a)           Executive further agrees that his obligations under Sections 7, 8, and 9 of this Agreement shall be binding upon him irrespective of the duration of his employment by the Company, the reasons for any cessation of his employment by the Company, or the amount of his compensation and shall survive the termination of this Agreement (whether such termination is by the Company, by Executive, upon expiration of this Agreement or otherwise).

(b)           Executive represents and warrants to the Company that he is not now under any obligations to any person, firm, or corporation, and has no other interest that is inconsistent or in conflict with this Agreement, or that would prevent, limit or impair, in any way, the performance by him of any of the covenants or his duties in his employment.

Section 20.       Gender.  Whenever used herein, the singular number shall include the plural, the plural shall include the singular, and the use of any gender shall include all genders.

Section 21.       Governing Law.  This Agreement shall be governed by and construed and enforced in accordance with the law of Washington.  Venue for any action arising from or in connection with this Agreement shall be in Spokane County, Washington.

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IN WITNESS WHEREOF, the parties have executed or caused to be executed this Agreement as of the date first above written.

Mines Management, Inc.
By:	/s/ James H. Moore
	James H. Moore, Chief Financial Officer
Executive		/s/ Nicole Altenburg
		Nicole Altenburg, Executive

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EXHIBIT A
STOCK OPTIONS

On the date of employment, Employee shall be granted 30,000 stock options subject to the following terms and conditions.

The Employee is employed by the Company.

The options are issued pursuant to the Company’s 2003 Stock Option Plan, as amended.

The options shall be Incentive Stock Options.

The exercise price of the options shall be the closing price of the Company’s common stock on the American Stock Exchange on the Date of Acceptance of Employment.

The term of the options shall be 5 years from the date of vesting, but in no event later than 10 years from the date of grant.

The options shall vest according to the following schedule:

Option to acquire 10,000 sharesVested immediately upon execution of this Employment Agreement May 7, 2007

Option to acquire 10,000 sharesMay 7, 2008

Option to acquire 10,000 sharesMay 7, 2009

EX-10.11

Exhibit 10.11

Execution Copy

EXPLORATION EARN-IN AGREEMENT

THIS EXPLORATION EARN-IN AGREEMENT (the “Agreement”) is made and entered into as of March 2, 2012 (the “Effective Date”), by and between ESTRELLA GOLD CORPORATION (“Estrella Gold”), a corporation formed under the laws of the Province of Ontario, Estrella Gold Peru S.A.C., a Peruvian sociedad anonima cerrada and a wholly owned subsidiary of Estrella Gold (“EGC Peru”, together with Estrella Gold herein called “EGC”), MINES MANAGEMENT, INC. (“Mines Management”), an Idaho corporation and Minera Montanore Peru S.A.C., a Peruvian sociedad anónima cerrada and a wholly owned subsidiary of Mines Management (“MMI Peru”, together with Mines Management herein called “MMI”). Estrella Gold, EGC Peru, Mines Management and MMI Peru are sometimes individually referred to as a “Party” and sometimes collectively as the “Parties.”

RECITALS

A.EGC is the owner of 100% of the mineral concessions or mining licenses, as more particularly described in Exhibit A-1 attached hereto and incorporated herein by reference, all of which are located in the Department of Huancavelica, Peru (the “Concessions”). These Concessions constitute the La Estrella Gold-Silver Project (the “Project”).

B.EGC desires to grant to MMI and MMI desires to acquire, the exclusive right to explore, evaluate and develop the Project and to earn a 75% undivided interest in the Project and in all easements, rights-of-way, water rights, after-acquired property, information, data, contract rights and other real and personal property, tangible and intangible, associated therewith (collectively, the “Property”), pursuant to the terms and conditions of this Agreement.

C.The Parties wish to agree to certain matters regarding the right to earn a 75% interest in the Property and the possible subsequent development of the Project.

AGREEMENT

NOW, THEREFORE, for and in consideration of the sum of Ten Dollars ($10.00) now paid by each Party to the other (the receipt and sufficiency of which are hereby acknowledged) and the mutual promises, covenants and conditions herein contained and recited, the Parties agree as follows:

A.GRANT OF EXPLORATION, DEVELOPMENT AND EARN-IN RIGHTS

1.EGC hereby grants to MMI the exclusive right, for so long as this Agreement remains in effect, (i) to enter upon the Property to explore, evaluate and develop the Concessions, and (ii) to acquire a 75% undivided interest in the Property (the “Earn-In Right”), for the following consideration:

(a)MMI, simultaneous with the execution and delivery of this Agreement, shall pay to EGC the amount of US $50,000 (the “Initial Payment”).

(b)In addition, in order to maintain its Earn-In Right in full force and effect and to acquire a 75% interest in the Property, MMI is required to:

(i)expend a minimum sum of US$500,000 (not including the Initial Payment) in Exploration and Development Expenses (as defined in Exhibit B attached hereto) prior to the end of the first Agreement Year (the “First Year Work Obligation”);

(ii)expend a additional minimum sum of US$500,000 in Exploration and Development Expenses prior to the end of the second Agreement Year (the “Second Year Work Obligation”, together with the First Year Work Obligation, the “Minimum Work Obligation”);

(iii)expend a minimum of US$5.0 million (the “Aggregate Work Obligation”) in Exploration and Development Expenses;

(iv)produce a Preliminary Economic Assessment (as defined in Exhibit C attached hereto) of a resource on the Property; and

(v)make the following payments (the “Additional Payments”) to EGC:

Prior to end of the first Agreement Year	US	$	100,000
Prior to end of each subsequent Agreement Year	US	$	200,000

“Agreement Year” means, during the Earn-In Period, each annual period with the first Agreement Year commencing on March 1,2012 and ending on February 28,2013, and each subsequent Agreement Year commencing on March 1 and ending on the following February 28 or 29, as the case may be.

“Earn-in Period” means the period commencing on the Effective Date and terminating on the earlier of the vesting of a 75% interest in the Property, to be evidenced by the issuance or transfer to MMI of shares in Newco Peru, and termination of this Agreement.

(c)All Exploration and Development Expenses incurred by MMI, including Exploration and Development Expenses in excess of the Minimum Work Obligation, during the first or any subsequent Agreement Year shall apply as a credit toward the Aggregate Work Obligation.

(d)The Initial Payment and the Additional Payments shall not apply as a credit toward the Aggregate Work Obligation or towards the Minimum Work Obligation. MMI’s obligation to make Additional Payments shall terminate upon completion of the Earn-in Period.

(e)During each of the first two Agreement Years, MMI shall spend at least U.S. $500,000 in Exploration and Development Expenses as set forth in Section A(l)(b) and complete at least 2,500 meters of exploration diamond or reverse circulation drilling on the Concessions. If MMI spends more than the First Year Work Obligation during the first Agreement Year, or completes more than 2,500 meters of exploration diamond or reverse circulation drilling on the Concessions during the first Agreement Year, the excess shall be credited towards the Minimum Work Obligation and drilling obligation for the second Agreement Year.

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(f)If MMI (i) terminates this Agreement prior to spending US$350,000 in Exploration and Development Expenses, or (ii) otherwise spends less than US$350,000 in Exploration and Development Expenses during the first Agreement Year, MMI shall pay to EGC an amount equal to the difference between US$350,000 and the amount actually spent by MMI and the Agreement shall be terminated.

(g)If MMI fails or elects not to achieve the First Year Work Obligation or the Second Year Work Obligation prior to the end of the respective Agreement Year, then, in order to keep this Agreement and the Earn-In Right in full force and effect, within 30 days after the end of such Agreement Year, MMI may in its sole discretion make a payment to EGC which shall equal the difference between the amount of the First Year Work Obligation or the Second Year Work Obligation, as the case may be, and the Exploration and Development Expenses actually incurred by MMI in respect of that Agreement Year. For the avoidance of doubt, any such payment shall satisfy either the First Year Work Obligation or the Second Year Work Obligation, as the case may be.

(h)MMI shall provide EGC with a report of its Exploration and Development Expenses not later than 60 days after the end of each Agreement Year. If for any reason it is subsequently determined that the Minimum Work Obligation was not completed during the first or second Agreement Year, then, in order to keep the Earn-In Right in good standing, MMI shall pay the amount of any agreed-upon deficiency to EGC within 30 days after the MMI and EGC reach agreement as to the amount of the deficiency, or as MMI and EGC may otherwise agree.

(i)MMI may in its sole discretion accelerate the timing of (i) incurring Exploration and Development Expenses to meet the Minimum Work Obligation and Aggregate Work Obligation, and (ii) completion of the Preliminary Economic Assessment, and may exercise the Earn-In Right at any time during the Earn-In Period.

(j)MMI shall be the exploration operator and shall have full control over the content of work programs and Exploration and Development Expenses during the Earn-In Period. MMI’s rights shall also include all other rights necessary or incident to or for the performance of its activities under this Agreement, including, but not limited to, the authority to apply for and obtain all necessary or desirable permits, licenses and other approvals from Peru, the Department of Huancavelica or any other governmental or other entity having regulatory authority over any part of the Property. EGC shall cooperate fully with MMI in obtaining such permits, licenses or approvals, which shall include obtaining such permits, licenses and other approvals in its own name and signing such applications or other related documents if required or desirable. Within 30 days following receipt of an invoice accompanied by appropriate supporting documentation, MMI shall reimburse EGC for its out of pocket costs, plus 10% of such out of pocket costs, incurred by EGC in assisting MMI in obtaining any such permits, licenses or approvals, and such amounts shall constitute Exploration and Development Expenses.

(k)During the first Agreement Year, EGC will retain responsibility for relationships with surface owners and possessors as may be required by MMI for its activities on or for the benefit of the Property including the local communities Comunidad Campesina de Añacusi, Comunidad Campesina de San Antonio de Añaylla, Comunidad Campesina de Los Andes, which shall include obtaining necessary or desirable rights to use the surface, permits or

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other rights from such communities. Within 30 days following receipt of an invoice accompanied by appropriate supporting documentation, MMI shall reimburse EGC for its out of pocket costs, plus 10% of such out of pocket costs, incurred by EGC in connection with relationships with surface owners and possessors, and such amounts shall constitute Exploration and Development Expenses. The amount and nature of such out of pocket costs, such expenses shall be submitted to MMI in advance by EGC and approved in advance in writing by MMI. Following the first Agreement Year, MMI shall be responsible for maintaining relationships with the local communities, and shall continue to consult with EGC regarding the same.

(l)During the Earn-In Period, EGC will timely make all property maintenance and other payments to government entities, including without limitation, the derecho de vigencia, that are required to maintain the Concessions in full force and effect, and shall provide MMI with evidence of such payments at least 30 days prior to the date such payments are due. Within 14 days following receipt of appropriate supporting documentation, MMI will reimburse EGC for such payments. The obligation of MMI to reimburse EGC for property maintenance payments is in addition to, and such reimbursements will not be credited against, the Aggregate Work Obligation or Minimum Work Obligation. If, however, EGC fails to timely pay derecho de vigencia or penalidad payments, MMI shall have the right to make such payments directly to the appropriate Peruvian government agency and) in such event, such payments will be credited against the Minimum Work Obligation and Aggregate Work Obligation.

(m)EGC and MMI anticipate that in the first Agreement Year and perhaps for a longer period, MMI will conduct its activities under EGC’s existing permits and licenses and that the Concessions will not be leased or assigned to MMI. Following the first Agreement Year, EGC and MMI agree to cooperate so that MMI may enter into an Exploration Investment Agreement with the Peruvian government and commence recovery of Impuesto General a las Ventas in connection with its Exploration and Development Expenses, which cooperation may involve the lease or assignment of the Concessions to MMI during the Earn-In Period.

(n)Upon receipt of a written request from MMI, EGC shall create a wholly owned Peruvian subsidiary (‘‘NewcoPeru’’) and EGC Peru shall transfer the Property to NewcoPeru free and clear of all liens, claims and encumbrances. EGC shall continue to own 100% of the shares of NewcoPeru until such time as MMI has completed the Earn-in Period and earned a 75% interest in the Property and NewcoPeru. EGC and MMI shall consult and cooperate in the formation of NewcoPeru and the transfer of the Property to NewcoPeru so that (i) the formation and transfer documents and process are acceptable to all Parties, (iii) MMI’s right to acquire 75% of the outstanding shares of NewcoPeru is appropriately noted in the share registry and in documents publicly filed in Peru so as to provide notice of such right to third parties, (iii) the transfer of the Property is accomplished in the most tax efficient manner, and (iv) NewcoPeru has no financial obligations to EGC following the transfer of the Property. MMI shall be pay or reimburse EGC for the costs associated with the formation of NewcoPeru and the transfer of the Property to NewcoPeru.

(o)The rights and obligations of MMI under this Agreement may be exercised or satisfied by Mines Management, MMI Peru) or any other wholly owned subsidiary

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of Mines Management that agrees to become a Party to this Agreement, as Mines Management may elect in its sole discretion.

2.Except as otherwise set forth in this Agreement, the timing, manner, nature, and extent of any exploration, development, or any other activities or operations undertaken on or for the benefit of the Property under this Agreement shall be at the sole discretion of MMI; and there shall be no express or implied covenant under this Agreement to ‘begin or continue any such operations or activities.

3.EGC has and shall continue to make available to MMI all records, information and data in its possession or reasonably available to it relating to title to the Property or environmental conditions at or pertaining to the Concessions, and all maps, assays, surveys, technical reports) drill logs, samples, mine, mill, processing and records, and metallurgical. geological, geophysical, geochemical) and engineering data, and interpretive reports derived therefrom, concerning the Concessions, and MMI, at its expense, may copy any such records, information and data that MMI desires.

4.MMI and EGC anticipate that MMI may contract with EGC for local administrative and other services in respect of the Project during the Earn-In Period. All amounts paid by MMI to EGC in respect of such services shall constitute Exploration and Development Expenses.

B.VESTING AND TRANSFER OF INTEREST

1.Upon MMI having made the Initial Payment and the Additional Payments to EGC in accordance with Section A(l) and having timely completed the Aggregate Work Obligation and the Preliminary Economic Assessment, MMI shall provide EGC with written notice of such completion together with a copy of the Preliminary Economic Assessment within 30 days after its completion and delivery to MMI. In such notice, MMI shall inform EGC whether MMI wishes, to exercise the Earn-In Right. MMI shall submit the Preliminary Economic Assessment to the Toronto Stock Exchange for approval and compliance with the requirements of Canadian National Instrument 43-101. Within 15 days following MMI’s receipt of acceptance by the Toronto Stock Exchange, which may follow amendments to the Preliminary Economic Assessment if necessary or desirable to obtain such Toronto Stock Exchange acceptance, if MMI has elected to exercise the Earn-In Right, EGC shall issue or transfer to MMI a number of shares of NewcoPeru so that, following such transfer, MMI shall own 75% of the outstanding shares of NewcoPeru, fully paid and non assessable, free and clear of all liens, claims and encumbrances (the “Earned Shares”). Concurrently with the issuance or transfer of the above noted shares to MMI, the Parties shall execute and deliver the shareholder’s agreement referred to in Section B(2). MMI agrees to be responsible for costs and fees which arise as a result of this the issuance or transfer of shares.

2.Upon MMI having exercised the Earn-In Right and EGC having issued or transferred the Earned Shares, EGC and MMI shall enter into a shareholders agreement (the “Shareholders Agreement”) with respect to their respective 25% and 75% of the outstanding shares of NewcoPeru, which shall be generally in accordance with the Rocky Mountain Mineral Law Foundation Exploration, Development and Mine Operating Agreement (Model Form 5A)

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(“Form 5A”). The Shareholders Agreement and the by-laws of NewcoPeru will govern the ongoing activities of MMI and EGC in respect of the Project and the Property, and shall include the concepts set forth in Section E below, and such other terms and provisions as are mutually agreeable to MMI and EGC. MMI will appoint the general manager of NewcoPeru and will have rights and responsibilities commensurate with those of the manager of a Form 5A joint venture. EGC and MMI agree to begin good faith negotiations of the Shareholders Agreement and by-laws of NewcoPeru at any time during the Earn-In Period, when requested by MMI. If MMI has exercised the Earn-In Right and EGC and MMI have not completed their negotiation of and executed and delivered the Shareholders Agreement and accompanying by-laws and other related contribution agreements, the provisions of Section E of this Agreement shall govern their relationship until the appropriate agreement(s) are executed and delivered.

C.REPRESENTATIONS, WARRANTIES AND COVENANTS

1.EGC hereby represents and warrants to MMI as of the Effective Date (which representations and warranties shall remain true and correct as of and through the date on which the Property including the Concessions is transferred to NewcoPeru) as set forth below, and acknowledge that MMI is relying upon these representations and warranties in entering into this Agreement.

(a)The Property including the Concessions is accurately described in Exhibit A-I attached hereto; EGC Peru is the sole owner thereof and is in exclusive possession thereof; and, except for the net smelter royalty described in Exhibit A-2, the Property including the Concessions is free and clear of all liens, claims (including the right or agreement of any third party to acquire any interest in the Concessions), encumbrances and defects.

(b)As to each of the Concessions:

(i)EGC is the sole, exclusive, legal, beneficial and registered titleholder of the Concessions, each of which has been duly and validly granted by the competent governmental agency, and recorded with the relevant Peruvian Public Registry, in accordance with applicable Peruvian laws.

(ii)Each Concession is valid and in legal good standing and there is no current dispute relating to any of the Concessions, and EGC has no reason to believe that any of the Concessions is under cause of forfeiture or termination.

(iii)With respect to each Concession, each and all applicable annual derecho de vigencia until year 2010 inclusive and all other maintenance payments, including applicable annual penalties for the year ended 31 December 2009, have been paid in full when due and there is no outstanding amount owed to any Peruvian governmental entity for any of these Concessions.

(c)All operations and activities conducted by or on behalf of EGC on the Concessions have been conducted in compliance with applicable Peruvian national, regional and local laws, rules and regulations, including without limitation Environmental Laws (as defined in Exhibit B), and agreements with Peruvian government entities, Peruvian communities, and other third parties.

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(d)Each of Estrella Gold and EGC Peru is duly incorporated, validly existing and in good standing under the laws of the jurisdiction in which it was formed. Each of Estrella Gold and EGC Peru has the requisite corporate power and capacity to carry on its business as presently conducted, to enter into this Agreement, and to perform all of its obligations hereunder.

(e)There are no outstanding agreements, leases or options (whether oral or written) which contemplate the acquisition of the Concessions or the Property or any interest therein by any other person or entity, or which limit or define in any way the activities that may be conducted on the Concessions, and except for (i) a 1.5% Net Smelter Return Royalty over the Cinco Hermanos, Jaime 1 and Julia 1 Concessions, in favor of former underlying owners as described in Exhibit A-2, and (ii) the statutory mining royalty payable to the Peruvian State as a consideration for exploitation of minerals which on the Effective Date of this Agreement is fixed at a sliding scale from 1% to 12%, there are no royalties or other payments based on mineral production or otherwise payable on the Concessions.

(f)The entering into of this Agreement and the performance by Estrella Gold and EGC Peru of their respective obligations hereunder will not violate or conflict with their respective articles of incorporation or by-laws, any applicable law or any order, decree or notice of any court or other governmental agency, nor conflict with, or result in a breach of, or accelerate the performance required by any contract or other commitment to which Estrella Gold or EGC Peru is a party or by which it is bound.

(g)All requisite corporate actions on the part of Estrella Gold and EGC Peru, and on the part of their respective officers, directors, and shareholders, necessary for the execution, delivery, and performance by it of this Agreement and all other agreements contemplated hereby, have been taken. This Agreement and all agreements and instruments contemplated hereby are, and when executed and delivered by them (assuming valid execution and delivery by the other Parties), will be their legal, valid, and binding obligations enforceable against each of them in accordance with their respective terms. Notwithstanding the foregoing, no representation is made as to the availability of equitable remedies for the enforcement of this Agreement or any other agreement contemplated hereby. Additionally, this representation is limited by applicable bankruptcy, insolvency, moratorium, and other similar laws affecting generally the rights and remedies of creditors and secured parties.

(h)To the best of the knowledge of EGC, there are no adverse environmental conditions at the Property which constitute a nuisance or that have caused or could result in a violation of or liability under any Environmental Laws or any agreements with government entities or communities. In conducting activities on the Property. EGC has complied with all applicable Environmental Laws as they relate to the Property and there have been no breaches of or liabilities caused or permitted to arise by EGC under any Environmental Laws. EGC has not received notification from any person, including without limitation, any governmental authority or community, of any potential violation or alleged violation of any applicable Environmental Laws relating to the Property or of any inspection or possible inspection or investigation by any governmental authority under any applicable Environmental Laws relating to the Property. EGC has not received any notification of or has knowledge of the presence or release of any Hazardous Materials (as defined in Exhibit B), in the soil, subsurface strata or water in, on or under the Property and EGC has not been the subject of any claims or incurred any expenses in

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respect of the presence of any contaminants in the soil subsurface strata or water in, on or under the Property.

(i)To the best of knowledge of EGC, there is no circumstance that would prevent any and all governmental licenses and permits required to carry out exploration, development, mining, processing, and reclamation operations on the Property from being obtained, as and when necessary.

(j)EGC has obtained all consents required under any agreement to which Estrella Gold or EGC Peru is a party and all required consents and approvals from governmental agencies, communities and any stock exchange, as necessary for Estrella Gold and EGC Peru to execute, deliver and perform their obligations under this Agreement.

(k)There are no actions, suits or proceedings pending or, to the knowledge of EGC, threatened against or affecting the Property, including any actions, suits, or proceedings being prosecuted by any federal, state or local department, commission, board, bureau, agency, or instrumentality. To the knowledge of EGC, neither Estrella Gold or EGC Peru is subject to any order, writ, injunction, judgment or decree of any court or any federal, state or local department, commission, board, bureau, agency, or instrumentality which relates to the Property.

(l)EGC will assist MMI in making applications for required permits or other required approvals from regulatory authorities required in order to conduct exploration and development activities and operations and related work on the Property.

(m)All negotiations relative to this Agreement and the transactions contemplated hereby have been carried on by EGC in such a manner as not to give rise to any valid claim against MMI or any third party for a brokerage commission, finder’s fee or other fee or commission arising by reason of the transactions contemplated by this Agreement.

2.MMI hereby represents and warrants to EGC as of the Effective Date (which representations and warranties shall remain true and correct as of and through the date on which the Property including the Concessions is transferred to NewcoPeru) as set forth below, and acknowledge that EGC is relying upon these representations and warranties in entering into this Agreement.

(a)Each of Mines Management and MMI Peru is duly incorporated, validly existing and in good standing under the laws of the jurisdiction in which it was formed. Each of Mines Management and MMI Peru has the requisite corporate power and capacity to carry on its business as presently conducted, to enter into this Agreement, and to perform all of its obligations hereunder.

(b)The entering into of this Agreement and the performance by Mines Management and MMI Peru of its respective obligations hereunder will not violate or conflict with its respective articles of incorporation or by-laws, any applicable law or any order, decree or notice of any court or other governmental agency, nor conflict with, or result in a breach of, or accelerate the performance required by any contract or other commitment to which either of them is a party or by which it is bound.

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(c)All requisite corporate actions on the part of Mines Management and MMI Peru and on the part of their respective officers, directors and shareholders, necessary for the execution, delivery and performance by it of this Agreement and all other agreements contemplated hereby, have been taken. This Agreement and all agreements and instruments contemplated hereby are, and when executed and delivered by them (assuming valid execution and delivery by the other Party), will be their legal, valid and binding obligations, enforceable against each of them in accordance with their respective terms. Notwithstanding the foregoing, no representation is made as to the availability of equitable remedies for the enforcement of this Agreement. Additionally, this representation is limited by applicable bankruptcy, insolvency, moratorium, and other similar laws affecting generally the rights and remedies of creditors and secured parties.

(d)MMI has obtained all consents required under any agreement to which Mines Management or MMI Peru is a party and all required consents and approvals from governmental agencies and any stock exchange, as necessary for it to execute, deliver and perform its obligations under this Agreement.

(e)All negotiations relative to this Agreement and the transactions contemplated hereby have been carried on by MMI in such manner as not to give rise to any valid claim against EGC or any third party for a brokerage commission, finder’s fee or other fee or commission arising by reason of the transactions contemplated by this Agreement.

D.TERMINATION OF AGREEMENT

1.MMI may in its sole discretion terminate this Agreement at any time during the Earn-In Period, provided that MMI must satisfy its obligation to EGC set forth in Section A(1)(f), by giving not less than 60 days prior written notice to that effect to EGC. During the period between such written notice and termination, MMI shall remain responsible for all of its financial commitments, and land payments under this Agreement (including any payments under Section A(l)(l) that may be required to be made during that period in order to maintain the Concessions in full force and effect). Upon expiry of the 60 day notice period, or if the Agreement is terminated pursuant to any other provision of this Agreement, the Agreement will be of no further force and effect. Upon and following the date of such termination, MMI shall have no further obligation to incur Exploration and Development Expenses on or for the benefit of the Property and shall have no further obligations or liabilities to EGC under this Agreement or with respect to the Property (including without limitation liability for lost profits or consequential, special, incidental or punitive damages as a result of an election by MMI to terminate this Agreement), other than: (i) as set forth in the remainder of this paragraph, (ii) its indemnification obligations under Section J and (iii) any reclamation obligations resulting from MMI’s activities on the Property. EGC hereby agrees to grant MMI such access to the Property as is reasonably necessary to complete any required reclamation. In the event of such termination, EGC’s and MMI’s indemnification obligations under Section J shall survive. In the event of such termination, the obligations of EGC and MMI pursuant to Sections J, M and N shall survive. At any time MMI may, at its option, terminate its interest in some but less than all of the Concessions by written notice to EGC. To the extent MMI terminates its interest in some but less than all of the Concessions, this Agreement shall remain in full force and effect with

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respect to the remaining Concessions, and the Concessions with respect to which MMI has terminated its interest shall not be transferred to NewcoPeru.

2.In the event MMI is in default in the observance or performance of any of its covenants, agreements or obligations under this Agreement, EGC may give written notice of such alleged default specifying the details of same. MMI shall have 30 days following receipt of said notice (or, in the event MMI in good faith disputes the existence of such a default, 30 days after a final, non appealable order of an arbitral tribunal engaged pursuant to Section M finding that such a default exists) within which to remedy any such default described therein, or to diligently commence action in good faith to remedy such default. If MMI does not cure or diligently commence to cure such default by the end of the applicable 30-day period, then EGC shall have the right to terminate this Agreement by providing 30 days advance written notice to MMI. In the event of such termination, the provisions of Section D(l) shall apply with respect to the Parties’ ongoing obligations and liabilities.

E.PARTICIPATION IN NEWCOPERU COMPANY

1.Following exercise of its Earn-in Right, the transfer or issuance of 75% of the outstanding shares of NewcoPeru to MMI and execution of the Shareholders Agreement and until Production (as defined in Exhibit B) has been achieved, EGC may elect to have MMI fund all costs of Concession and property maintenance, exploration and, if it is decided to develop a mine on the Concessions, all costs of development and construction, and EGC’s proportionate 25% share of such costs shall be “carried” by MMI during this period and the total of EGC’s proportionate 25% share of such costs plus interest from the date of any advance made by MMI on EGC’s behalf, at the Prime Rate compounded quarterly (collectively, the “Carried Amount”) shall be recoupable by MMI from EGC’s 25% proportionate share of the Products or Net Cash Flow from Operations (as defined in Exhibit B attached hereto and incorporated herein by reference) from the Concessions until the Carried Amount has been fully repaid. The Carried Amount shall include all costs of obtaining third party financing of EGC’s 25% share of such costs. At MMI’s request, EGC shall grant to third party lenders and to MMI first and second priority security interests in EGC’s shares of NewcoPeru and its share of Products, until such time as any third party financing or the Carried Interest has been fully repaid or recovered, as the case may be. EGC shall cooperate fully with the MMI in this respect, including executing mortgages, share pledges and such other documents as such third party lender or MMI reasonably deems necessary to perfect that security interest.

2.At such time as Production is achieved, MMI and EGC will thereafter provide required funding to the NewcoPeru in accordance with their respective interests therein, or have their respective percentage interests in the NewcoPeru diluted in accordance with a straight line dilution formula, as set forth in the Shareholders Agreement.

3.If through dilution the interest of a Party is reduced to less than 10%, then that Party’s interest shall automatically be converted to a 3% NSR royalty, as described in Exhibit D. Should the Concessions be burdened by production royalties payable to third parties or the Peruvian government, then with respect to those properties the 3% royalty described above would be reduced by the amount of such royalty but not below 1%.

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4.MMI will serve as operator of the NewcoPeru and the person holding the position of general manager of the NewcoPeru will be appointed by MMI so long as it holds a majority of the shares of the NewcoPeru, unless it resigns or agrees that EGC may act as operator.

5.Annual programs and budgets will be proposed by the General Manager and reviewed and approved by the majority vote of a Management Committee comprised of members from MMI and EGC voting in proportion to their respective percentage interests in the NewcoPeru.

6.The Management Committee will be formed generally in accordance with the provisions of Form 5A with committee members of each Party holding collectively votes in proportion to the percentage of shares in the NewcoPeru held by the Party they represent.

7.MMI as operator will be entitled to a 5% overhead fee for exploration, development and mine development and construction activities and a US $7.00 per ounce of gold or gold equivalent production overhead fee from all production obtained from the mining operations of NewcoPeru (provided, however that if the primary mineral being produced from the mine is a mineral other than gold or silver, the fee payable to MMI for mine operations will be the economic equivalent of $7.00 per ounce of gold). Calculation of the overhead fee will not include land holding costs.

8.All exploration and related data must be provided to both EGC and MMI by the NewcoPeru, with summary reports provided by the NewcoPeru on a quarterly basis.

9.Annual programs and budgets must be presented to the minority Party 60 days prior to funds being required. This includes any amendments to any approved annual program and budget.

10.Capitalized terms used in this Section E but not defined herein shall have the meaning ascribed to them in Form 5A.

11.If for any reason the operator does not propose a budget for a period in excess of 12 continuous months, the non-operator shall have the right to propose and fund a budget and the operator will have the right to participate or be diluted in accordance with the provisions herein and the Shareholders Agreement.

12.The Shareholders Agreement shall set forth the terms and conditions with respect to each Parties’ respective 25% and 75% interests in the outstanding shares of NewcoPeru. Such terms and conditions will include a provision restricting the Parties from transferring all or any part of its shares in NewcoPeru to any third party who is not a party to or has not agreed to be bound by the Shareholders Agreement.

F.OPERATIONS DURING EARN-IN PERIOD

During the Earn-In Period:

1.MMI and its employees, agents, consultants and independent contractors shall have the exclusive right to enter upon the Property and to conduct such prospecting, exploration,

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development or other related work thereon and thereunder as they desire and as is permitted by applicable law. MMI’s activities on the Property may include any activities for which the costs would qualify as Exploration and Development Expenses, as well as the removal of mineral samples for the purpose of, and in amounts appropriate for, testing such mineral samples, including bulk sampling, and in addition MMI shall have the right to bring upon and erect upon the Property such buildings, plants, machinery and equipment as MMI may deem necessary or desirable to carry out such activities.

2.MMI in its sole discretion will decide any matter concerning the conduct) timing and nature of its prospecting, exploration, development or other mining activities on the Property, except matters involving community relations during the first Agreement Year and thereafter in consultation with EGC.

3.MMI shall conduct its exploration, development and other activities on the Property in compliance with applicable laws and regulations, including laws and regulations related to exploration) development and mining.

4.Subject to EGC’s prior written approval (which shall not be unreasonably withheld), MMI shall have the full, exclusive right, but not the obligation, to abandon, reacquire, amend, defend contests or adverse actions or suits and negotiate settlement thereof with respect to any and all of the Concessions) and EGC shall cooperate with MMI and shall execute any and all documents necessary or desirable in the opinion of MMI to further such amendments, reacquisitions, contests, adverse actions or suits, or settlement of such contests or adverse actions or suits. MMI shall not be liable to EGC for the loss of any of the Concessions as a result of such abandonments, amendments, relocations, contests or adverse actions or suits) so long as the same are undertaken in good faith.

5.All exploration and related data and results generated by either Party must be provided to both Parties in as close to near real time as reasonable. In addition, EGC may request copies of any other data or information pertaining to the Project at any time and this must be provided by MMI within a reasonable time frame. Notwithstanding the foregoing, MMI may elect not to provide interpretive reports to EGC that it generates at its own expense. Any interpretive work done by a third party and charged as an Exploration and Development Expense shall be provided to both Parties. Subject to Section K(2), both Parties shall have the right to report such data and results.

6.MMI agrees to carry such insurance, covering all persons working at or on the Property for MMI, as will fully comply with the requirements of applicable. In addition, during the Earn-In Period, so long as it is carrying out exploration, development or activities as the exploration operator, MMI agrees to carry liability insurance with respect to such operations in reasonable amounts not less than the greater of the minimum levels required by law or as set forth below:

(a)Commercial General Liability Insurance with limits of not less than $1,000,000 per occurrence.

(b)Automobile Liability Insurance, with:

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(i)Limits of not less than $1,000,000 Combined Single Limit per accident.

(ii)Coverage applying to any auto.

All of the above-described policies (with the exception of worker’s compensation) shall name EGC as an additional insured and shall contain provisions that the insurance companies will have no right of recovery or subrogation against EGC, its affiliates, or subsidiary companies, it being the intention of the Parties that MMI’s carrier shall be liable for any and all losses covered by the above-described insurance. All policies providing coverage hereunder shall contain provisions that no cancellation or material changes in the policies shall become effective except on thirty (30) days’ advance written notice thereof to EGC.

7.EGC and its authorized agents, at EGC’s sole risk and expense, shall have the right, exercisable during regular business hours, at a mutually convenient time, in compliance with MMI’s safety rules and regulations, and in a reasonable manner so as not to interfere with MMI’s operations, to go upon the Property for the purpose of confirming that MMI is conducting its operations in the manner required by this Agreement and to conduct informational tours. EGC shall indemnify and hold MMI harmless from all claims for damages arising out of any death, personal injury or property damage sustained by EGC, its agents or employees, while in or upon the Property, whether or not EGC, its agents or employees are in or upon the Property pursuant to this Section F.7, unless such death, injury or damage is due to MMI’s gross negligence or willful misconduct. If requested by MMI, EGC, its agents and employees will confirm in writing their waiver of claims against MMI.

8.MMI and EGC shall keep the title to the Property free and clear of all liens and encumbrances; provided, however, that either Party may refuse to pay any claims asserted against it which it disputes in good faith. At its sole cost and expense, such Party shall contest any suit, demand or action commenced to enforce such a claim and, if the suit, demand or action is decided by a court or other authority of ultimate and final jurisdiction against such Party or the Property, such Party shall promptly pay the judgment and shall post any bond and take all other action necessary to prevent any sale or loss of the Property or any part thereof.

9.If MMI exercises its Earn-In Right, the reclamation obligations associated with any disturbances of the Property made by MMI during the Earn-In Period shall become obligations of NewcoPeru.

G.FORCE MAJEURE

If MMI should be delayed in or prevented from performing any of the terms, covenants or conditions of this Agreement by reason of a cause beyond the control of MMI, whether or not foreseeable, the cause or effects of which continue for 45 days, including fires, floods, earthquakes, subsidence, ground collapse or landslides, interruptions or delays in transportation or power supplies, strikes, lockouts or other labor disputes, wars, acts of God, changes in laws, native or indigenous title claims, inability to obtain required governmental permits or approvals in a timely manner, curtailment or suspension of activities to remedy or avoid an actual or alleged, present or prospective violation of Environmental Laws, government regulation or

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interference (but excluding a lack of funds), drought or other adverse weather condition, delay or failure by suppliers or transporters of materials, parts, supplies, services or equipment or by contractors’ or subcontractors’ shortage of, or inability to obtain, labor, transportation, materials, machinery, equipment (including without limitation drilling rigs), supplies, utilities or services, accidents, breakdown of equipment, machinery or facilities, actions by citizen groups or local communities, including but not limited to environmental organizations or native rights groups, declaration of a state of emergency by the Peruvian government, an illegal protest or blockage of access or any other cause whether similar or dissimilar to the foregoing (each an “Event of Force Majeure”), then any such failure on the part of MMI to so perform shall not be deemed to be a breach of this Agreement and the time within which MMI is obliged to comply with any terms, covenants or conditions of this Agreement (including without limitation the Earn-In Period obligation to meet the Minimum Work Obligation and the dates for payments to EGC to maintain the Agreement in full force and effect provided that MMI shall be required to comply with its obligations pursuant to Section A(1)(l)) shall be extended by the period of all such delays. MMI shall give notice in writing to EGC forthwith and for each Event of Force Majeure shall set out in such notice particulars of the cause, and the date on which the same arose, and shall take all reasonable steps to remove the cause of such Event of Force Majeure (although MMI shall have no obligation to settle any labor dispute on terms other than those acceptable to it in its sole discretion), and shall also give notice immediately following the date that such cause ceases to exist.

H.AREA OF INTEREST

1.Any interest or rights to acquire any interest in (a) mineral concessions, surface rights or in other real property interests within the area described in Exhibit A-3 (the “Area of Interest”), or (b) contiguous mineral concessions, surface rights or other real property interests that may extend beyond the Area of Interest, acquired during the Earn-In Period by or on behalf of EGC or MMI, or any affiliate or subsidiary of either of them, shall become subject to the terms and provisions of this Agreement in accordance with the provisions of Section H(2).

2.Within 30 days after the acquisition of such additional property, all or any portion of which lies within the Area of Interest (or which constitutes contiguous mineral concessions, surface rights or other real property interests that may extend beyond the Area of Interest), the acquiring Party shall notify the other Party of such acquisition. Such notice shall describe in detail the acquisition, the lands, the nature of the interest therein, the mineral concessions, surface rights or other real property interest covered thereby, and the acquisition cost. In addition to such notice, the acquiring Party shall make any and all information it has concerning the additional property available to the other Party. The other Party shall then have 30 days after receipt of such notice and information to elect in its sole discretion whether such additional interest shall be contributed to NewcoPeru if and when MM exercises the Earn-In Right. If the other Party so elects, such additional interest shall be considered part of the Property for purposes of this Agreement, and shall transferred to NewcoPeru in the same manner as the Property and the Concessions pursuant to Section B.

3.All costs incurred by MMI for acquiring additional property that becomes subject to this Agreement shall count as Exploration and Development Expenses. Should EGC be the acquiring Party and MMI elect that the additional property be contributed to NewcoPeru, MMI

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shall reimburse EGC for its acquisition costs, and the amount of such reimbursement shall count as Exploration and Development Expenses.

4.If a Party elects pursuant to Section H (2) that such additional property shall not be contributed to NewcoPeru, then with respect to that additional interest, the acquiring Party shall be free to take actions with respect to and dispose of such interest in its sole discretion, without any obligation to the other Party.

I.ASSIGNMENT

1.This Agreement shall be binding upon and inure to the benefit of the Parties and their permitted successors and assigns. MMI may, upon the prior written approval of EGC, which approval shall not be unreasonably withheld or delayed, assign its interest in this Agreement to any third party that is not affiliated with MMI at any time, provided that the assignee agrees in writing to assume all MMI’s obligations under this Agreement. Upon such assignment, or an assignment to an affiliate (as described below), MMI shall have no further obligations or liabilities under this Agreement. Notwithstanding the foregoing, at any time, and without the consent of EGC, MMI may assign this Agreement:

(a)to one or more of its affiliates upon the affiliate assuming all of MMI’s obligations under this Agreement (affiliate meaning any entity which directly or indirectly controls or is controlled by, or under common control with, MMI);

(b)in connection with a pledge by MMI for financing purposes;

(c)in connection with a corporate merger or reorganization involving MMI or any affiliate;

(d)in connection with a sale of all or substantially all of MMI’s assets; or

(e)to a third party that is technically and financially capable of performing MMI’s obligations under this Agreement.

Upon MMI’s prior written approval, which approval shall not be unreasonably withheld or delayed, EGC may convey its interest in the Property and assign its interest in this Agreement to a third party, provided that any such third party must agree in writing to be bound by all of the terms and conditions of this Agreement, and provided further that EGC may, without the consent of MMI, convey its interest in the Property and assign its interest in this Agreement to any third party.

2.Except for assignments by MMI under Section I.1(a) through (d), to which this Section 1.2 shall not apply, if during the Earn-In Period either party (the “Selling Party”) desires to transfer all or any part of its interest in this Agreement, the other party (the “Remaining Party”) shall have a right of first offer to acquire such interest as provided in this Section I(2):

(a)if the Selling Party intends to transfer all or any of its interest hereunder, it shall promptly notify the Remaining Party of its intentions. The Remaining Party shall have 28 days from the date such notice is delivered to notify the Selling Party whether it elects to acquire

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the offered interest and the terms and conditions thereof and the price (the “Offered Price”) therefor. The consideration payable for the offered interest shall be stated in cash unless otherwise agreed. The Selling Party shall have no further obligations to the Remaining Party.

(b)if the Remaining Party does so elect, and the Selling Party is not agreeable to the terms and conditions offered by the Remaining Party, the Selling Party shall have 90 days following receipt of the offer from the Remaining Party to sell the interest to an arm’s length third party upon terms and conditions no less favorable than those offered by the Remaining Party, including that the offer price (or its cash equivalent, if that offer price includes consideration other than cash) shall not be less than an amount that is 10% greater than the Offered Price;

(c)if the Remaining Party does not so elect within the period provided for in Section I.2(a), the Selling Party shall have 90 days following the expiration of such period to consummate the transfer to an arm’s length third party upon such terms and conditions as are satisfactory to the Selling Party; and

(d)if the Selling Party fails to consummate the transfer to a third party within the period set forth in Sections I.2(b) and (c), the right of first offer of the Remaining Party in such offered interest shall be deemed to be revived. Any subsequent proposal to transfer such interest shall be conducted in accordance with all of the procedures set forth in this Section I.2.

J.INDEMNIFICATION

1.MMI agrees to indemnify, defend and hold harmless EGC and its officers, directors, employees, agents, attorneys, affiliates, successors, and assigns (the “EGC Indemnified Party”) from and against any and all debts, liens, claims, causes of action, administrative orders and notices, costs (including, without limitation, response and/or remedial costs), personal injuries, losses, damages, liabilities, demands, interest, fines, penalties and expenses, including reasonable attorney’s fees and expenses, consultant’s fees and expenses, court costs and all other out-of-pocket expenses, suffered or incurred by EGC Indemnified Party as a result of:

(a)any breach by MMI of any of its representations, warranties and covenants set forth in this Agreement; or

(b)any operations or activities engaged in by MMI, including operations by independent contractors and others on behalf of MMI, on the Property, including without limitation any matter, condition or state of fact involving Environmental Laws or Hazardous Materials or Environmental Liabilities which may arise after the Effective Date of this Agreement and that is caused by MMI or its independent contractors and others acting on behalf of MMI.

2.EGC agrees to indemnify, defend and hold harmless MMI and its officers, directors, employees, agents, attorneys, affiliates, successors, and assigns (the “MMI Indemnified Party”) from and against any and all debts, liens, claims, causes of action, administrative orders and notices, costs (including, without limitation, response and/or remedial costs), personal injuries, losses, damages, liabilities, demands, interest, fines, penalties and expenses, including reasonable attorney’s fees and expenses, consultant’s fees and expenses,

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court costs, and all other out-of-pocket expenses suffered or incurred by MMI Indemnified Party as a result of:

(a)           any breach by EGC of any of their representations, warranties, and covenants set forth in this Agreement; or

(b)any operations or activities engaged in by EGC, including operations by independent contractors and others on behalf of EGC, on the Property, including without limitation any matter, condition or state of fact involving Environmental Laws or Hazardous Materials or Environmental Liabilities which may exist prior to the Effective Date of this Agreement or which may arise after the Effective Date of this Agreement and that is caused by EGC or its independent contractors and others acting on behalf of EGC.

3.The Parties, within 5 days after the service of process upon either of them in a lawsuit, including any notices of any court action or administrative action (or any other type of action or proceeding), or promptly after either of them, to its respective knowledge, shall become subject to, or possess actual knowledge of, any damage, liability, loss, cost, expense, or claim to which the indemnification provisions of this Section J relate, shall give written notice to the other Party setting forth the fact relating to the claim, damage, or loss, if available, and the estimated amount of the same. “Promptly” for purposes of this paragraph shall mean giving notice within 5 days. Failure to provide prompt notification shall not relieve either Party of its indemnification obligations hereunder unless such Party is materially prejudiced thereby. Upon receipt of such notice relating to a lawsuit, the indemnifying party shall be entitled to:

(a)participate at its own expense in the defense or investigation of any claim or lawsuit; or

(b)assume the defense thereof, in which event the indemnifying party shall not be liable to the indemnified party for legal or attorney fees thereafter incurred by such indemnified party in defense of such action or claim; provided, that if the indemnified party may have any unindemnified liability out of such claim, such party shall have the right to approve the counsel selected by the indemnifying party, which approval shall not be withheld unreasonably.

If the indemnifying party assumes the defense of any claim or lawsuit, all costs of defense of such claim or lawsuit shall thereafter be borne by such party and such party shall have the authority to compromise and settle such claim or lawsuit, or to appeal any adverse judgment or ruling with the cost of such appeal to be paid by such party; provided, however, if the indemnified party may have any un indemnified liability arising out of such claim or lawsuit the indemnifying party shall have the authority to compromise and settle each such claim or lawsuit only with the written consent of the indemnified party, which shall not be withheld unreasonably. The indemnified party may continue to participate in any litigation at its expense after the indemnifying party assumes the defense of such action. In the event the indemnifying party does not elect to assume the defense of a claim or lawsuit, the indemnified party shall have authority to compromise and settle such claim or lawsuit only with the written consent of the indemnifying party, which consent shall not be unreasonably withheld, or to appeal any adverse judgment or ruling, with all costs, fees, and expenses indemnifiable under this Section J hereof to be paid by the indemnifying party. Upon the indemnified party’s furnishing to the indemnifying party an

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estimate of any loss, damage, liability, or expense to which the indemnification provisions of this Section J relate, the indemnifying party shall pay to the indemnified party the amount of such estimate within 10 days after receipt of such estimate.

Notwithstanding any other provision contained in this Agreement to the contrary, no Party shall be liable to any other Party for any consequential, punitive, special or indirect damages including without limitation loss of profit, loss of use, loss of opportunity, loss of production of products, whether such liability is based, or asserted to be based, upon any breach of any Party’s obligations under this Agreement, or whether such liability is based or asserted to be based upon any negligent act or omission of a Party, its agents or affiliates, or asserted to be based on any other legal ground.

K.CONFIDENTIALITY

1.All data and information coming into possession of EGC or MMI by virtue of this Agreement with respect to the business or operations of the other Party, or the Property generally, shall be kept confidential and shall not be disclosed to any person not a party hereto without the prior written consent of the other Party, except:

(a)as required by law, rule, regulation or policy of any stock exchange or securities commission having jurisdiction over a Party;

(b)as may be required by a Party in the prosecution or defense of a lawsuit or other legal or administrative proceedings;

(c)as required by a financial institution in connection with a request for financing relating to development or mining activities; or

(d)as may be required in connection with a proposed conveyance to a third party of an interest in the Property or this Agreement, provided such third party agrees in writing in a manner enforceable by the other Party to abide by all of the provisions of this Agreement, including this Section K with respect to such data and information.

2.To the extent either Party intends to disclose data or information via press release or other similar format as described in Section K.1 (a), the disclosing Party shall provide the other Party with not less than five business days notice of the text of the proposed disclosure, and the other Party shall have the right to comment on the same.

3.The Parties agree that the Confidentiality Agreement dated as of June 9,2011 shall, with respect to the Property, the Concessions and the Project, be of no further force or effect and is hereby terminated as of the Effective Date.

4.Each Party agrees with the other that in negotiating and entering into this Agreement it has relied on its own analysis and estimates as to the value of the Property and upon its own geologic and engineering interpretations related thereto.

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L.ENTIRE AGREEMENT

This Agreement contains the entire agreement between the Parties relating to the Property.

M.DISPUTE RESOLUTION

1.Any controversy, claim or dispute arising out of or relating to this Agreement (including, without limitation, the interpretation of any provision of this Agreement or the breach, termination or invalidity of this Agreement) that cannot reasonably be resolved by the Parties shall be submitted to and settled exclusively and finally by binding arbitration under the International Arbitration Rules of the International Dispute Resolution Procedures of the American Arbitration Association in effect on and as of the date of this Agreement (the “AAA Rules”), except as such AAA Rules are modified pursuant to this Section. Any Party shall give the other Parties at least 10 days prior to commencing an arbitration proceeding.

2.The arbitration shall be conducted before a panel of three arbitrators, each of whom shall be fluent in English and shall be knowledgeable about mineral exploration. The arbitrators shall be appointed by the administrator in accordance with the AAA Rules.

3.The arbitration shall be conducted in Denver, Colorado, USA. The arbitration shall be conducted in English.

4.No less than 30 days prior to the date on which the arbitration proceeding is to begin, each party shall submit to the other party the documents, in English, a list of witnesses it intends to use in the arbitration. At any oral hearing of evidence in connection with the arbitration, each party or its legal counsel shall have the right to examine witnesses and to cross-examine the witnesses of the opposing party.

5.The arbitrators shall apply the laws of the state of Colorado to any dispute before the arbitration panel, and the arbitrators shall be so instructed. The arbitrators shall issue a written opinion stating the findings of fact and the conclusions of law upon which the decision is based. The decision of the arbitrators shall be final and binding and may, in appropriate circumstances, include injunctive relief. Judgment on such award may be entered in any court of appropriate jurisdiction, or application may be made to that court for a judicial acceptance of the award and an order of enforcement, as the party seeking to enforce that award may elect. Any arbitration award for money damages shall be in United States Dollars. The arbitrators shall be bound by the provisions of this Agreement and shall not have the authority to amend this Agreement to affect an award. Nothing contained in this Section shall be deemed to limit any Party’s ability to terminate this Agreement in accordance with its terms and conditions.

6.Each Party shall bear its own costs and expenses, including attorneys fees and an equal share of the arbitrators’ and administrative fees of arbitration, incurred in connection with any arbitration or other legal proceedings brought for enforcement or interpretation of this Agreement, and no court or arbitrator shall have any power to award attorneys or other fees or costs to the prevailing party.

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7.Notwithstanding any other provisions in this Agreement to the contrary, no Party hereto shall be liable to the other in contract, tort, strict liability, warranty or under any other theory of liability, for any loss of production, loss of use, loss of anticipated profits or revenue incurred by such Party, or for special, incidental, consequential, punitive or indirect damages.

N.AGREEMENTS OF MMI AND EGC

MMI agrees to cause MMI Peru to comply with and perform its obligations, covenants and agreements as set forth in this Agreement. EGC agrees to cause EGC Peru to comply with and perform its obligations, covenants and agreements as set forth in this Agreement. The Parties submit to the jurisdiction of the federal and state courts in the State of Colorado.

O.GENERAL

1.Notice to a Party under this Agreement shall be sufficiently given if delivered personally, or if sent by prepaid mail or reputable overnight courier, or if transmitted by facsimile to such Party with confirmation of receipt:

(a)in the case of a notice to MMI or MMI Peru at:

Mines Management, Inc.

905 W. Riverside, Suite 311

Spokane, WA 99201

Attention: James H. Moore, Chief Financial Officer

Tel: 509-838-6050

FAX: 509-838-0486

And

(b)in the case of a notice to EGC or EGC Peru at:

Estrella Gold Corporation

325 Howe Street

Vancouver, British Columbia

Canada V6C lZ7

Attention: Keith Laskowski

Tel: +1 604 687 3520

FAX: +1 604 688 3392

or at such other address or addresses as the Party to whom such notice or other writing is to be given shall have last notified the Party giving the same in the manner provided in this section. Any notice or other writing delivered to the Party to whom it is addressed as set forth above shall be deemed to have been given and received on the day it is so delivered at such address, provided that if such day is not a business day in the city where the notice is delivered, then such notice or other writing shall be deemed to have been given and received on the next following business day. Any notice or other writing submitted by facsimile or other form of recorded

20

communication shall be deemed to have been given and received on the first business day after its transmission.

2.Each of MMI and EGC shall, with reasonable diligence, do all such things and provide all such reasonable assurances and assistance as may be required to consummate the transactions contemplated by this Agreement and each Party shall provide such further documents or instruments required by the other Party as may reasonably be necessary or desirable in order to give effect to the terms and conditions of this Agreement and carry out its provisions at, before or after the Effective Date.

3.This Agreement may be executed by each Party in counterparts and by facsimile, or by electronic delivery each of which when so executed and delivered shall be an original, but both such counterparts, whether executed and delivered in the original or by facsimile or by electronic delivery, shall together constitute one and the same agreement. The Parties agree to execute and deliver a short form of this Agreement to be prepared by MMI, which the Parties agree MMI may file in the public records of the Peruvian Public Registry.

4.All dollar references in this Agreement are to the United States dollars.

5.This Agreement, including all documents annexed hereto and other agreements, documents and other instruments delivered in connection herewith shall be governed by and construed in accordance with the laws of the State of Colorado (other than its rules as to conflicts of law) and the laws of the United States as applicable.

6.The Parties agree that this Agreement shall be construed to benefit the Parties hereto and their respective permitted successors and assigns only, and shall not be construed to create any third party beneficiary rights in any other Party or in any governmental organization or agency, except as specifically set forth in Section J.

7.In the event that any one or more of the provisions contained in this Agreement or in any other instrument or agreement contemplated hereby shall, for any reason, be held to be invalid, illegal, or unenforceable in any respect; such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement or any such other instrument or agreement contemplated hereby.

8.No implied term, covenant, condition or provision of any kind whatsoever except for good faith and fair dealing shall affect any of the Parties’ respective rights and obligations hereunder, including, without limitation, rights and obligations with respect to exploration, development, mining, processing and marketing of minerals, and the only terms, covenants, conditions or provisions which shall in any way affect any of their respective rights and obligations shall be those expressly set forth in this Agreement.

9.This Agreement may not be amended or modified, nor may any obligation hereunder be waived, except by writing duly executed on behalf of both Parties, and unless otherwise specifically provided in such writing, any amendment, modification, or waiver shall be effective only in the specific instance and for the purpose it is given.

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10.This Agreement is, and the rights and obligations of the Parties are, strictly limited to the matters set forth herein. Subject to the provisions of Section H, each of the Parties shall have the free and unrestricted right to independently engage in and receive the full benefits of any and all business ventures of any sort whatever, whether or not competitive with the matters contemplated hereby, without consulting the other or inviting or allowing the other to participate therein. The doctrines of “corporate opportunity” or “business opportunity” shall not be applied to any other activity, venture, or operation of either Party, whether adjacent to, nearby, or removed from the Property, and neither Party shall have any obligation to the other with respect to any opportunity to acquire any interest in any property outside the Property at any time, or within the Property after termination of this Agreement, regardless of whether the incentive or opportunity of a Party to acquire any such property interest may be based, in whole or in part, upon information learned during the course of operations or activities hereunder.

11.The Parties do not intend that there be any violation of the rule of perpetuities, the rule against unreasonable restraints or the alienation of property, or any similar rule. Accordingly, if any right or option to acquire any interest in the Property, or in any other real property, exists under this Agreement, such right or option must be exercised, if at all, so as to vest such interest within time periods permitted by applicable rules. If, however, such violation should inadvertently occur, the Parties hereby agree that a court shall reform that provision in such a way as to approximate most closely the intent of the Parties within the limits permissible under such rules.

12.Nothing contained in this Agreement shall be deemed to constitute either Party the partner of the other, nor, except as otherwise herein expressly provided, to constitute either Party the agent or legal representative of the other, nor to create any fiduciary relationship between them. It is not the intention of the Parties to create, nor shall this Agreement be construed to create, any mining, commercial, or other partnership. Neither Party shall have any authority to act for or to assume any obligation or responsibility on behalf of the other Party, except as otherwise expressly provided herein.

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IN WITNESS WHEREOF, the Parties have executed this Exploration Earn-In Agreement effective as of the date first set forth above.

MINES MANAGEMENT, INC.
By:	/s/ James H. Moore
Printed Name: James H. Moore
Title: Chief Financial Officer
MINERA MONTANORE PERU S.A.C.
By:	/s/ James H. Moore
Printed Name: James H. Moore
Title: CFO/Director
ESTRELLA GOLD CORPORATION
By:		/s/ Keith Laskowski
Printed Name: Keith Laskowski
Title: President & CEO
ESTRELLA GOLD PERU S.A.C.
By:	/s/ Keith Laskowski
Printed Name: Keith A. Laskowski
Title: Director

23

EXHIBIT A-1

To that Exploration Earn-In Agreement between ESTRELLA GOLD CORPORATION (“EGC”), a corporation formed under the laws of the Province of Ontario, Estrella Gold Peru S.A.C., a Peruvian sociedad anonima cerrada and a wholly owned subsidiary of EGC (“EGC Peru”, together with EGC herein called “EGC”), MINES MANAGEMENT, INC. (“MMI”),an Idaho corporation and Minera Montanore Peru S.A.C., a Peruvian sociedad anonima cerrada and a wholly owned subsidiary of MMI (“MMI Peru”, together with MMI herein called “MMI”) dated effective March 1, 2012.

Description of the Project

Department of Huancavelica, Peru

The following Concessions situated in the Department of Huancavelica, Peru:

			Area		Recording Details of Title to Mineral
	Mineral	Code	originally granted	Resolution Approving Title to	Concession (Public Registry in the	Location UTM Coordinates (PSAD 56)
	Concession	Number	(Hectares)	Mineral Concession	city of Huancayo)	North	East	Vertex
1	Cinco Hermanos	06008353X01	100.0000	R.J. N° 7577-94-RPM	File 20002904	8,603,739.96	530,770.23	1
				(21 November 1994)		8,601,741.20	530,699.85	2
						8,601,758.80	530,200.15	3
						8,603,757.56	530,270.53	4
2	Jaime 1	010204399	600.0000	R.J. N° 00974-2000-RPM	File 11006506	8,603,000.00	532,000.00	1
				(16 March 2000)		8,601,000.00	532,000.00	2
						8,601,000.00	529,000.00	3
						8,603,000.00	529,000.00	4
3	Julia 1	010204499	600.0000	R.J. N° 01169-2000-RPM	File 11006525	8,605,000.00	532,000.00	1
				(27 March 2000)		8,603,000.00	532,000.00	2
						8,603,000.00	529,000.00	3
						8,605,000.00	529,000.00	4
4	La Estrella 1	010634407	1000.0000	R.P. N° 1793-2008-INGEMMET/PCD/PM	File 11118359	8,604,000.00	528,000.00	1
				(29 May 2008)		8,604,000.00	529,000.00	2
						8,601,000.00	529,000.00	3
						8,601,000.00	532,000.00	4
						8,600,000.00	532,000.00	5
						8,600,000.00	527,000.00	6
						8,603,000.00	527,000.00	7
						8,603,000.00	528,000.00	8

A-1-1

EXHIBIT A-2

Details of the 1.5% NSR Royalty over Cinco Hermanos, Jaime 1 and Julia 1 mineral concessions

	Mineral Concession	Beneficiaries of 1.5%Net Smelter Return	Recording Details of the 1.5% Net Smelter Return Royalty(Public Registry in the city of Huancayo)
1	Cinco Hermanos	Jaime Oswaldo Vergara León,	Entry 7 of File 2002904
2	Jaime 1	Carmen Julia Herrera Galdo, and	Entry 5 of File 11006506
3	Julia 1	Jannette Vergara Herrera	Entry 5 of File 11006525

A-2-1

EXHIBIT A-3

To that Exploration Earn-In Agreement between ESTRELLA GOLD CORPORATION (“EGC”), a corporation formed under the laws of the Province of Ontario, Estrella Gold Peru S.A.C., a Peruvian sociedad anonima cerrada and a wholly owned subsidiary of EGC (“EGC Peru”, together with EGC herein called “EGC”), MINES MANAGEMENT, INC. (“MMI”), an Idaho corporation and Minera Montanore Peru S.A.C., a Peruvian sociedad anonima cerrada and a wholly owned subsidiary of MMI (“MMI Peru”, together with MMI herein called “MMI”) dated effective March 1, 2012.

AREA OF INTEREST

The Area of Interest shall be 2 kilometers from the exterior boundaries of the existing Concessions as described in Exhibit A-1.

A-3-1

EXHIBIT B

To that Exploration Earn-In Agreement between ESTRELLA GOLD CORPORATION (“EGC”), a corporation formed under the laws of the Province of Ontario, Estrella Gold Peru S.A.C., a Peruvian sociedad anonima cerrada and a wholly owned subsidiary of EGC (“EGC Peru”, together with EGC herein called “EGC”), MINES MANAGEMENT, INC. (“MMI”), an Idaho corporation and Minera Montanore Peru S.A.C., a Peruvian sociedad anonima cerrada and a wholly owned subsidiary of MMI (“MMI Peru”, together with MMI herein called “MMI”) dated effective March 1, 2012.

A.“Environmental Laws” shall mean all laws (including rules, regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder) of federal, state and local governments (and all agencies thereof) concerning pollution or protection of the environment, reclamation, public health and safety, or employee health and safety, including laws relating to emissions, discharges, releases, or threatened releases of pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials or wastes into ambient air, surface water, ground water, or lands or otherwise relating to the existence, manufacture, processing, distribution, use, treatment, storage, disposal, recycling, transport, or handling or reporting or notification to any governmental authority in the collection, storage, use, treatment or disposal of pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials or wastes.

B.“Environmental Liabilities” shall mean any liability arising out of, based on or resulting from (i) the presence, release, threatened release, discharge or emission into the environment of any Hazardous Materials or substances existing or arising on, beneath or above such property and/or emanating or migrating and/or threatening to emanate or migrate from such property to other properties; (ii) disposal or treatment of or the arrangement for the disposal or treatment of Hazardous Materials originating or transported from such property to an off-site treatment, storage or disposal facility, (iii) physical disturbance of the environment on or from such property; or (iv) the violation or alleged violation of any Environmental Laws relating to such property.

C.“Exploration and Development Expenses” shall mean and include all costs or fees, expenses, liabilities and charges paid, incurred or accrued by MMI which are related to exploration and development activities on or for the benefit of the Property, including without limitation:

1.All costs and expenses incurred in conducting exploration and prospecting activities on or in connection with the Property, including, without limitation, the active pursuit of required federal, state or local authorizations or permits and the performance of required environmental protection or reclamation obligations, the building, maintenance and repair of roads, drill site preparation, drilling, tracking, sampling, trenching, digging test pits, shaft sinking, acquiring, diverting and/or transporting water necessary for exploration, logging of drill holes and drill core, completion and evaluation of geological, geophysical, geochemical or other exploration data and preparation of interpretive reports, and surveying and laboratory costs and charges (including assays, or metallurgical analyses and tests);

B-1

2.All expenses incurred in conducting development activities on or in connection with the Property, the active pursuit of required federal, state or local authorization or permits and the performance of required environmental protection or reclamation obligations, pre-stripping and stripping, the construction and installation of a mill, leach pads or other beneficiation facilities for valuable minerals, and other activities, operations or work performed in preparation for the removal or testing of valuable minerals from the Property;

3.All costs of acquiring additional interests in real property within the Area of Interest, to the extent such interests become subject to this Agreement, including without limitation costs and expenses incurred by MMI in conducting negotiations and due diligence, attorneys’ fees and all amounts paid by MMI to EGC or to third parties in acquiring such interests;

4.All costs incurred in performing any reclamation or other restoration or clean-up work required by any federal, state or local agency or authority, and all costs of insurance obtained or in force to cover activities undertaken by or on behalf of MMI on the Property;

5.Salaries, wages, expenses and benefits of employees or consultants of MMI engaged in operations directly relating to the Property, including salaries and fringe benefits of those who are temporarily assigned to and directly employed on work relating to the Property for the periods of time such employees are engaged in such activities and reasonable transportation expenses for all such employees to and from their regular place of work to the Property;

6.All costs incurred in connection with the preparation of pre-feasibility or feasibility studies and economic and technical analyses pertaining to the Property, whether carried out by MMI or by third parties under contract with MMI;

7.Taxes and assessments, other than income taxes, assessed or levied upon or against the Property or any improvements thereon situated thereon for which MMI is responsible or for which MMI reimburses EGC;

8.Costs of material, equipment and supplies acquired, leased or hired, for use in conducting exploration or development operations relating to the Property; provided, however, that equipment owned and supplied by MMI shall be chargeable at rates no greater than comparable market rental rates available in the area of the Property;

9.Costs and expenses of establishing and maintaining field offices, camps and housing facilities; and

10.Costs incurred by MMI in examining and curing title to any part of the Property, in making required payments or performing other required obligations under any underlying agreements, in satisfying surface use or damage obligations to landowners, or in conducting any analyses of the environmental conditions at the Property.

11.“Hazardous Materials” means any substance: (a) the presence of which requires reporting, investigation, removal or remediation under any Environmental Law; (b) that is defined as “dangerous goods”, a “hazardous waste,” “hazardous substance,” “extremely hazardous substance” or “pollutant” or “contaminant” under any Environmental Law; (c) that is

B-2

toxic, explosive, corrosive, flammable, ignitable, infectious, radioactive, reactive, carcinogenic, mutagenic or otherwise hazardous and is regulated under any Environmental Law; (d) the presence of which on a property causes or threatens to cause a nuisance upon the property or to adjacent properties or poses or threatens to pose a hazard to the health or safety of persons on or about the property; (e) that contains gasoline, diesel fuel or other liquid hydrocarbons; or (f) that contains PCBs, asbestos or urea formaldehyde foam insulation.

12.“Net Cash Flow from Operations” for any period shall be calculated by determining all revenues received from the sale of Products or, if Products are taken in kind, the deemed sale of Products at the spot price, and any other revenues received (including without limitation interest income, insurance proceeds and proceeds from the sale of equipment or other assets for that period), and deducting therefrom all cash payments for all costs, expenses, liabilities and charges incurred within that period from and after the date that Production is achieved for exploration, development and the construction or replacement of facilities upon the Property, and the mining, processing, treatment, transportation, refining, sales and marketing of Products from the Property, plus a working capital reserve equal to two months of expenditures necessary for mining, processing, treatment, transportation, refining, sales and marketing of Products, all in accordance with generally accepted accounting principles consistently applied by Mines Management, except for any non-cash charges such as depreciation, amortization or depletion.

In calculating Net Cash Flow from Operations, no deduction shall be made for income taxes payable to either federal or state governments which are a liability of the individual Parties and not of NewcoPeru. Any capital expenditures incurred after the commencement of Production, including capitalized exploration and deferred mining, shall be deducted at their actual cost at the time they are incurred. If, in any year after the commencement of Production, an operating loss results, the amount of the loss shall be considered as and be included with outstanding costs and expenses and carried forward in determining Net Cash Flow for subsequent periods.

13.“Ore” means material containing valuable minerals that is mined or will be mined and will be sold or further processed for the recovery of valuable minerals.

14.“Production” means mining and processing of Ore from the first deposit of Ore to be mined on the Property at a rate of not less than 50% of the design capacity of the mine and related facilities for at least one month without interruption; provided, however, that the term “Production” shall not include the minor refining of Ore or Products for metallurgical tests, pilot projects and facility start-up testing.

15.“Products” means all Ores, minerals and mineral resources produced from the Properties under this Agreement.

B-3

EXHIBIT C

To that Exploration Earn-In Agreement between ESTRELLA GOLD CORPORATION (“EGC”), a corporation formed under the laws of the Province of Ontario, Estrella Gold Peru S.A.C., a Peruvian sociedad anonima cerrada and a wholly owned subsidiary of EGC (“EGC Peru”, together with EGC herein called “EGC”), MINES MANAGEMENT, INC. (“MMI”), an Idaho corporation and Minera Montanore Peru S.A.C., a Peruvian sociedad anonima cerrada and a wholly owned subsidiary of MMI (“MMI Peru”, together with MMI herein called “MMI”) dated effective March 1 2012.

PRELIMINARY ECONOMIC ASSESSMENT

“Preliminary Economic Assessment” means a study that includes an economic analysis of the potential viability of mineral resources taken at an early stage of the project prior to the completion of a preliminary feasibility study and that complies with Canadian National Instrument 43-101.

“Preliminary feasibility study” as used in the preceding sentence has the meaning set forth in Canadian National Instrument 43-101.

C-1

EXHIBIT D

NET SMELTER RETURN ROYALTY

NET SMELTER RETURNS

1.Calculation.

(a)As used herein, “Payor” means the Party obligated to pay the Production Royalty (and its successors and assigns), and “Payee” means the Party entitled to receive the Production Royalty (and its successors and assigns).

(b)As used herein, “Net Smelter Returns” means the Gross Returns from any and all ores, metals, minerals and materials of every kind and character found in, on or under the Property (“Valuable Minerals”), extracted, produced and sold or deemed to have been sold from the Property, less all Allowable Deductions.

(c)As used herein, “Gross Returns” has the following meanings for the following categories of Valuable Minerals:

(i)If Payor causes refined gold that meets or exceeds the generally accepted commercial standards for refined gold to be produced by an independent third party refinery from ores mined from the Property, for purposes of determining the Production Royalty, the refined gold shall be deemed to have been sold in the calendar month in which it was produced at the refinery at the Monthly Average Gold Price for that month. The Gross Returns from such deemed sales shall be determined by multiplying Gold Production during the month by the Monthly Average Gold Price. As used herein, “Gold Production” means the quantity of refined gold that is outturned to Payor’s account by the refinery during the calendar month on either a provisional or final settlement basis. If outturn of refined gold is made by the refinery on a provisional basis, the Gross Returns shall be based upon the amount of such provisional settlement, but shall be adjusted in subsequent statements to account for the amount of refined metal established by final settlement by the refinery. As used herein, “Monthly Average Gold Price” means the average London Bullion Market Association P.M. Gold Fix, calculated by dividing the sum of all such prices reported for the month by the number of days for which such prices were reported. If the London Bullion Market Association P.M. Gold Fix ceases to be published. the Monthly Average Gold Price shall be determined by reference to prices for refined gold for immediate delivery in the most nearly comparable established market selected by Payor as such prices are published in “Metals Week” or a similar publication.

(ii)If Payor causes refined silver that meets or exceeds the generally accepted commercial standards for refined silver to be produced by an independent third-party refinery from are mined from the Property, for purposes of determining the Production Royalty, the refined silver shall be deemed to have been sold in the calendar month in which it was produced at the Monthly Average Silver Price for that month. The Gross Returns from such deemed sales shall be determined by multiplying Silver

D-1

Production during the calendar month by the Monthly Average Silver Price. As used herein, “Silver Production” shall mean the quantity of refined silver that is outturned to Payor’s account by the refinery during the calendar month on either a provisional or final settlement basis. If outturn of refined silver is made by the refinery on a provisional basis, the Gross Returns shall be based upon the amount of such provisional settlement, but shall be adjusted in subsequent statements to account for the amount of refined metal established by final settlement by the refinery. As used herein, “Monthly Average Silver Price” shall mean the average New York Silver Price as published daily by Handy & Harman, calculated by dividing the sum of all such prices reported for the calendar month by the number of days for which such prices were reported. If the Handy & Harman quotation ceases to be published, the Monthly Average Silver Price shall be determined by reference to prices for refined silver for immediate delivery in the most nearly comparable established market selected by Payor as published in “Metals Week” or a similar publication.

(iii)If Payor sells refined metals (other than refined gold and refined silver), doré or concentrates produced from Valuable Minerals from the Property, the Gross Returns for such refined metals shall be the proceeds actually received by Payor from their sale. If such sales are to an Affiliate, the refined metals, doré, or concentrates shall be deemed, solely for the purpose of computing Gross Returns, to have been sold at prices and on terms no less favorable to Payor than those which would have been received under similar circumstances from an unaffiliated third party. As used herein, “Affiliate” means any person, partnership, limited liability company, joint venture, corporation, or other form of enterprise which Controls, is Controlled by, or is under common Control with Payor, and “Control” means the ability, directly or indirectly through one or more intermediaries, to direct or cause the direction of the management and policies of such entity through (A) the legal or beneficial ownership of voting securities or membership interests; (B) the right to appoint managers, directors or corporate management; (C) contract; (D) operating agreement; (E) voting trust; or (F) otherwise.

(d)As used herein, “Allowable Deductions” means the following costs, charges, and expenses incurred or accrued by Payor:

(i)If Payor sells or is deemed to have sold refined gold or refined silver:

(A)all costs, charges and expenses for smelting and refining doré or concentrates to produce the refined gold or refined silver (including handling, processing, and provisional settlement fees, sampling, assaying and representation costs, penalties, and other processor deductions);

(B)all costs, charges, and expenses for weighing, sampling, determining moisture content and packaging Valuable Minerals and for loading and transportation of ores, minerals, doré or concentrates from the Property to the refinery or smelter and then to the place of sale (including freight, insurance,

D-2

security, transaction taxes, handling, port, demurrage, delay, and forwarding expenses incurred by reason of or in the course of such transportation); and

(C)actual sales and brokerage costs incurred by Payor.

(ii)If Payor sells refined metals (other than refined gold or refined silver), doré concentrate or ores:

(A)all costs, charges, and expenses for (I) beneficiation, processing or treatment of such materials at any plant or facility not owned by Payor and (II) smelting or refining to produce a refined metal (including handling, processing, and provisional settlement fees, sampling, assaying and representation costs, penalties, and other processor deductions);

(B)all costs, charges, and expenses for weighing, sampling, determining moisture content and packaging Valuable Minerals and for loading and transportation of ores. Minerals, doré concentrates or other products from the Property (I) to the place of sale, or (II) if such ores or other materials are beneficiated, processed, treated, smelted or refined at any plant or facility more than five (5) miles from the exterior boundary of the Property, to such plant of facility and then to the place of sale (including freight, insurance, security, transaction taxes, handling, Port, demurrage, delay, and forwarding expenses incurred by reason of or in the course of such transportation); and

(C)actual sales and brokerage costs.

(iii)All royalties payable to any governmental agency and all sales, use, severance, Nevada net proceeds of mines and ad valorem taxes and any other tax or governmental levy or fee on or measured by mineral production from the Property (other than taxes based on income).

(e)Payor shall have the right to market and sell or refrain from selling refined gold, refined silver and other mineral products from the Property in any manner it may elect, including the right to engage in forward sales, future trading or commodity options trading, and other price hedging, price protection, and speculative arrangements (“Trading Activities”) which may involve the possible delivery of gold, silver or other mineral products from the Property. With respect to Production Royalty payable on refined gold and refined silver and any other Valuable Minerals, Payee shall not be entitled to participate in the proceeds or be obligated to share in any losses generated by Payor’s actual marketing or sales practices or by its Trading Activities and no such profits or losses shall be included in Gross Returns.

2.Manner of Payment. Production Royalty payments shall be paid by Payor to Payee (or notice of a credit against Production Royalties as provided above shall be given to Payee) on or before thirty (30) days following the calendar quarter during which Payor shall have received payment for Valuable Minerals sold by Payor or during which Valuable Minerals are deemed sold as provided above. Production Royalties shall accrue to Payee’s account upon such final payment or upon being credited to the account of Payor by the smelter, refinery or other are buyer to Payor for the Valuable Minerals sold and for which the Production Royalty is

D-3

payable. All Production Royalty payments shall be made at Payor’s election by Payor’s check or by wire transfer. All Production Royalty payments shall be accompanied by a statement and settlement sheet showing the quantities and grades of Valuable Minerals mined and sold from the Property, the proceeds of sales, cost, assays and analyses, and other pertinent information in reasonably sufficient detail to explain the calculation of the Production Royalty payment.

3.Payments; Where Made. All payments hereunder shall be sent by certified U.S. mail to Payee at its address as set forth above, or by wire transfer to an account designated by and in accordance with written instructions from Payee. The date of placing such payment in the United States mail by Payor, or the date the wire transfer process is initiated, shall be the date of such payment. Payments by Payor in accordance herewith shall fully discharge Payor’s obligation with respect to such payment, and Payor shall have no duty to otherwise apportion or allocate any payment due to Payee or its successors or assigns.

4.Audits; Objections to Payments. Payee, at its sole election and expense, shall have the right to perform, not more frequently than once annually following the close of each calendar year, an audit of Payor’s accounts relating to payment of the Production Royalty hereunder by any authorized representative of Payee. Any such inspection shall be for a reasonable length of time during regular business hours, at a mutually convenient time, upon at least five (5) business days prior written notice by Payee. All royalty payments made in any calendar year shall be considered final and in full accord and satisfaction of all obligations of Payor with respect thereto, unless Payee gives written notice describing and setting forth a specific objection to the calculation thereof within six (6) months following the close of the annual audit for that calendar year. Payor shall account for any agreed upon deficit or excess in Production Royalty payments made to Payee by adjusting the next quarterly statement and payment following completion of such audit to account for such excess.

5.Conduct of Operations. Payor shall have the sole and exclusive control of all operations on or for the benefit of the Property, and of any and all equipment, supplies, machinery, and other assets purchased or otherwise acquired or under its control in connection with such operations. Payor may carry out such operations on the Property as it may, in its sole discretion, determine to be warranted, so long as such operations are conducted in accordance with procedures acceptable in the mining and metallurgical industry. The timing, nature, manner and extent of any exploration, development, mining or processing operations carried out or in connection with the Property shall be within the sole discretion of Payor, and there shall be no implied covenant whatsoever to begin or continue any such operations. If Payor at any time, and from time to time after commencing operations, desires to shut down, suspend or cease operations for any reason, it shall have the right to do so. Payor may use and employ such methods of mining as it may desire or find most profitable. Payor shall not be required to mine, preserve, or protect in its mining operations any ores, leachates, precipitates, concentrates or other products containing Valuable Minerals which cannot be mined or shipped at a reasonable profit to Payor. Any decision as to the time, manner and form, if any, in which ores or other products containing Valuable Minerals are to be sold shall be made by Payor in its sole discretion.

6.Ore Processing. All determinations with respect to: (a) whether ore from the Property will be beneficiated, processed or milled by Payor or sold in a raw state; (b) the

D-4

methods of beneficiating, processing or milling any such ore; (c) the constituents to be recovered therefrom, and (d) the purchasers to whom any ore, minerals or mineral substances derived from the Property may be sold, shall be made by Payor in its sole and absolute discretion.

7.Ore Samples. The mineral content of all ore mined and removed from the Property (but excluding ore leached in place) and the quantities of constituents recovered by Payor shall be determined by Payor, or with respect to such ore which is sold, by the mill or smelter to which the ore is sold, in accordance with standard sampling and analysis procedures, and shall be weighted average based on the total amount of ore from the Property crushed and sampled, or the constituents recovered, during an entire calendar quarter. Upon reasonable advance written notice to Payor, Payee shall have the right to have representatives present at the time samples are taken for the purpose of confirming that the sampling and analysis procedure is standard and acceptable according to accepted industry practices.

8.Commingling of Ores. Payor shall have the right to mix or commingle, either underground, at the surface, or at processing plants or other treatment facilities, any material containing Valuable Minerals mined or extracted from the Property with ores or material derived from other lands or properties owned, leased or controlled by Payor; provided, however, that before commingling, Payor shall calculate from representative samples the average grade of the ore from the Property and shall either weigh or volumetrically calculate the number of tons of ore from the Property to be commingled. As products are produced from the commingled ores, Payor shall calculate from representative samples the average percentage recovery of products produced from the commingled ores during each month. In obtaining representative samples, calculating the average grade of commingled ores and average percentage of recovery, Payor may use any procedures acceptable in the mining and metallurgical industry which Payor believes to be accurate and cost-effective for the type of mining and processing activity being conducted, and Payor’s choice of such procedures shall be final and binding upon Payee.  In addition, comparable procedures may be used by Payor to apportion among the commingled ores any penalty charges imposed by the smelter or refiner on commingled ores or concentrates. The records relating to commingled ores shall be available for inspection by Payee, at Payee’s sole expense, at all reasonable times, and shall be retained by Payor for a period of two (2) years.

9.Waste Rock, Spoil and Tailings. Any ore, mine waters, leachates, pregnant liquors, pregnant slurries, and other products or compounds or metals or minerals mined from the Property shall be the property of Payor, subject to the Production Royalty as provided for in Section 1. The Production Royalty shall be payable only on metals, ores, or minerals recovered prior to the time waste rock, spoil, tailings, or other mine waste and residue are first disposed of as such, and Payor shall be free to use or dispose of such waste and residue in whatever manner it sees fit in its sole discretion. Payor shall have the sole right to dump, deposit, sell, dispose of, or reprocess such waste rock, spoil, tailings, or other mine wastes and residues, and Payee shall have no claim or interest therein other than for the payment of the Production Royalty to the extent any Valuable Minerals are produced and sold therefrom.

10.No Covenants. The parties agree that in no event shall Payor have any duty or obligation, express or implied, to explore for, develop, mine or produce ores, minerals or mineral substances from the Property, and the timing, manner, method and amounts of such exploration, development, mining or production, if any, shall be in the sole discretion of Payor. Payee

D-5

acknowledges that the expenditures made by Payor to advance activities on the Property and the right to the Production Royalty are sufficient consideration for the conversion of its Participating Interest. None of the provisions of this Section 10 or any other provision of this Exhibit D shall be deemed to limit or restrict Payor’s ability to sell or otherwise conveyor transfer to any third party all or any portion of Payor’s interest in the Property.

11.Nature of Payee’s Interest. The Production Royalty payable to Payee shall payable only on production of Valuable Minerals from the Property and any real property interest within the Area of Interest acquired during the term of the this Agreement or the Shareholder Agreement (“AOI Property), but not production from any other properties adjacent to or in the vicinity of the Property or within the Area of Interest. With respect to the Property and the AOI Property, the Payee shall have only the rights and incidents of ownership of a non-executive royalty owner. Payee shall not have any possessory or working interest in the Property or the AOI Property nor any of the incidents of such interest. By way of example but not by way of limitation, Payee shall not have (a) the right to participate in the execution of applications for authorities, permits or licenses, mining leases, options, farm-outs or other conveyances, (b) the right to share in bonus payments or rental payments received as the consideration for the execution of such leases, options, farm-outs, or other conveyances, or (c) the right to enter upon the Property or the AOI Property and prospect for, mine, drill for, or remove ores, minerals or mineral products therefrom.

D-6

EX-21

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Exhibit 21

SUBSIDIARIES OF THE REGISTRANT

Newhi, Inc. (WA)

Montanore Minerals Corp. (DE)

Montmin Resources Corp. (DE)

Minera Montanore Peru, SAC

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Exhibit 21

SUBSIDIARIES OF THE REGISTRANT

EX-23.1

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Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

        We consent to the reference to our firm under the caption "Experts" in the Registration Statements on Forms S-8 (File Nos. 333-186468, 333-152732,, 333-125701 and 333-104724) and Forms S-3 (File Nos. 333-148069and 333-114258) of Mines Management, Inc. and to the incorporation by reference therein of our report dated April 1, 2013 with respect to the consolidated financial statements of Mines Management, Inc. included in its Annual Report (Form 10-K) for the year ended December 31, 2012 as filed with the Securities and Exchange Commission.

/s/ Tanner LLC

Salt Lake City, Utah
April 1, 2013

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Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

EX-23.2

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EXHIBIT 23.2

CONSENT OF MINE DEVELOPMENT ASSOCIATES INC.

        We hereby consent to the incorporation by reference of mineralization or resources and other analyses performed by us in our capacity as an independent consultant to Mines Management, Inc. (the "Company"), which are set forth in this Annual Report on Form 10-K for the year ended December 31, 2012, in the Registration Statements on Forms S-8 (File Nos. 333-186468, 333-152732, 333125701 and 333-104724) and Forms S-3 (File Nos. 333-148069 and 333-114258), as amended, or any related abbreviated registration statement filed by the Company with the Securities and Exchange Commission pursuant to Rule 462(b) under the Securities Act of 1933, as amended, or in any amendment to any of the foregoing, or to any prospectuses or amendments or supplements thereto. We also consent to the reference to us under the heading "Experts" in such Registration Statements and any prospectuses or amendments or supplements thereto.

Dated this 29th day of March, 2013

Mine Development Associates, Inc.
/s/ STEVE RISTORCELLI
Name:	Steve Ristorcelli
Title:	Authorized Person

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EXHIBIT 23.2

CONSENT OF MINE DEVELOPMENT ASSOCIATES INC.

EX-23.3

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EXHIBIT 23.3

CONSENT OF MINE AND QUARRY ENGINEERING SERVICES, INC.

        We hereby consent to (i) the reference to the technical report entitled "Technical Report—Preliminary Economic Assessment—Montanore Project—Montana, USA" dated February 3, 2011 (the "Report") relating to Mines Management, Inc.'s (the "Company") Montanore Project, portions of which were prepared by us in our capacity as an independent consultant to the Company, which is set forth in this Annual Report on Form 10-K for the year ended December 31, 2012, (ii) the inclusion or incorporation by reference of information derived from the Report (to the extent prepared by us) in the Registration Statements on Forms S-8 (File Nos. 333-186468, 333-104724, 333-125701 and 333-104724) and Forms S-3 (File Nos. 333-162555, 333-148069, 333-129784 and 333-114258), as amended, or any related abbreviated registration statement filed by the Company with the Securities and Exchange Commission pursuant to Rule 462(b) under the Securities Act of 1933, as amended, or in any amendment to any of the foregoing, or to any prospectuses or amendments or supplements thereto and (iii) all other references to the undersigned and its agents included or incorporated by reference in the above-referenced Registration Statements and in any prospectuses or amendments or supplements thereto, provided that such references are consistent with the disclosure set forth in this Annual Report on Form 10-K for the year ended December 31, 2012. We also consent to the reference to us under the heading "Experts" in such Registration Statements and any prospectuses or amendments or supplements thereto, provided that such reference is consistent with the disclosure set forth in this Annual Report on Form 10-K for the year ended December 31, 2012.

Dated this 29th day of March, 2013

Mine and Quarry Engineering Services, Inc.
/s/ CHRISTOPHER KAYE
Name:	Christopher Kaye
Title:	President

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EXHIBIT 23.3

CONSENT OF MINE AND QUARRY ENGINEERING SERVICES, INC.

EX-31.1

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EXHIBIT 31.1

CERTIFICATION

I, Glenn M. Dobbs, certify that:

1.

I have reviewed this Form 10-K of Mines Management, Inc. (the "registrant");

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: April 1, 2013

/s/ GLENN M. DOBBS
Glenn M. Dobbs
Chief Executive Officer

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EXHIBIT 31.1

CERTIFICATION

EX-31.2

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EXHIBIT 31.2

CERTIFICATION

I, Nicole Altenburg, certify that:

1

I have reviewed this Form 10-K of Mines Management, Inc. (the "registrant");

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: April 1, 2013

/s/ NICOLE ALTENBURG
Nicole Altenburg
Principal Financial Officer

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EXHIBIT 31.2

CERTIFICATION

EX-32.1

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EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        In connection with the Annual Report of Mines Management, Inc. (the "Company") on Form 10-K for the period ended December 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned hereby certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: April 1, 2013

/s/ GLENN M. DOBBS
Glenn M. Dobbs
Chief Executive Officer

        A signed original of this written statement required by Section 906 has been provided to Mines Management, Inc. and will be retained by Mines Management, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

EX-32.2

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EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        In connection with the Annual Report of Mines Management, Inc. (the "Company") on Form 10-K for the period ended December 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned hereby certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: April 1, 2013

/s/ NICOLE ALTENBURG
Nicole Altenburg
Principal Financial Officer

        A signed original of this written statement required by Section 906 has been provided to Mines Management, Inc. and will be retained by Mines Management, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

XML

DEFERRED INCOME TAX (Details) (USD $)	Dec. 31, 2012	Dec. 31, 2011
Deferred tax assets:
Net operating loss carryforwards	$ 20,340,000	$ 18,270,000
Stock-based compensation	650,000	710,000
Property, plant and equipment	1,250,000	1,250,000
Asset retirement obligation	160,000	150,000
Warrant derivatives		120,000
Total deferred tax assets	22,400,000	20,500,000
Deferred tax liabilities:
Property, plant and equipment	480,000	570,000
Net deferred tax asset before valuation allowance	21,920,000	19,930,000
Less valuation allowance	$ (21,920,000)	$ (19,930,000)

XML

FAIR VALUE MEASUREMENTS (Details 2) (USD $)	12 Months Ended
	Dec. 31, 2012
Warrant Derivatives
Fair value reconciliation of level 3 liabilities measured at fair value
Balance at the beginning of the period	$ 357,977
Gain on warrant derivatives	(357,977)
Asset Retirement Obligation
Fair value reconciliation of level 3 liabilities measured at fair value
Balance at the beginning of the period	435,171
Accretion expense	21,652
Balance at the end of the period	$ 456,823

XML

STOCK OPTIONS (Tables)

12 Months Ended

Dec. 31, 2012

STOCK OPTIONS

Summary of stock option activity

A summary of the option activity under the Plans as of December 31, 2012, and changes during the year then ended, is presented below:

	Number of Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2012		3,601,000		$	1.86
Granted		456,000		$	1.19
Exercised		(265,000	)	$	1.06
Forfeited or expired		(170,000	)	$	2.53
Outstanding and exercisable at December 31, 2012		3,622,000		$	1.81		2.83	$	20,000

Schedule of assumptions used to estimate the fair value of stock options

	Years Ended December 31,
	2012			2011
Weighted average risk-free interest rate		0.30	%		0.63	%
Weighted average volatility		72.33	%		86.39	%
Expected dividend yield		—			—
Weighted average expected life (in years)		3.0			3.5
Weighted average grant-date fair value	$	0.56		$	1.19

Schedule of nonvested options

A summary of the status of the Company's nonvested options as of December 31, 2012 and changes during the year then ended is presented below:

	Number of Options			Weighted- Average Grant-Date Fair Value
Nonvested at January 1, 2012		730,000		$	1.18
Expired		(80,000	)	$	0.99
Vested		(650,000	)	$	1.20
Nonvested at December 31, 2012		—			—

XML

COMMITMENTS (Details 2) (Estrella Gold Corp., USD $)	12 Months Ended	1 Months Ended	12 Months Ended				0 Months Ended
	Dec. 31, 2012 First agreement year	Feb. 28, 2013 First agreement year Subsequent event	Dec. 31, 2012 First agreement year Minimum	Dec. 31, 2012 First agreement year Exploration activities Minimum	Dec. 31, 2012 Second agreement year Minimum	Dec. 31, 2012 Subsequent agreement year	Apr. 05, 2012 Exploration activities
Commitments
Percentage of Estrella exploration property located in central Peru that could be acquired by the company							75.00%
Exploration activities commitment							$ 5,000,000
Annual cash payments required to be made to Estrella	100,000					200,000
Annual cash payments made to Estrella		100,000
Exploration and development expenditures			$ 500,000	$ 350,000	$ 500,000

XML

STOCKHOLDERS' EQUITY (Details) (USD $)	12 Months Ended		125 Months Ended	0 Months Ended		1 Months Ended	0 Months Ended	12 Months Ended	0 Months Ended	1 Months Ended	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012	Apr. 04, 2011 Public offering 2011 transaction	Mar. 08, 2011 Public offering 2011 transaction	Apr. 04, 2011 Public offering 2011 transaction	Apr. 20, 2007 Public offering 2007 transaction	Dec. 31, 2012 Public offering 2007 transaction	Nov. 02, 2007 Private placement 2007 transaction item	Oct. 31, 2005 The 2005 transaction	Dec. 31, 2012 The 2005 transaction	Dec. 31, 2011 The 2005 transaction	Oct. 31, 2005 The 2005 transaction Maximum
Common Shares:
Number of shares issued or sold					4,800,000				2,500,000	1,016,667
Issue price (in dollars per share)				$ 3.15	$ 3.15	$ 3.15			$ 4.00	$ 6.00
Gross proceeds				$ 1,008,000	$ 15,120,000
Net proceeds	275,400	15,337,494	74,881,436	947,520	14,212,800	15,160,320
Number of shares that can be purchased by the underwriters under over-allotment option					720,000
Period after closing for which shares granted under over-allotment option are exercisable					30 days
Number of shares issued on exercise of over-allotment option by underwriters				320,000
Total offering of shares of common stock						5,120,000
Number of units issued in public offering excluding over-allotment option							6,000,000
Issue price (in dollars per unit)							$ 5.00
Number of shares of common stock per unit							1
Number of warrants per unit							0.50
Number of shares of common stock that can be purchased with one warrant							1
Number of investors									1
Period time of right of first proposal and a right to match third-party proposals									20 years
Upfront payments received for ROFR not applying to trade sales and spot sales	0
Warrants
Number of shares of common stock that can be purchased on exercise of warrants											2,375,368		737,084
Cumulative warrants exercised (in shares)											269,620
Warrants exercised (in shares)								0			0	101,435
Gross proceeds on exercise of warrants											$ 0	$ 144,474
Exercise Price							$ 5.75			$ 8.25	$ 2.56
Preferred Shares:
Authorized preferred shares	10,000,000	10,000,000	10,000,000
Preferred stock, par value (in dollars per share)	$ 0	$ 0	$ 0

XML

MINING PROPERTIES

12 Months Ended

Dec. 31, 2012

MINING PROPERTIES

MINING PROPERTIES

NOTE 2—MINING PROPERTIES

Montanore:

        The Montanore property is located in northwestern Montana and includes 355 acres plus one 5-acre patented mill site. In August 2002, the Company acquired a controlling interest in the Montanore silver and copper deposit in Sanders County, Montana. The Company received a quitclaim deed from Noranda Mineral Corp. ("Noranda") when Noranda elected to withdraw from the project. In December 2002, the Company received a quitclaim deed to all intellectual property connected with studies that Noranda carried out on the project.

Advance and Iroquois:

        The Advance and Iroquois properties are located in northern Washington State. The Advance property consists of 720 acres of patented mineral rights. Although the Company does not own the overlying surface rights to its patented mineral rights, it does have right of access to explore and mine. The Iroquois property consists of 62 acres of patented mineral and surface rights and 15 unpatented mining claims containing 300 acres.

XML

MINING PROPERTIES (Details)	12 Months Ended
	Dec. 31, 2012 acre
Montanore
MINING PROPERTIES
Area of property (in acres)	355
Number of patented mining properties	1
Patented area of property (in acres)	5
Advance
MINING PROPERTIES
Area of property (in acres)	720
Iroquois
MINING PROPERTIES
Patented area of property (in acres)	62
Number of unpatented mining properties	15
Unpatented area of property (in acres)	300

XML

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details)	12 Months Ended
	Dec. 31, 2012
Building and leasehold improvements
Property and equipment
Estimated useful lives	39 years
Plant and equipment and office equipment | Minimum
Property and equipment
Estimated useful lives	5 years
Plant and equipment and office equipment | Maximum
Property and equipment
Estimated useful lives	10 years

XML

CERTIFICATES OF DEPOSIT (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
CERTIFICATES OF DEPOSIT
Number of certificates of deposit owned	2	2
Certificate of deposit value	$ 1,559,361	$ 1,559,361
Reclamation deposits	1,184,966	1,236,846
Certificates of deposit maturing in August 2013
CERTIFICATES OF DEPOSIT
Certificate of deposit value	1,559,361	1,559,361
Interest rate (as a percent)	30.00%
Certificates of deposit maturing on January 3, 2013
CERTIFICATES OF DEPOSIT
Reclamation deposits	1,124,055	1,175,935
Interest rate (as a percent)	0.55%
Certificates of deposit renewed and maturing on January 3, 2014
CERTIFICATES OF DEPOSIT
Certificate of deposit value	$ 1,124,055
Interest rate (as a percent)	0.45%

XML

AVAILABLE-FOR-SALE SECURITIES (Details) (USD $)	1 Months Ended	12 Months Ended		125 Months Ended
	Mar. 31, 2011 item	Dec. 31, 2012 item	Dec. 31, 2011	Dec. 31, 2012
AVAILABLE-FOR-SALE SECURITIES
Cost		$ 11,165	$ 11,165	$ 11,165
Unrealized Gains		8,468	2,111	8,468
Fair Market Value		19,633	13,276	19,633
Number of investments in marketable equity securities sold	1	0
Proceeds from the sale of investment in marketable equity securities	3,821,252
Gain on sale of available-for-sale securities	$ 2,005,904		$ 2,005,904	$ 2,005,904

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ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2012

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1—ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization:

        Mines Management, Inc. (the "Company") is a publicly held Idaho corporation incorporated in 1947. The Company acquires, explores, and develops mineral properties in North and South America.

Summary of Significant Accounting Policies:

a.

Principles of consolidation

        The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and include the accounts of Mines Management, Inc., and its wholly-owned subsidiaries, Newhi, Inc., Montanore Minerals Corp., Montmin Resources Corp., and Minera Montanore Peru, SAC. Intercompany balances and transactions have been eliminated.

b.

Exploration stage enterprise

        Since the Company is in the exploration stage of operation, the Company's financial statements are prepared in accordance with the provisions of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 915 Development Stage Enterprises, as it devotes substantially all of its efforts to acquiring and exploring mining interests that management believes should eventually provide sufficient net profits to sustain the Company's existence. Until such interests are engaged in commercial production, the Company will continue to prepare its consolidated financial statements and related disclosures in accordance with this standard.

        Financial statements issued by an exploration stage enterprise present financial position, changes in financial position, and results of operations in conformity with U.S. GAAP applicable to established operating enterprises and include the following additional information: (1) cumulative net losses reported as "deficit accumulated during exploration stage" in the stockholders' equity section of the consolidated balance sheets; (2) cumulative amounts from the inception of the exploration stage included on the consolidated statements of operations, statements of cash flows, and statements of stockholders' equity.

c.

Cash and cash equivalents

        Cash and cash equivalents include cash on hand, cash in banks, investments in certificates of deposit with original maturities of 90 days or less, and money market funds.

d.

Available for sale securities

        Available-for-sale securities are recorded at fair value, with unrealized gains or losses recorded as a component of equity, unless a decline in value of the security is considered other than temporary. Realized gains and losses and other than temporary impairments are recorded in the statement of operations.

e.

Property and equipment

        Property and equipment are stated at cost less accumulated depreciation. Buildings and leasehold improvements are depreciated on the straight-line basis over an estimated useful life of 39 years. Plant and equipment and office equipment are generally depreciated on a straight-line basis over estimated useful lives ranging from 5 to 10 years. When assets are retired or sold, the costs and related allowances for depreciation are eliminated from the accounts and any resulting gain or loss is reflected in the statement of operations.

f.

Mining properties, exploration and development costs

        All exploration expenditures, including costs to acquire stationary equipment for use in exploration activities that have no significant alternative future use, are expensed as incurred. Significant property acquisition payments for active exploration properties are capitalized, including payments to acquire mineral rights. Once a feasibility study has been completed, approved by management, and a decision is made to put the ore body into production, expenditures to develop new mines, to define further mineralization in existing ore bodies, and to expand the capacity of operating mines, are capitalized and amortized on the units of production basis over proven and probable reserves. The Company charges to operations the allocable portion of capitalized costs attributable to properties sold. Capitalized costs are allocated to properties sold based on the proportion of claims sold to the claims remaining within the project area.

g.

Asset impairment

        The Company evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amount may not be recoverable. If the sum of estimated future net cash flows on an undiscounted basis is less than the carrying amount of the related asset grouping, asset impairment is considered to exist. The related impairment loss is measured as the amount by which the carrying amount of the asset exceeds its fair value. Changes in significant assumptions underlying future cash flow estimates may have a material effect on the Company's financial position and results of operations.

h.

Fair value measurements

        The Company discloses the inputs used to develop the fair value measurements for the Company's financial assets and liabilities that are measured at fair value on a recurring basis as well as the level within the fair value hierarchy in which the fair value measurements in their entirety fall. The three levels of the fair value hierarchy are as follows:

• Level 1:    Unadjusted quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date.

  Level 2:    Quoted prices in inactive markets for identical assets or liabilities, quoted prices for similar assets or liabilities in active markets, or other observable inputs either directly related to the asset or liability or derived principally from corroborated observable market data.

  Level 3:    Unobservable inputs due to the fact that there is little or no market activity.

i.

Asset retirement obligations

        A liability is recognized for the present value of estimated environmental remediation (asset retirement obligation), in the period in which the liability is incurred if a reasonable estimate of fair value can be made. The offsetting balance is charged to expense as an exploration cost if the liability is incurred during the exploration stage of the related mining project or as an asset if the related mining project is in production. Adjustments are made to the liability for changes resulting from passage of time and changes to either the timing or amount of the original present value estimate underlying the obligation. The Company has an asset retirement obligation associated with its underground evaluation program at the Montanore Project, described more fully in note 7.

j.

Deferred income taxes

        Deferred income tax is provided for differences between the basis of assets and liabilities for financial and income tax reporting. A deferred tax asset, subject to a valuation allowance, is recognized for estimated future tax benefits of tax-basis operating losses being carried forward. Uncertain tax positions are evaluated in a two-step process, whereby (1) it is determined whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the largest amount of tax benefit that is greater than fifty percent likely to be realized upon ultimate settlement with the related tax authority would be recognized. If income tax related interest and penalties were to be assessed, the Company would charge interest to interest expense, and penalties to general and administrative expense.

k.

Stock based compensation

        The Company measures and records the costs of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award, recognized over the period during which an employee is required to provide services in exchange for such award. Compensation cost is recognized for awards granted and for awards modified, repurchased or cancelled.

l.

Net loss per share

        Basic earnings or loss per share is computed on the basis of the weighted average number of shares outstanding during the periods. Diluted earnings or loss per share is calculated on the basis of the weighted average number of shares outstanding during the period plus the effect of potential dilutive shares during the period. Potential dilutive shares include outstanding stock options and warrants. For periods in which a net loss is reported, potential dilutive shares are excluded because they are antidilutive. Therefore, basic loss per share is the same as diluted loss per share for the years ended December 31, 2012 and 2011.

n.

Assumptions and use of estimates

        The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Significant areas requiring the use of management assumptions and estimates relate to asset impairments, including long-lived assets and investments, asset retirement obligations, and valuation of stock based compensation and warrant derivatives. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Company's consolidated financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions, which could have a material effect on the reported amounts of the Company's consolidated financial position and results of operations.

o.

Recent accounting pronouncements

        In June 2011, the FASB issued guidance regarding the presentation of comprehensive income (loss). The new standard requires the presentation of comprehensive income (loss), the components of net income (loss) and the components of other comprehensive income (loss) either in a single continuous statement of comprehensive income (loss) or in two separate but consecutive statements. The entity is also required to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statements where the components of net income and the components of other comprehensive income are presented. The updated guidance is effective on a retrospective basis for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011. The Company adopted the provisions of this guidance effective January 1, 2012.

        In February 2013, the FASB issued guidance related to items reclassified from accumulated other comprehensive income. The new standard requires either in a single note or parenthetically on the face of the financial statements: (i) the effect of significant amounts reclassified from each component of accumulated other comprehensive income based on its sources and (ii) the income statement line items affected by the reclassification. The standard is effective January 1, 2013, with early adoption permitted. We do not expect this guidance to have a significant impact on our consolidated financial position, results of operations or cash flows.

p.

Subsequent events

        The Company evaluated events and transactions subsequent to the balance sheet date of December 31, 2012, for potential recognition or disclosure in the condensed consolidated financial statements.

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FAIR VALUE MEASUREMENTS (Details) (USD $)	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
FAIR VALUE MEASUREMENTS
Financial assets that are measured at fair value on a nonrecurring basis	$ 0
Financial liabilities that are measured at fair value on a nonrecurring basis	0
Assets:
Available-for-sale securities	19,633	13,276
Liabilities:
Asset retirement obligation	456,823	435,171	414,601
Recurring basis | Level 1
Assets:
Available-for-sale securities	19,633	13,276
Recurring basis | Level 3
Liabilities:
Warrant derivatives		357,977
Asset retirement obligation	$ 456,823	$ 435,171

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DEFERRED INCOME TAX (Details 2) (Federal, USD $)	Dec. 31, 2012
Federal
Operating loss carryforwards
Net operating loss carryforwards	$ 59,800,000

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CONSOLIDATED BALANCE SHEETS (USD $)	Dec. 31, 2012	Dec. 31, 2011
CURRENT ASSETS:
Cash and cash equivalents	$ 10,246,073	$ 17,121,800
Interest receivable	7,815	13,702
Prepaid expenses and deposits	250,892	207,285
Certificates of deposit	1,559,361	1,559,361
Total current assets	12,064,141	18,902,148
PROPERTY AND EQUIPMENT:
Buildings and leasehold improvements	836,454	836,454
Equipment	6,450,089	6,450,089
Office equipment	344,939	330,356
Total property and equipment, gross	7,631,482	7,616,899
Less accumulated depreciation	5,392,684	4,438,799
Total property and equipment, net	2,238,798	3,178,100
OTHER ASSETS:
Available-for-sale securities	19,633	13,276
Reclamation deposits	1,184,966	1,236,846
Total other assets	1,204,599	1,250,122
Total assets	15,507,538	23,330,370
CURRENT LIABILITIES:
Accounts payable	495,326	370,723
Payroll and payroll taxes payable	17,874	17,631
Warrant derivatives		357,977
Total current liabilities	513,200	746,331
LONG-TERM LIABILITIES:
Asset retirement obligation	456,823	435,171
Total liabilities	970,023	1,181,502
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock-no par value, 10,000,000 shares authorized; -0- shares issued and outstanding
Common stock-$0.001 par value, 100,000,000 shares authorized; 28,999,752 and 28,739,110 shares issued and outstanding, respectively	29,000	28,739
Additional paid-in capital	86,805,769	86,224,400
Accumulated deficit	(1,117,306)	(1,117,306)
Deficit accumulated during the exploration stage	(71,188,416)	(62,989,076)
Accumulated other comprehensive income	8,468	2,111
Total stockholders' equity	14,537,515	22,148,868
Total liabilities and stockholders' equity	$ 15,507,538	$ 23,330,370

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $)	Total	Common Stock	Issuable Common Stock	Additional Paid-in Capital	Accumulated Deficit	Deficit Accumulated During the Exploration Stage	Accumulated Other Comprehensive Income
BALANCES at Aug. 11, 2002	$ 407,355	$ 5,317	$ 22,500	$ 1,495,998	$ (1,117,306)		$ 846
BALANCES (in shares) at Aug. 11, 2002		5,316,956	90,000
Increase (Decrease) in Stockholders' Equity
Issuable common stock issued		90	(22,500)	22,410
Issuable common stock issued (in shares)		90,000	(90,000)
Common stock issued for cash	55,414,871	14,517		55,400,354
Common stock issued for cash (in shares)		14,515,912
Exercise of stock options and warrants	3,853,671	3,011		3,850,660
Exercise of stock options and warrants (in shares)		3,011,067
Stock-based compensation	8,935,496	380		8,935,116
Stock-based compensation (in shares)		380,000
Issuance of stock for Heidelberg shares		27		(27)
Issuance of stock for Heidelberg shares (in shares)		28,162
Cumulative adjustment for warrant derivative	(476,381)			(476,381)
Adjustment to net unrealized gain on marketable securities	1,893,635						1,893,635
Net loss	(57,403,645)					(57,403,645)
BALANCES at Dec. 31, 2010	12,625,002	23,342		69,228,130	(1,117,306)	(57,403,645)	1,894,481
BALANCES (in shares) at Dec. 31, 2010		23,342,097
Increase (Decrease) in Stockholders' Equity
Exercise of stock options and warrants	297,174	277		296,897
Exercise of stock options and warrants (in shares)		277,013
Stock-based compensation	1,664,173			1,664,173
Issuance of stock for Heidelberg shares	15,040,320	5,120		15,035,200
Issuance of stock for Heidelberg shares (in shares)		5,120,000
Adjustment to net unrealized gain on marketable securities	113,534						113,534
Reclassification to realized gain upon sale of marketable securities	(2,005,904)						(2,005,904)
Net loss	(5,585,431)					(5,585,431)
BALANCES at Dec. 31, 2011	22,148,868	28,739		86,224,400	(1,117,306)	(62,989,076)	2,111
BALANCES (in shares) at Dec. 31, 2011		28,739,110
Increase (Decrease) in Stockholders' Equity
Exercise of stock options and warrants	275,400	261		275,139
Exercise of stock options and warrants (in shares)		260,642
Stock-based compensation	306,230			306,230
Adjustment to net unrealized gain on marketable securities	6,357						6,357
Net loss	(8,199,340)					(8,199,340)
BALANCES at Dec. 31, 2012	$ 14,537,515	$ 29,000		$ 86,805,769	$ (1,117,306)	$ (71,188,416)	$ 8,468
BALANCES (in shares) at Dec. 31, 2012		28,999,752

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ASSET RETIREMENT OBLIGATIONS (Details) (USD $)	12 Months Ended		125 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012
ASSET RETIREMENT OBLIGATIONS
Credit adjusted risk-free interest rate used to discount estimated reclamation costs (as a percent)	4.78%
Estimated retirement obligation term	25 years
Summary of activity in the ARO
Balance at the beginning of the period	$ 435,171	$ 414,601
Accretion expense	21,652	20,570	112,636
Balance at the end of the period	$ 456,823	$ 435,171	$ 456,823

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FAIR VALUE MEASUREMENTS (Tables)

12 Months Ended

Dec. 31, 2012

FAIR VALUE MEASUREMENTS

Schedule of financial assets and liabilities accounted for at fair value on a nonrecurring basis

	Balance at December 31, 2012		Balance at December 31, 2011		Input Hierarchy Level
Assets:
Available-for-sale securities	$	19,633	$	13,276	Level 1
Liabilities:
Warrant derivatives		—	$	357,977	Level 3
Asset retirement obligation	$	456,823	$	435,171	Level 3

Schedule of fair value reconciliation of level 3 liabilities measured at fair value

The following table presents the fair value reconciliation of Level 3 liabilities measured at fair value during the year ended December 31, 2012:

	Warrant Derivatives			Asset Retirement Obligation
Balance January 1, 2012	$	357,977		$	435,171
Accretion expense		—			21,652
Gain on derivatives		(357,977	)		—
Balance December 31, 2012		—		$	456,823

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CONCENTRATION OF CREDIT RISK (Details) (Cash and cash equivalents, Concentration of credit risk, USD $)	12 Months Ended
	Dec. 31, 2012 item
Cash and cash equivalents | Concentration of credit risk
CONCENTRATION OF CREDIT RISK
Number of financial institutions	1
Maximum balances insured by Federal Deposit Insurance Corporation	$ 250,000
Uninsured bank deposit balance	$ 12,690,000

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ASSET RETIREMENT OBLIGATIONS (Tables)

12 Months Ended

Dec. 31, 2012

ASSET RETIREMENT OBLIGATIONS

Summary of activity in the Company's ARO

	Year Ended December 31, 2012		Year Ended December 31, 2011
Balance January 1,	$	435,171	$	414,601
Accretion expense		21,652		20,570
Balance December 31,	$	456,823	$	435,171

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	12 Months Ended		125 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (8,199,340)	$ (5,585,431)	$ (71,188,416)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation	306,230	1,664,173	10,905,899
Stock received for services			(11,165)
Depreciation	972,155	1,008,302	5,424,737
Initial measurement of asset retirement obligation			344,187
Accretion of asset retirement obligation	21,652	20,570	112,636
Gain on sale of available-for-sale investments		(2,005,904)	(2,005,904)
Loss (gain) from warrant derivatives	(357,977)	(1,718,265)	(476,381)
Impairment of mineral properties			504,492
Changes in assets and liabilities:
Interest receivable	5,887	19,336	(7,815)
Prepaid expenses and deposits	(43,607)	(32,004)	(311,303)
Accounts payable	124,603	(232,207)	495,162
Payroll and payroll taxes payable	243	(2,792)	14,694
Net cash used in operating activities	(7,170,154)	(6,864,222)	(56,199,177)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(32,853)		(7,697,121)
Proceeds from disposition of property and equipment			35,423
Proceeds (purchase) of certificates of deposit	51,880	(39,564)	(2,683,415)
Net proceeds from sale of available-for-sale securities		3,821,252	2,005,904
Increase in mineral properties			(144,312)
Net cash provided by (used in) investing activities	19,027	3,781,688	(8,483,521)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of common stock	275,400	15,337,494	74,881,436
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(6,875,727)	12,254,960	10,198,738
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	17,121,800	4,866,840	47,335
CASH AND CASH EQUIVALENTS, END OF PERIOD	10,246,073	17,121,800	10,246,073
SUPPLEMENTAL INFORMATION:
Interest paid			65,768
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
Unrealized gains on available-for-sale securities	$ 6,357	$ 113,534	$ 7,622

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Dec. 31, 2012	Dec. 31, 2011
CONSOLIDATED BALANCE SHEETS
Preferred stock, par value (in dollars per share)	$ 0	$ 0
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	28,999,752	28,739,110
Common stock, shares outstanding	28,999,752	28,739,110

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STOCK OPTIONS

12 Months Ended

Dec. 31, 2012

STOCK OPTIONS

STOCK OPTIONS

NOTE 10—STOCK OPTIONS

        The Company has four equity incentive plans: the 2003 Stock Option Plan (which includes both qualified and nonqualified options), the 2003 Consultant Stock Compensation Plan, the 2007 Equity Incentive Plan, and the 2012 Equity Incentive Plan (collectively, the "Plans"). Under all of the equity incentive plans, the option exercise price may not be less than 100% of the fair market value per share on the date of grant, the stock options are exercisable within ten years from the date of the grant of the option, and the vesting schedule of the options is at the discretion of the Board of Directors.

        Under the 2003 Stock Option Plan and Consultant Stock Compensation Plan, the Company may grant options to purchase up to 3,000,000 shares and 700,000 shares of authorized and unissued common stock, respectively. Under the 2007 Equity Incentive Plan (the "2007 Plan"), which provides for the issuance of both qualified and nonqualified stock options and restricted shares to directors, employees and consultants of the Company, the Company may issue up to 3,000,000 shares of the Company's authorized but unissued common stock.

        The Board of Directors authorized the Company to establish the 2012 Equity Incentive Plan ("2012 Plan") which was approved by the shareholders in June 2012. The Company may grant options to purchase up to 3,000,000 common shares, bought on the market or otherwise, at the discretion of the Board. The 2012 Plan provides for the issuance of incentive stock options to employees and nonqualified stock options to directors, employees and consultants of the Company. No participant is eligible to be granted more than 200,000 common shares during any calendar year.

        A summary of the option activity under the Plans as of December 31, 2012, and changes during the year then ended, is presented below:

	Number of Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2012		3,601,000		$	1.86
Granted		456,000		$	1.19
Exercised		(265,000	)	$	1.06
Forfeited or expired		(170,000	)	$	2.53
Outstanding and exercisable at December 31, 2012		3,622,000		$	1.81		2.83	$	20,000

        The fair value for each option award is estimated at the date of grant using the Black-Scholes option-pricing model using the assumptions noted in the following table. Volatility for the years presented is based on the historical volatility of the Company's common stock over the expected life of the option. The risk-free rate for periods within the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. The Company does not foresee the payment of dividends in the near term.

	Years Ended December 31,
	2012			2011
Weighted average risk-free interest rate		0.30	%		0.63	%
Weighted average volatility		72.33	%		86.39	%
Expected dividend yield		—			—
Weighted average expected life (in years)		3.0			3.5
Weighted average grant-date fair value	$	0.56		$	1.19

        During the years ended December 31, 2012 and 2011, there were 265,000 and 303,000 options exercised with a weighted average exercise price of $1.06 and $1.57, respectively. The total intrinsic value of the options exercised during the years ended December 31, 2012 and 2011 was $212,522 and $218,293, respectively.

        A summary of the status of the Company's nonvested options as of December 31, 2012 and changes during the year then ended is presented below:

	Number of Options			Weighted- Average Grant-Date Fair Value
Nonvested at January 1, 2012		730,000		$	1.18
Expired		(80,000	)	$	0.99
Vested		(650,000	)	$	1.20
Nonvested at December 31, 2012		—			—

        As of December 31, 2012, there was no unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plans.

        Total compensation costs recognized for stock-based employee compensation awards was $306,230 and $1,664,173 for the years ended December 31, 2012 and 2011, respectively. These costs were included in general and administrative and technical services expenses on the Statements of Operations. Total costs recognized for stock-based compensation awards for services performed by outside parties were $0 and $40,500 for the years ended December 31, 2012 and 2011, respectively. Cash received from options exercised under all share-based payment arrangements for the years ended December 31, 2012 and 2011 was $275,400 and $64,500, respectively.

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Document and Entity Information (USD $) In Millions, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Mar. 29, 2013	Jun. 30, 2012
Document and Entity Information
Entity Registrant Name	MINES MANAGEMENT INC
Entity Central Index Key	0000066649
Document Type	10-K
Document Period End Date	Dec. 31, 2012
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float			$ 35.9
Entity Common Stock, Shares Outstanding		28,999,752
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	FY

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DEFERRED INCOME TAX

12 Months Ended

Dec. 31, 2012

DEFERRED INCOME TAX

DEFERRED INCOME TAX

NOTE 11—DEFERRED INCOME TAX

        As of December 31, 2012 and 2011, the Company had net deferred tax assets that were fully reserved by valuation allowances. Following are the components of such assets and allowances:

	Years Ended December 31,
	2012			2011
Deferred tax assets:
Net operating loss carryforwards	$	20,340,000		$	18,270,000
Stock-based compensation		650,000			710,000
Property, plant and equipment		1,250,000			1,250,000
Asset retirement obligation		160,000			150,000
Warrant derivatives		—			120,000
Total deferred tax assets		22,400,000			20,500,000
Deferred tax liabilities:
Property, plant and equipment		480,000			570,000
Net deferred tax asset before valuation allowance		21,920,000			19,930,000
Less valuation allowance		(21,920,000	)		(19,930,000	)
Net deferred tax assets	$	—		$	—

        For the periods presented, the effective income tax rate differed from the expected rate because of the effects of changes in the deferred tax asset valuation allowance. Changes in the deferred tax asset valuation allowance for the years ended December 31, 2012 and 2011 relate only to corresponding changes in deferred tax assets for those periods.

        As of December 31, 2012, the Company had federal tax-basis net operating loss carryforwards totaling approximately $59,800,000 which will expire in various amounts from 2013 through 2032. The Company is subject to examination of its income tax filings in the United States and various state jurisdictions for the 2009 through 2012 tax years. Within each of these jurisdictions the Company has examined its material tax positions and determined that they would more likely than not be sustained.

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CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)	12 Months Ended		125 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012
REVENUE:
Royalties	$ 31,233	$ 19,640	$ 151,304
OPERATING EXPENSES:
General and administrative	3,219,702	4,801,994	32,941,257
Technical services and exploration	3,857,609	2,801,655	30,804,485
Depreciation	972,155	1,008,302	5,424,737
Legal, accounting, and consulting	418,677	543,946	4,664,539
Fees, filing, and licenses	178,511	297,037	2,745,329
Impairment of mineral properties			504,492
Total operating expenses	8,646,654	9,452,934	77,084,839
LOSS FROM OPERATIONS	(8,615,421)	(9,433,294)	(76,933,535)
OTHER INCOME:
Gain from warrant derivatives	357,977	1,718,265	476,381
Gain on sale of available-for-sale securities		2,005,904	2,005,904
Interest income, net	58,104	123,694	3,262,834
Total other income	416,081	3,847,863	5,745,119
NET LOSS	$ (8,199,340)	$ (5,585,431)	$ (71,188,416)
NET LOSS PER SHARE (basic and diluted) (in dollars per share)	$ (0.28)	$ (0.20)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (basic and diluted)	28,946,272	27,700,144

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FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2012

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

NOTE 5—FAIR VALUE MEASUREMENTS

        The following table summarizes the Company's financial assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 2012 and 2011, and the fair value calculation input hierarchy level determined to apply to each asset and liability category. Quoted market prices were used to determine the fair value of available-for-sale securities. See note 6 for further discussion on the fair value measurement technique used to value the warrant derivatives. The Company has no financial assets or liabilities that are measured at fair value on a nonrecurring basis.

	Balance at December 31, 2012		Balance at December 31, 2011		Input Hierarchy Level
Assets:
Available-for-sale securities	$	19,633	$	13,276	Level 1
Liabilities:
Warrant derivatives		—	$	357,977	Level 3
Asset retirement obligation	$	456,823	$	435,171	Level 3

        The following table presents the fair value reconciliation of Level 3 liabilities measured at fair value during the year ended December 31, 2012:

	Warrant Derivatives			Asset Retirement Obligation
Balance January 1, 2012	$	357,977		$	435,171
Accretion expense		—			21,652
Gain on derivatives		(357,977	)		—
Balance December 31, 2012		—		$	456,823

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AVAILABLE-FOR-SALE SECURITIES

12 Months Ended

Dec. 31, 2012

AVAILABLE-FOR-SALE SECURITIES

AVAILABLE-FOR-SALE SECURITIES

NOTE 4—AVAILABLE-FOR-SALE SECURITIES

        Available-for-sale securities are comprised of common stocks which have been valued using quoted market prices in active markets. The following table summarizes the Company's available-for-sale securities:

	December 31, 2012		December 31, 2011
Cost	$	11,165	$	11,165
Unrealized Gains		8,468		2,111
Fair Market Value	$	19,633	$	13,276

        The Company sold one investment in marketable equity securities during March 2011. Proceeds from the sale were $3,821,252 and the realized gain from the sale was $2,005,904. No securities were sold during 2012.

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WARRANT DERIVATIVES (Tables)

12 Months Ended

Dec. 31, 2012

WARRANT DERIVATIVES

Schedule of assumptions used to estimate the fair value of warrants

	December 31, 2012		December 31, 2011
Weighted average risk-free interest rate		—		0.02	%
Weighted average volatility		—		79.04	%
Expected dividend yield		—		—
Weighted average expected life (in years)		—		0.3

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COMMITMENTS

12 Months Ended

Dec. 31, 2012

COMMITMENTS

COMMITMENTS

NOTE 12—COMMITMENTS

Operating Leases:

        The Company leases office space and equipment. The following is a schedule by years of future minimum rental payments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of December 31, 2012.

Year ending December 31:
2013		47,000
2014		48,500
2015		50,000
2016		8,500
Total minimum payments required	$	154,000

Employment Agreements:

        The Company has employment agreements with certain executives. The agreements include a provision for severance pay equal to a multiple of each executive's salary. To receive severance, termination must be without cause and cannot be a result of death or disability. Additionally, severance must be paid if the executive resigns for good reason within one year following a change in control of the Company. As of December 31, 2012, the potential aggregate liability for severance pay under the agreements is $2,600,000.

Royalties on Patented Mining Claims:

        Two of the Company's patented mining claims, which cover the Montanore deposit, are burdened by a production payment obligation of $0.20 per ton of ore extracted and milled therefrom. The calculation and timing of the production payment are specifically defined by a Purchase and Sale Agreement.

Exploration Earn-In Agreement

        The Company entered into an Exploration Earn-In Agreement with Estrella Gold Corporation ("Estrella") on April 5, 2012, pursuant to which the Company could acquire 75% of the Estrella gold and silver exploration property located in central Peru by expending $5,000,000 on exploration activities. Under the terms of the agreement, the Company is required to make annual cash payments to Estrella of $100,000 prior to the end of the first agreement year ending on February 28, 2013, and $200,000 prior to the end of each subsequent agreement year until the earn-in has been completed. The Company is also required to expend a minimum of $500,000 in exploration and development expenditures in each of the first and second agreement years. The Company may terminate this agreement at any time during the earn-in period, however, a minimum of $350,000 in exploration and development expenses was required during the first year of the agreement regardless of whether or not the agreement is terminated. As of December 31, 2012, the Company had met the first year's exploration and development expenditure requirements. During February 2013, the Company made the required $100,000 cash payment prior to the end of the first agreement year and continued the Exploration Earn-In Agreement into the second year.

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CONCENTRATION OF CREDIT RISK

12 Months Ended

Dec. 31, 2012

CONCENTRATION OF CREDIT RISK

CONCENTRATION OF CREDIT RISK

NOTE 8—CONCENTRATION OF CREDIT RISK

        The Company maintains its cash and cash equivalents in one financial institution. Balances are insured by the Federal Deposit Insurance Corporation up to $250,000. The Company's total uninsured bank deposit balance totals approximately $12,690,000 as of December 31, 2012. To date, the Company has not experienced a material loss or lack of access to its invested cash or cash equivalents; however, no assurance can be provided that access to the Company's invested cash and cash equivalents will not be impacted by adverse conditions in the financial markets.

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WARRANT DERIVATIVES

12 Months Ended

Dec. 31, 2012

WARRANT DERIVATIVES

WARRANT DERIVATIVES

NOTE 6—WARRANT DERIVATIVES

        The Company had common share purchase warrants with exercise price reset features which qualified for treatment as a derivative liability. These warrants expired on April 20, 2012. The warrants did not qualify for hedge accounting, and as such, all changes in the fair value of the warrants were recognized in earnings until they expired. The Company reported a gain from the change in fair value of the warrants of $357,977 and $1,718,265 in the Consolidated Statements of Operations for the years ended December 31, 2012 and 2011, respectively.

        These common share purchase warrants did not trade in an active securities market, and as such, we estimated the fair value of these warrants using the Black-Scholes option pricing model using the following assumptions:

	December 31, 2012		December 31, 2011
Weighted average risk-free interest rate		—		0.02	%
Weighted average volatility		—		79.04	%
Expected dividend yield		—		—
Weighted average expected life (in years)		—		0.3

        Expected volatility was based primarily on historical volatility. Historical volatility was computed using weekly pricing observations for recent periods. The Company believed this method produced an estimate that was representative of its expectations of future volatility over the expected term of these warrants. The expected life was based on the remaining term of the warrants. The risk-free interest rate was based on three-month U.S. Treasury securities.

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ASSET RETIREMENT OBLIGATIONS

12 Months Ended

Dec. 31, 2012

ASSET RETIREMENT OBLIGATIONS

ASSET RETIREMENT OBLIGATIONS

NOTE 7—ASSET RETIREMENT OBLIGATIONS

        The Company has an asset retirement obligation ("ARO") associated with its underground evaluation program at the Montanore Project. The ARO resulted from the reclamation and remediation requirements of the Montana Department of Environmental Quality as outlined in the Company's permit to carry out the evaluation program.

        Estimated reclamation costs were discounted using a credit adjusted risk-free interest rate of 4.78% from the time the Company expects to pay the retirement obligation to the time it incurred the obligation, which is estimated at 25 years. The following table summarizes activity in the Company's ARO.

	Year Ended December 31, 2012		Year Ended December 31, 2011
Balance January 1,	$	435,171	$	414,601
Accretion expense		21,652		20,570
Balance December 31,	$	456,823	$	435,171

        The Company has a certificate of deposit which is pledged as security for a Letter of Credit to the Montana Department of Environmental Quality as a reclamation guarantee for the Montanore expansion evaluation program which is discussed further in note 3.

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STOCKHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2012

STOCKHOLDERS' EQUITY

STOCKHOLDERS' EQUITY

NOTE 9—STOCKHOLDERS' EQUITY

Common Shares:

        On March 8, 2011, the Company completed a public offering of 4,800,000 shares of common stock at a price of $3.15 per share, resulting in gross proceeds of $15,120,000 ($14,212,800 in net proceeds after deducting underwriting commissions and a corporate finance fee but before deducting offering expenses). The underwriters were granted an over-allotment option to purchase an additional 720,000 shares exercisable for a period of 30 days following the closing. On April 4, 2011, the underwriters exercised the over-allotment option for 320,000 shares of common stock at a price of $3.15 per share. The gross proceeds resulting from the exercise of the over-allotment option were $1,008,000 ($947,520 in net proceeds after deducting underwriting commissions and a corporate finance fee but before deducting offering expenses). Therefore, the total offering was 5,120,000 shares of common stock, resulting in aggregate net proceeds of $15,160,320 before deducting offering expenses.

        On April 20, 2007, the Company completed a public offering of 6,000,000 units at a price of $5.00 per unit. Each unit was comprised of one share of common stock and one-half of one common stock purchase warrant, with each full warrant being exercisable to purchase one share of common stock at a price of $5.75 per share. No warrants related to this offering were exercised before they expired on April 20, 2012.

        On November 2, 2007, the Company sold 2,500,000 common shares at a price of $4.00 per share in a private placement to one investor. In connection with the stock sale, the Company entered into a Right of First Refusal agreement (the "ROFR") which grants a twenty-year right of first proposal and a right to match third-party proposals, to purchase all or any portion of silver mined, produced or recovered by the Company in the State of Montana. The ROFR does not apply to trade sales and spot sales in the ordinary course of business or to forward sales, in each case, for which no upfront payment is received by the Company.

        In October 2005, the Company sold 1,016,667 common shares at a price of $6.00 per share. In connection with the stock sales, the Company granted warrants to purchase up to 737,084 shares of common stock at $8.25 per share. During the term of the warrants, the exercise price of the warrants was reduced to $2.56 per share and the number of common shares issuable upon exercise increased to 2,375,368 shares to comply with the anti-dilution provisions of the warrant agreement. The warrants expired on April 20, 2012. During the years ended December 31, 2012 and 2011, 0 and 101,435 warrants were exercised for gross proceeds of $0 and $144,474, respectively. Cumulative warrants exercised relating to this issue were 269,620 as of December 31, 2012 and 2011.

Preferred Shares:

        The Company has authorized 10,000,000 shares of no par value preferred stock. Through December 31, 2012, the Company had not issued any preferred shares.

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WARRANT DERIVATIVES (Details) (USD $)	12 Months Ended		125 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012
WARRANT DERIVATIVES
Gain from warrant derivatives	$ 357,977	$ 1,718,265	$ 476,381
Common share purchase warrant
Warrant derivatives
Weighted average volatility (as a percent)	0.00%	79.04%
Expected dividend yield (as a percent)	0.00%
Term of U.S. treasury securities used for determining the risk-free interest rate	3 months
Common share purchase warrant | Weighted average
Warrant derivatives
Risk-free interest rate (as a percent)	0.00%	0.02%
Expected life	0 years	3 months 18 days

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AVAILABLE-FOR-SALE SECURITIES (Tables)

12 Months Ended

Dec. 31, 2012

AVAILABLE-FOR-SALE SECURITIES

Schedule of the Company's available-for-sale securities

	December 31, 2012		December 31, 2011
Cost	$	11,165	$	11,165
Unrealized Gains		8,468		2,111
Fair Market Value	$	19,633	$	13,276

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DEFERRED INCOME TAX (Tables)

12 Months Ended

Dec. 31, 2012

DEFERRED INCOME TAX

Schedule of components of net deferred tax assets fully reserved by valuation allowances

As of December 31, 2012 and 2011, the Company had net deferred tax assets that were fully reserved by valuation allowances. Following are the components of such assets and allowances:

	Years Ended December 31,
	2012			2011
Deferred tax assets:
Net operating loss carryforwards	$	20,340,000		$	18,270,000
Stock-based compensation		650,000			710,000
Property, plant and equipment		1,250,000			1,250,000
Asset retirement obligation		160,000			150,000
Warrant derivatives		—			120,000
Total deferred tax assets		22,400,000			20,500,000
Deferred tax liabilities:
Property, plant and equipment		480,000			570,000
Net deferred tax asset before valuation allowance		21,920,000			19,930,000
Less valuation allowance		(21,920,000	)		(19,930,000	)
Net deferred tax assets	$	—		$	—

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COMMITMENTS (Details) (USD $)	12 Months Ended
	Dec. 31, 2012
Operating Leases
2013	47,000
2014	48,500
2015	50,000
2016	8,500
Total minimum payments required	154,000
Employment Agreements | Executive officers
COMMITMENTS
Potential aggregate liability for severance pay	2,600,000
Employment Agreements | Executive officers | Maximum
COMMITMENTS
Resignation period following a change in control of the company resulting in additional severance payment	1 year
Royalties on patented mining claims | Montanore
COMMITMENTS
Number of patented mining claims burdened by a production payment obligation	2
Production payment obligation per ton of ore extracted and milled therefrom (in dollars per ton)	0.20

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (USD $)	12 Months Ended		125 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Net loss	$ (8,199,340)	$ (5,585,431)	$ (71,188,416)
Reclassification to realized gain upon sale of marketable securities		(2,005,904)	(2,005,904)
Adjustment to net unrealized gain on marketable securities	6,357	113,534	2,013,526
COMPREHENSIVE LOSS	$ (8,192,983)	$ (7,477,801)	$ (71,180,794)

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CERTIFICATES OF DEPOSIT

12 Months Ended

Dec. 31, 2012

CERTIFICATES OF DEPOSIT

CERTIFICATES OF DEPOSIT

NOTE 3—CERTIFICATES OF DEPOSIT

        The Company owned two certificates of deposit for a total of $1,559,361 as of December 31, 2012 and 2011. These investments mature in August 2013 and bear interest at the rate of 0.30%.

        The Company also has a certificate of deposit pledged as security for a letter of credit to the Montana Department of Environmental Quality as a reclamation guarantee for the Montanore expansion evaluation program. This certificate of deposit was in the amount of $1,124,055 and $1,175,935 as of December 31, 2012 and 2011, respectively. It bears interest at the rate of 0.55% as of December 31, 2012 and had a maturity date of January 3, 2013. This certificate of deposit renews automatically each year and is included with reclamation deposits on the Consolidated Balance Sheets for the years ended December 31, 2012 and 2011. The certificate was renewed on January 3, 2013 in the amount of $1,124,055 bearing interest at the rate of 0.45% and expires on January 3, 2014.

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COMMITMENTS (Tables)

12 Months Ended

Dec. 31, 2012

COMMITMENTS

Schedule by years of future minimum rental payments required under operating leases

The following is a schedule by years of future minimum rental payments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of December 31, 2012.

Year ending December 31:
2013		47,000
2014		48,500
2015		50,000
2016		8,500
Total minimum payments required	$	154,000

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STOCK OPTIONS (Details) (USD $)	12 Months Ended
	Dec. 31, 2012 item	Dec. 31, 2011
Stock options
Number of equity incentive plans	4
Contractual term	10 years
Number of Options
Outstanding at the beginning of the period (in shares)	3,601,000
Granted (in shares)	456,000
Exercised (in shares)	(265,000)	(303,000)
Forfeited or expired (in shares)	(170,000)
Outstanding at the end of the period (in shares)	3,622,000	3,601,000
Weighted-Average Exercise Price
Outstanding at the beginning of the period (in dollars per share)	$ 1.86
Granted (in dollars per share)	$ 1.19
Exercised (in dollars per share)	$ 1.06	$ 1.57
Forfeited or expired (in dollars per share)	$ 2.53
Outstanding at the end of the period (in dollars per share)	$ 1.81	$ 1.86
Weighted-Average Remaining Contractual Term
Outstanding at the end of the period	2 years 9 months 29 days
Aggregate Intrinsic Value
Outstanding at the end of the period	$ 20,000
Assumptions used to estimate the fair value of stock options
Weighted average risk-free interest rate (as a percent)	0.30%	0.63%
Weighted average volatility (as a percent)	72.33%	86.39%
Weighted average expected life	3 years	3 years 6 months
Weighted-average grant-date fair value (in dollars per share)	$ 0.56	$ 1.19
Additional disclosure for stock options
Intrinsic value of awards exercised	212,522	218,293
Number of Options
Nonvested at the beginning of the period (in shares)	730,000
Expired (in shares)	(80,000)
Vested (in shares)	(650,000)
Nonvested at the end of the period (in shares)		730,000
Weighted-Average Grant-Date Fair Value
Nonvested at the beginning of the period (in dollars per share)	$ 1.18
Expired (in dollars per share)	$ 0.99
Vested (in dollars per share)	$ 1.20
Nonvested at the end of the period (in dollars per share)	$ 0.00	$ 1.18
Disclosures for share-based compensation cost
Unrecognized compensation expense related to nonvested share-based compensation arrangements	0
Total compensation costs recognized for stock-based employee compensation awards	306,230	1,664,173
Costs recognized for stock-based compensation awards for services performed by outside parties	0	40,500
Cash received from options exercised	$ 275,400	$ 64,500
2003 Stock Option Plan
Stock options
Shares authorized for grant under the plans	3,000,000
Unissued shares of common stock	700,000
Option exercise price as percentage of fair market value per share on the date of grant	100.00%
2007 Plan
Stock options
Shares authorized for grant under the plans	3,000,000
2012 Plan
Stock options
Shares authorized for grant under the plans	3,000,000
2012 Plan | Minimum
Stock options
Maximum number of shares to grant a participant in a calendar year	200,000

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ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2012

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation

a.

Principles of consolidation

        The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and include the accounts of Mines Management, Inc., and its wholly-owned subsidiaries, Newhi, Inc., Montanore Minerals Corp., Montmin Resources Corp., and Minera Montanore Peru, SAC. Intercompany balances and transactions have been eliminated.

Exploration stage enterprise

b.

Exploration stage enterprise

        Since the Company is in the exploration stage of operation, the Company's financial statements are prepared in accordance with the provisions of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 915 Development Stage Enterprises, as it devotes substantially all of its efforts to acquiring and exploring mining interests that management believes should eventually provide sufficient net profits to sustain the Company's existence. Until such interests are engaged in commercial production, the Company will continue to prepare its consolidated financial statements and related disclosures in accordance with this standard.

        Financial statements issued by an exploration stage enterprise present financial position, changes in financial position, and results of operations in conformity with U.S. GAAP applicable to established operating enterprises and include the following additional information: (1) cumulative net losses reported as "deficit accumulated during exploration stage" in the stockholders' equity section of the consolidated balance sheets; (2) cumulative amounts from the inception of the exploration stage included on the consolidated statements of operations, statements of cash flows, and statements of stockholders' equity.

Cash and cash equivalents

c.

Cash and cash equivalents

        Cash and cash equivalents include cash on hand, cash in banks, investments in certificates of deposit with original maturities of 90 days or less, and money market funds.

Available for sale securities

d.

Available for sale securities

        Available-for-sale securities are recorded at fair value, with unrealized gains or losses recorded as a component of equity, unless a decline in value of the security is considered other than temporary. Realized gains and losses and other than temporary impairments are recorded in the statement of operations.

Property and equipment

e.

Property and equipment

        Property and equipment are stated at cost less accumulated depreciation. Buildings and leasehold improvements are depreciated on the straight-line basis over an estimated useful life of 39 years. Plant and equipment and office equipment are generally depreciated on a straight-line basis over estimated useful lives ranging from 5 to 10 years. When assets are retired or sold, the costs and related allowances for depreciation are eliminated from the accounts and any resulting gain or loss is reflected in the statement of operations.

Mining properties, exploration and development costs

f.

Mining properties, exploration and development costs

        All exploration expenditures, including costs to acquire stationary equipment for use in exploration activities that have no significant alternative future use, are expensed as incurred. Significant property acquisition payments for active exploration properties are capitalized, including payments to acquire mineral rights. Once a feasibility study has been completed, approved by management, and a decision is made to put the ore body into production, expenditures to develop new mines, to define further mineralization in existing ore bodies, and to expand the capacity of operating mines, are capitalized and amortized on the units of production basis over proven and probable reserves. The Company charges to operations the allocable portion of capitalized costs attributable to properties sold. Capitalized costs are allocated to properties sold based on the proportion of claims sold to the claims remaining within the project area.

Asset impairment

g.

Asset impairment

        The Company evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amount may not be recoverable. If the sum of estimated future net cash flows on an undiscounted basis is less than the carrying amount of the related asset grouping, asset impairment is considered to exist. The related impairment loss is measured as the amount by which the carrying amount of the asset exceeds its fair value. Changes in significant assumptions underlying future cash flow estimates may have a material effect on the Company's financial position and results of operations.

Fair value measurements

h.

Fair value measurements

        The Company discloses the inputs used to develop the fair value measurements for the Company's financial assets and liabilities that are measured at fair value on a recurring basis as well as the level within the fair value hierarchy in which the fair value measurements in their entirety fall. The three levels of the fair value hierarchy are as follows:

• Level 1:    Unadjusted quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date.

  Level 2:    Quoted prices in inactive markets for identical assets or liabilities, quoted prices for similar assets or liabilities in active markets, or other observable inputs either directly related to the asset or liability or derived principally from corroborated observable market data.

  Level 3:    Unobservable inputs due to the fact that there is little or no market activity.

Asset retirement obligations

i.

Asset retirement obligations

        A liability is recognized for the present value of estimated environmental remediation (asset retirement obligation), in the period in which the liability is incurred if a reasonable estimate of fair value can be made. The offsetting balance is charged to expense as an exploration cost if the liability is incurred during the exploration stage of the related mining project or as an asset if the related mining project is in production. Adjustments are made to the liability for changes resulting from passage of time and changes to either the timing or amount of the original present value estimate underlying the obligation. The Company has an asset retirement obligation associated with its underground evaluation program at the Montanore Project, described more fully in note 7.

Deferred income taxes

j.

Deferred income taxes

        Deferred income tax is provided for differences between the basis of assets and liabilities for financial and income tax reporting. A deferred tax asset, subject to a valuation allowance, is recognized for estimated future tax benefits of tax-basis operating losses being carried forward. Uncertain tax positions are evaluated in a two-step process, whereby (1) it is determined whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the largest amount of tax benefit that is greater than fifty percent likely to be realized upon ultimate settlement with the related tax authority would be recognized. If income tax related interest and penalties were to be assessed, the Company would charge interest to interest expense, and penalties to general and administrative expense.

Stock-based compensation

k.

Stock based compensation

        The Company measures and records the costs of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award, recognized over the period during which an employee is required to provide services in exchange for such award. Compensation cost is recognized for awards granted and for awards modified, repurchased or cancelled.

Net loss per share

l.

Net loss per share

        Basic earnings or loss per share is computed on the basis of the weighted average number of shares outstanding during the periods. Diluted earnings or loss per share is calculated on the basis of the weighted average number of shares outstanding during the period plus the effect of potential dilutive shares during the period. Potential dilutive shares include outstanding stock options and warrants. For periods in which a net loss is reported, potential dilutive shares are excluded because they are antidilutive. Therefore, basic loss per share is the same as diluted loss per share for the years ended December 31, 2012 and 2011.

Assumptions and use of estimates

n.

Assumptions and use of estimates

        The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Significant areas requiring the use of management assumptions and estimates relate to asset impairments, including long-lived assets and investments, asset retirement obligations, and valuation of stock based compensation and warrant derivatives. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Company's consolidated financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions, which could have a material effect on the reported amounts of the Company's consolidated financial position and results of operations.

Recent accounting pronouncements

o.

Recent accounting pronouncements

        In June 2011, the FASB issued guidance regarding the presentation of comprehensive income (loss). The new standard requires the presentation of comprehensive income (loss), the components of net income (loss) and the components of other comprehensive income (loss) either in a single continuous statement of comprehensive income (loss) or in two separate but consecutive statements. The entity is also required to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statements where the components of net income and the components of other comprehensive income are presented. The updated guidance is effective on a retrospective basis for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011. The Company adopted the provisions of this guidance effective January 1, 2012.

        In February 2013, the FASB issued guidance related to items reclassified from accumulated other comprehensive income. The new standard requires either in a single note or parenthetically on the face of the financial statements: (i) the effect of significant amounts reclassified from each component of accumulated other comprehensive income based on its sources and (ii) the income statement line items affected by the reclassification. The standard is effective January 1, 2013, with early adoption permitted. We do not expect this guidance to have a significant impact on our consolidated financial position, results of operations or cash flows.

Subsequent events

p.

Subsequent events

        The Company evaluated events and transactions subsequent to the balance sheet date of December 31, 2012, for potential recognition or disclosure in the condensed consolidated financial statements.