Mines Management Inc.: Second Quarter 2016 Financial Results and Montanore Project Update

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