UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2013

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER 001-32074

MINES MANAGEMENT, INC.

(Exact Name of Registrant as Specified in its Charter)

IDAHO		91-0538859
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No 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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o		Accelerated filer o

Non-accelerated filer o		Smaller reporting company x

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 August 14, 2013, 28,999,752 common shares, par value $0.001 per share, were issued and outstanding.

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CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

Information contained in or incorporated by reference into this Quarterly Report on Form 10-Q may contain forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995. The use of any of the words “development”, “anticipate”, “continues”, “estimate”, “expect”, “may”, “project”, “should”, “believe”, or similar expressions are intended to identify such statements. Forward-looking statements included in this report relate to, among other things, 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; the process and timing associated with the Montanore Project permitting process, including the issuance of biological opinions, a final environmental impact statement and a record of decision and completion of wetland mitigation plans; financing needs, including the financing required to fund the final phases of the Montanore Project advanced exploration and delineation drilling program and a bankable feasibility study; sources of financing; the sufficiency of working capital to complete the rehabilitation of the Libby adit and commence delineation drilling; planned expenditures and cash requirements for 2013 and 2014; planned exploration and evaluation of the Estrella property in Peru, and results of drilling at Estrella; efforts to reduce costs, including reducing manpower; results of the Montanore Project hydrological model and the effects thereof; the search for potential exploration and development opportunities in the mining industry; the possibility of challenges by environmental groups or others to our permitting efforts or planned exploration, development or mining activities; potential completion of a bankable feasibility study and the costs associated therewith; and markets for silver and copper. We believe the expectations reflected in those forward-looking statements are reasonable. However, we cannot assure that the expectations will prove to be correct. Certain cautionary statements are also included elsewhere in this report, including, without limitation, in conjunction with the forward-looking statements. All forward-looking statements speak only as of the date made. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements. Except as required by law, we undertake no obligation to update any forward-looking statements. Factors that could cause actual results to differ materially from our expectations include, among others, those factors referenced in the “Risk Factors” section of this report and our Annual Report on Form 10-K for the year ended December 31, 2012 and such things as:

· the availability of experienced employees;

· uncertainties associated with developing new mines or mining operations;

· the absence of any history of production;

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

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

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

· 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;

· the need for additional financing to complete the underground evaluation program, to develop the Montanore Project and to conduct additional exploration at the Estrella project in Peru;

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

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

· the competitive nature of the mining industry;

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

· changes in geological information and the interpretation thereof;

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Mines Management, Inc. and Subsidiaries

(An Exploration Stage Company)

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	June 30, 2013			December 31, 2012
*Assets*
CURRENT ASSETS:
Cash and cash equivalents	$	6,908,782		$	10,246,073
Interest receivable	6,453			7,815
Prepaid expenses and deposits	221,787			250,892
Certificates of deposit	1,559,361			1,559,361
Total current assets	8,696,383			12,064,141

PROPERTY AND EQUIPMENT:
Buildings and leasehold improvements	836,454			836,454
Equipment	6,450,089			6,450,089
Office equipment	344,939			344,939
	7,631,482			7,631,482
Less accumulated depreciation	5,860,332			5,392,684
	1,771,150			2,238,798
OTHER ASSETS:
Available-for-sale securities	21,418			19,633
Reclamation deposits	1,191,182			1,184,966
	1,212,600			1,204,599
	$	11,680,133		$	15,507,538
*Liabilities and Stockholders’ Equity*
CURRENT LIABILITIES:
Accounts payable	$	380,594		$	495,326
Payroll and payroll taxes payable	25,334			17,874
Total current liabilities	405,928			513,200

LONG-TERM LIABILITIES:
Asset retirement obligation	467,926			456,823
Total liabilities	873,854			970,023

COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY:
Preferred shares — no par value, 10,000,000 shares authorized; -0- shares issued and outstanding	—			—
Common shares — $0.001 par value, 100,000,000 shares authorized; 28,999,752 shares issued and outstanding	29,000			29,000
Additional paid-in capital	87,055,369			86,805,769
Accumulated deficit	(1,117,306		)	(1,117,306		)
Deficit accumulated during the exploration stage	(75,171,037		)	(71,188,416		)
Accumulated other comprehensive income	10,253			8,468
Total stockholders’ equity	10,806,279			14,537,515
	$	11,680,133		$	15,507,538

See accompanying notes to condensed consolidated financial statements.

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Mines Management, Inc. and Subsidiaries

(An Exploration Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three Months Ended June 30,						Six Months Ended June 30,						From Inception of Exploration Stage August 12, 2002 Through June 30,
	2013			2012			2013			2012			2013
REVENUE:
Royalties	$	6,937		$	5,833		$	15,245		$	20,581		$	166,549
OPERATING EXPENSES:
General and administrative	758,453			958,884			1,733,854			1,737,774			34,675,111
Technical services and exploration	625,090			1,090,976			1,420,914			1,621,047			32,225,399
Depreciation	232,745			246,992			467,648			491,388			5,892,385
Legal, accounting, and consulting	199,746			96,992			305,885			222,401			4,970,424
Fees, filing, and licenses	32,556			2,125			83,242			53,916			2,828,571
Impairment of mineral properties	—			—			—			—			504,492
Total operating expenses	1,848,590			2,395,969			4,011,543			4,126,526			81,096,382
LOSS FROM OPERATIONS	(1,841,653		)	(2,390,136		)	(3,996,298		)	(4,105,945		)	(80,929,833		)
OTHER INCOME:
Gain from warrant derivatives	—			21,057			—			357,977			476,381
Gain on sale of available-for-sale securities	—			—			—			—			2,005,904
Interest income, net	6,110			15,309			13,677			34,614			3,276,511
	6,110			36,366			13,677			392,591			5,758,796
NET LOSS	$	(1,835,543	)	$	(2,353,770	)	$	(3,982,621	)	$	(3,713,354	)	$	(75,171,037	)
NET LOSS PER SHARE (basic and diluted)	$	(0.06	)	$	(0.08	)	$	(0.14	)	$	(0.13	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (basic and diluted)	28,999,752			28,849,000			28,999,752			28,894,182

See accompanying notes to condensed consolidated financial statements.

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Mines Management, Inc. and Subsidiaries

(An Exploration Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)

	Three Months Ended June 30,						Six Months Ended June 30,						From Inception of Exploration Stage August 12, 2002 Through
	2013			2012			2013			2012			June 30, 2013
Net Loss	$	(1,835,543	)	$	(2,353,770	)	$	(3,982,621	)	$	(3,713,354	)	$	(75,171,037	)
Unrealized holding gains (losses) arising during the period	7,770			(843		)	1,785			1,905			2,016,157
Less reclassification adjustment for realized gains included in net income, net of income tax of $0	—			—			—			—			(2,005,904		)
COMPREHENSIVE LOSS	$	(1,827,773	)	$	(2,354,613	)	$	(3,980,836	)	$	(3,711,449	)	$	(75,160,784	)

See accompanying notes to condensed consolidated financial statements.

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Mines Management, Inc. and Subsidiaries

(An Exploration Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Six Months Ended June 30,						From Inception of Exploration Stage August 12, 2002 Through June 30,
	2013			2012			2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(3,982,621	)	$	(3,713,354	)	$	(75,171,037	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation	249,600			50,870			11,155,499
Stock received for services	—			—			(11,165		)
Depreciation	467,648			491,388			5,892,385
Initial measurement of asset retirement obligation	—			—			344,187
Accretion of asset retirement obligation	11,103			10,636			123,739
Gain on sale of available-for-sale securities	—			—			(2,005,904		)
Gain from warrant derivatives	—			(357,977		)	(476,381		)
Impairment of mineral properties	—			—			504,492
Changes in assets and liabilities:
Interest receivable	1,362			1,340			(6,453		)
Prepaid expenses and deposits	29,105			(120,664		)	(282,198		)
Accounts payable	(114,732		)	155,953			380,430
Payroll and payroll taxes payable	7,460			27,000			22,154
Net cash used in operating activities	(3,331,075		)	(3,454,808		)	(59,530,252		)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	—			(10,915		)	(7,697,121		)
Proceeds from disposition of property and equipment	—			—			35,423
Proceeds (purchase) of certificates of deposit	(6,216		)	51,880			(2,689,631		)
Net proceeds from sale of available-for-sale securities	—			—			2,005,904
Increase in mineral properties	—			—			(144,312		)
Net cash provided by (used in) investing activities	(6,216		)	40,965			(8,489,737		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of common stock	—			198,000			74,881,436
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(3,337,291		)	(3,215,843		)	6,861,447
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	10,246,073			17,121,800			47,335
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	6,908,782		$	13,905,957		$	6,908,782
SUPPLEMENTAL INFORMATION:
Interest paid	$	—		$	—		$	65,768
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
Unrealized gains on available-for-sale securities	$	1,785		$	1,905		$	10,253

See accompanying notes to condensed consolidated financial statements.

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NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Organization:

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

Summary of Significant Accounting Policies:

These unaudited interim financial statements have been prepared by the Company in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information, as well as the instructions to Form 10-Q. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of the Company’s management, all adjustments (consisting solely of normal recurring adjustments) considered necessary for a fair presentation of the interim financial statements have been included.

The preparation of financial statements in accordance with U.S. GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, 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. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Company’s condensed 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. Operating results for the three and six month periods ended June 30, 2013 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2013.

For further information, refer to the consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

(a) 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 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.

(b) Mining properties, exploration and development costs

All exploration expenditures 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.

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.

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

(d) Stock 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.

(e) 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 period. 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 periods ended June 30, 2013 and 2012.

(f) Recent Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board 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 Company adopted the provisions of this guidance effective January 1, 2013. This guidance did not have a significant impact on the Company’s consolidated financial position, results of operations or cash flows.

(g) Subsequent events

The Company evaluated events and transactions subsequent to the balance sheet date of June 30, 2013 for potential recognition or disclosure in the condensed consolidated financial statements.

NOTE 2 — CERTIFICATES OF DEPOSIT:

The Company owns two certificates of deposit for a total of $1,559,361. 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 matures on January 3, 2014, bears interest at the rate of 0.45% and renews automatically each year. This certificate of deposit ($1,130,271 and $1,124,055 as of June 30, 2013 and December 31, 2012, respectively) is included with reclamation deposits on the Condensed Consolidated Balance Sheets.

NOTE 3 — 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:

	June 30, 2013		December 31, 2012
Cost	$	11,165	$	11,165
Unrealized Gains	10,253		8,468
Fair Market Value	$	21,418	$	19,633

NOTE 4 — 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 June 30, 2013, 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 5 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.

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	June 30, 2013		December 31, 2012		Input Hierarchy Level
Assets:
Available-for-sale securities	$	21,418	$	19,633	Level 1
Liabilities:
Asset retirement obligation	$	467,926	$	456,823	Level 3

The following table presents the fair value reconciliation of Level 3 liabilities measured at fair value during the six months ended June 30, 2013 and 2012:

	Asset Retirement Obligation
	2013		2012
Balance January 1	$	456,823	$	435,171
Accretion expense	5,488		5,286
Balance March 31	462,311		440,457
Accretion expense	5,615		5,350
Balance June 30	$	467,926	$	445,807

NOTE 5 — 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 these warrants of $-0- and $21,057 in the Condensed Consolidated Statements of Operations for the three months ended June 30, 2013 and 2012, respectively. Gains of $-0- and $357,977 were recorded for the six months ended June 30, 2013 and 2012, respectively.

NOTE 6 — CONCENTRATION OF CREDIT RISK:

The Company maintains most of 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 totaled approximately $9,400,000 as of June 30, 2013. 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 7 — STOCKHOLDERS’ EQUITY:

Common Shares:

For a description of the public offerings that occurred in 2011 and 2007 and the sales of common stock during 2007 and 2005, refer to the consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. The warrants associated with the public offering completed in April 2007 expired on April 20, 2012. No warrants related to this offering were exercised before they expired. The warrants associated with the sale of stock in October 2005 also expired on April 20, 2012. Cumulative warrants exercised relating to this issue were 269,620 for each of the periods ended June 30, 2013 and December 31, 2012. No warrants were exercised during the six months ended June 30, 2013 and 2012.

Preferred Shares:

The Company has authorized 10,000,000 preferred shares, no par value. Through June 30, 2013, the Company had not issued any preferred shares.

NOTE 8 — STOCK OPTIONS:

There has been no change to the Company’s 2003 and 2007 Stock Option Plans during 2013, other than the items summarized below. For a description of these Stock Option Plans, refer to the consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

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 under the 2012 Plan. The

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common shares subject to the 2012 Plan may be either authorized and unissued shares or reacquired 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. The option exercise price may not be less than 100% of fair market value per share on the date of grant and the options are exercisable within ten years from the date of grant of the option. The vesting schedule of the options is at the discretion of the Board of Directors.

A summary of the option activity under the Company’s Stock Option Plans as of June 30, 2013, and changes during the period then ended, is presented below:

	Number of Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1, 2013	3,622,000		$	1.81
Issued	520,000		$	1.05
Outstanding at March 31, 2013	4,142,000		$	1.71
Expired	(200,000	)	$	0.99
Outstanding and exercisable at June 30, 2013	3,942,000		$	1.75	3.04	—

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 periods presented is based on the historical volatility of the Company’s common shares 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.

	Three Months Ended June 30,		Six Months Ended June 30,
	2013(1)	2012(1)	2013			2012(1)
Weighted average risk-free interest rate	—	—	0.44		%	—
Weighted average volatility	—	—	68.88		%	—
Expected dividend yield	—	—	—			—
Weighted average expected life (in years)	—	—	3.0			—
Weighted average grant-date fair value	—	—	$	0.48		—

(1) No options were granted during the three months ended June 30, 2013 and 2012, or the six months ended June 30, 2012.

During the six months ended June 30, 2013 there were no stock options exercised. During the three months ended June 30, 2012, there were 5,000 stock options exercised with a weighted average price of $1.29 and a total intrinsic value of $122. During the six months ended June 30, 2012, there were 205,000 stock options exercised with a weighted average exercise price of $1.00 and a total intrinsic value of $210,122.

During the six months ended June 30, 2013, the Company did not have any nonvested options. As of June 30, 2013, there was no unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plans.

There were no compensation costs recognized for stock-based employee compensation awards for the three months ended June 30, 2013 and 2012. Total compensation costs recognized for stock-based employee compensation awards was $249,600 and $50,870 for the six months ended June 30, 2013 and 2012, respectively. These costs were included in general and administrative expenses and technical services on the Condensed Consolidated Statements of Operations. Cash received from options exercised under all share-based payment arrangements during the six months ended June 30, 2013 and 2012 was $-0- and $198,000, respectively.

NOTE 9 — COMMITMENTS:

The Company entered into an Exploration Earn-In Agreement with Estrella Gold Corp. 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

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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 was terminated. The Company met the first year’s exploration and development expenditure requirements during 2012. 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.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the year ended December 31, 2012, as well as with the financial statements and related notes and the other information appearing elsewhere in this report. As used in this report, unless the context otherwise indicates, references to “we,” “our,” the “Company” and “us” refer to Mines Management, Inc. and its subsidiaries collectively.

We are an exploration stage company with a large silver-copper project, the Montanore Project, located in northwestern Montana. The Montanore Project continues to be the Company’s main focus. During 2013, the Company has continued to plan for the advanced exploration and delineation drilling program at the Montanore Project, principally through the pursuit of federal and state agency permitting approvals.

Overview Second Quarter 2013

· The Biological Consultation with U.S. Fish and Wildlife Service (“USFWS”) continued with work being advanced toward completion of the aquatics portion of the Biological Opinion (“BO”). A draft aquatics BO was completed and is currently being reviewed by USFWS staff, with completion anticipated by the agencies in the third quarter. The terrestrial portion of the biological opinion remains in draft form, and the U.S. Forest Service (“USFS”) and USFWS are working through the details of the document.

· The 404 Permit to be issued by the U.S. Army Corps of Engineers (“USACE”) advanced with a detailed mitigation plan sent to the U.S. Environmental Protection Agency “EPA”, USFS, and Montana Dept. of Environmental Quality (“MDEQ”) for review and comments. Comments are due during the third quarter of 2013.

· The Final Environmental Impact Statement (“EIS”) is advancing with numerous sections already complete in draft form. The agency contractor responsible for writing the Final EIS, has provided the agencies with a draft and comments are being incorporated into the final version.

· At the Estrella project in Peru, the Company completed metallurgical analysis on main phase mineralized rock and advanced work to extend exploration permits. Exploration activities on the property have been reduced as part of the Company’s overall cost reduction initiative.

Current Activities

Montanore Project:

Montanore Permitting. Approval by regulatory agencies will be required before the Montanore Project can proceed with further exploration and project development. The agencies that are involved with the major permits include the USFS, MDEQ, and USACE. The permitting process requires completion of the Final EIS before a Record of Decision can be issued by the USFS and MDEQ. The Final EIS describes various elements of the project, provides analysis of impacts, includes public input, and discloses aspects of the proposed project that were considered by the agencies. Significant progress has been made on the Final EIS. The agencies continue to edit and re-write various resource sections in the Final EIS which are based on the Draft EIS and Supplemental Draft EIS previously issued. This process is occurring concurrently with the review of other regulatory elements of the project.

Part of the review requires consultation between the USFS and the USFWS under the Endangered Species Act. The process requires the USFS to prepare and submit biological assessments (“BA”) for terrestrial and aquatic wildlife to the USFWS, who in turn, through a consultation process, review the documents and develop a BO which includes mitigation requirements designed to offset the project’s impact to wildlife.

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Upon acceptance of the aquatics BA in the first quarter, consultation by the USFWS began and has continued with completion expected in the second half of 2013. In addition, the Company submitted comments on the draft mitigation plan for the terrestrial biological opinion, which is in draft form and currently under review by USFS and USFWS.

The other major permit required is the 404 permit issued by the USACE under the Clean Water Act. This permit is required when waters of the U.S. are impacted by a proposed action, in this case by the project tailings impoundment. In 2012, the USACE issued a preliminary jurisdictional determination which is a critical step towards a decision to issue a 404 permit. During the quarter, the Company submitted a detailed wetlands mitigation plan. The USACE sent the plan to the EPA, USFS, and MDEQ for review, and comments are due from the agencies during the third quarter of 2013.

The Company continues to work on related environmental regulatory processes. In 2012, the Company initiated certain monitoring and data collection requirements that were included in the Supplemental Draft EIS which must be completed prior to initiating certain exploration and development activities. In 2013, the Company continues to advance and/or expand these pre-activity monitoring requirements. As part of this effort, during the second quarter, some pre-construction environmental monitoring was implemented with further implementation expected in the third quarter.

Montanore Operations. During the second quarter of 2013, the Company continued to maintain the Libby adit site in a care and maintenance condition in preparation for evaluation activities and adit rehabilitation expected to recommence when the Record of Decision is received. Such activities include the continued filtration of water discharged from the adit through the water treatment facility and maintenance of the water level inside the adit. Technical support and assistance were provided by Company personnel for ongoing permitting and environmental efforts. Gathering of environmental data and reporting to state and federal agencies as part of the permitting process is ongoing.

La Estrella Project:

Metallurgical Analyses. Following the decision to continue the Project into a second year, the Company commenced an initial round of metallurgical analyses of Estrella mineralization. A composite sample was designed based on assays from the 2012 drilling. The Company selected eighty samples to contain low, moderate, and strong gold-silver mineralization and form a composite sample representative of Estrella mineralization. The results of the metallurgical assessment of main phase mineralized rock indicated that dacite-hosted mineralization is strongly pyritic and moderately refractory.

Permitting. The Company submitted a three month extension application of the 2010 Environmental Impact Assessment which was granted by the permitting agencies, and submitted a modification application for the general permit to the Environmental Office of the Peruvian Ministry of Energy and Mining, which is currently in process. In addition, the Company was granted a new Water Use Permit by the regional Water Authority, which permit is valid for 18 months.

Community Relations. The Company continues to support aspects of community activities in the vicinity of the project, and relations with the community remain very good.

The Company continues to advance exploration activities at La Estrella in accordance with its ongoing cash reduction strategies pending future funding opportunities.

Financial and Operating Results

Mines Management, Inc. is an exploration stage company with a large silver-copper project, the Montanore Project, located in northwestern Montana. The Company continues to expense all of its expenditures when incurred, with the exception of equipment and buildings which are capitalized. The Company has no revenues from mining operations. Financial results of operations include primarily general and administrative expenses, permitting, project advancement and engineering expenses.

Quarter Ended June 30, 2013

The Company reported a net loss of $1.8 million for the quarter ended June 30, 2013 compared to a net loss of $2.4 million for the quarter ended June 30, 2012. The decrease in the net loss is attributable to the following items: (1) a $0.2 million decrease in general and administrative expenses including a $0.1 million decrease in salaries with one less executive officer in 2013 compared to 2012, and a $0.1 million reduction in consulting fees compared to 2012, (2) a $0.3 million decrease in technical services associated with the

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exploration of the Estrella Project, (3) a $0.2 million reduction in technical services expenditures associated with the Montanore project resulting from expenditures in the second quarter of 2012 which did not occur during 2013, including a grizzly bear study completed in 2012 and expenditures related to work on the Biological Opinion, and (4) a $0.1 million increase in legal, accounting, and consulting fees primarily associated with a litigation matter. See Part II, Item 1.

Six Months Ended June 30, 2013

The Company reported a net loss of $4.0 million for the six months ended June 30, 2013 compared to a net loss of $3.7 million for the six months ended June 30, 2012. The $0.3 million increase in net loss includes the following items: (1) a $0.2 million reduction in technical services which consists of a combined $0.1 million decrease in Estrella Project exploration costs and expenditures associated with a grizzly bear study completed in 2012, and a $0.1 million decrease in consulting fees and other costs associated with permitting and maintenance of the Montanore project, (2) an increase of $0.1 million in legal, accounting, and consulting fees primarily associated with a litigation matter as described in Part II, Item 1,and (3) a decrease of $0.4 million in the net gain on fair market value of warrant derivatives which expired in April of 2012.

Liquidity

During the six months ended June 30, 2013, the net cash used for operating activities was approximately $3.3 million, which is $0.1 million less than the same period during the prior year. This reduced our cash and cash equivalents and certificates of deposit from $11.8 at December 31, 2012 to approximately $8.5 million at June 30, 2013. We have continued to limit activity levels, including capital expenditures, until the timing for the receipt of the Record of Decision for the Montanore Project becomes clearer.

We anticipate expenditures of approximately $3.1 million for the final two quarters of 2013, which we expect to consist of approximately $1.5 million each quarter for general and administrative expenses, permitting, engineering, and geologic studies for the permitting for the Montanore Project and $0.1 million on exploration support and resource modeling at La Estrella. We expect to fund these expenditures from cash on hand. We expect to require external financing before mid 2014 in order to continue our business. We expect that the timing and amount of additional external financing will be affected by the anticipated timing of the Record of Decision and planned drilling program for Montanore and by exploration results and additional exploration plans, if any, for the La Estrella project. There can be no assurance that external financing will be available on acceptable terms or at all.

Off-Balance Sheet Arrangements

As of June 30, 2013, we had no existing off-balance sheet arrangements (as defined under SEC rules) that have, or are reasonably likely to have, a material current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The majority 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 permitting and engineering of the Montanore Project and for general corporate purposes utilizing our money market account, and we invest funds not immediately required in certificates of deposit with varying maturities and fixed early retirement costs of three months interest. Our policy is to invest only in government 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 include expectations with regard to the rate of inflation, the exchange rates of the U.S. 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

Our management, with the participation of the Company’s Chief Executive Officer and the Company’s Controller and Principal Financial Officer, has evaluated the Company’s disclosure controls and procedures as of June 30, 2013. Based upon this evaluation, the Chief Executive Officer and Principal Financial Officer concluded that the Company’s disclosure controls and procedures are designed and were effective as of June 30, 2013 to give reasonable assurances that the information required to be disclosed in the reports that the Company’s files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed,

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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 the Company’s management, including its Chief Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

There has been no change in our internal control over financial reporting during the quarter ended June 30, 2013 that has materially affected, or that is reasonably likely to materially affect, our internal control over financial reporting.

PART II— OTHER INFORMATION

ITEM 1. 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 that the unpatented mining claims of certain defendants allegedly located above portions of our adit and overlapping certain of our patented mining claims are invalid. The defendants asserted trespass claims against us relating to our use of certain of our mining claims and the adit. The parties participated in a mediation in 2009 which resulted in a settlement with all but one of the ten defendants. Subsequently, however, two of the nine defendants that were part of the settlement claimed that a settlement had not been reached. In mid-March 2013 the Court issued an order on pending motions (i) confirming the settlement with seven of the ten defendants, (ii) stating that one of the defendants is entitled to an injunction from trespassing on certain mining claims; and (iii) stating that the mining claims of another defendant are valid and superior. The mining claim that the Court determined was valid overlaps portions of the adit, which could affect our ability to use the adit. The claims with respect to which injunctive relief from trespass applies appear not to overlap the adit.

We have appealed to the Montana Supreme Court, Case No DA 13-0240, certain portions of the order. We also filed on June 28, 2013 a condemnation action, Montanore Minerals Corp. v. Easements and Rights of Way under through and across those certain unpatented lode mining claims et al., Cause No. CV-00133-DLC, in the United States District Court for the District of Montana, Missoula Division. In this action we seek to acquire necessary easements and rights of way for the Montanore Project including for use of the adit and the construction and use of other underground tunnels and related equipment that are contemplated by the draft environment impact statement for the Montanore Project and other draft permits. The defendants include the defendant in the case referenced in the preceding paragraph whose claim was determined to be valid and overlaps the existing tunnel. No response to the condemnation action has yet been filed.

ITEM 1A. RISK FACTORS

None.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

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FINANCIAL STATEMENTS (unaudited):

Condensed consolidated balance sheets		1

Condensed consolidated statements of operations		2

Condensed consolidated statements of comprehensive loss		3

Condensed consolidated statements of cash flows		4

Notes to condensed consolidated financial statements		5-9

Exhibit No.		Title of Exhibit
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
31.2		Certification of Controller and Principal 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 Controller and Principal Financial Officer pursuant to 18 U.S.C., 1350 (Section 906 of the Sarbanes-Oxley Act)
101		The following financial information from Mines Management Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at June 30, 2013 and December 31, 2012, (ii) Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2013 and June 30, 2012, and from Inception through June 30, 2013, (iii) Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2013 and June 30, 2012, and from Inception through June 30, 2013 and (iv) the Notes to Condensed Consolidated Financial Statements. Pursuant to rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 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, as amended, are deemed not filed for purposes of Section 18 of the securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

	MINES MANAGEMENT, INC.


Date: August 14, 2013	By:	/s/ Glenn M. Dobbs
		Glenn M. Dobbs
		Chief Executive Officer


Date: August 14, 2013	By:	/s/ Nicole Altenburg
		Nicole Altenburg
		Controller and Principal Financial Officer

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PART I — FINANCIAL INFORMATION

ITEM 1.	Financial Statements (unaudited)	i
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	9
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	11
ITEM 4.	Controls and Procedures	11

PART II — OTHER INFORMATION

ITEM 1.	Legal Proceedings	12
ITEM 1A.	Risk Factors	12
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	12
ITEM 3.	Defaults Upon Senior Securities	12
ITEM 4.	Mine Safety Disclosures	12
ITEM 5.	Other Information	12
ITEM 6.	Exhibits	13

SIGNATURES		14