10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2014

OR

oTRANSITION 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 May15, 2014, 29,161,448 common shares, par value $0.001 per share, were issued and outstanding.

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, 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 a final environmental impact statement and a record of decision, financing needs, including the financing required to fund the Company’s ongoing activities, sources of financing; planned expenditures and cash requirements for the remaining three quarters of 2014,  efforts to reduce costs, including reducing manpower.  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, 2013 and such things as:

·the availability of experienced employees;

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

·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 continue our business, and complete the underground evaluation program;

·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;

·changes in geological information and the interpretation thereof;

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

·ongoing reclamation obligations on the Montanore Project properties;

·significant government regulation of mining activities;

·environmental risks;

·uncertainty regarding title to some of our properties;

·the volatility of the market price of our common stock;

·the potential depressive effect of potential issuances of common stock on the market price of our common stock;

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

·other factors, many of which are beyond our control.

MINES MANAGEMENT, INC.

FORM 10-Q

QUARTER ENDED MARCH 31, 2014

INDEX

		Page
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	10
ITEM 4.	Controls and Procedures	11
PART II — OTHER INFORMATION
ITEM 1.	Legal Proceedings	11
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	12
SIGNATURES		13

PART I— FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

Contents

	Page
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

i

Mines Management, Inc. and Subsidiaries

(An Exploration Stage Company)

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	March 31,2014			December 31,2013
Assets
CURRENT ASSETS:
Cash and cash equivalents	$	4,694,957		$	4,145,092
Interest receivable	1,077			6,988
Prepaid expenses and deposits	201,897			237,286
Certificates of deposit	—			1,559,361
Total current assets	4,897,931			5,948,727
PROPERTY AND EQUIPMENT:
Buildings and leasehold improvements	836,454			836,454
Equipment	6,419,066			6,419,066
Office equipment	343,897			344,939
	7,599,417			7,600,459
Less accumulated depreciation	6,500,672			6,294,700
	1,098,745			1,305,759
OTHER ASSETS:
Available-for-sale securities	6,233			14,174
Reclamation deposits	1,184,966			1,191,182
	1,191,199			1,205,356
	$	7,187,875		$	8,459,842
Liabilities and Stockholders’ Equity
CURRENT LIABILITIES:
Accounts payable	$	475,319		$	381,305
Payroll and payroll taxes payable	32,214			23,358
Total current liabilities	507,533			404,663
LONG-TERM LIABILITIES:
Asset retirement obligation	485,248			479,488
Total liabilities	992,781			884,151
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; 29,161,448 and 28,999,752 shares issued and outstanding, respectively	29,162			29,000
Additional paid-in capital	87,401,274			87,230,381
Accumulated deficit	(1,117,306		)	(1,117,306		)
Deficit accumulated during the exploration stage	(80,113,104		)	(78,569,393		)
Accumulated other comprehensive income	(4,932		)	3,009
Total stockholders’ equity	6,195,094			7,575,691
	$	7,187,875		$	8,459,842

See accompanying notes to condensed consolidated financial statements.

1

Mines Management, Inc. and Subsidiaries

(An Exploration Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three Months EndedMarch 31,						From Inception of Exploration Stage August 12, 2002 ThroughMarch 31,
	2014			2013			2014
REVENUE:
Royalties	$	7,291		$	8,308		$	188,767
OPERATING EXPENSES:
General and administrative	591,635			975,401			36,417,713
Technical services and exploration	481,918			795,824			33,905,594
Depreciation	206,701			234,903			6,564,477
Legal, accounting, and consulting	206,704			106,139			5,633,560
Fees, filing, and licenses	67,769			50,686			3,071,942
Impairment of mineral properties	—			—			504,492
Total operating expenses	1,554,727			2,162,953			86,097,778
LOSS FROM OPERATIONS	(1,547,436		)	(2,154,645		)	(85,909,011		)
OTHER INCOME:
Gain from warrant derivatives	—			—			476,381
Gain from sale of property and equipment	—			—			23,000
Gain on sale of available-for-sale securities	—			—			2,005,904
Interest income, net	3,725			7,567			3,290,622
	3,725			7,567			5,795,907
NET LOSS	$	(1,543,711	)	$	(2,147,078	)	$	(80,113,104	)
NET LOSS PER SHARE (basic and diluted)	$	(0.05	)	$	(0.07	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (basic and diluted)	29,036,990			28,999,752

See accompanying notes to condensed consolidated financial statements.

2

Mines Management, Inc. and Subsidiaries

(An Exploration Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)

	Three Months Ended March 31,						From Inception of Exploration Stage August 12, 2002 Through March 31,
	2014			2013			2014
Net loss	$	(1,543,711	)	$	(2,147,078	)	$	(80,113,104	)
Reclassification to realized gain upon sale of marketable securities	—			—			(2,005,904		)
Adjustment to net unrealized holding gain on marketable securities	(7,941		)	(5,985		)	2,000,972
COMPREHENSIVE LOSS	$	(1,551,652	)	$	(2,153,063	)	$	(80,118,036	)

See accompanying notes to condensed consolidated financial statements.

3

 Mines Management, Inc. and Subsidiaries

(An Exploration Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Three Months EndedMarch 31,						From Inception of Exploration Stage August 12, 2002 Through March 31,
	2014			2013			2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,543,711	)	$	(2,147,078	)	$	(80,113,104	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation	42,805			249,600			11,373,316
Stock received for services	—			—			(11,165		)
Depreciation	206,701			234,903			6,564,477
Initial measurement of asset retirement obligation	—			—			344,187
Accretion of asset retirement obligation	5,760			5,488			141,061
Gain on sale of available-for-sale securities	—			—			(2,005,904		)
Gain from warrant derivatives	—			—			(476,381		)
Gain on sale of property and equipment	—			—			(23,000		)
Impairment of mineral properties	—			—			504,492
Changes in assets and liabilities:
Interest receivable	5,911			3,790			(1,077		)
Prepaid expenses and deposits	35,389			30,597			(262,308		)
Accounts payable	94,014			(71,566		)	475,155
Payroll and payroll taxes payable	8,856			81,283			29,034
Net cash used in operating activities	(1,144,275		)	(1,612,983		)	(63,461,217		)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	—			—			(7,697,121		)
Proceeds from disposition of property and equipment	313			—			58,736
Proceeds (purchase) of certificates of deposit	1,565,577			(6,216		)	(1,124,054		)
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	1,565,890			(6,216		)	(6,900,847		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of common stock	128,250			—			75,009,686
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	549,865			(1,619,199		)	4,647,622
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	4,145,092			10,246,073			47,335
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	4,694,957		$	8,626,874		$	4,694,957
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest	$	—		$	—		$	65,768
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
Unrealized losses on available-for-sale securities	$	(7,941	)	$	(5,985	)	$	(4,932	)

See accompanying notes to condensed consolidated financial statements.

4

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 month period ended March 31, 2014 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2014.

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, 2013.

(a)           Going concern

The accompanying consolidated financial statements have been prepared under the assumption that the Company will continue as a going concern and do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. The Company is an exploration stage company and has incurred losses since the inception of its exploration stage. The Company does not have sufficient cash to fund normal operations beyond 2014 without raising additional funds. The Company currently does not have a recurring source of revenue sufficient to fund normal operations and its ability to continue as a going concern is dependent on the Company’s ability to secure sufficient funding for its future exploration and working capital requirements, which may include the sale of its equity or debt securities, and the eventual profitable exploitation of its mining properties. There can be no assurance that the Company will succeed in securing additional funding on terms acceptable to the Company or at all, or in generating future profitable operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

(b)Exploration Stage Enterprise

Since the Company is in the exploration stage of operation, the Company’s financial statements are prepared in accordance with the provisions of 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.

(c)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.

5

(d)Fair value measurements

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

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

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

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

(e)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.

(f)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 March 31, 2014 and 2013.

(f)Recent Accounting Pronouncements

During 2013, the Financial Accounting Standards Board issued guidance related to unrecognized tax benefits related to a net operating loss carryforward, similar tax loss or a tax credit carryforward.  The new standard requires an unrecognized tax benefit that is not available under the tax law or not intended to be used at the reporting date to be presented as a separate liability, rather than netted against a deferred tax asset in the financial statements.  The Company adopted the provisions of this guidance effective January 1, 2014. This guidance did not have a significant impact on our consolidated financial position, results of operations or cash flows for the three months ended March 31, 2014.

(g)Subsequent events

The Company evaluated events and transactions subsequent to the balance sheet date of March 31, 2014 for potential recognition or disclosure in the condensed consolidated financial statements.

NOTE 2  — CERTIFICATES OF DEPOSIT:

The Company owned two certificates of deposit for a total of $1,559,361 at December 31, 2013.  These investments matured in February 2014 and were not renewed.

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, 2015, bears interest at the rate of 0.40% and renews automatically each year.  This certificate of deposit ($1,124,055 and $1,130,271 as of March 31, 2014 and December 31, 2013, 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:

6

	March 31,2014			December 31, 2013
Cost	$	11,165		$	11,165
Unrealized Gains (Losses)	(4,932		)	3,009
Fair Market Value	$	6,233		$	14,174

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 March 31, 2014, 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.  The Company has no financial assets or liabilities that are measured at fair value on a nonrecurring basis.

	March 31,2014		December 31, 2013		Input HierarchyLevel
Assets:
Available-for-sale securities	$	6,233	$	14,174	Level 1
Liabilities:
Asset retirement obligation	$	485,248	$	479,488	Level 3

The following table presents the fair value reconciliation of Level 3 liabilities measured at fair value during the three months ended March 31, 2014 and 2013:

	Asset Retirement Obligation
	2014		2013
Balance January 1	$	479,488	$	456,823
Accretion expense	5,760		5,488
Balance March 31	$	485,248	$	462,311

NOTE 5 — CONCENTRATION OF CREDIT RISK:

The Company maintains most of its cash and cash equivalents in one financial institution.  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. The total uninsured bank deposit balance on the Company’s bank statements was approximately $5,602,000 as of March 31, 2014.

NOTE 6 — 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, 2013.

Preferred Shares:

The Company has authorized 10,000,000 preferred shares, no par value.  Through March 31, 2014, the Company had not issued any preferred shares.

NOTE 7 — STOCK OPTIONS:

The Company had four equity incentive plans as of December 31, 2013.  Two of these plans, the 2003 Stock Option Plan and the 2003 Consultant Stock Compensation Plan, expired in February 2014.  There has been no change to the Company’s 2007 and 2012 Equity Incentive Plans during 2014, other than the items summarized below.  For a description of these Equity Incentive 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, 2013.

A summary of the option activity under the Company’s Equity Incentive Plans as of March 31, 2014, and changes during the period then ended, is presented below:

7

	Number of Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1, 2014	4,663,000		$	1.53
Exercised	(187,000	)	$	0.87
Forfeited or expired	(535,000	)	$	1.96
Outstanding at March 31, 2014	3,941,000		$	1.50	2.68	$	200,820
Exerciseable at March 31, 2014	3,371,000		$	1.66	2.28	$	200,820

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 EndedMarch 31,
	2014(1)		2013
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 March 31, 2014.

During the three months ended March 31, 2014 there were 187,000 stock options exercised with a weighted average price of $0.87 and a total intrinsic value of $67,724.  During the three months ended March 31, 2013, there were no stock options exercised.

A summary of the status of the Company’s nonvested options as of March 31, 2014 and changes during the year then ended is presented below:

	Number of Options		Weighted- Average Grant-Date Fair Value
Nonvested at January 1, 2014	588,000		$	0.27
Vested	(18,000	)	$	0.27
Nonvested at March 31, 2014	570,000		$	0.27

As of March 31, 2014, there was $27,883 of unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plans.  The cost is expected to be recognized over a weighted-average period of less than one year.

Total compensation costs recognized for stock-based employee compensation awards was $42,805 and $249,600 for the three months ended March 31, 2014 and 2013, respectively.  These costs were included in general and administrative expenses and technical services and exploration expenses on the Condensed Consolidated Statements of Operations.  Total costs recognized for stock-based compensation awards for services performed by outside parties were $5,519 and $0 for the three months ended March 31, 2014 and 2013, respectively.  Cash received from options exercised under all share-based payment arrangements during the three months ended March 31, 2014 and 2013 was $128,250 and $0, respectively.

NOTE 8 — 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 was required to make annual cash payments to Estrella of $100,000 prior to the end of the first agreement year ending on February 28, 2013, and $200,000 prior to the end of each subsequent agreement year until the earn-in had been completed.  The Company was also required to expend a minimum of $500,000 in

8

exploration and development expenditures in each of the first and second agreement years.  The Company was able to 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.  During January 2014, the Company terminated the Exploration Earn-In Agreement.

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, 2013, 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 2014, 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 First Quarter 2014

·The U.S. Fish and Wildlife Service (“USFWS”) issued a Final Biological Opinion (“BO”) for terrestrial and aquatic endangered species indicating the Montanore Project poses no jeopardy to endangered or threatened species in the area around the project.

·The U.S. Forest Service (“USFS”) and the Montana Department of Environmental Quality (“MDEQ”) continued to develop the Final Environmental Impact Statement (“FEIS”) during the quarter. The agency contractor responsible for writing the FEIS completed a draft of the document as well as a draft Record of Decision for agency review.

·The Company continued to work with the U.S. Army Corps of Engineers (“USACE”) on the Clean Water Act 404 permitting process. This process will continue concurrently with work on the FEIS and is required prior to the beginning construction of the tailings impoundment dam.

·The Company terminated the exploration program at its La Estrella gold-silver project in central Peru under the terms of its Earn-In Agreement with the owner, Estrella Gold Corp, during January 2014, as part of its cash conservation measures.

Montanore Permitting and Environmental

Approval by regulatory agencies will be required before the Montanore Project can proceed with exploration and project development.  The agencies that are involved with the major permits include the USFS, MDEQ, USACE, and the USFWS.  There are other permits required, such as water rights, which will involve other agencies.

The USFWS issued a Final BO for terrestrial and aquatic endangered species on March 31, 2014.  The USFWS determined the proposed plan of operations of the Montanore project, when combined with the planned mitigation, would not jeopardize the continued existence of grizzly bears, lynx, and bull trout in the area around the project. 

The permitting process requires completion of the FEIS before a Record of Decision can be issued by the USFS and MDEQ.  The FEIS 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.  During the quarter, the contractor working on the FEIS submitted a draft to the involved agencies for internal review.  The USFS, MDEQ, and other agencies provided comments on the FEIS back to the contractor which is now working on the final editing and review steps in the process.  As part of the process, the agencies prepared a general schedule for completion that indicates a preliminary FEIS could be issued during the second or third quarter of 2014.  After the preliminary FEIS is issued, the final FEIS review process begins which includes preparation for publication and release to the public.

The USFS and MDEQ are also preparing a Record of Decision for the Montanore project.  Draft versions of that document were also completed during the quarter and are currently being reviewed and edited by the agencies.  A draft Record of Decision will be issued with the FEIS.

9

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.  The USACE and the Environmental Protection Agency (“EPA”) met during the quarter to coordinate their reviews of the proposed action as it relates to the approval of the 404 permit application submitted by the Company.  The Company expects the USACE to issue additional comments specific to the Company’s mitigation plan design that will be addressed as part of its continued review of the application.

The MDEQ continues to work on state reviews of various permits required for the project.  Under the State of Montana’s regulations, these permits will be issued after the FEIS and Record of Decision are completed.

Financial and Operating Results

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 March 31, 2014

The Company reported a net loss of $1.5 million for the quarter ended March 31, 2014 compared to a net loss of $2.1 million for the quarter ended March 31, 2013.  The change in net loss in the 2014 quarter resulted primarily from reduced operating expenses:  (1) a $0.4 million decrease in general and administrative expenses consisting of $0.2 million less of stock based compensation issued during the first quarter of 2014 compared to 2013, the absence of a $0.1 million payment to continue the Earn-In Agreement with Estrella Gold Corp. in 2014, and a decrease of $0.1 million in payroll with two less employees during 2014;  and  (2) a $0.3 million decrease in technical services and exploration expenses which includes a $0.2 million reduction in Estrella project expenditures due to the termination of the project in January 2014 and a $0.1 million decrease in fees paid to the contractor working on the Environmental Impact Study during 2014; partly offset by (3) an increase of $0.1 million in legal, accounting and consulting expenditures primarily associated with a litigation matter as described in Part II, Item I, Legal Proceedings.

Liquidity

During the three months ended March 31, 2014, the net cash used in operating activities was approximately $1.1 million, which is $0.5 million less than the same period in the prior year.  This reduced our cash and cash equivalents and certificates of deposit from $5.7 million at December 31, 2013 to approximately $4.7 million at March 31, 2014.  We have continued to limit activity levels, including capital expenditures, until the Record of Decision is issued.

We anticipate expenditures of approximately $4.2 million for the final three quarters of 2014, which we expect to consist of approximately $0.8 million each quarter for general and administrative expenses, and $0.6 million each quarter for permitting, environmental, engineering, and geologic studies for the Montanore Project. We do not currently have enough cash on hand to fund ongoing operating expenses beyond 2014.  Additional financing will be required to continue operations as a going concern and to complete the evaluation drilling program and a bankable feasibility study.

Off-Balance Sheet Arrangements

As of March 31, 2014, 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

10

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 March 31, 2014.  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 March 31, 2014 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, 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 March 31, 2014 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 against certain of the defendants that the unpatented mining claims of such defendants allegedly located above portions of our adit and overlapping certain of our patented and unpatented mining claims, mill sites and tunnel sites are invalid. The defendants then asserted trespass claims against us relating to our use of certain of our mining claims, millsites and the adit. The parties participated in a mediation in 2009 which resulted in a settlement with seven of the ten defendants. On March 21, 2013, the Court issued an order (i) enforcing the settlement with seven of the ten defendants, (ii) enjoining us from trespassing on certain mining claims owned by one of the defendants, and (iii) finding that the mining claim of another defendant is valid and superior to certain of our claims. The claims with respect to which we were enjoined from trespass do not overlap the adit. The mining claim that the Court determined was valid and superior to certain of our claims overlaps portions of the adit and portions of certain of our patented claims and unpatented mill sites and tunnel sites. We do not believe that this order affects our ability to use the adit or to conduct exploration and development operations as currently planned once we have obtained the required permits.

We appealed to the Montana Supreme Court, Case No. DA 13-0240, certain portions of the order. The Supreme Court ruled in favor of the Company remanding the case to the District Court with instructions to vacate the injunction and to conduct further proceedings. The Supreme Court reversed the District Court on the basis of lack of findings, existence of an issue of fact, lack of evidence regarding trespass and misplaced reliance on evidence that the District Court relied upon with respect to claim validity.

On remand, the Company filed a motion to substitute the District Court judge, which was denied. The Company has appealed this denial to the Montana Supreme Court.

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 sought to acquire necessary easements and rights of way for the Montanore Project including for use of the adit and the construction and use of another underground tunnel 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 paragraphs whose claim was determined to be valid and overlaps the existing adit.  We filed a motion for a preliminary condemnation order and injunction to obtain immediate access to the easements and rights-of-way and a motion to have the court declare the subject mining claims void for failure to comply with an essential federal filing requirement. The primary defendant filed a motion requesting the court to dismiss without prejudice or stay the condemnation proceeding on abstention grounds and a motion to dismiss one of the two condemnation counts.

On April 29, 2014, the U.S. District Court in Missoula granted the Company’s motion for a preliminary condemnation order, which affirms the Company’s right of access through the adit, and its right to construct another tunnel that is planned in connection with the potential construction of a mine.  In addition, the U.S. District Court granted the Company’s motion for a preliminary injunction for immediate right of possession, thereby preserving the Company’s ongoing access through the adit.  Our motion to declare the subject mining claims void was denied on abstention grounds.  The primary defendant’s motions to dismiss without prejudice or stay the condemnation proceeding on abstention grounds was denied.  The primary defendant’s motion to dismiss one of the condemnation counts was denied as moot.  The court decisions are subject to appeal.

11

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.

ITEM 6.EXHIBITS

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 March 31, 2014, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at March 31, 2014, and December 31, 2013, (ii) Condensed Consolidated Statements of Operations for the three months ended March 31, 2014, and March 31, 2013 and from Inception through March 31, 2014, (iii) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2014, and March 31, 2013, and from Inception through March 31, 2014 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.

12

SIGNATURES

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

	MINES MANAGEMENT, INC.
Date: May 15, 2014	By:	/s/ Glenn M. Dobbs
		Glenn M. Dobbs
		Chief Executive Officer
Date: May 15, 2014	By:	/s/ Nicole Altenburg
		Nicole Altenburg
		Principal Financial Officer

13

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

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

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

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter 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 control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

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

Date: May 15, 2014
	/s/ Glenn M. Dobbs
	Glenn M. Dobbs
	Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

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

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

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter 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 control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

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

Date: May 15, 2014
	/s/ Nicole Altenburg
	Nicole Altenburg
	Principal 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, 2014, 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

Chief Executive Officer

May 15, 2014

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, 2014, 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/ Nicole Altenburg

Nicole Altenburg

Principal Financial Officer

May 15, 2014

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.

XML

STOCK OPTIONS: (Details) (USD $)	1 Months Ended	3 Months Ended		12 Months Ended
	Feb. 28, 2014 item	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013 item
Stock options
Number of equity incentive plans				4
Number of equity incentive plans expired	2
Number of Options
Outstanding at the beginning of the period (in shares)		4,663,000
Exercised (in shares)		(187,000)	0
Forfeited or expired (in shares)		(535,000)
Outstanding at the end of the period (in shares)		3,941,000		4,663,000
Exercisable at the end of the period (in shares)		3,371,000
Weighted-Average Exercise Price
Outstanding at the beginning of the period (in dollars per share)		$ 1.53
Exercised (in dollars per share)		$ 0.87
Forfeited or expired (in dollars per share)		$ 1.96
Outstanding at the end of the period (in dollars per share)		$ 1.50		$ 1.53
Exercisable at the end of the period (in dollars per share)		$ 1.66
Weighted-Average Remaining Contractual Term
Outstanding at the end of the period		2 years 8 months 5 days
Exercisable at the end of the period		2 years 3 months 11 days
Aggregate Intrinsic Value
Outstanding at the end of the period		$ 200,820
Exercisable at the end of the period		200,820
Assumptions used to estimate the fair value of stock options
Weighted average risk-free interest rate (as a percent)			0.44%
Weighted average volatility (as a percent)			68.88%
Weighted average expected life			3 years
Weighted-average grant-date fair value (in dollars per share)			$ 0.48
Granted (in shares)		0
Exercised (in shares)		187,000	0
Exercised (in dollars per share)		$ 0.87
Intrinsic value of awards exercised		67,724
Number of Options
Nonvested at the beginning of the period (in shares)		588,000
Vested (in shares)		(18,000)
Nonvested at the end of the period (in shares)		570,000		588,000
Weighted-Average Grant-Date Fair Value
Nonvested at the beginning of the period (in dollars per share)		$ 0.27
Vested (in dollars per share)		$ 0.27
Nonvested at the end of the period (in dollars per share)		$ 0.27		$ 0.27
Disclosures for share-based compensation cost
Unrecognized compensation expense related to nonvested share-based compensation arrangements		27,883
Expected weighted-average period of recognition of unrecognized compensation cost related to nonvested share-based compensation arrangements		1 year
Total compensation costs recognized for stock-based employee compensation awards		42,805	249,600
Costs recognized for stock-based compensation awards for services performed by outside parties		5,519	0
Cash received from options exercised		$ 128,250	$ 0

XML

AVAILABLE-FOR-SALE SECURITIES:

3 Months Ended

Mar. 31, 2014

AVAILABLE-FOR-SALE SECURITIES:

AVAILABLE-FOR-SALE SECURITIES:

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:

	March 31,2014			December 31, 2013
Cost	$	11,165		$	11,165
Unrealized Gains (Losses)	(4,932		)	3,009
Fair Market Value	$	6,233		$	14,174

XML

CERTIFICATES OF DEPOSIT:

3 Months Ended

Mar. 31, 2014

CERTIFICATES OF DEPOSIT:

CERTIFICATES OF DEPOSIT:

NOTE 2  — CERTIFICATES OF DEPOSIT:

The Company owned two certificates of deposit for a total of $1,559,361 at December 31, 2013.  These investments matured in February 2014 and were not renewed.

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, 2015, bears interest at the rate of 0.40% and renews automatically each year.  This certificate of deposit ($1,124,055 and $1,130,271 as of March 31, 2014 and December 31, 2013, respectively) is included with reclamation deposits on the Condensed Consolidated Balance Sheets.

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)	Mar. 31, 2014	Dec. 31, 2013
CURRENT ASSETS:
Cash and cash equivalents	$ 4,694,957	$ 4,145,092
Interest receivable	1,077	6,988
Prepaid expenses and deposits	201,897	237,286
Certificates of deposit		1,559,361
Total current assets	4,897,931	5,948,727
PROPERTY AND EQUIPMENT:
Buildings and leasehold improvements	836,454	836,454
Equipment	6,419,066	6,419,066
Office equipment	343,897	344,939
Total property and equipment, gross	7,599,417	7,600,459
Less accumulated depreciation	6,500,672	6,294,700
Total property and equipment, net	1,098,745	1,305,759
OTHER ASSETS:
Available-for-sale securities	6,233	14,174
Reclamation deposits	1,184,966	1,191,182
Total other assets	1,191,199	1,205,356
Total assets	7,187,875	8,459,842
CURRENT LIABILITIES:
Accounts payable	475,319	381,305
Payroll and payroll taxes payable	32,214	23,358
Total current liabilities	507,533	404,663
LONG-TERM LIABILITIES:
Asset retirement obligation	485,248	479,488
Total liabilities	992,781	884,151
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; 29,161,448 and 28,999,752 shares issued and outstanding, respectively	29,162	29,000
Additional paid-in capital	87,401,274	87,230,381
Accumulated deficit	(1,117,306)	(1,117,306)
Deficit accumulated during the exploration stage	(80,113,104)	(78,569,393)
Accumulated other comprehensive income	(4,932)	3,009
Total stockholders' equity	6,195,094	7,575,691
Total liabilities and stockholders' equity	$ 7,187,875	$ 8,459,842

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	3 Months Ended		140 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Mar. 31, 2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (1,543,711)	$ (2,147,078)	$ (80,113,104)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation	42,805	249,600	11,373,316
Stock received for services			(11,165)
Depreciation	206,701	234,903	6,564,477
Initial measurement of asset retirement obligation			344,187
Accretion of asset retirement obligation	5,760	5,488	141,061
Gain on sale of available-for-sale securities			(2,005,904)
Gain from warrant derivatives			(476,381)
Gain on sale of property and equipment			(23,000)
Impairment of mineral properties			504,492
Changes in assets and liabilities:
Interest receivable	5,911	3,790	(1,077)
Prepaid expenses and deposits	35,389	30,597	(262,308)
Accounts payable	94,014	(71,566)	475,155
Payroll and payroll taxes payable	8,856	81,283	29,034
Net cash used in operating activities	(1,144,275)	(1,612,983)	(63,461,217)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment			(7,697,121)
Proceeds from disposition of property and equipment	313		58,736
Proceeds (purchase) of certificates of deposit	1,565,577	(6,216)	(1,124,054)
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	1,565,890	(6,216)	(6,900,847)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of common stock	128,250		75,009,686
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	549,865	(1,619,199)	4,647,622
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	4,145,092	10,246,073
CASH AND CASH EQUIVALENTS, END OF PERIOD	4,694,957	8,626,874	4,694,957
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest			65,768
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
Unrealized losses on available-for-sale securities	$ (7,941)	$ (5,985)	$ (4,932)

XML

FAIR VALUE MEASUREMENTS: (Details 2) (Asset Retirement Obligation, USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Asset Retirement Obligation
Fair value reconciliation of level 3 liabilities measured at fair value
Balance at the beginning of the period	$ 479,488	$ 456,823
Accretion expense	5,760	5,488
Balance at the end of the period	$ 485,248	$ 462,311

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STOCKHOLDERS' EQUITY: (Details) (USD $)	Mar. 31, 2014	Dec. 31, 2013
Preferred Shares:
Authorized preferred shares	10,000,000	10,000,000
Preferred stock, par value (in dollars per share)	$ 0.00	$ 0.00

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ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

3 Months Ended

Mar. 31, 2014

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

NOTE 1  — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Organization:

Mines Management, Inc. (the Company) is 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 month period ended March 31, 2014 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2014.

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, 2013.

(a)           Going concern

The accompanying consolidated financial statements have been prepared under the assumption that the Company will continue as a going concern and do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. The Company is an exploration stage company and has incurred losses since the inception of its exploration stage. The Company does not have sufficient cash to fund normal operations beyond 2014 without raising additional funds. The Company currently does not have a recurring source of revenue sufficient to fund normal operations and its ability to continue as a going concern is dependent on the Company’s ability to secure sufficient funding for its future exploration and working capital requirements, which may include the sale of its equity or debt securities, and the eventual profitable exploitation of its mining properties. There can be no assurance that the Company will succeed in securing additional funding on terms acceptable to the Company or at all, or in generating future profitable operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

(b) Exploration Stage Enterprise

Since the Company is in the exploration stage of operation, the Company’s financial statements are prepared in accordance with the provisions of 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.

(c) 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.

(d) Fair value measurements

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

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

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

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

(e) 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.

(f) 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 March 31, 2014 and 2013.

(f) Recent Accounting Pronouncements

During 2013, the Financial Accounting Standards Board issued guidance related to unrecognized tax benefits related to a net operating loss carryforward, similar tax loss or a tax credit carryforward.  The new standard requires an unrecognized tax benefit that is not available under the tax law or not intended to be used at the reporting date to be presented as a separate liability, rather than netted against a deferred tax asset in the financial statements.  The Company adopted the provisions of this guidance effective January 1, 2014. This guidance did not have a significant impact on our consolidated financial position, results of operations or cash flows for the three months ended March 31, 2014.

(g) Subsequent events

The Company evaluated events and transactions subsequent to the balance sheet date of March 31, 2014 for potential recognition or disclosure in the condensed consolidated financial statements.

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Mar. 31, 2014	Dec. 31, 2013
CONDENSED CONSOLIDATED BALANCE SHEETS
Preferred stock, par value (in dollars per share)
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	29,161,448	28,999,752
Common stock, shares outstanding	29,161,448	28,999,752

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FAIR VALUE MEASUREMENTS: (Tables)

3 Months Ended

Mar. 31, 2014

FAIR VALUE MEASUREMENTS:

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

	March 31,2014		December 31, 2013		Input HierarchyLevel
Assets:
Available-for-sale securities	$	6,233	$	14,174	Level 1
Liabilities:
Asset retirement obligation	$	485,248	$	479,488	Level 3

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

	Asset Retirement Obligation
	2014		2013
Balance January 1	$	479,488	$	456,823
Accretion expense	5,760		5,488
Balance March 31	$	485,248	$	462,311

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Document and Entity Information	3 Months Ended
	Mar. 31, 2014	May 15, 2014
Document and Entity Information
Entity Registrant Name	MINES MANAGEMENT INC
Entity Central Index Key	0000066649
Document Type	10-Q
Document Period End Date	Mar. 31, 2014
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		29,161,448
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q1

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STOCK OPTIONS: (Tables)

3 Months Ended

Mar. 31, 2014

STOCK OPTIONS:

Summary of stock option activity

	Number of Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1, 2014	4,663,000		$	1.53
Exercised	(187,000	)	$	0.87
Forfeited or expired	(535,000	)	$	1.96
Outstanding at March 31, 2014	3,941,000		$	1.50	2.68	$	200,820
Exerciseable at March 31, 2014	3,371,000		$	1.66	2.28	$	200,820

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

	Three Months EndedMarch 31,
	2014(1)		2013
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 March 31, 2014.

Summary of nonvested options

	Number of Options		Weighted- Average Grant-Date Fair Value
Nonvested at January 1, 2014	588,000		$	0.27
Vested	(18,000	)	$	0.27
Nonvested at March 31, 2014	570,000		$	0.27

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)	3 Months Ended		140 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Mar. 31, 2014
REVENUE:
Royalties	$ 7,291	$ 8,308	$ 188,767
OPERATING EXPENSES:
General and administrative	591,635	975,401	36,417,713
Technical services and exploration	481,918	795,824	33,905,594
Depreciation	206,701	234,903	6,564,477
Legal, accounting, and consulting	206,704	106,139	5,633,560
Fees, filing, and licenses	67,769	50,686	3,071,942
Impairment of mineral properties			504,492
Total operating expenses	1,554,727	2,162,953	86,097,778
LOSS FROM OPERATIONS	(1,547,436)	(2,154,645)	(85,909,011)
OTHER INCOME:
Gain from warrant derivatives			476,381
Gain from sale of property and equipment			23,000
Gain on sale of available-for-sale securities			2,005,904
Interest income, net	3,725	7,567	3,290,622
Total other income	3,725	7,567	5,795,907
NET LOSS	$ (1,543,711)	$ (2,147,078)	$ (80,113,104)
NET LOSS PER SHARE (basic and diluted) (in dollars per share)	$ (0.05)	$ (0.07)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (basic and diluted)	29,036,990	28,999,752

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STOCKHOLDERS' EQUITY:

3 Months Ended

Mar. 31, 2014

STOCKHOLDERS' EQUITY:

STOCKHOLDERS' EQUITY:

NOTE 6 — 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, 2013.

Preferred Shares:

The Company has authorized 10,000,000 preferred shares, no par value.  Through March 31, 2014, the Company had not issued any preferred shares.

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CONCENTRATION OF CREDIT RISK:

3 Months Ended

Mar. 31, 2014

CONCENTRATION OF CREDIT RISK:

CONCENTRATION OF CREDIT RISK:

NOTE 5 — CONCENTRATION OF CREDIT RISK:

The Company maintains most of its cash and cash equivalents in one financial institution.  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. The total uninsured bank deposit balance on the Company’s bank statements was approximately $5,602,000 as of March 31, 2014.

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CONCENTRATION OF CREDIT RISK: (Details) (Cash and cash equivalents, Concentration of credit risk, USD $)	3 Months Ended
	Mar. 31, 2014 item
Cash and cash equivalents | Concentration of credit risk
CONCENTRATION OF CREDIT RISK:
Number of financial institutions	1
Uninsured bank deposit balance	$ 5,602,000

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CERTIFICATES OF DEPOSIT: (Details) (USD $)	3 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
CERTIFICATES OF DEPOSIT:
Number of certificates of deposit owned		2
Certificate of deposit value		$ 1,559,361
Reclamation deposits	1,184,966	1,191,182
Certificates of deposit maturing in February 2014
CERTIFICATES OF DEPOSIT:
Certificate of deposit value		1,559,361
Certificates of deposit renewed and maturing on January 3, 2015
CERTIFICATES OF DEPOSIT:
Reclamation deposits	$ 1,124,055	$ 1,130,271
Interest rate (as a percent)	0.40%

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ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Policies)

3 Months Ended

Mar. 31, 2014

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Going concern

(a)           Going concern

The accompanying consolidated financial statements have been prepared under the assumption that the Company will continue as a going concern and do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. The Company is an exploration stage company and has incurred losses since the inception of its exploration stage. The Company does not have sufficient cash to fund normal operations beyond 2014 without raising additional funds. The Company currently does not have a recurring source of revenue sufficient to fund normal operations and its ability to continue as a going concern is dependent on the Company’s ability to secure sufficient funding for its future exploration and working capital requirements, which may include the sale of its equity or debt securities, and the eventual profitable exploitation of its mining properties. There can be no assurance that the Company will succeed in securing additional funding on terms acceptable to the Company or at all, or in generating future profitable operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

Exploration Stage Enterprise

(b) Exploration Stage Enterprise

Since the Company is in the exploration stage of operation, the Company’s financial statements are prepared in accordance with the provisions of 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.

Mining properties, exploration and development costs

(c) 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.

Fair value measurements

(d) Fair value measurements

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

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

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

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

Stock compensation

(e) 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.

Net loss per share

(f) 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 March 31, 2014 and 2013.

Recent Accounting Pronouncements

(f) Recent Accounting Pronouncements

During 2013, the Financial Accounting Standards Board issued guidance related to unrecognized tax benefits related to a net operating loss carryforward, similar tax loss or a tax credit carryforward.  The new standard requires an unrecognized tax benefit that is not available under the tax law or not intended to be used at the reporting date to be presented as a separate liability, rather than netted against a deferred tax asset in the financial statements.  The Company adopted the provisions of this guidance effective January 1, 2014. This guidance did not have a significant impact on our consolidated financial position, results of operations or cash flows for the three months ended March 31, 2014.

Subsequent events

(g) Subsequent events

The Company evaluated events and transactions subsequent to the balance sheet date of March 31, 2014 for potential recognition or disclosure in the condensed consolidated financial statements.

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STOCK OPTIONS:

3 Months Ended

Mar. 31, 2014

STOCK OPTIONS:

STOCK OPTIONS:

NOTE 7 — STOCK OPTIONS:

The Company had four equity incentive plans as of December 31, 2013.  Two of these plans, the 2003 Stock Option Plan and the 2003 Consultant Stock Compensation Plan, expired in February 2014.  There has been no change to the Company’s 2007 and 2012 Equity Incentive Plans during 2014, other than the items summarized below.  For a description of these Equity Incentive 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, 2013.

A summary of the option activity under the Company’s Equity Incentive Plans as of March 31, 2014, 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, 2014	4,663,000		$	1.53
Exercised	(187,000	)	$	0.87
Forfeited or expired	(535,000	)	$	1.96
Outstanding at March 31, 2014	3,941,000		$	1.50	2.68	$	200,820
Exerciseable at March 31, 2014	3,371,000		$	1.66	2.28	$	200,820

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 EndedMarch 31,
	2014(1)		2013
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 March 31, 2014.

During the three months ended March 31, 2014 there were 187,000 stock options exercised with a weighted average price of $0.87 and a total intrinsic value of $67,724.  During the three months ended March 31, 2013, there were no stock options exercised.

A summary of the status of the Company’s nonvested options as of March 31, 2014 and changes during the year then ended is presented below:

	Number of Options		Weighted- Average Grant-Date Fair Value
Nonvested at January 1, 2014	588,000		$	0.27
Vested	(18,000	)	$	0.27
Nonvested at March 31, 2014	570,000		$	0.27

As of March 31, 2014, there was $27,883 of unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plans.  The cost is expected to be recognized over a weighted-average period of less than one year.

Total compensation costs recognized for stock-based employee compensation awards was $42,805 and $249,600 for the three months ended March 31, 2014 and 2013, respectively.  These costs were included in general and administrative expenses and technical services and exploration expenses on the Condensed Consolidated Statements of Operations.  Total costs recognized for stock-based compensation awards for services performed by outside parties were $5,519 and $0 for the three months ended March 31, 2014 and 2013, respectively.  Cash received from options exercised under all share-based payment arrangements during the three months ended March 31, 2014 and 2013 was $128,250 and $0, respectively.

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COMMITMENTS:

3 Months Ended

Mar. 31, 2014

COMMITMENTS:

COMMITMENTS:

NOTE 8 — 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 was required to make annual cash payments to Estrella of $100,000 prior to the end of the first agreement year ending on February 28, 2013, and $200,000 prior to the end of each subsequent agreement year until the earn-in had been completed.  The Company was 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 was able to 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.  During January 2014, the Company terminated the Exploration Earn-In Agreement.

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AVAILABLE-FOR-SALE SECURITIES: (Tables)

3 Months Ended

Mar. 31, 2014

AVAILABLE-FOR-SALE SECURITIES:

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

	March 31,2014			December 31, 2013
Cost	$	11,165		$	11,165
Unrealized Gains (Losses)	(4,932		)	3,009
Fair Market Value	$	6,233		$	14,174

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FAIR VALUE MEASUREMENTS: (Details) (USD $)	Mar. 31, 2014	Dec. 31, 2013
FAIR VALUE MEASUREMENTS:
Financial assets that are measured at fair value on a nonrecurring basis	$ 0
Financial liabilities that are measured at fair value on a nonrecurring basis	0
Assets:
Available-for-sale securities	6,233	14,174
Liabilities:
Asset retirement obligation	485,248	479,488
Recurring basis | Level 1
Assets:
Available-for-sale securities	6,233	14,174
Recurring basis | Level 3
Liabilities:
Asset retirement obligation	$ 485,248	$ 479,488

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COMMITMENTS: (Details) (Estrella Gold Corp., USD $)	1 Months Ended	3 Months Ended					0 Months Ended
	Feb. 28, 2013 First agreement year	Mar. 31, 2014 First agreement year	Mar. 31, 2014 First agreement year Minimum	Mar. 31, 2014 First agreement year Exploration activities Minimum	Mar. 31, 2014 Second agreement year Minimum	Mar. 31, 2014 Subsequent agreement year	Apr. 05, 2012 Exploration activities
COMMITMENTS:
Percentage of Estrella exploration property located in central Peru that could be acquired by the company							75.00%
Exploration activities commitment							$ 5,000,000
Annual cash payments required to be made to Estrella		100,000				200,000
Annual cash payments made to Estrella	100,000
Exploration and development expenditures			$ 500,000	$ 350,000	$ 500,000

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (USD $)	3 Months Ended		140 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Mar. 31, 2014
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Net loss	$ (1,543,711)	$ (2,147,078)	$ (80,113,104)
Reclassification to realized gain upon sale of marketable securities			(2,005,904)
Adjustment to net unrealized holding gain on marketable securities	(7,941)	(5,985)	2,000,972
COMPREHENSIVE LOSS	$ (1,551,652)	$ (2,153,063)	$ (80,118,036)

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FAIR VALUE MEASUREMENTS:

3 Months Ended

Mar. 31, 2014

FAIR VALUE MEASUREMENTS:

FAIR VALUE MEASUREMENTS:

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 March 31, 2014, 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.  The Company has no financial assets or liabilities that are measured at fair value on a nonrecurring basis.

	March 31,2014		December 31, 2013		Input HierarchyLevel
Assets:
Available-for-sale securities	$	6,233	$	14,174	Level 1
Liabilities:
Asset retirement obligation	$	485,248	$	479,488	Level 3

The following table presents the fair value reconciliation of Level 3 liabilities measured at fair value during the three months ended March 31, 2014 and 2013:

	Asset Retirement Obligation
	2014		2013
Balance January 1	$	479,488	$	456,823
Accretion expense	5,760		5,488
Balance March 31	$	485,248	$	462,311

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AVAILABLE-FOR-SALE SECURITIES: (Details) (USD $)	Mar. 31, 2014	Dec. 31, 2013
AVAILABLE-FOR-SALE SECURITIES:
Cost	$ 11,165	$ 11,165
Unrealized Gains (Losses)	(4,932)	3,009
Fair Market Value	$ 6,233	$ 14,174