10-Q

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(MARK ONE)

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED March 31, 2007.

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM                  TO                 .

COMMISSION FILE NUMBER  000-29786

MINES MANAGEMENT, INC.

(Exact Name of Registrant as Specified in its Charter)

IDAHO	91-0538859
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

905 W. Riverside Avenue, Suite 311
Spokane, Washington	99201
(Address Of Principal Executive Offices)	(Zip Code)

(509) 838-6050

(Registrant’s Telephone Number, Including Area Code)

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.  x Yes  o No

Indicate by check mark whether the registrant is a large accelerated filer, and accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer x Non-accelerated filer o

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

At May 2, 2007, 18, 899,467 shares of common stock, par value $0.001 per share, were issued and outstanding.

SEC 1296 (9-05)   Potential persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.

MINES MANAGEMENT, INC.
FORM 10-Q
QUARTER ENDED March 31, 2007

INDEX

PART I — FINANCIAL INFORMATION (Note final to match pages)
ITEM 1.	FINANCIAL STATEMENTS
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK AND HEDGING ACTIVITIES
ITEM 4.	CONTROLS AND PROCEDURES
PART II — OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS
ITEM 1A.	RISK FACTORS
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 5.	OTHER INFORMATION
ITEM 6.	EXHIBITS
SIGNATURES

2

Part I — Financial Information

Item 1. Financial statements (unaudited)

MINES MANAGEMENT, INC.
AND SUBSIDIARIES

Consolidated Financial Statements

March 31, 2007 and 2006

3

Mines Management, Inc. and Subsidiaries

Contents

	Page
FINANCIAL STATEMENTS:
Consolidated balance sheets	5
Consolidated statements of operations	6
Consolidated statements of stockholders’ equity	7
Consolidated statements of cash flows	8
Notes to consolidated financial statements	9-17

4

Mines Management, Inc. and Subsidiaries

Consolidated Balance Sheets (unaudited)

	March 31, 2007			December 31, 2006
Assets
CURRENT ASSETS:
Cash and cash equivalents	$	617,297		$	743,652
Interest receivable	29,587			64,426
Prepaid expenses and deposits	30,786			71,118
Total current assets	677,670			879,196
MINERAL PROPERTIES	504,492			504,492
PROPERTY AND EQUIPMENT:
Mine buildings and leasehold improvements	265,698			172,535
Equipment	400,284			259,914
Office equipment	223,815			222,514
	889,797			654,963
Less accumulated depreciation	184,675			156,280
	705,122			498,683
INVESTMENTS:
Certificates of deposit	2,541,013			4,370,253
Available-for-sale securities	241,119			77,844
	2,782,132			4,448,097
	$	4,669,416		$	6,330,468
Liabilities and Stockholders’ Equity
CURRENT LIABILITIES:
Accounts payable	$	321,680		$	301,667
Due to officer	2,398			2,398
Payroll taxes payable	4,444			3,549
Total current liabilities	328,522			307,614
COMMITMENTS
STOCKHOLDERS’ EQUITY:
Common stock — 100,000,000 shares, $0.001 par value; 12,849,467 and 12,849,467 shares issued and outstanding, respectively	12,849			12,849
Preferred stock — 10,000,000 shares, no par value, authorized; -0- shares issued and outstanding	—			—
Additional paid-in capital	22,268,710			22,268,710
Accumulated deficit	(1,117,306		)	(1,117,306		)
Deficit accumulated during the development stage	(17,053,313		)	(15,208,078		)
Accumulated other comprehensive income	229,954			66,679
Total stockholders’ equity	4,340,894			6,022,854
	$	4,669,416		$	6,330,468

See accompanying notes to consolidated financial statements.

5

Mines Management, Inc. and Subsidiaries

Consolidated Statements of Operations (unaudited)

							From Inception
							August 12, 2002
	Three Months Ended March 31,						Through March 31,
	2007			2006			2007
REVENUE:
Royalties	$	2,015		$	3,704		$	43,514
OPERATING EXPENSES:
Depreciation	28,395			11,169			120,661
Administrative	227,482			120,945			2,210,231
Legal, accounting, and consulting	275,094			36,738			1,126,838
Miscellaneous	7,654			1,720			39,787
Exploration	30,372			—			183,682
Oil and gas operating	113			—			12,286
Rent and office	114,877			59,220			638,084
Compensation, directors, officers and staff	260,713			181,713			2,468,940
Taxes and licenses	48,706			13,865			186,796
Telephone	9,458			5,109			61,482
Fees, filing, and licenses	112,621			162,954			1,346,917
Environmental	43,643			26,383			564,471
Engineering	9,162			205,348			1,437,572
Permitting	876,198			313,380			3,425,865
Commissions	—			—			68,440
Stock options granted to officers and employees	—			—			3,471,131
Stock options granted for services	—			—			601,204
Total operating expenses	2,044,488			1,138,544			17,964,387
LOSS FROM OPERATIONS	(2,042,473		)	(1,134,840		)	(17,920,873		)
OTHER INCOME:
Interest	197,238			79,486			864,102
Miscellaneous	—			—			3,458
	197,238			79,486			867,560
NET LOSS	$	(1,845,235	)	$	(1,055,354	)	$	(17,053,313	)
NET LOSS PER SHARE	$	(0.14	)	$	(0.08	)
WEIGHTED—AVERAGE COMMON SHARES OUTSTANDING	12,849,467			12,598,954

See accompanying notes to consolidated financial statements.

6

Mines Management, Inc. and Subsidiaries

Consolidated Statements of Stockholders’ Equity (unaudited)

Three Months Ended March 31, 2007

															Deficit
															Accumulated			Accumulated
				Issuable					Additional						During the			Other
	Common Stock			Common Stock					Paid-in			Accumulated			Development			Comprehensive
	Shares	Amount		Shares		Amount			Capital			Deficit			Stage			Income		Total
BALANCES, AUGUST 12, 2002 (INCEPTION)	5,316,956	$	5,317	90,000		$	22,500		$	1,495,998		$	(1,117,306	)	$	—		$	846	$	407,355
Common stock issued for cash	5,169,312	5,130		—		—			14,152,615			—			—			—		14,157,745
Common stock issued to directors	375,000	375		—		—			149,625			—			—			—		150,000
Common stock issued for services	5,000	5		—		—			1,995			—			—			—		2,000
Issuable common stock issued	90,000	90		(90,000	)	(22,500		)	22,410			—			—			—		—
Exercise of stock options	1,181,462	1,181		—		—			957,548			—			—			—		958,749
Exercise of stock warrants	684,117	724		—		—			1,568,359			—			—			—		1,569,083
Issuance of stock options	—	—		—		—			3,900,257			—			—			—		3,900,257
Issuance of stock for Heidelberg shares	27,620	27		—		—			(27		)	—			—			—		—
Revaluation of stock options	—	—		—		—			19,930			—			—			—		19,930
Comprehensive loss:
Adjustment to net unrealized gain on marketable securities	—	—		—		—			—			—			—			65,833		65,833
Net loss	—	—		—		—			—			—			(15,208,078		)	—		(15,208,078		)
Comprehensive loss																				(15,142,245		)
BALANCES, DECEMBER 31, 2006	12,849,467	12,849		—		—			22,268,710			(1,117,306		)	(15,208,078		)	66,679		6,022,854
Exercise of stock options	—	—		—		—			—			—			—			—		—
Exercise of stock warrants	—	—		—		—			—			—			—			—		—
Comprehensive loss:
Adjustment to net unrealized gain on marketable securities	—	—		—		—			—			—			—			163,275		163,275
Net loss	—	—		—		—			—			—			(1,845,235		)	—		(1,845,235		)
Comprehensive loss																				(1,681,960		)
BALANCES, MARCH 31, 2007	12,849,467	$	12,849	—		$	—		$	22, 268,710		$	(1,117,306	)	$	(17,053,313	)	$	229,954	$	4,340,894

See accompanying notes to consolidated financial statements.

7

Mines Management, Inc. and Subsidiaries

Consolidated Statements of Cash Flows (unaudited)

	Three Months Ended March 31,						From Inception August 12, 2002 Through  March 31,
	2007			2006			2007
Increase (Decrease) in Cash and Cash Equivalents
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,845,235	)	$	(1,055,354	)	$	(17,053,313	)
Adjustments to reconcile net loss to net cash used in operating activities:
Issuance of stock options	—			—			4,072,335
Stock received for services	—			—			(11,165		)
Depreciation	28,395			11,169			120,661
Changes in assets and liabilities:							—
Interest receivable	34,839			(1,734		)	(29,587		)
Prepaid expenses and deposits	40,332			15,169			(30,286		)
Accounts payable	20,013			(119,483		)	324,078
Severance payable	—			(20,000		)	—
State income taxes payable	—			—			(164		)
Payroll taxes payable	895			(12,886		)	1,264
Net cash used in operating activities	(1,720,761		)	(1,183,119		)	(12,606,177		)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets	(234,834		)	(5,602		)	(823,945		)
(Purchase) Sale of certificates of deposit	1,829,240			(40,966		)	(2,541,013		)
Increase in mineral properties	—			—			(144,312		)
Net cash provided by (used in) investing activities	1,594,406			(46,568		)	(3,509,270		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sales of common stock	—			1,146,500			16,685,409
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(126,355		)	(83,187		)	569,962
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	743,652			4,648,294			47,335
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	617,297		$	4,565,107		$	617,297

See accompanying notes to consolidated financial statements.

8

Mines Management, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

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 principally in North America.  The Company performed exploration activities in South America in 2002.

Summary of Significant Accounting Policies:

a.The accompanying consolidated financial statements, include the accounts of Mines Management, Inc., and its wholly-owned subsidiaries, Newhi, Inc., Montanore Mineral Corporation, and Montmin Corporation.  Intercompany balances and transactions have been eliminated.  Newhi, Inc. was formed by the Company for the purpose of merger with Heidelberg Silver Mining Company, Inc.  In the merger, completed on April 15, 1988, Heidelberg Silver Mining Company, Inc., was merged into Newhi, Inc.  To effect the merger, the Company issued 367,844 shares of its previously unissued common stock.  Also in connection with this merger, the Company issued 11,117 shares of common stock and paid $4,446 as a finder’s fee.  Montanore Mineral Corporation and Montmin Corporation were acquired in conjunction with a stock transfer agreement with Noranda Finance Corporation as described more fully in note 9.

b.All exploration expenditures are expensed as incurred.  Significant property acquisition payments for active exploration properties are capitalized.  If no mineable ore body is discovered, previously capitalized costs are expensed in the period the property is abandoned.  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.

Should a property be abandoned, its capitalized costs are charged to operations.  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.

c.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, an asset impairment is considered to exist.  The related impairment loss is measured by comparing estimated future net cash flows on a discounted basis to the carrying amount of the asset.  Changes in significant assumptions underlying future cash flow estimates may have a material effect on the Company’s financial position and results of operations.  To date no such impairments have been identified.

d.Property and equipment are stated at cost.  Buildings and leasehold improvements are depreciated on the straight-line basis over an estimated useful life of 39 years.  Machinery and furniture are generally being depreciated using accelerated methods over estimated useful lives ranging from 5 to 10 years.

e.Basic and diluted loss per share is computed using the weighted average number of shares outstanding during the periods (12,849,467 and 12,781,827 in the first quarter ended March 31, 2007, and the year ended December 31, 2006, respectively).  Stock options and warrants outstanding are antidilutive and are not considered in the computation.

9

Summary of Significant Accounting Policies (continued):

f.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.

g.The Company’s financial instruments, as defined by Statement of Financial Accounting Standards (SFAS) No. 107, Disclosures about Fair Value of Financial Instruments, include cash and loans payable.  All instruments are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at March 31, 2007.

h.Deferred income tax is provided for differences between the bases 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.

i.The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results may differ from those estimates.

j.The Company has adopted SFAS No. 143, Accounting for Asset Retirement Obligations, which establishes a uniform methodology for accounting for estimated reclamation and abandonment costs.  According to SFAS No. 143, the fair value of a liability for an asset retirement obligation (ARO) will be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made.  The ARO is capitalized as part of the carrying value of the assets to which it is associated, and depreciated over the useful life of the asset.

In March 2005, the Financial Accounting Standards Board (“FASB”) issued Interpretation (FIN) No. 47, Accounting for Conditional Asset Retirement Obligations, which clarifies that the term conditional asset retirement obligation as used in SFAS No. 143 refers to a legal obligation to perform an asset retirement activity where the timing or method of settlement is conditional on a future event.  Where the obligation to perform the asset retirement activity is unconditional, even though uncertainty exists about the timing or method of settlement, the entity is required to recognize a liability for the fair value of the conditional retirement obligation if reasonably estimable.  FIN No. 47 also clarifies when an entity would have sufficient information to reasonably estimate fair value.  At March 31, 2007, no asset retirement liabilities have been recorded by the Company.

k.Certain amounts in the prior-period financial statements have been reclassified for comparative purposes to conform to current period presentation with no effect on previously reported net loss.

10

Summary of Significant Accounting Policies (continued):

l.In December 2004, FASB issued SFAS No. 123R, Share-Based Payment, which revised SFAS No. 123 and superseded APB No. 25 and its related implementation guidance.  SFAS No. 123R requires measurement and recording to the financial statements of 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.  Effective January 1, 2004, the Company adopted SFAS No. 123R, as amended by SFAS No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure.  As provided for under SFAS No. 148, the Company used the “modified prospective method” of transition.  Under that method of transition, the costs recognized in the financial statements for the quarters ended March 31, 2007 and 2006 are the same as if they had been based on their fair values at the grant date.  There was no stock-based compensation recognized for the quarters ended March 31, 2007 and 2006.

At March 31, 2007, the Company had four stock option plans, which are described more fully in note 6.

11

NOTE 2 — STOCKHOLDERS’ EQUITY:

Common Stock:

In 2003, the Company sold 1,152,007 common shares for $1,267,207 ($1.10 per share).  In connection with the stock sales, the Company granted warrants to purchase up to 1,152,007 common shares at $1.20 per share through two years from the date of issue.  Cumulative warrants exercised relating to this issue at December 31, 2006, 2005, and 2004, were 1,152,007, 1,152,007, and 573,640 shares, respectively.

In 2004, the Company sold 1,285,000 common shares for $6,425,000 ($5.00 per share).  In connection with the stock sales, the Company granted warrants to purchase up to 511,000 common stock shares at $7.25 per share through five years from the initial exercise date.  The Company paid a cash finder’s fee of 7% of the gross offering funds received in the offering.  The finder also received 3% warrant compensation or warrants to purchase 192,750 common shares at $7.25 per share through February 18, 2009.  These warrants were repriced at $6.00 per share in October 2005 and to $5.00 per share in April 2007 in accordance with the terms of the 2004 warrant agreement. Cumulative warrants exercised relating to this issue at December 31, 2006, 2005, and 2004, were 145,750, 40,000, and -0-, respectively.

In 2005, the Company sold 1,016,667 common shares for $6,100,002 ($6.00 per share).  In connection with the stock sales, the Company granted warrants to purchase up to 737,084 common stock shares at $8.25 per share through five years from the initial exercise date.  To date, no warrants have been exercised.  The Company paid a cash finder’s fee of 7% of the gross offering funds received in the offering.  The finder also received a 3.75% warrant compensation or warrants to purchase 228,750 common shares at $8.25 per share through October 20, 2010.  These warrants were repriced at $5.00 per share in April 2007 in accordance with the terms of the 2005 warrant agreement.

In 2005, the Company also sold an additional 40,000 common shares for $240,000 ($6.00 per share).

Preferred Stock:

The Company has authorized 10,000,000 shares of no-par-value preferred stock.  Through March 31, 2007, the Company had not issued any of the authorized preferred stock.

NOTE 3 — MINING PROPERTIES:

Mining properties are comprised of acquisition, exploration, and development costs related to the Montanore property in northwestern Montana and the Advance and Iroquois properties in the Northport region of northeastern Washington, as shown below:

	March 31,		December 31,
	2007		2006
Montanore	$	278,519	$	278,519
Advance	2,139		2,139
Iroquois	223,834		223,834
	$	504,492	$	504,492

12

NOTE 3 — MINING PROPERTIES (continued):

The Montanore property (formerly the Noxon property) is located in northwestern Montana and includes 18 mining claims covering 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.  The mineral rights acquired by the Company are subject to a $0.20 per ton royalty, and a 5% net profits royalty which would commence after the operator has recovered all of its exploration and development costs.  In December 2002, the Company received a quitclaim deed to all intellectual property connected with studies that Noranda carried out on the project.

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 64 acres of patented mineral and surface rights and 15 unpatented mining claims containing 300 acres.

NOTE 4 — INVESTMENTS:

The Company owns one $111,549 certificate of deposit and one $1,124,055 certificate of deposit for a total of $1,235,604.  These investments mature in 2008 and earn rates of 3.64 and 5.28% respectively.  The Company owns six $217,568 certificates of deposit for a total of $1,305,409.  These investments mature in 2009 and earn rates of 4.21%.

The Company owns 45,000 free-trading shares of Bitterroot Resources, Ltd. (BTT), a public Canadian corporation traded on the Toronto Venture Exchange.  The shares are held as “available for sale.”  This investment is being recorded at fair market value with a corresponding adjustment to stockholders’ equity.  The 45,000 free-trading shares at March 31, 2007 and December 31, 2006 have a market value of $26,930 and $28,213 U.S. funds, respectively.  The Company also owns 196,000 free-trading shares of Centram Exploration Ltd., a public Canadian corporation traded on the Toronto Venture Exchange.  The shares are held as “available for sale.”  The shares were received in year 2002 in exchange for administrative services provided by the Company.  The 196,000 free-trading shares at March 31, 2007 and December 31, 2006 have a market value of $214,189 and $49,631 U.S. funds, respectively.

NOTE 5 — STOCK OPTIONS:

During the year ended December 31, 1998, the shareholders of the Company approved two stock-based compensation plans: a fixed employee stock-based compensation plan and a performance-based plan.  Under the fixed plan, the Company may grant options to purchase up to 460,000 shares of common stock.  The option price may not be less than the fair market value on the date of grant of the shares.  Stock options  are exercisable within ten years from the date of the grant of the option.  Options under the fixed plan vest immediately.

At March 31, 2007, no 1998 nonqualified plan options were outstanding.

13

NOTE 5 — STOCK OPTIONS (continued):

Under the performance based plan, the Company may grant options to purchase up to 460,000 shares of common stock.  The option price may not be less than the fair market value on the date of grant of the shares.  Stock options are exercisable within ten years from the date of the grant of the option.  Options under the incentive plan vest immediately.

At March 31, 2007, no incentive-based plan options were outstanding.

During the year ended December 31, 2003, the stockholders of the Company approved two new stock-based compensation plans — the 2003 Stock Option Plan (which includes both qualified and nonqualified options) and the 2003 Consultant Stock Compensation Plan.  Under the 2003 Stock Option Plan, the Company may grant options to purchase up to 1,200,000 shares of common stock.  Under the 2003 Consultant Stock Compensation Plan the Company may grant options to purchase up to 400,000 shares of common stock.  During 2004, the Company increased the maximum number of common shares available under the 2003 Stock Option Plan and the 2003 Consultant Stock Compensation Plan to 3,000,000 and 700,000 shares, respectively.

Under both 2003 plans the option price may not be  less than 100% of the fair market value per share on the date of grant.  Stock options are  exercisable within ten years from the date of the grant of the option.  Vesting of the options granted under both plans is at the prerogative of the Board of Directors.  Options granted under the plans in 2003 vest immediately except for options issued to Glenn Dobbs, President and Chairman of the Board of Directors. Options issued to Mr. Dobbs were 50% vested at year end December 31, 2003 and become fully vested upon completion of certain financing arrangements.  The options granted to Mr. Dobbs were fully vested at year end December 31, 2004.

At March 31, 2007, the following 2003 plan options were outstanding:

					Remaining
			Weighted		Contractual
Exercise		Number of	Average		Life	Number
Prices		Options	Exercise Price		(in years)	Exercisable
$	1.60	500,000	$	1.60	.93	500,000
1.85		100,000	1.85		1.41	100,000
3.95		20,000	3.95		2.23	20,000
4.65		475,000	4.65		2.09	475,000
3.75		220,000	3.75		2.76	120,000
3.93		155,000	3.93		2.84	155,000
4.01		214,000	4.01		3.16	214,000
5.01		5,000	5.01		3.22	5,000
5.01		175,000	5.01		4.20	175,000
5.01		30,000	5.01		4.41	10,000
5.01		100,000	5.01		3.71	100,000
5.01		200,000	5.01		4.33	—
Subtotal		2,194,000	$	3.70		1,874,000

14

NOTE 5 — STOCK OPTIONS (continued):

During January 2005, the Company issued 214,000 stock options to an individual as compensation for the  performance of marketing services. The options have an exercise price of $4.01 and vested 25% at the time of issuance, 25% in 60 days thereafter and the remaining balance on May 28, 2005.

During February 2005, the Company issued 205,000 stock options to directors and employees.  The options have an exercise price of $3.93 and vested immediately.  The options expire five years from issuance.

During June 2005, the Company issued 25,000 stock options to an individual as compensation for the performance of consulting services.  The options have an exercise price of $5.70 and vested immediately.  These options expire five years from issuance.

During June 2005, the Company issued 25,000 stock options to an individual as compensation for the performance of consulting services.  The options had an exercise price of $5.99 per share, representing the share price at the close of trading on June 6, 2005, and vested 40% at the time of  grant (June 6, 2005), and 20% each on June 6 of 2006, 2007, and 2008.  The Company has a policy of re-pricing all incentive stock options as market conditions allow.  As a result, the above stock option grants on June 6, 2005 were cancelled and replaced by the same number of stock options at an exercise price of $4.92 per share representing the stock price as of the close of trading on September 7, 2005.  During September 2006, the remaining options outstanding were forfeited.

During December 2005, the Company issued 100,000 stock options to an officer.  The options had an exercise price of $6.34 per share, representing the share price at the close of trading on December 13, 2005, and vested 50% at the time of issuance (December 13, 2005), and 50% on December 13, 2006.  During October 2006, the options were cancelled and replaced by the same number of stock options at an exercise price of $5.01 per share representing the stock price as of the close of trading on October 3, 2006.

During June 2006, the Company issued 170,000 stock options to officers, directors, and employees and 5,000 stock options to an individual as compensation for the performance of consulting services.  The options had an exercise price of $6.20 and vested immediately.  The options expire five years from issuance.  During October 2006, the options were cancelled and replaced by the same number of stock options at an exercise price of $5.01 per share representing the stock price as of the close of trading on October 3, 2006.

During July and September 2006, the Company issued 200,000 stock options to directors and 30,000 to our new Project Engineer for the Montanore Project.  The options had exercise prices of $6.42 and $6.21, respectively.  The options issued to the directors vest over a two year period, 20,000 on July 9, 2007 and 20,000 on July 9, 2008 for each director.  For the options issued to the new employee, 10,000 vested immediately, while the remaining 20,000 vest over a two year period, 10,000 on September 20, 2007 and 10,000 on September 20, 2008. Fair value of the options is calculated using the Black-Scholes option-pricing model and is recognized as the options vest.  During October 2006, the options were cancelled and replaced by the same number of stock options at an exercise price of $5.01 per share representing the stock price as of the close of trading on October 3, 2006.

Options outstanding at March 31, 2007, have a remaining contractual life of approximately three years.

15

NOTE 6 — 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 $100,000 per institution.

NOTE 7 — DEFERRED INCOME TAX:

At March 31, 2007, and December 31, 2006, the Company had deferred tax assets that were fully reserved by valuation allowances.  Following are the components of such assets and allowances:

	March 31,		December 31,
	2007		2006
Deferred tax assets arising from:
Net operating loss carryforwards	$	2,044,000	$	1,770,000
Stock option compensation	610,000		610,000
Accrued severance compensation	0		0
	2,654,000		2,380,000
Less valuation allowance	2,654,000		2,380,000
Net deferred tax assets	$	—	$	—

For the periods presented, the effective income tax rate differed from the expected rate because of the effects of annual changes in the deferred tax asset valuation allowance.  Changes in the deferred tax asset valuation allowance for the years ended March 31, 2007 and December 31, 2006 relate only to corresponding changes in deferred tax assets for those periods.

At March 31, 2007, the Company had federal tax-basis net operating loss carryforwards totaling approximately $13,600,000 which will expire in various amounts from 2008 through 2027.

NOTE 8 — COMMITMENTS:

On August 11, 2005, Mines Management was named as a co-defendant in a lawsuit filed by Montana Reserves Company (“MRC”) in the Superior Court of the State of Washington in Spokane County, Washington.  Named as co-defendants are Noranda Minerals, Normin Corp., Mines Management and Newhi, Inc.  The action seeks damages in connection with the conveyance of the Montanore property from Noranda to Newhi, and challenges the computation of a net proceeds royalty payable to MRC pursuant to a Royalty Agreement between Noranda and MRC in respect to the Montanore property.  Management does not believe that the outcome of this lawsuit will have a material adverse effect.

16

NOTE 9 — BUSINESS COMBINATION:

On May 31, 2006, Noranda Finance Corporation and Newhi, Inc. executed a stock transfer agreement by which all issued and outstanding shares of capital stock for both Noranda Minerals Corporation and Normin Corporation have been transferred to Newhi, Inc.  Noranda Minerals Corporation and Normin Corporation are Delaware corporations registered to do business in Montana.  At the same time, Newhi submitted a $30,000 cash bond to the Montana Department of Environmental Quality (DEQ) to replace Noranda’s previous bond.  Subsequently, the official names of the companies where changed to Montanore Mineral Corporation and Montmin Corporation, respectively.  The existing Montana State Hard Rock Permit #00150 and MPDES permit MT-00320279 stayed in place with Montanore Mineral Corporation, formerly known as Noranda Minerals Corporation, which is now owned by Newhi, Inc., a wholly-owned subsidiary of the Company.

NOTE 10 — SUBSEQUENT EVENT:

On April 20, 2007 the Company completed a public offering of 6,000,000 units at a price of $5.00 per unit, resulting in gross proceeds of $30,000,000 ($28,200,000 net proceeds).  Each unit is comprised of one share of common stock and one-half of one common stock purchase warrant, with each full warrant being exercisable for five years to purchase one share of common stock at an exercise price of $5.75 per share.

The underwriters were granted an over-allotment option, exercisable for a period of 30 days following the closing, to acquire up to an additional 900,000 units.

On May 7, 2007, the Company received notice that the underwriters had elected to exercise the over-allotment option for 836,600 units.  The total offering is therefore 6,836,600 units for gross proceeds to the Company of $34,183,000, or $32,132,020 in net proceeds to the Company, after deducting underwriting commissions but before deducting offering expenses.  The shares of common stock issuable in connection with the exercise of the over-allotment are not included in the number of shares outstanding as reported in this Quarterly Report on Form 10-Q.

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Item 2:Management’s Discussion and Analysis of Financial Condition and Results of Operations

On April 20, 2007, Mines Management, Inc. (“MMI” or the “Company”) completed a US$30,000,000 public offering at $5.00 per unit in which 6,000,000 units were sold, realizing US$28,200,000 net proceeds to the Company after deducting underwriting commissions but before deducting offering expenses.  As a result, the Company has sufficient funds on hand for the first three phases of  its planned advanced exploration and delineation program that it expects to undertake at the Montanore project over the next two years.  The Montanore project continues to be the Company’s main focus and, in addition to the planned delineation drilling program, the Company is continuing its repermitting efforts with applicable federal and state agencies and its optimization review of the Project.

Overview

In the first quarter of 2007, the Company

·Completed the $30 million public offering described above.

·Maintained strong cash and investment position with $3.5 million on hand at March 31, 2007.

·Continued adding infrastructure at the  Libby adit site.

·Completed a water quality pilot plant test and analysis in the Libby adit.

·Continued work with state and federal agencies to provide technical information in support of the preparation of the draft of the environmental impact statement.

·Finished a detail schedule and budget for the next two years for the Montanore project.

The Company has initiated its planned two-year advanced exploration and delineation drilling program at the Montanore Project.  We expect to dewater and rehabilitate the Libby adit, and then advance the adit approximately 3,000 feet toward the middle of the deposit.  We plan an additional 10,000 feet of development drifting to provide drill access to different portions of the deposit, construction of drill stations, and diamond core drilling of approximately 50 holes totaling approximately 45,000 feet. The objectives of our advanced exploration and delineation 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.

We expect that results of the drilling program, if successful, would provide data to support the completion of a bankable feasibility study.

The net cash expenditures for operating activities for the quarter ending March 31, 2007 was $1.7 million.  The Company believes that the recently completed financing, raising $28.2 million, net of commissions but before expenses, provides sufficient working capital for rehabilitation of the Libby adit and commencement of the evaluation drilling program over the next two years.  In order to complete the planned program, the Company would need an additional $10 million in external financing.

Permitting and Environmental

During the first quarter of 2007, MMI continued to address technical questions and comments generated by the U.S. Forest Service and the Montana Department of Environment Quality (MDEQ) as they prepare the draft environmental impact statement (EIS) relating to the Montanore Project.  In response, MMI submitted final technical information for the proposed tailings dam design and the transmission line and additional technical information regarding road use, mitigation of impact on grizzly bear and grizzly bear habitat and water management.

18

The collection of the requested information culminated in the submission by MMI in February 2007 of a revised project description for the EIS incorporating all technical comments generated by the agencies to that point.

Our third-party EIS contractor continues to work on alternative analyses of the environmental impacts of the Project.

Geology

In the first quarter of 2007, MMI continued work on the geologic model of the Montanore deposit, including digitally defining shapes that represent bedding planes and rock types. This geologic model will be enhanced with the results of the planned delineation drilling program, with the goal of better defining the predictability of the deposit ore grades and of the ore and mineralized zones.

During the first quarter of 2007, MMI also identified potential geology staff for the Project with an emphasis on employing individuals to work on the upcoming delineation drilling program.

Engineering

The primary engineering focus during the first quarter of 2007 was the activity associated with installing infrastructure at the Libby adit site in preparation for the commencement of delineation drilling.

Montanore Project optimization opportunities continued to be reviewed and developed by the engineering staff.

Advanced Exploration and Delineation Drilling Program

In July 2006, MMI initiated site preparation for the delineation drilling program planned at the Libby adit.  These efforts continued in the first quarter of 2007, during which time MMI completed construction of the shop, office, and rehabilitation of the portal and generators.  Ventilation fans and other equipment were installed in the Libby adit site.

Following completion of the pilot scale tests of the water treatment method in 2007, MMI prepared a bid package that should be submitted in the second quarter of 2007, with delivery and commencement of operation of the water treatment plant anticipated to occur late in the second quarter and early third quarter of 2007.

Also in the first quarter of 2007, MMI placed orders for underground equipment including a roof bolter, scissor deck, underground loader, and underground trucks, which are expected to begin arriving in May or June of 2007, with deliveries continuing throughout the year.

MMI currently has four employees at the adit site and plans to hire four additional employees starting in the second quarter of 2007.

Financial and Operating Results

Mines Management is an exploration stage company with a large silver/copper project, the Montanore Project, located in northwest Montana.  The Company continues to expense all of its expenditures and has no revenues from mining operations.  Financial results of operations include primarily interest income, general and administrative expenses, permitting and engineering expenses, and other miscellaneous.

Quarter Ended March 31, 2007

The Company reported a net loss for the quarter ended March 31, 2007 of $1.8 million or $0.14 per share compared to $1.1 million loss or $0.08 per share for the quarter ended March 31, 2006.  The $0.7 million increase in net loss was attributed to increased expenditures for the first quarter 2007 compared to first quarter 2006 resulting from increased activity for the Montanore Project including permitting, technical studies, and preparation for the Libby adit rehabilitation and delineation drilling program, and corporate legal, accounting, and administrative expenses relating to the public offering completed on April 20, 2007.

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Liquidity

For the quarter ended March 31, 2007, the net cash used for operating activities was $1.7 million, which largely consisted of permitting, engineering and site preparation expenses for the Libby adit rehabilitation and delineation drilling program. The net cash provided by investing activities for the quarter was $1.6 million from the sale of certificates of deposit. The net decrease in cash on hand at the end of the first quarter 2007 versus year end 2006 was $0.1 million.

The Company anticipates spending approximately $15 million from cash and investments on hand for the final three quarters of 2007 for activities related to the Libby adit rehabilitation and delineation drilling program.

Forward Looking Statements

Some information contained in or incorporated by reference into this report may contain forward looking statements.  These statements include comments regarding Montanore Project permitting, the commencement and completion of activities related to the planned rehabilitation of the Libby adit and delineation drilling program, the hiring of additional staff, and the markets for silver and copper.  The use of any of the words “development”, “anticipate”, “continues”, “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 and incorporated by reference into this report:

·Worldwide economic and political events affecting the supply of and demand for silver and copper

·Volatility in the market price for silver and copper

·Financial market conditions and the availability of financing on acceptable terms

·Uncertainties associated with developing new mines

·Variations in ore grade and other characteristics affecting mining, crushing, milling and smelting and mineral recoveries

·Geological, technical, permitting, mining and processing problems

·The availability, terms, conditions and timing of required governmental permits and approvals

·Uncertainty regarding future changes in applicable law or implementation of existing law

·The availability of experienced employees

·The factors discussed under “Risk Factors” in our Form 10-K, as amended, for the period ending December 31, 2006.

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Item 3.    Quantitative and Qualitative Disclosures About Market Risk and Hedging Activities

All of our cash balances are held in U.S. dollars and our long term investment certificates of deposit  are denominated in U.S. dollars in local and national banking institutions.  We manage the timing of cash required for review of the Montanore deposit permitting, and engineering of the Montanore Project and for general corporate purposes utilizing our money market account and invest funds not immediately required in investments, currently in certificates of deposit with varying maturities and fixed early retirement costs of three months interest.  Our policy is to invest only in government and corporate grade securities rated “investment grade” or better.

The market prices of base and precious metals such as silver and copper fluctuate widely and are affected by numerous factors beyond the control of any mining company.  These factors included expectations with regard to the rate of inflation, the exchange rates of the dollar and other currencies, interest rates, global or regional political, economic or banking crises, and a number of other factors.  If the market price of silver or copper should decrease, the value of the Company’s Montanore Project could decline and the Company might not be able to recover its investment in that project.  Any determination to develop or construct a mine would be made long before the first revenues from production would be received. Price fluctuations between the time that such decisions are made and the commencement of production could affect the economics of the mine.

Item 4.    Controls and Procedures

Glenn M. Dobbs, MMI’s President and CEO, and James H. Moore, MMI’s Chief Financial Officer and Treasurer, have evaluated MMI’s disclosure controls and procedures as of March 31, 2007.  Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that MMI’s disclosure controls and procedures are designed and were effective as of March 31, 2007 to give reasonable assurances that the information required to be disclosed in the reports that MMI files or submits under the Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is also accumulated and communicated to MMI’s management, including its Chief Executive Officer and Chief Financial Officer.

There were no changes in MMI’s internal controls or, to the knowledge of the management of MMI, any other changes that materially affect, or are reasonably likely to materially affect, MMI’s internal control over financial reporting.

21

PART II: OTHER INFORMATION

Item 1.    Legal Proceedings

On August 11, 2005, Mines Management was named as a co-defendant in a lawsuit filed by Montana Reserves Company (“MRC”) in the Superior Court in Spokane County Washington.  Named as co-defendants are Noranda Minerals, Normin Corp., Mines Management and Newhi, Inc.  The action seeks damages in connection with the conveyance of the Montanore property from Noranda to Newhi, and challenges the computation of a net proceeds royalty payable to MRC pursuant to a Royalty Agreement between Noranda and MRC in respect to the Montanore property.  Management does not believe that the outcome of this lawsuit will have a material adverse effect on Mines Management’s business or results of operations.

Item 1a.Risk Factors

There are no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K, as amended, for the year ending December 31, 2006.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3.    Defaults Upon Senior Securities

None

Item 4.    Submission of Matters to a Vote of Security Holders

None

Item 5.    Other Information

None

Item 6.    Exhibits

(a)	Exhibits:
	31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
	31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
	32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C., 1350 (Section 906 of the Sarbanes-Oxley Act)
	32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C., 1350 (Section 906 of the Sarbanes-Oxley Act)

22

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf of the undersigned thereunto duly authorized.

Date: May 10, 2007	By:	/s/ Glenn M. Dobbs
		Glenn M. Dobbs
		President and Chief Executive Officer
Date: May 10, 2007	By:	/s/ James H. Moore
		James H. Moore
		Chief Financial Officer

23

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, Glenn M. Dobbs, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of Mines Management, Inc.;

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 controls 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 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 officers 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 registrant’s board of directors:

a.         All significant deficiencies and material weaknesses in the design or operation of internal controls 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: May 10, 2007
	\s\ Glenn M. Dobbs
	Glenn M. Dobbs
	President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, James H. Moore, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Mines Management, Inc.;

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 controls 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 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 officers 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 registrant’s board of directors:

a.         All significant deficiencies and material weaknesses in the design or operation of internal controls 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: May 10, 2007
	\s\ James H. Moore
	James H. Moore
	Chief Financial Officer

EX-32.1

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 Quarterly Report of Mines Management, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), 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.

\s\ Glenn M. Dobbs

Glenn M. Dobbs

President and Chief Executive Officer

May 10, 2007

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.

EX-32.2

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 Quarterly Report of Mines Management, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), 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.

\s\ James H. Moore

James H. Moore

Chief Financial Officer

May 10, 2007

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.