Mines Management Inc. : Second Quarter 2016 Financial Results and Montanore Project Update
18 Agosto 2016 - 7:28PM
MINES MANAGEMENT REPORTS SECOND
QUARTER 2016 FINANCIAL RESULTS AND MONTANORE PROJECT
UPDATE
August 18, 2016
PRESS RELEASE 16-09
Spokane, Washington - August 18, 2016 - MINES
MANAGEMENT, INC. (NYSE-MARKET: "MGN", TSX: "MGT")(the "Company")
announces financial and operating results for the second fiscal
quarter ending June 30, 2016.
Overview
- On May 23, 2016, the Company entered into an
agreement and plan of merger ("merger agreement") with Hecla Mining
Company ("Hecla"). Pursuant to the merger agreement and
subject to approval of the Company's stockholders and the
satisfaction of other conditions specified in the agreement, a
subsidiary of Hecla (HL Idaho Corp.) would merge with and into the
Company, with the Company continuing as the surviving corporation
and as a direct wholly owned subsidiary of Hecla. Each
outstanding share of the Company's common stock will be exchanged
for 0.2218 shares of Hecla's common stock per the terms of the
merger agreement. The merger agreement, as amended, may
be terminated in certain circumstances prior to the closing,
including by either party if the Company fails to obtain
stockholder approval of the merger agreement or the merger is not
consummated by the deadline. The merger agreement has
been amended to extend the deadline for consummating the merger
agreement to September 30, 2016.
- On May 23, 2016, the Company and its subsidiaries
entered into a term loan and security agreement with Hecla as
lender ("the term loan agreement"). The term loan
agreement provides for a $2.3 million secured term loan which bears
interest at a rate equal to the LIBOR rate plus five percent and,
as amended, matures on the earlier of September 30, 2016 or the
date the merger is completed. The term loan becomes due
and payable in full upon a change of control or event of default
(as such terms are defined in the term loan agreement) or if the
merger agreement is terminated for any reason other than a breach
of the merger agreement by Hecla. The term loan is
secured, subject to certain permitted liens, by a security interest
in substantially all of the Company's assets, including the
Montanore Project.
- The Company's cash reserves as of June 30, 2016,
are insufficient to continue operations through the end of the
third quarter of 2016. If the proposed merger with Hecla is not
completed, the Company will need to seek additional capital or
consider other alternatives, which could include bankruptcy or the
sale of some or all of its assets.
- As of June 30, 2016, all of the issued and
outstanding shares of the Company's Series B 6% convertible
preferred stock had been converted into 5,085,176 shares of common
stock.
- Based on information provided by the Company
through June 30, 2016 and the Company's May 24, 2016 press
release announcing a merger agreement with Hecla, the NYSE MKT
granted a revised plan period for the Company to regain compliance
with certain continued listing standards until September 30,
2016.
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 and maintenance of the Montanore Project, and legal,
accounting, and consulting expenses.
Quarter Ended June 30,
2016
The Company reported operating expenses of $1.2
million for each of the quarters ended June 30, 2016 and
2015. The most significant differences in operating
expenditures between those two quarters include: (i) a $0.1 million
decrease in general and administrative expenses primarily due to
the lack of stock compensation and the lack of expenditures for an
annual meeting and directors compensation during 2016,
(ii) a decrease of $0.2 million in technical expenses in 2016
primarily due to the completion of the final environmental impact
statement on the Montanore Project ("FEIS") and issuance of the
federal and state records of decision, which resulted in reduced
fees paid to the contractors working on obtaining and maintaining
project approvals and permits as well as a reduction in the
baseline studies associated with the Environmental Impact Study,
and (iii) a $0.3 million increase in legal, accounting and
consulting fees primarily associated with the agreement and plan of
merger with Hecla.
Six Months Ended June 30,
2016
The Company reported operating expenses of $2.2
million for the six months ended June 30, 2016 compared to
$2.8 million for the six months ended June 30, 2015. The
most significant differences in operating expenditures between
those two quarters include: (i) a $0.2 million decrease in general
and administrative expenses primarily due to the lack of stock
compensation during 2016 (compared to $0.1 million during 2015) and
the absence of expenditures for an annual meeting and
director compensation during 2016 (compared to $0.1 million during
2015), (ii) a decrease of $0.3 million in technical expenses in
2016 primarily due to the completion of the FEIS and issuance of
the records of decision, which resulted in reduced fees paid to the
contractors working on obtaining and maintaining project approvals
and permits as well as a reduction in the baseline studies
associated with the Environmental Impact Study, and (iii) a $0.1
million increase in legal, accounting and consulting fees primarily
associated with expenditures related to the agreement and plan
of merger with Hecla.
Liquidity
During the six months ended June 30, 2016,
the net cash used in operating activities was approximately $1.8
million, which was $0.8 million less than the net cash used in
operating activities during the same period in the prior
year. Net cash provided by financing activities during
2016 included approximately $1.3 million provided by the term loan
agreement entered into with Hecla and $0.2 million in proceeds from
stock options exercised, offset by $0.1 million cumulative
preferred stock dividends paid. During 2015, net cash
utilized by financing activities included $0.1 million cumulative
preferred stock dividends paid. The Company's cash and
cash equivalents decreased from $1.2 million at December 31,
2015 to approximately $0.8 million at June 30, 2016.
The Company does not currently have enough cash on
hand to fund ongoing operating expenses through the end of the
third quarter of 2016. The Company expects to fund its operating
expenses during this period, prior to completion of the merger with
Hecla, by borrowing the remaining funds available from Hecla
pursuant to the $2.3 million term loan described above. The Company
does not have a recurring source of revenue or sufficient cash to
fund normal operations or meet its debt obligations without raising
additional funds. These factors raise substantial doubt
about the Company's ability to continue as a going
concern. If the proposed merger with Hecla is not
completed, the Company will need to seek additional capital or
consider other alternatives, which could include bankruptcy or the
sale of some or all of its assets.
About Mines Management
Mines Management, Inc. is engaged
in the business of acquiring and exploring, and if exploration is
successful, developing mineral properties containing precious and
base metals. The Company's primary focus is on the advancement of
the Montanore silver-copper project located in northwestern
Montana. The Montanore is an advanced stage exploration project,
which contains mineralized material of approximately 81.5 million
tons with average grades of 2.04 ounces silver per ton and 0.74%
copper.
Cautionary Note
to U.S. Investors concerning estimates of Mineralized
Material:
This press release uses the terms "Mineralized Material". We
advise U.S. investors that the term, while permissible under the
Securities and Exchange Commission Industry Guide 7, does not
indicate "reserves" by SEC standards. There can be no assurance
that any part of the mineralized material at Montanore will ever be
confirmed or converted into SEC Industry Guide 7 compliant
"reserves". Investors are cautioned not to assume that all or
any part of the mineralized material will ever be confirmed or
converted into reserves or that mineralized material can be
economically or legally extracted.
Statements
Regarding Forward-Looking Information: Some statements
contained in this press release are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995 and other applicable U.S. and Canadian securities laws
including comments regarding the anticipated merger with Hecla
Mining Company, the Company's plans to fund its operating expenses
during the period prior to the merger with Hecla by borrowing from
Hecla; the terms of the Hecla loan and the Company's lack of cash
to fund its ongoing operating expenses through the third quarter of
2016. Investors are cautioned that forward looking statements
are inherently uncertain and involve risks and uncertainties that
could cause actual results to differ materially from those
presented. Factors that could cause results to differ materially
include delay in or failure to complete the merger with Hecla, the
failure of either party to comply with the merger agreement or loan
agreement, whether the Company's operating expenses are higher than
anticipated; whether external financing for the Company's business
can be obtained on acceptable terms or at all if the Hecla merger
is not completed; possible bankruptcy filing or sale of a portion
or all of the Company's assets if the Hecla merger is not
completed, continued disputes regarding claim ownership and rights
in the Montanore Project area; the outcome or effects of
shareholder litigation challenging the Hecla merger; changes in
interpretation of geological information, whether additional
permitting may be required at Montanore in the future; the results
of delineation drilling and feasibility studies; continued
decreases and future fluctuations in silver, gold and copper
prices; and world economic conditions. Mines Management, Inc.
assumes no obligation to update this information. There can be no
assurance that future developments affecting Mines Management, Inc.
will be those anticipated by management. Please refer to the
discussion of risk factors in the Company's Form 10-K for the year
ended December 31, 2015.
For more information, contact:
Douglas D. Dobbs
President, Mines Management, Inc.
Phone: 509-838-6050
Fax: 509-838-0486
Email: info@minesmanagement.com
Web: www.minesmanagement.com
This
announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Mines Management Inc. via Globenewswire
HUG#2036063
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