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TABLE OF CONTENTS
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2007
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                             to

Commission file number 001-32047

MINES MANAGEMENT, INC.
(Exact Name of Registrant as Specified in its Charter)

Idaho (State of Incorporation or Organization)	91-0538859 (I.R.S. Employer Identification No.)
905 W. Riverside Avenue, Suite 311 Spokane, Washington (Address of principal executive office)	99201 (Zip Code)
(509) 838-6050 (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, $0.001 par value	American Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

         Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o    No ý

         Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o    No ý

         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. Yes ý    No o

         Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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 definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated Filer o Accelerated Filer ý Non-accelerated Filer o
(Do not check if a smaller reporting company) Smaller reporting company o

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

         The aggregate market value of the voting and non-voting common equity held by non-affiliates as of June 29, 2007, was approximately $54.6 million based on the closing price of the Common Stock on the American Stock Exchange of $3.37 per share. The number of shares of our common stock outstanding as of March 11, 2008 was 22,746,220.

         Certain information required for Items 10, 11, 12, 13 and 14 of Part III of this Annual Report on Form 10-K is incorporated by reference to the Registrant's Definitive Proxy Statement for the 2008 Annual Meeting of Stockholders to be filed no later than April 29, 2008.

TABLE OF CONTENTS

			Page
PART I			8
	ITEM 1.	BUSINESS	8
	ITEM 1A.	RISK FACTORS	10
	ITEM 1B.	UNRESOLVED STAFF COMMENTS	16
	ITEM 2.	DESCRIPTION OF PROPERTIES	16
	ITEM 3.	LEGAL PROCEEDINGS	24
	ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	24
PART II			25
	ITEM 5.	MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES	25
	ITEM 6.	SELECTED FINANCIAL DATA	27
	ITEM 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION	28
	ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	30
	ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	31
	ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	48
	ITEM 9A.	CONTROLS AND PROCEDURES	48
	ITEM 9B.	OTHER INFORMATION	49
PART III			50
	ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	50
	ITEM 11.	EXECUTIVE COMPENSATION	50
	ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	50
	ITEM 13.	CERTAIN RELATIONSHIPS and RELATED TRANSACTIONS	50
	ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	50
PART IV			51
	ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES	51

FORWARD LOOKING STATEMENTS

        Some information contained in or incorporated by reference into this report may contain forward looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements include comments regarding further exploration and evaluation of the Montanore Project, including planned rehabilitation and extension of the Libby adit, drilling activities, feasibility determination, engineering studies, environmental and permitting requirements, process and timing, and estimates of mineralized material and measured, indicated and inferred resources; financing needs; the markets for silver and copper and planned expenditures in 2008 and 2009; and potential completion of a bankable feasibility study. The use of any of the words "anticipate," "estimate," "expect," "may," "project," "should," "believe," and similar expressions are intended to identify uncertainties. We believe the expectations reflected in those forward looking statements are reasonable. However, we cannot assure that the expectations will prove to be correct. Actual results could differ materially from those anticipated in these forward looking statements as a result of the factors set forth below and other factors set forth and incorporated by reference into this report:

•

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



•

Volatility in the market price for silver and copper



•

Financial market conditions and the availability of financing on acceptable terms or on any terms



•

Uncertainty regarding whether reserves will be established at Montanore



•

Uncertainties associated with developing new mines



•

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



•

Geological, technical, permitting, mining and processing problems



•

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



•

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



•

The availability of experienced employees



•

The factors discussed under "Risk Factors" in this Annual Report on Form 10-K for the period ending December 31, 2007.

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GLOSSARY OF TERMS

        We report our reserves to two separate standards to meet the requirements for reporting in both the United States and Canada. U.S. reporting requirements for disclosure of mineral properties are governed by Securities and Exchange Commission Industry Guide 7. Canadian reporting requirements for disclosure of mineral properties are governed by National Instrument 43-101 ("NI 43-101"). The definitions given in NI 43-101 are adopted from those given by the Canadian Institute of Mining Metallurgy and Petroleum.

        The definitions for each reporting standard are presented below with supplementary explanation and descriptions of the parallels and differences.

Mineralized material(1)
The term "mineralized material" refers to material that is not included in reserves as it does not meet all of the criteria for adequate demonstration of economic or legal extraction.

(1)

This category is substantially equivalent to the combined categories of measured and indicated mineral resources specified in NI 43-101.

Non-reserves	The term "non-reserves" refers to mineralized material that is not included in reserves as it does not meet all of the criteria for adequate demonstration of economic or legal extraction.
Exploration stage	An "exploration stage" prospect is one which is not in either the development or production stage.
Development stage	A "development stage" project is one which is undergoing preparation of an established commercially mineable deposit for extraction but which is not yet in production. This stage occurs after completion of a feasibility study.
Production stage	A "production stage" project is one actively engaged in the process of extraction and beneficiation of mineral reserves to produce a marketable metal or mineral product.
NI 43-101 Definitions
Mineral resource	The term "mineral resource" refers to a concentration or occurrence of natural, solid, inorganic or fossilized organic material in or on the earth's crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a mineral resource are known, estimated or interpreted from specific geological evidence and knowledge.

3

Measured mineral resource	The term "measured mineral resource" refers to that part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity.
Indicated mineral resource	The term "indicated mineral resource" refers to that part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed.
Inferred mineral resource	The term "inferred mineral resource" refers to that part of a mineral resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.
Qualified person(2)	The term "qualified person" refers to an individual who is an engineer or geoscientist with at least five years of experience in mineral exploration, mine development, production activities and project assessment, or any combination thereof, including experience relevant to the subject matter of the project or report and is a member in good standing of a self-regulating organization.

(2)

Industry Guide 7 does not require designation of a qualified person.

Additional Definitions
Adit	A horizontal tunnel or drive, open to the surface at one end, which is used as an entrance to a mine.
Axis	Intersection of the axial plane of a fold with a particular bed; axial line.

4

Bornite	An isometric mineral, 1[Cu5 FeS4]; metallic; brownish bronze tarnishing to iridescent blue and purple; brittle; massive; in hypogene and contact metamorphic deposits and mafic rocks; a valuable source of copper.
Breccia	Rock consisting of angular fragments of other rocks held together by mineral cement or a fine-grained matrix.
Chalcocite	A monoclinic mineral, 96[Cu2 S]; pseudohexagonal, metallic gray-black with blue to green tarnish; sp gr, 5.5 to 5.8; a secondary vein mineral; an important source of copper.
Chalcopyrite	A tetragonal mineral, CuFeS2; brass-yellow with bluish tarnish; massive; softer than pyrite; occurs in late magmatic hydrothermal veins and secondary enrichment zones; the most important source of copper.
Development	Work carried out for the purpose of opening up a mineral deposit and making the actual ore extraction possible.
Dip	The angle at which a vein, structure or rock bed is inclined from the horizontal as measured at right angles to the strike. A vein is a mineralized zone having a more or less regular development in length, width and depth, which clearly separates it from neighboring rock. A strike is the direction or bearing from true north of a vein or rock formation measured on a horizontal surface.
Drift	A horizontal underground opening that follows along the length of a vein or rock formation as opposed to a cross-cut which crosses the rock formation.
Enechelon	Pattern of off-set mineralized strata similar to stair steps.
Exploration	Work involved in searching for ore, usually by drilling or driving a drift.
Galena	A sulphide mineral of lead, being a common lead ore mineral.
Grade	The average assay of a ton of ore, reflecting metal content.
Horizon	In geology, any given definite position or interval in the stratigraphic column or the scheme of stratigraphic classification; generally used in a relative sense.
Host rock	The rock surrounding an ore deposit.
Interbed	Occurring between distinct rock layers or strata.
Lensoid(al)	Flat lenses of mineralized material between layers of host rock.
Limestone	A bedded, sedimentary deposit consisting chiefly of calcium carbonate.
Lode	A vein of mineral ore deposited between clearly demarcated layers of rock.

5

Metasediment	A sedimentary rock which shows evidence of having been subjected to metamorphism.
Mineral	A naturally occurring homogeneous substance having definite physical properties and chemical composition and, if formed under favorable conditions, a definite crystal form.
Mineralization	The presence of economic minerals in a specific area or geological formation.
Ore	Material that can be mined and processed that provides a positive cash flow.
Patented mining claim	A patented mining claim is one for which the federal government has passed its title to the claimant, making it private land. A person may mine and remove minerals from a mining claim without a mineral patent. However, a mineral patent gives the owner exclusive title to the locatable minerals. It also gives the owner title to the surface and other resources.
Precambrian	All geologic time before the Paleozoic era.
Prospect	A mining property, the value of which has not been determined by exploration.
Quartzite	A metamorphic rock formed by the transformation of a sandstone rock by heat and pressure.
Reclamation	The restoration of a site after mining or exploration activity is completed.
Recovery	The percentage of valuable metal in the ore that is recovered by metallurgical treatment.
Siltite	An indurated silt having the texture and composition of shale but lacking its fine lamination or fissility; a massive mudstone in which the silt predominates over clay; a nonfissile silt shale. It tends to be flaggy, containing hard, durable, generally thin layers, and often showing various primary current structures.
Sphalerite	Zinc sulfide based mineral.
Stope	An excavation in the form of steps made by the mining of ore from steeply inclined or vertical veins.
Stratabound	A situation in which mineralization is essentially contained in or confined to a particular sedimentary or volcanic unit.
Stratigraphy	The branch of geology which studies the formation, composition, sequence and correlation of the stratified rock as parts of the earth's crust.
Strike	The direction, or bearing from true north, of a vein or rock formation measured on a horizontal surface.
Sulfide	A compound of bivalent sulfur with an electropositive element or group, especially a binary compound of sulfur with a metal.

6

Tailings	Material rejected from a mill after more of the recoverable valuable minerals have been extracted.
Trend	The direction, in the horizontal plane, or a linear geological feature (for example, an ore zone), measured from true north.
Unpatented mining claim	A parcel of property located on federal lands pursuant to the General Mining Law of 1872 and the requirements of the state in which the unpatented claim is located, the paramount title of which remains with the federal government. The holder of a valid, unpatented lode-mining claim is granted certain rights including the right to explore and mine such claim under the U.S. General Mining Law.
Vein	A mineralized zone having a more or less regular development in length, width and depth, which clearly separates it from neighboring rock.

7

PART I

ITEM 1.    BUSINESS

General

        Mines Management, Inc. (together with its subsidiaries, "MMI," "Mines Management," the "Company" or "we"), is engaged in the business of acquiring and exploring, and if exploration is successful, developing mineral properties, primarily those containing silver and associated base and precious metals. The Company was incorporated under the laws of the State of Idaho on February 20, 1947. The Company's executive offices are located at 905 W. Riverside, Suite 311, Spokane, Washington 99201.

        The Company's principal mineral property interest, the Montanore Project, is held by its wholly owned subsidiary, Newhi, Inc. The Company's properties, including the Montanore property, are currently in the exploration stage. The Company has commenced re-permitting of the Montanore Project and is determining its feasibility for development. No property is currently in production.

        The Montanore Project is located in northwestern Montana, and from 1988 to 2002 was owned by Noranda Minerals Corporation. During that time the project received an approved environmental impact statement and all of its primary environmental permits. From 1988 to 2002 the Company held royalty rights to a portion of the deposit. In 2002, Noranda announced that it was abandoning the project, and subsequently transferred to the Company by quitclaim deed the patented and unpatented mining claims that control the mineral rights, and all drill core and intellectual property including geologic, environmental and engineering studies, relating to the Montanore Project.

        In May 2006, we acquired two Noranda subsidiaries that held title to the property providing access to the 14,000 foot Libby adit and related permits. We have obtained permit revisions that allowed us to reopen the Libby adit and to dewater and rehabilitate the adit. The Libby adit, when extended, will provide access to the Montanore deposit for our planned underground evaluation drilling program. We reopened the Libby adit in June 2006 and water samples and testing were completed in July 2006.

        In November 2006, we received another permit revision allowing us to proceed with our planned $40 million underground evaluation drilling program at the Montanore Project. This advanced exploration and delineation drilling program as currently planned includes the following:

•

Development and advancement of the Libby adit by 3,000 feet to access the deposit;



•

Drifting of approximately 10,000 feet and establishment of drill stations; and



•

Diamond core drilling of approximately 45,000 feet among approximately 50 holes.

Results of the drill program, if successful, are expected to provide data to assist in completion of a bankable feasibility study and further optimization of the mine plan.

        Also, in the fourth quarter 2006, we purchased a site generator and erected a warehouse building at the Libby adit site, along with an office and employee change facility. We established a $1.124 million stand-by letter of credit in early January 2007 to satisfy reclamation bonding requirements related to our planned exploration at the Libby adit.

        In 2007, we completed the construction of site infrastructure to support our planned underground evaluation program at the Montanore Project. This included the design, engineering and construction of a $1.3 million water treatment plant to process all water pumped out of the adit. The utility design was completed and an initial order of electrical supplies, ventilation material, pumping equipment, and ground control roof bolts and supplies has been delivered to the site. Construction of a dry storage structure for inventory was completed in the fall of 2007.

8

        The initial fleet of surface equipment and underground equipment was purchased at a cost in excess of $6 million and delivered in the third and fourth quarters of 2007. This equipment includes the following:

•

Sandvik Toro 6 LHD



•

Sandvik Toro 7 LHD



•

Sandvik Toro 40 Haul Dump Truck—Two Units



•

Robolt 5 Bolter



•

Axers Boom Jumbo Drill



•

Telehandler JLG



•

2007 Kawasaki Mule ATB Diesel



•

Teledyne Scissor Lift



•

Getman Lube Fuel Truck



•

Getman Scaler



•

Getman Scissor Lift



•

Caterpillar 950 Loader



•

Caterpillar 420E Backhoe



•

Caterpillar 225 KW Generators—Three

        Our focus in 2008 continues to be the progression of our underground evaluation program at the Montanore Project. The program schedule has been set back by approximately six months as a result of delay in receiving approval from the U.S. Forest Service of an environmental assessment (EA) pertaining to planned road use during the process of dewatering and rehabilitating the Libby Adit. We have been advised by the USFS that approval of the EA would be received by mid-March. Following receipt of that approval, we expect to dewater and rehabilitate the adit and proceed with the planned underground evaluation drilling program. We also expect to continue the update of the Montanore environmental and engineering studies focused on determining an economically viable operational design, and to complete of the EIS process.

        The Company also owns certain patented and unpatented mining claims on zinc proprieties in northern Washington state referred to as the Iroquois and Advance properties. The Company has not conducted mining activities on these properties since the 1960s. In December 2007, the Company completed an evaluation of the carrying values of the Iroquois and Advance properties relative to their immediate development potential. In connection with the evaluation, the Company wrote down capitalized costs associated with the properties in the amount of $226,000 which had been recorded in connection with mining activity that occurred in the 1950s. We continue to hold the real property, mining claims, and patented claims underlying the Iroquois and Advance properties. The Company also has a small income from a working interest royalty, acquired more than 40 years ago, in several producing oil wells located in Kansas.

Competition

        There is aggressive competition within the minerals industry to discover and acquire properties considered to have commercial potential. When we wish to acquire an exploration project, we typically compete with other entities, most of which have greater resources than we do. In addition, we compete with others in efforts to obtain financing to explore and develop mineral properties.

9

Employees

        As of March 11, 2007, the Company had seven employees located in Spokane, Washington and thirteen employees in Libby, Montana. The Company plans to add additional engineering, geological, and operating staff at Libby as the Montanore Project develops. Outside consultants are engaged to perform project and permitting tasks involved in re-permitting the Montanore Project. The Company expects to continue to rely on consultants to provide these services in the immediate future.

Regulation

        The Company's activities in the United States are subject to various federal, state, and local laws and regulations governing exploration, labor standards, occupational health and mine safety, control of toxic substances, and other matters involving environmental protection and taxation. In addition, it is possible that future changes in these laws or regulations could have a significant impact on the Company's business, causing those activities to be economically reevaluated at that time.

Available Information

        We maintain a link to investor relations information on our website, www.minesmanagement.com, where we make available, free of charge, our Securities and Exchange Commission (SEC) filings, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our website and the information contained on or connected to our website is not incorporated by reference herein and our web address is included as an inactive textual reference only.

ITEM 1A.    RISK FACTORS.

        Our business, operations, and financial condition are subject to various risks. We urge you to consider the following risk factors in addition to the other information contained in, or incorporated by reference into, this Annual Report on Form 10-K.

We have no recent history of production.

        We have no recent history of producing silver or other metals. The development of our Montanore Project would require the construction and operation of mines, processing plants, and related infrastructure. As a result, we would be subject to all of the risks associated with establishing a new mining operation and business enterprise. We may never successfully establish mining operations, and any operations may not achieve profitability.

We have a history of losses and we expect losses to continue for at least the next three years.

        As an exploration company that has no production history, we have incurred losses since our inception and we expect to continue to incur additional losses for at least the next three years. As of December 31, 2007, we had an accumulated deficit of $23.5 million. There can be no assurance that we will achieve or sustain profitability in the future.

We have no proven or probable reserves.

        We have no proven or probable reserves on any of our properties. We are currently focused on our Montanore Project. Substantial additional work, including delineation drilling, will be required in order to determine if any proven or probable reserves exist on our Montanore Project. The commercial viability of a mineral deposit once discovered is dependent on a number of factors beyond our control,

10

including particular attributes of the deposit such as size, grade and proximity to infrastructure, as well as metal prices.

        Estimates of reserves, mineralized material, resources, and capital and production costs can also be affected by such factors as environmental permitting regulations and requirements, weather, environmental factors, unforeseen technical difficulties, unusual or unexpected geological formations and work interruptions. Material changes in ore reserves, grades, stripping ratios or recovery rates may affect the economic viability of any project. Even if commercial quantities of minerals are discovered, the Montanore Project may not be brought into commercial production.

The exploration of mineral properties is highly speculative in nature, involves substantial expenditures and is frequently non-productive.

        Mineral exploration is highly speculative in nature and is frequently non-productive. Substantial expenditures are required to:

•

establish ore reserves through drilling and metallurgical and other testing techniques;



•

determine metal content and metallurgical recovery processes to extract metal from the ore; and



•

design mining and processing facilities.

        If we discover ore at the Montanore Project, we expect that it would be several additional years from the initial phases of exploration until production is possible. During this time, the economic feasibility of production could change. As a result of these uncertainties, there can be no assurance that our exploration programs will result in new proven and probable reserves in sufficient quantities to justify commercial operations at the Montanore Project.

We may not be able to obtain permits required for development of the Montanore Project.

        In the ordinary course of business, mining companies are required to seek governmental permits for expansion of existing operations or for the commencement of new operations. We will be required to obtain numerous permits for our Montanore Project. Obtaining the necessary governmental permits is a complex and time-consuming process involving numerous jurisdictions and often involving public hearings and costly undertakings. Obtaining required permits for the Montanore Project may be more difficult due to its location within the Cabinet Wilderness Area, its proximity to core habitat of certain protected species, including the grizzly bear, bull trout and lynx, and the efforts of a third party to permit another mining operation near the Montanore Project. Private groups dedicated to protection of the environment have been active in opposing permitting of other projects in and near the Cabinet Wilderness Area.

        In addition, mining projects require the evaluation of environmental impacts for air, water, vegetation, wildlife, cultural, historical, geological, geotechnical, geochemical, soil and socioeconomic conditions. An Environmental Impact Statement would be required before we could commence mine development or mining activities. Baseline environmental conditions are the basis on which direct and indirect impacts of the Project are evaluated and based on which potential mitigation measures would be proposed. If the Montanore Project were found to significantly adversely impact the baseline conditions, we could incur significant additional costs to avoid or mitigate the adverse impact, and delays in the Montanore Project could result.

        Permits would also be required for, among other things, storm-water discharge; air quality; wetland disturbance; dam safety (for water storage and/or tailing storage); septic and sewage and water rights appropriation. In addition, compliance must be demonstrated with the Endangered Species Act and the National Historical Preservation Act.

11

        The duration and success of our efforts to re-permit are contingent upon many variables not within our control. There can be no assurance that we will obtain all necessary permits will be obtained and, if obtained, that the permitting costs involved will not exceed those that had been previously estimated. It is possible that the costs and delays associated with the compliance with such standards and regulations could become such that we would not proceed with the further exploration, development or operation of a mine or mines at the Montanore Project.

Even if our exploration efforts at Montanore are successful, we may not be able to raise the funds necessary to develop the Montanore Project.

        If our exploration efforts at Montanore are successful, our current estimates indicate that we would be required to raise approximately $415 million in external financing to develop and construct the Montanore Project. Sources of external financing could include bank borrowings and debt and equity offerings. The failure to obtain financing would have a material adverse effect on our growth strategy and our results of operations and financial condition. There can be no assurance that we will commence production at Montanore or generate sufficient revenues to meet our obligations as they become due or obtain necessary financing on acceptable terms, if at all, and we may not be able to secure the financing necessary to begin or sustain production at the Montanore Project. In addition, should we incur significant losses in future periods, we may be unable to continue as a going concern, and realization of assets and settlement of liabilities in other than the normal course of business may be at amounts significantly different than those included in this Annual Report on Form 10-K.

The mining industry is intensely competitive.

        The mining industry is intensely competitive. We may be at a competitive disadvantage because we must compete with other individuals and companies, many of which have greater financial resources, operational experience and technical capabilities than we do. Increased competition could adversely affect our ability to attract necessary capital funding or acquire suitable producing properties or prospects for mineral exploration in the future. We may also encounter increasing competition from other mining companies in our efforts to hire experienced mining professionals. Competition for exploration resources at all levels is currently intense, particularly affecting the availability of manpower and exploration equipment.

Our future success is subject to risks inherent in the mining industry.

        Our future mining operations, if any, would be subject to all of the hazards and risks normally incident to developing and operating mining properties. These risks include insufficient ore reserves, fluctuations in metal prices and increases in production costs that may make mining of reserves uneconomic; significant environmental and other regulatory restrictions; labor disputes; geological problems; failure of underground stopes and/or surface dams; force majeure events; and the risk of injury to persons, property or the environment.

Our future profitability will be affected by changes in the prices of metals.

        If we establish reserves, complete a favorable feasibility study for the Montanore Project, and complete development of a mine, our profitability and long-term viability will depend, in large part, on the market price of silver and copper. The market prices for these metals are volatile and are affected by numerous factors beyond our control, including:

•

global or regional consumption patterns;



•

supply of, and demand for, silver and copper;



•

speculative activities;

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•

expectations for inflation; and



•

political and economic conditions.

        The aggregate effect of these factors on metals prices is impossible for us to predict. Decreases in metals prices have delayed, and could in the future adversely affect our ability to finance, the exploration and development of our properties, which would have a material adverse effect on our financial condition and results of operations and cash flows. There can be no assurance that metals prices will not decline. During the five-year period ended December 31, 2007, the high and low settlement prices for silver and copper were $15.82 and $4.37 per ounce and $4.08 and $0.71 per pound, respectively.

We have ongoing reclamation obligations on the Montanore Project properties.

        Although we have posted bonds with the State of Montana to cover expected future mine reclamation costs, there is no guarantee that the amount of these bonds will satisfy the environmental regulations and requirements. Should government regulators determine that additional reclamation work is required, we may be required to fund this work, which could have a material adverse effect on our financial position.

We are subject to significant governmental regulations.

        Our operations and exploration and development activities are subject to extensive federal, state, and local laws and regulations governing various matters, including:

•

environmental protection;



•

management and use of toxic substances and explosives;



•

management of natural resources;



•

exploration and development of mines, production and post-closure reclamation;



•

taxation;



•

labor standards and occupational health and safety, including mine safety; and



•

historic and cultural preservation.

        Failure to comply with applicable laws and regulations may result in civil or criminal fines or penalties or enforcement actions, including orders issued by regulatory or judicial authorities enjoining or curtailing operations or requiring corrective measures, installation of additional equipment or remedial actions, any of which could result in us incurring significant expenditures. We may also be required to compensate private parties suffering loss or damage by reason of a breach of such laws, regulations or permitting requirements. It is also possible that future laws and regulations, or a more stringent enforcement of current laws and regulations by governmental authorities, could cause additional expense, capital expenditures, restrictions on or suspensions of any future operations and delays in the exploration of our properties.

Changes in mining or environmental laws could increase costs and impair our ability to develop our properties.

        From time to time the U.S. Congress may consider revisions in its mining and environmental laws. It remains unclear to what extent new legislation may affect existing mining claims or operations. The effect of any such revisions on our operations cannot be determined conclusively until such revision is enacted; however, such legislation could materially increase costs on properties located on federal

13

lands, such as ours, and such revision could also impair our ability to develop the Montanore Project and other mineral projects.

We are subject to environmental risks.

        Mineral exploration and mining is subject to potential risks and liabilities associated with pollution of the environment and the disposal of waste products occurring as a result of mineral exploration and production. Insurance against environmental risk (including potential liability for pollution or other hazards as a result of the disposal of waste products occurring from exploration and production) is not generally available to us (or to other companies in the minerals industry) at a reasonable price. To the extent that we become subject to environmental liabilities, the satisfaction of those liabilities would reduce funds otherwise available to us and could have a material adverse effect on us. Laws and regulations intended to ensure the protection of the environment are constantly changing, and are generally becoming more restrictive.

The title to some of our properties may be uncertain or defective.

        Although the Montanore deposit is held by patented mining claims, a significant portion of our holdings consist of unpatented lode and millsite claims. Certain of our United States mineral rights consist of "unpatented" mining and millsite claims created and maintained in accordance with the U.S. General Mining Law of 1872. Unpatented mining and millsite claims are unique U.S. property interests, and are generally considered to be subject to greater title risk than other real property interests because the validity of unpatented mining and millsite claims is often uncertain. This uncertainty arises, in part, out of the complex federal and state laws and regulations that supplement the General Mining Law. Also, unpatented mining and millsite claims and related rights, including rights to use the surface, are subject to possible challenges by third parties or contests by the federal government. The validity of an unpatented mining or millsite claim, in terms of both its location and its maintenance, is dependent on strict compliance with a complex body of federal and state statutory and decisional law. In addition, there are few public records that definitively control the issues of validity and ownership of unpatented mining and millsite claims. We have not filed a patent application for any of the unpatented and millsite claims that are located on federal public lands in the United States and, under possible future legislation to change the General Mining Law, patents may be difficult to obtain.

        In recent years, the U.S. Congress has considered a number of proposed amendments to the General Mining Law, as well as legislation that would make comprehensive changes to the law. Although no such legislation has been adopted to date, there can be no assurance that such legislation will not be adopted in the future. If ever adopted, such legislation could, among other things, impose royalties on silver and copper production from unpatented mining and millsite claims located on federal lands or impose fees on production from patented mining and millsite claims. Further, it could have an adverse impact on earnings from our operations, could reduce estimates of any reserves we may establish and could curtail our future exploration and development activity on federal lands or patented claims.

        While we have no reason to believe that title to any of our properties is in doubt, title to mining properties is subject to potential claims by third parties claiming an interest in them.

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The market price of our common stock is subject to volatility and could decline significantly.

        Our common stock is listed on the American Stock Exchange (AMEX) and the Toronto Stock Exchange (TSX).

        Securities of small-cap companies such as ours have experienced substantial volatility in the past, often based on factors unrelated to the financial performance or prospects of the companies involved. These factors include macroeconomic developments in North America and globally and market perceptions of the attractiveness of particular industries. Our share price is also likely to be significantly affected by short-term changes in silver and copper prices or in our financial condition or results of operations as reflected in our quarterly earnings reports. Other factors unrelated to our performance that could have an effect on the price of our common stock include the following:

•

the extent of analytical coverage available to investors concerning our business is limited because investment banks with research capabilities do not follow our securities;



•

the trading volume and general market interest in our securities could affect an investor's ability to trade significant numbers of shares of our common stock;



•

the relatively small size of the public float will limit the ability of some institutions to invest in our securities; and



•

a substantial decline in our stock price that persists for a significant period of time could cause our securities to be delisted from the AMEX and the TSX, further reducing market liquidity.

        As a result of any of these factors, the market price of our common stock at any given point in time might not accurately reflect our long-term value. Securities class action litigation often has been brought against companies following periods of volatility in the market price of their securities. We could in the future be the target of similar litigation. Securities litigation could result in substantial costs and damages and divert management's attention and resources.

We do not intend to pay any cash dividends in the foreseeable future.

        We have never paid dividends and any future decision as to the payment of dividends will be at the discretion of our board of directors and will depend upon our earnings, receipt of dividends from our subsidiaries, financial position, capital requirements, plans for expansion and such other factors as our board of directors deems relevant. We intend to retain our earnings, if any, to finance the growth and development of our business. Any return on an investment in our common stock will come from the appreciation, if any, in the value of our common stock.

Our shareholders are subject to future dilution by the exercise of options and warrants, and the existence of a significant number of options and warrants can depress the price of our common stock.

        As of March 11, 2008, we had 22,746,220 shares outstanding. As of that date, there were options outstanding to purchase up to 1,616,000 shares of common stock at exercise prices ranging from $1.85 to $5.70 per share and warrants outstanding to purchase 5,965,333 shares at an exercise prices ranging from $4.00 to $5.75 per share. We have customarily repriced stock options when the exercise price falls $1.00 or more below the prevailing market price of our common stock. 329,000 additional shares of common stock are available for issuance under our stock option plans. If currently outstanding options or warrants to purchase our common stock are exercised, the investments of our shareholders would be further diluted. In addition, the potential for exercise of a significant number of options and warrants can have a depressive effect on the market price for our common stock. A new 2008 Stock Option Plan was approved by the Board of Directors on 11/20/07 providing for the issuance of options to purchase an additional 3,000,000 shares of common stock. The plan and grants of options to purchase an

15

additional 3,000,000 shares of common stock becomes effective only if approved by our shareholders. Approval of this plan will increase the potential dilutive effect of our stock options.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

        None.

ITEM 2.    DESCRIPTION OF PROPERTIES

        The significant properties in which the Company has an interest are described below.

Montanore Property

        The Montanore Project is located in Sanders and Lincoln Counties in northwestern Montana and consists of two federal patented mining claims and approximately 1,105 unpatented lode mining claims and mill sites. The unpatented lode claims and mill sites are owned by the Company and are held subject to a $125 per claim annual payment to the Federal government.

        The Company's ownership of the Montanore deposit stems primarily from its ownership of two patented mining claims, identified as HR 133 and HR 134, which cover the surface outcrop or "apex" of the gently dipping mineralized beds. According to U.S. mining law, the holders of claims covering the apex of a dipping, tabular deposit own the minerals to depth, even if the deposit passes from beneath the apex claim. For the Company's claims at Montanore these "extralateral rights" have been confirmed by the U.S. Secretaries of Agriculture and Interior and upheld in U.S. District Court. In addition to the patented apex claims, the Company owns unpatented claims located along the fault which bounds the southwestern margin of the deposit and extends outside of the western border of the Cabinet Wilderness Area.

        The Company's property holdings for operational access and infrastructure support for the Montanore Project are located to the east of the deposit, south of the town of Libby, and are accessed from Libby by about 16 miles of secondary road up Libby Creek. The apex of the deposit can be reached from Noxon, the nearest town, by taking State Highway 200 about 2 miles to the east and then north about 5 miles on a secondary graveled road to the junction of the west and east forks of Rock Creek. From this point it is about a 4-mile hike up a Jeep trail behind a locked U.S. Forest Service gate to the deposit outcrop. The deposit outcrops near the border of, and lies entirely within the Cabinet Wilderness Area. Because any future mining of the deposit would take place underground and the Company has access to the deposit from outside the Cabinet Wilderness Area, (our patented mining claims and certain other mineral rights predate the wilderness area designation), we do not believe that any future mining or associated surface activity would impact the wilderness area.

        On May 31, 2006, we acquired Hard Rock Operating Permit 150 that covers certain exploration activities and the Montana Pollution Discharge Elimination System (MPDES) water discharge permit for the Montanore Project and title to properties providing access to the portal of the Libby adit. The 14,000 foot Libby adit was constructed in the early 1990s by previous operators. The adit stops approximately 2,000 feet short of the deposit. Prior to our activity in 2006, there were no plant, equipment, subsurface improvements or equipment other than the Libby adit, which was plugged and in reclamation. During the third quarter of 2006, the Company reopened the adit and completed initial water testing to determine the treatment method for water discharged from the adit. The necessary permit revisions were received in November 2006 to undertake a planned $40 million underground evaluation drilling program over the next two years. Also in the fourth quarter 2006, we purchased a site generator and erected a warehouse building at the Libby adit site, along with an office and employee change facility. We established a $1.124 million stand-by letter of credit in early January 2007 to satisfy reclamation bonding requirements related to our planned exploration at the Libby adit. During 2007, we added six additional staff, purchased equipment, and completed the design,

16

procurement, erection and start-up of a water treatment plant to support our planned underground exploration activities. Power for the planned evaluation drilling program will be provided by three on-site Caterpillar 225 KW generators. The Company owns water rights associated with the Montanore property that it believes will be sufficient for possible mining activities.

Non-Reserves—Mineralized Material; Measured, Indicated and Inferred Resources

        Non-Reserves Reported in the United States.    The estimate of mineralized material set forth below was prepared by Mine Development Associates, referred to as MDA. The estimate was prepared in accordance with SEC Industry Guide 7.

Mineralized Material Estimate in accordance with U.S. SEC Industry Guide 7

		Silver Grade			Cutoff Grade
	Tons	(Ounces per ton)	Copper Grade		(Silver ounces per ton)
Mineralized Material	81,506,000	2.04	0.75	%	1.0

        Non-Reserves Reported in Canada.    In accordance with Canada's National Instrument 43-101, the estimate of resources at Montanore as set forth below was prepared by MDA. Steve Ristorcelli, R.P. Geo., C.P.G., and David C. Fitch, C.P.G., acting on behalf of MDA, are the qualified persons under Canada's National Instrument 43-101 for this resource estimate.

Cautionary Note to U.S. Investors concerning estimates of Measured and Indicated Mineral Resources

        This section uses the terms "measured mineral resources" and "indicated mineral resources." We advise U.S. investors that while these terms are recognized and required by Canadian regulations, the U.S. Securities and Exchange Commission does not recognize them. U.S. Investors are cautioned not to assume that any part or all of the mineral deposits in these categories will ever be converted into mineral reserves.

Cautionary Note to U.S. Investors concerning estimates of Inferred Mineral Resources

        This section uses the term "inferred mineral resources." We advise U.S. investors that while this term is recognized and required by Canadian regulations, the U.S. Securities and Exchange Commission does not recognize it. "Inferred mineral resources" have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. In accordance with Canadian rules, estimates of inferred mineral resources cannot form the basis of feasibility or other economic studies. U.S. investors are cautioned not to assume that part or all of the inferred mineral resource exists, or is economically or legally mineable.

Resource Estimate as presented in accordance with Canada's National Instrument 43-101

		Silver Grade			Cutoff Grade
	Tons	(Ounces per ton)	Copper Grade		(Silver ounces per ton)
Measured	4,026,000	1.85	0.74	%	1.0
Indicated	77,480,000	2.05	0.75	%	1.0
Inferred	35,080,000	1.85	0.71	%	1.0

Geology

        The Montanore Project contains a strata-bound silver-copper deposit occurring in the Revett Formation, which is part of an extensive series of Precambrian-aged metasedimentary rocks belonging

17

to the Belt Supergroup. The Revett Formation has been subdivided into three members (upper, middle and lower) based on the contained amounts of quartzite, silty quartzite and siltite. The lower Revett, which hosts the mineralized horizons, is composed primarily of quartzite with lesser interbeds of siltite and silty quartzite.

        The silver-copper mineralization at Montanore is strata-bound in the upper portions of the lower Revett Formation. Copper and silver values are carried predominately in the minerals bornite, chalcocite, chalcopyrite and native silver in variable proportions and concentrations. Sulfide content of the mineralized rock rarely exceeds 3% to 4% and is commonly 1% to 2%.

        The mineralized zone crops out at the surface and expends down dip at least 12,000 ft to the north-northwest. The mineralization is open ended in the down dip direction. Mineralization occurs in at least two sub-parallel horizons separated by a silver- and copper-deficient zone containing low-grade lead in the form of galena. The two horizons are identified as the B1 for the upper zone and the B for the lower and more extensive zone. Both zones dip to the northwest between 15 degrees and 30 degrees, with an average of just over 15 degrees. The width of the main (B) horizon, in plan view, is defined by a fault on one side and a fold axis on the other, varies from 804 feet to 3,540 feet. The property boundaries, however, limit the controlled portion of the deposit to a maximum of 2,000 feet. The average thickness for each of the two horizons is 35 feet, depending upon cutoff.

History

        In 2002, Noranda notified us that it was abandoning its rights to the project. Under the terms of its claim lease agreement with Newhi, Inc., Noranda was required to quitclaim to us any claims owned by Noranda that overlapped the original Heidelberg claims. As the newly patented apex claims were overlapping, Noranda deeded these claims to Newhi in August 2002. In December 2002, Noranda transferred to us approximately 63,000 feet of drill core and all geologic, environmental, and engineering data generated during its 14 year management of the project. The mineral rights we acquired are subject to a $0.20 per ton royalty, and a 5% net profits royalty which would commence after the operator has recovered all of its exploration and development costs. On October 18, 2007, the Company agreed to purchase the net profits royalty from Montana Reserves Company for $500,000 and the dismissal with prejudice of all claims made by MRC against the Company.

        The Company resubmitted its plan of operation and hard rock mine operating permit application for the Montanore project to the U.S. Forest Service and Montana Department of Environmental Quality (MDEQ) at the end of December 2004. The initial draft EIS is currently being routed to the agencies for comments. See "—Permitting and Environmental."

        We are conducting an extensive optimization review and feasibility study of the Montanore Project in order to update the potential mine plan and to determine the optimal rates of production. We have spent an estimated $8.8 million on the Montanore property since acquiring it, primarily on the re-permitting process, a pre-feasibility study, exploration and an additional $139,000 per year in property holding costs. We estimate expenditures of at least $17.7 million in 2008 in connection with the continued permitting, engineering, exploration and preparation for and commencement of the underground evaluation drilling program.

Engineering

        McIntosh Engineering and Hatch Ltd. completed the Cost Update Study and generated a draft report for the project in May 2006. This report included engineering optimization, engineering review, cost updates, mine planning, and other aspects of the project. The report also provides additional optimization opportunities that should be evaluated as part of the on-going internal engineering work currently underway.

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        As part of the mine planning effort, we assembled all of the geologic information developed by Noranda and U.S. Borax for the project and incorporated the information into the Vulcan mine modeling package. This 3-dimensional geologic model is a critical first step in further evaluating mine planning activities and projection of ore zones. This information was also used to develop the underground drilling targets for the evaluation drilling program, described below.

Advanced Exploration and Delineation Drilling Program

        In 2006, we acquired the property providing access to the 14,000 foot Libby adit. With additional development, the Libby adit will provide access to the Montanore deposit. We also acquired two permits related to the Libby adit that, with minor revisions, allow us to reopen, dewater and rehabilitate the adit.

        In 2007, as part of the advanced exploration and delineation drilling program at Montanore, we completed the construction on and startup of a water treatment facility. We plan to dewater and rehabilitate the Libby adit in early 2008 and then advance the adit approximately 3,000 feet towards the middle of the deposit. An additional 10,000 feet of development drifting will be necessary to provide drill access. Once the drifting is underway, we expect to undertake delineation diamond core drilling of approximately 50 holes totaling approximately 45,000 feet. The objectives of our underground evaluation program are to:

•

expand the known higher grade intercepts of the Montanore deposit;



•

develop additional information about the deposit;



•

further assess and define the mineralized zone; and



•

provide additional geotechnical, hydrological and other data.

Stage 1—Dewatering and Adit Rehabilitation

        With the exception of the first 600 feet, the length of the Libby adit contains water. During the first stage of the evaluation drilling program, we plan to dewater the adit, and treat the discharged water using ultra-filtration and possibly chemical pre-treatment so that discharged water, both during the dewatering process as well as during development of the adit and drilling program, meets Montana's water quality standards. We completed the pilot scale tests of the water treatment plant in November 2007. We have been delayed starting the dewatering pending approval by the Forest Service of an environmental assessment (EA) for road use.

        As dewatering begins, we plan to rehabilitate the adit, which we anticipate to involve, among other activities, scaling the walls, installing new roof bolts and extending electricity, ventilation and dewatering infrastructure into the adit. We estimate that Stage 1 activities will cost approximately $7.3 million.

Stage 2—Advancement of Adit, Drifting and Establishment of Drill Stations

        Once rehabilitation is complete, expected by the second quarter of 2008, we plan to advance the adit approximately 3,000 feet towards the middle of the deposit. Following the advancement of the adit, we expect to commence 10,000 feet of development drifting, which will be necessary to provide drill access. Once drifting is underway we will also begin to establish drill stations. The process of drifting and the establishment of drill stations will continue throughout the remainder of the program. We expect that Stage 2 will cost approximately $7.5 million.

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Stage 3—Phase I Delineation Drilling

        In Stage 3 of the advanced exploration and delineation drilling program, we expect to commence approximately 20,000 feet of delineation diamond core drilling. We expect to spend approximately $0.5 million on Phase I delineation drilling. We also expect to spend approximately $12.7 million during Stages 1, 2 and 3 on site operating and capital costs, optimization studies and general corporate support.

Stage 4—Phase II Drilling and Bankable Feasibility Study

        During this stage we anticipate completing an additional 25,000 feet of diamond core drilling, undertaking additional metallurgical and geotechnical testing and analysis, and if the results of our exploration are successful, preparing for and completing a bankable feasibility study at an estimated cost, with site operating and capital costs, of approximately $10.0 million.

Permitting and Environmental

Permitting of the Advanced Exploration and Delineation Drilling Program

        In 2006, we acquired the property providing access to the portal of the Libby adit and two permits: Hard Rock Operating Permit 150 that covers certain exploration activities and the Montana Pollution Discharge Elimination System (MPDES) water discharge permit for the Montanore Project. With minor revisions completed in 2006, these permits allow us to proceed with our planned advanced exploration and delineation drilling program, including adit rehabilitation, dewatering and extension, drifting and establishment of drill stations, and drilling activities. In mid-2007, we were advised by the U.S. Forest Service that we would be required to submit an EA covering our proposed road use during the program. The EA was submitted in August 2007 and approval has been delayed to March 2008. Pending such approval, we have been issued a temporary use permit to provide site access.

Permitting of the Montanore Project

        In order to advance the Montanore Project past the exploration stage, we must obtain project approval from the U.S. Forest Service (USFS) and the State of Montana Department of Environmental Quality (DEQ) and final permits. The USFS and the State of Montana are undertaking a joint review of the Montanore Project and related permits, a process that typically takes several years. In early January 2008, we received a clarification letter from the Montana DEQ confirming that Hard Rock Operating Permit 150 issued in 1993 was transferred with the acquisition of Noranda Mineral Corporation in May 2006 to the Company. The DEQ asked that the Company withdraw its plan of operations and permit application (submitted in 2004) and instead submit proposal amendments and update the existing permit. The revised plan will be submitted in March 2008.

        To initiate the joint review process, in 2004 we submitted a proposed plan of operations to the USFS and a hard rock mining program application to the State of Montana, which included baseline environmental data, certain technical documents and other pertinent information about the Montanore Project. We have also submitted applications and technical supporting data for an air quality permit, a wetland 404 permit that would establish the allowable level of discharge of dredged or fill material into wetlands and non-wetland waters, an MPDES water discharge permit that would establish the allowable levels of mine and rain water discharge that might occur during any development of and operations at the Montanore Project, a power transmission line permit for the power line that would connect the Project to the power grid; and revisions to Hard Rock Operating Permit 150 that would permit mining operations on federal land, along with a permit to cover mining operations on private land. We have benefited from the work completed by previous holders of the Montanore Project, who obtained final Project permits in 1993. Rather than being required to develop all of the initial data, we were able to update the environmental baseline and other environmental and technical data developed by the prior

20

holders. This allowed us to submit applications and technical information approximately 12 months earlier than otherwise would have been the case. Since our applications were initially submitted, we have responded to agency comments and submitted supplemental technical information and applications.

        A central element of the federal and state project review is the completion of a thorough environmental review process, which will be documented in a joint Environmental Impact Statement (EIS). As an integral part of drafting the EIS, the USFS is required under the Endangered Species Act to complete a biological assessment and initiate a consultation with the U.S. Fish and Wildlife Service for the purpose of issuing a biological opinion addressing the impact of the project on threatened and endangered species, including grizzly bear, lynx and bull trout. The agencies completed preparation of the preliminary draft EIS in the fourth quarter of 2007, which is currently being reviewed internally by the agencies. We continue to address technical questions and comments generated by the USFS and the State during the EIS review process.

        Once the agencies have completed their review, the final draft EIS and the draft permits are provided to the public for review and comment. The agencies may consider public comments in preparing the final EIS and final permits. If the public review process is successfully completed, the agencies would proceed to determine the form of the final EIS and permits and would issue a joint Record of Decision setting forth their decisions on our proposed plan of operations and hard rock mining program. Following issuance of the Record of Decision, and resolution of any appeals or legal challenges to the Record of Decision, we would receive the required permits and finalize the Montanore Project Description based on the results of the completed agency review.

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Advance and Iroquois Properties

        The Company owns the Advance and Iroquois zinc-lead exploration properties located in northeastern Washington State, approximately six miles south of the Canadian border. The properties are situated five miles apart along a belt of Cambrian carbonate sediments that have acted as host rocks for several former mines. Both properties are easily accessible on secondary graveled roads by two wheel drive vehicles. A large zinc smelter and refinery is located at Trail, British Columbia, Canada, approximately 17 miles away, over excellent roads.

        The Company was originally formed in 1947 to explore the Advance and Iroquois properties. Since that time, it has leased its holdings to major companies including Rare Metals, Inc. (El Paso Natural Gas) (1959-65), The Bunker Hill Company (1962-65), Cominco American, Inc. (1966-67 and 1974-75), Brinco, Ltd. (RTZ Group) (1977-78), and Equinox Resources Ltd. (1989-91). Total expenditures on the properties to date are estimated to be at least $1,500,000.

        The Advance and Iroquois properties are located along the Deep Lake Trend, a northeast-striking belt of Cambrian carbonate rocks collectively designated as the Metaline Limestone. Rocks of the Deep Lake Trend have been strongly folded and faulted by numerous high-angle as well as thrust faults. As a result the Metaline Limestone has a complex outcrop pattern, with steeply overturned bedding.

        Zones of brecciation are found throughout the Metaline Limestone and are often, but not always, the location of zinc and lead sulfide mineralization. These features are predominantly stratabound and have gradational, often irregular borders. Individual breccia bodies are crudely lensoid in cross section and have third dimensions that attain considerable length. The zones often occur in an enechelon, and sometimes interconnected, pattern. A variety of evidence suggests that the breccia bodies are solution collapse features controlled by favorable stratigraphy or lithologic facies.

        Mineralization consists of irregular bands, lenses, and fine disseminations of sphalerite and galena accompanied by varying amounts of pyrite. The mineralization is considered to have been localized by permeable zones within and peripheral to breccia bodies created by solution collapse. The sulfide minerals are found in white dolomite that makes up the breccia matrix and fills other voids, and also as selective replacements of the host carbonate rocks. Individual deposits have irregular gradational borders and are crudely lensoidal to oval in outline. Their elongated third dimension parallels the regional strike of the host rocks, and often plunge at low angles. Cross sectional widths up to 80 feet and heights of as much as 150 feet have been noted in the more prominent zones. Lengths of mineralization vary up to 650 feet. The deposits have a tendency to occur together in an enechelon pattern over a stratigraphic interval of as much as 300 feet. Such groupings of deposits may be more or less interconnected and have composite lengths of as much as 5,000 feet. Metal values generally decrease outward thus necessitating a border to be established by economic consideration. Although individual sample values within a deposit may be as high as 20% zinc, average values for a deposit will usually range up to 7% zinc and 1% lead depending upon the "assay border" selected.

        The Advance property consists of 720 acres of patented mining claims located approximately five miles east of the town of Northport. The property is reached from Northport, the nearest town, by taking the paved Deep Lake road south for four miles to the graveled Black Canyon road and thence north for three miles. The Metaline Formation is the principal rock unit to crop out on the Advance property. Previous exploration consisting of soil sampling, drilling, trenching, and tunneling has shown that several zones of low-grade, disseminated zinc mineralization occur on the property. The Advance property is without known reserves, is considered to be of an exploratory nature, and was written down to a zero carrying balance at December 31, 2007 following an internal review which concluded that the property is not commercially viable at present.

        The Iroquois property consists of 62 acres of patented mining claims and surface rights, and 15 unpatented mining claims containing about 300 acres. The property is reached from Northport, the

23

nearest town, by taking the paved Deep Lake road south and east for 19 miles to the graveled Iroquois Mine Road, and thence northeast for three miles. The unpatented mining claims are held subject to a $125 per claim annual payment to the U.S. Federal government. More than 25,000 feet of drilling and approximately 2,600 feet of tunneling have shown low-grade mineralization to occur in multiple zones, extending for the entire 5,000 foot length of the property. Most of the exploration has been concentrated in one area where a mineralized zone of disseminated zinc with associated lead values has been outlined over approximately 900 feet in length and within 300 feet of the surface. The Iroquois property is without known reserves, is considered to be of an exploratory nature and has been written down to a zero carrying balance at December 31, 2007 following an internal review which determined that at this time there was no commercial value in the property.

Oil Interests

        We receive income from a 10.16% working interest in four oil wells on a lease in Sumner County, Kansas. We do not engage in oil and gas exploration or production activities.

ITEM 3.    LEGAL PROCEEDINGS

        On August 11, 2005, Mines Management was named as a co-defendant in a lawsuit filed by Montana Reserves Company ("MRC") in the Superior Court in Spokane County Washington. Named as co-defendants are Noranda Minerals, Normin Corp., Mines Management and Newhi, Inc. The action seeks damages in connection with the conveyance of the Montanore property from Noranda to Newhi, and challenges the computation of a net proceeds royalty payable to MRC pursuant to a Royalty Agreement between Noranda and MRC in respect of the Montanore property. On October 18, 2007, the Company agreed to purchase the net proceeds royalty from MRC for $500,000 in consideration of the dismissal with prejudice of MRC's claim against the Company. Formal conveyance of the settlement agreement was completed in November 2007.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        No matter was submitted during the fourth quarter of 2007 to a vote of security holders.

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PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES.

        The common stock commenced trading on AMEX under the symbol, "MGN," on March 24, 2004. On January 10, 2006, the Company's common stock began trading on the Toronto Stock Exchange under the symbol "MGT."

        The following table shows the high and low closing sales prices for our common stock for each quarter since January 1, 2006. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. On March 11, 2008, the closing price of the Company's common stock was $3.89 on AMEX and Cdn$3.84 on TSX.

		AMEX ($)				TSX (Cdn$)
Fiscal Year
		High		Low		High		Low
2007:
	First Quarter	$	6.44	$	4.53	$	7.50	$	5.11
	Second Quarter	$	5.33	$	3.33	$	6.10	$	3.52
	Third Quarter	$	4.12	$	2.82	$	4.25	$	2.94
	Fourth Quarter	$	4.80	$	2.99	$	4.49	$	3.01
2006:
	First Quarter	$	9.00	$	6.20		N/A		N/A
	Second Quarter	$	9.97	$	6.20	$	10.71	$	7.00
	Third Quarter	$	7.47	$	5.60	$	8.75	$	6.01
	Fourth Quarter	$	6.40	$	4.91	$	7.99	$	5.35

        As of March 11, 2008 there were 746 shareholders of record of our common stock and approximately 3,253 additional shareholders whose shares are held through brokerage firms or other institutions.

        We have never paid dividends and any future decision as to the payment of dividends will be at the discretion of our board of directors and will depend upon our earnings, receipt of dividends from our subsidiaries, financial position, capital requirements, plans for expansion and such other factors as our board of directors deems relevant.

25

Performance Graph

        The following graph compares the yearly cumulative total shareholders return on common stock of the Company since December 31, 2002, with the cumulative total return over the same period for the Russell Microcap 1000 Index and the XAU Gold and Silver Index.

        Pursuant to the rules and regulations set forth by the SEC, the comparison assumes $100 was invested on December 31, 2002 in the Company's common stock and in each of the indices.

        Historic stock price is not indicative of future stock price performance. This performance graph shall not be deemed to be "soliciting material" or to be "filed" under either the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

Total Return to Stockholders
(Assumes $100 investment on 12/31/2002)

	Russell Microcap 1000 Index		XAU Gold & Silver Index		Mines Management, Inc.
12/31/07	$	208.82	$	225.79	$	272.00
12/31/06	$	226.98	$	185.32	$	399.20
12/31/05	$	194.76	$	166.79	$	561.60
12/31/04	$	189.89	$	129.43	$	337.60
12/31/03	$	166.36	$	141.79	$	532.00
12/31/02	$	100.00	$	100.00	$	100.00

26

Securities Authorized for Issuance Under Equity Compensation Plans

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted-average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a)) (c)
Equity compensation plans approved by shareholders	2,136,000	$	2.68	329,000
Equity compensation plans not approved by shareholders(3)	750,000	$	2.99	2,250,000
Total	2,886,000	$	2.76	2,579,000

(3)

The issuance of the options and authorization of the shares by the Company's board of directors reflected in "Equity compensation plans not approved by shareholders" are each contingent upon approval by the Company's shareholders.

ITEM 6.    SELECTED FINANCIAL DATA

        The selected financial data of Mines Management, Inc. for the years ended December 31, 2007, December 31, 2006, December 31, 2005, December 31, 2004 and December 31, 2003 are derived from audited financial statements. This table should be read in conjunction with the Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations.

		Years Ended December 31,
		2007			2006			2005			2004			2003
Statement of Operations:
Revenues		$	10,740		$	13,130		$	11,282		$	8,604		$	6,038
Operating Expenses		$	(9,457,750	)	$	(6,293,164	)	$	(5,448,169	)	$	(2,652,056	)	$	(1,300,997	)
	Loss from Operations	$	(9,447,010	)	$	(6,280,034	)	$	(5,436,887	)	$	(2,643,452	)	$	(1,294,959	)
Other Income		$	1,113,944		$	296,489		$	226,877		$	127,383		$	19,339
	Net Loss	$	(8,333,066	)	$	(5,983,545	)	$	(5,210,010	)	$	(2,516,069	)	$	(1,275,620	)
Net Loss per Share of Common Stock		$	(0.37	)	$	(0.47	)	$	(0.45	)	$	(0.26	)	$	(0.18	)
Weighted Average Shares of Common Stock Outstanding			18,015,734			12,781,827			11,461,043			9,745,097			7,234,703
Cash Flow Data:
Cash Flows from Financing Activities		$	41,497,286		$	1,513,750		$	6,686,520		$	6,448,010		$	1,770,929
Cash Flows from Operating Activities		$	(5,073,977	)	$	(4,858,322	)	$	(4,178,761	)	$	(1,217,131	)	$	(591,516	)
Cash Flows from Investing Activities		$	(7,423,589	)	$	(560,070	)	$	(284,460	)	$	(3,088,521	)	$	(1,160,251	)

	At December 31,
	2007		2006		2005		2004		2003
Balance Sheet Data:
Total Assets	$	42,157,005	$	6,330,468	$	9,673,157	$	7,135,017	$	1,889,735
Total Liabilities	$	1,971,739	$	307,614	$	171,101	$	114,984	$	188,656
Shareholders Equity	$	40,185,266	$	6,022,854	$	9,502,056	$	7,020,033	$	1,701,079

27

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

        The following discussion and analysis is provided as a supplement to, and should be read in conjunction with, our financial statements and the accompanying notes ("Notes").

Overview

2007 Highlights

•

Successfully completed financing activities include completion of public equity offering in second quarter 2007 with gross proceeds of $34.2 million and completion of a private placement with gross proceeds of $10 million in November 2007.



•

Commenced the advanced underground exploration program at the Montanore Site by completing construction of a water treatment plant and dry storage facility in November 2007.



•

Procurement and delivery of underground and surface equipment to rehabilitate the adit, completion of 3,000 feet of additional adit toward the ore body, and development of the drill stations for the drilling program



•

Hired an additional 12 employees including Vice President/General Manager for the Montanore Project, Project Engineer, Senior Site Geologist and additional operations staff for the site.



•

Advanced the permitting process by working closely with state and federal agencies, including preparation and submission of a preliminary draft EIS in November 2007.

        Our December 31, 2007 cash and certificates of deposit balances remained strong at over $32.3 million. Our net cash expenditures for operating activities for 2007 totaled $5.1 million. Cash outlays were less than we had projected due to delays in the Forest Service's approval of the road use EA. We purchased fixed assets totaling $6.1 million, including $5.6 million for underground and surface equipment. Construction in process spending for 2007 was $3.1 million for site infrastructure and the water treatment facility. In 2008, we plan to continue to focus on the $40 million advanced exploration and delineation drilling program at the Montanore Project. We also intend to continue to pursue the re-permitting applications with the goal of commencing a phased financing plan and feasibility study for the Montanore Project in the second half of 2008.

Financial and Operating Results

        Mines Management, Inc. reported a net loss for the year ended December 31, 2007 of $8.4 million or $0.38 per share compared to a loss of $6.0 million or $0.47 per share for the year ending December 31, 2006. The 2007 increase of $2.4 million in net loss versus 2006, and the 2006 net loss increase of $0.8 million versus 2005, were primarily due to increased capital investment and administrative expenses in support of the Montanore Project:

	Expense Summary
Expenditures
	2007			2006			2005
	(millions)
Montanore Project Expense	$	2.9		$	2.7		$	2.7
Administrative Expense	$	5.6		$	2.7		$	1.7
Non Cash Stock Option Expense	$	1.0		$	0.9		$	1.0
Interest Income	$	(1.1	)	$	(.3	)	$	(.2	)

        Montanore Project expense includes exploration, fees, filing and licenses, environmental, engineering and permitting expense. Increased activity on the Montanore Project primarily resulted from increased payments to consultants for permitting activities, collecting additional environmental

28

baseline data, mineralized material and resource studies, and exploration activities related to reopening the Libby adit. Administrative Expense, which includes general overhead and office expense, legal, accounting, compensation, rent, taxes, and investor relations expense, increased $2.9 million or 107% in 2007 over 2006. This increase is attributed to the purchase in November 2007 of the MRC 5% net proceed Royalty for $500,000, expensing of $500,000 in property charges related to a write down, addition of seven staff members, salary increases among existing staff and increased legal and accounting fees associated with our cross-border equity financings in 2007 that resulted in gross proceeds of $44.2 million. Stock option expense, which includes stock options granted to officers, employees and consultants, increased $0.1 million from 2006 to 2007, while interest income increased significantly by $0.8 million due to the increased cash on hand after completing the public and private stock offerings.

        The major area for additional spending for 2006 over 2005 was the increased administrative expenses of $1.0 million or 50% increase in 2006 over 2005 was due to additional staff, increased legal and accounting fees due to increased regulatory requirements and implementation of the requirements of the Sarbanes-Oxley Act of 2002 reporting on internal controls as an accelerated filer for the first time in 2006, and a general increase in the Company's activities. Stock option expense, which includes stock options granted to officers, employees and consultants, remained approximately unchanged from 2005 to 2006, while interest income increased slightly due to a full year of interest for certificates of deposit purchased in October of 2005.

Liquidity and Capital Resources

        At December 31, 2007, our aggregate cash, short term investments, and long term investments totaled $32.6 million compared to $5.2 million at December 31, 2006. In 2007, we received $41.6 million in net proceeds from the sales of common stock from a public offering in the second quarter of 2007 and a private placement in November 2007. The net cash used for operating activities during 2007 was $5.1 million, which consisted primarily of permitting, environmental, exploration, and engineering expenses for the Montanore project and general administrative expenses. We purchased $6.1 million in fixed assets in 2007, which principally consisted of equipment for rehabilitating and extending the adit. We spent $3.1 million in 2007 for infrastructure classified as construction in progress at the Montanore Project site. The net increase in cash and cash equivalents for the year ending December 31, 2007 was $29.0 million.

        We anticipate capital expenditures in 2008 of approximately $22.7 million which will consist of (i) $1.3 million in each quarter for ongoing operating and general administrative expenses, (ii) $2.5 million in the first quarter to begin the exploration and delineation drilling program at the Montanore Project and (iii) $5.0 million in each remaining quarter to sustain efforts in furtherance of the program. We will require external financing in 2008 and 2009 to fund the completion of the advanced exploration and delineation drilling program and completion of a bankable feasibility study.

Off Balance Sheet Arrangements

        We have no off balance sheet arrangements.

Table of Contractual Obligations

        The following table summarizes our contractual obligations at December 31, 2007:

Contractual Obligations	Total		Less Than 1 Year		2-3 Years		4-5 Years		Thereafter
Operating leases	$	425,000	$	75,000	$	150,000	$	200,000	$	—

29

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

        The market prices of base and precious metals such as copper and silver 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 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 drop dramatically, the value of the Company's Montanore Project could drop and the Company might not be able to recover its investment in that project. The decision to develop or construct a mine would be made several years before the first revenues from production would be received. Price fluctuations between the time that such decision is made and the commencement of production could affect the economics of the mine.

30

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        The consolidated financial statements for the years ended December 31, 2007, 2006 and 2005 are included in this Report on Form 10-K as set forth below.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		32-33
FINANCIAL STATEMENTS:
	Consolidated balance sheets	34
	Consolidated statements of operations	35
	Consolidated statements of stockholders' equity	36
	Consolidated statements of cash flows	37
	Notes to consolidated financial statements	38-47

31

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
Mines Management, Inc. and Subsidiaries
Spokane, Washington

        We have audited the consolidated balance sheets of Mines Management, Inc. (an Idaho Corporation) and Subsidiaries as of December 31, 2007, 2006, and 2005, and related consolidated statements of operations, stockholders' equity, and cash flows for the years then ended and for the period from inception of the development stage (August 12, 2002 through December 31, 2007). These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provided a reasonable basis for our opinion.

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Mines Management, Inc. and Subsidiaries as of December 31, 2007, 2006, and 2005, and the results of their operations and their cash flows for the years then ended and for the period from inception of the development stage (August 12, 2002 through December 31, 2007) in conformity with U.S. generally accepted accounting principles.

        We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Mines Management, Inc. and Subsidiaries' internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 12, 2008 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

/s/ LeMaster & Daniels PLLC

Spokane, Washington
March 12, 2008

32

REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
Mines Management, Inc. and Subsidiaries

        We have audited Mines Management, Inc. and Subsidiaries' internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Mines Management, Inc. and Subsidiaries' management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express an opinion on the company's internal control over financial reporting based on our audit.

        We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

        A company's internal control over financial reporting is a process designed 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. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        In our opinion, Mines Management, Inc. and Subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

        We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Mines Management, Inc. and Subsidiaries as of December 31, 2007, 2006, and 2005, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2007, and our report dated March 12, 2008, expressed an unqualified opinion.

/s/ LeMaster & Daniels PLLC

Spokane, Washington
March 12, 2008

33

Mines Management, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

			December, 31,
			2007			2006			2005
Assets
CURRENT ASSETS:
	Cash and cash equivalents		$	29,743,372		$	743,652		$	4,648,294
	Interest receivable			80,662			64,426			101,380
	Prepaid expenses and deposits			130,583			10,207			30,169
		Total current assets		29,954,617			818,285			4,779,843
MINERAL PROPERTIES				—			504,492			504,492
PROPERTY AND EQUIPMENT:
	Construction in progress			3,092,374			—			—
	Mine buildings and leasehold improvements			783,610			172,535			39,917
	Equipment			5,662,485			259,914			80,568
	Office equipment			297,909			222,514			185,969
				9,836,378			654,963			306,454
	Less accumulated depreciation			428,693			156,280			101,470
				9,407,685			498,683			204,984
OTHER ASSETS:
	Certificates of deposit			2,601,276			4,370,253			4,158,692
	Available-for-sale securities			132,516			77,844			25,146
	Reclamation deposits			60,911			60,911			—
				2,794,703			4,509,008			4,183,838
			$	42,157,005		$	6,330,468		$	9,673,157
Liabilities and Stockholders' Equity
CURRENT LIABILITIES:
	Accounts payable		$	1,948,566		$	301,667		$	130,655
	Due to officer			—			2,398			2,398
	Payroll and payroll taxes payable			23,173			3,549			38,048
		Total current liabilities		1,971,739			307,614			171,101
COMMITMENTS
STOCKHOLDERS' EQUITY:
	Common stock—100,000,000 shares, $0.001 par value authorized; 22,236,067, 12,849,467, and 12,469,510 shares issued and outstanding, respectively			22,236			12,849			12,470
	Preferred stock—10,000,000 shares, no par value, authorized; -0- shares issued and outstanding			—			—			—
	Additional paid-in capital			64,700,129			22,268,710			19,817,444
	Accumulated deficit			(1,117,306	)		(1,117,306	)		(1,117,306	)
	Deficit accumulated during the development stage			(23,541,144	)		(15,208,078	)		(9,224,533	)
	Accumulated other comprehensive income			121,351			66,679			13,981
		Total stockholders' equity		40,185,266			6,022,854			9,502,056
			$	42,157,005		$	6,330,468		$	9,673,157

See accompanying notes to consolidated financial statements.

34

Mines Management, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

			Years Ended December 31,									From Inception August 12, 2002 Through December 31,
			2007			2006			2005			2007
REVENUE:
	Royalties		$	10,740		$	13,130		$	11,282		$	52,239
OPERATING EXPENSES:
	Depreciation			283,564			54,810			22,655			375,830
	Administrative			1,924,887			905,875			1,261,633			4,508,840
	Legal, accounting, and consulting			690,871			437,940			197,972			1,542,615
	Miscellaneous			21,781			16,329			4,573			53,914
	Exploration			11,866			148,614			718			165,176
	Oil and gas operating			797			—			—			12,970
	Rent and office			165,866			282,832			115,601			680,361
	Compensation; directors, officers and staff			2,446,024			1,773,859			1,072,640			8,125,382
	Taxes and licenses			121,643			52,129			38,569			259,733
	Telephone			43,417			20,699			16,421			95,441
	Fees, filing, and licenses			330,609			565,549			474,549			1,564,905
	Environmental			336,425			275,065			112,954			857,253
	Engineering			63,421			348,799			988,653			1,491,831
	Permitting			2,160,130			1,402,165			1,141,018			4,709,797
	Equipment rental			351,957			8,499			213			360,669
	Commissions			—			—			—			68,440
	Impairment of mineral properties			504,492			—			—			504,492
		Total operating expenses		9,457,750			6,293,164			5,448,169			25,377,649
LOSS FROM OPERATIONS				(9,447,010	)		(6,280,034	)		(5,436,887	)		(25,325,410	)
OTHER INCOME:
	Interest			1,113,944			296,489			226,877			1,780,808
	Miscellaneous			—			—			—			3,458
				1,113,944			296,489			226,877			1,784,266
NET LOSS			$	(8,333,066	)	$	(5,983,545	)	$	(5,210,010	)	$	(23,541,144	)
NET LOSS PER SHARE (basic and diluted)			$	(0.37	)	$	(0.47	)	$	(0.45	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING				18,015,734			12,781,827			11,461,043

See accompanying notes to consolidated financial statements.

35

Mines Management, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FROM INCEPTION (AUGUST 12, 2002) THROUGH DECEMBER 31, 2007

						Issuable Common Stock
			Common Stock														Deficit Accumulated During the Development Stage
											Additional Paid-in Capital			Accumulated Deficit						Accumulated Other Comprehensive Income
			Shares	Amount		Shares		Amount														Total
BALANCES, AUGUST 12, 2002 (Inception)			5,316,956	$	5,317	90,000		$	22,500		$	1,495,998		$	(1,117,306	)	$	—		$	846	$	407,355
	Common stock issued for cash		4,112,645		4,113	—			—			8,481,026			—			—			—		8,485,139
	Common stock issued to directors		375,000		375	—			—			149,625			—			—			—		150,000
	Common stock issued for services		5,000		5	—			—			1,995			—			—			—		2,000
	Issuable common stock issued		90,000		90	(90,000	)		(22,500	)		22,410			—			—			—		—
	Exercise of stock options		729,931		730	—			—			(730	)		—			—			—		—
	Issuance of stock options		—		—	—			—			1,978,091			—			—			—		1,978,091
	Issuance of stock for Heidelberg shares		1,058		1	—			—			(1	)		—			—			—		—
	Comprehensive loss:
		Adjustment to net unrealized gain on marketable securities	—		—	—			—			—			—			—			11,971		11,971
		Net loss	—		—	—			—			—			—			(4,014,523	)		—		(4,014,523	)
	Comprehensive loss																						(4,002,552	)
BALANCES, DECEMBER 31, 2004			10,630,590		10,631	—			—			12,128,414			(1,117,306	)		(4,014,523	)		12,817		7,020,033
	Common stock issued for cash		1,016,667		1,017	—			—			5,671,985			—			—			—		5,673,002
	Exercise of stock options		178,157		178	—			—			79,322			—			—			—		79,500
	Exercise of stock warrants		618,367		618	—			—			933,400			—			—			—		934,018
	Issuance of stock options		—		—	—			—			984,419			—			—			—		984,419
	Revaluation of stock options		—		—	—			—			19,930			—			—			—		19,930
	Issuance of stock for Heidelberg shares		25,729		26							(26	)		—			—			—		—
	Comprehensive loss:
		Adjustment to net unrealized gain on marketable securities	—		—	—			—			—			—			—			1,164		1,164
		Net loss	—		—	—			—			—			—			(5,210,010	)		—		(5,210,010	)
	Comprehensive loss																						(5,208,846	)
BALANCES, DECEMBER 31, 2005			12,469,510		12,470	—			—			19,817,444			(1,117,306	)		(9,224,533	)		13,981		9,502,056
	Exercise of stock options		273,374		273	—			—			878,976			—			—			—		879,249
	Exercise of stock warrants		105,750		106	—			—			634,395			—			—			—		634,501
	Issuance of stock options		—		—	—			—			937,895			—			—			—		937,895
	Issuance of stock for Heidelberg shares		833		—	—			—			—			—			—			—		—
	Comprehensive loss:
		Adjustment to net unrealized gain on marketable securities	—		—	—			—			—			—			—			52,698		52,698
		Net loss	—		—	—			—			—			—			(5,983,545	)		—		(5,983,545	)
	Comprehensive loss																						(5,930,847	)
BALANCES, DECEMBER 31, 2006			12,849,467		12,849	—			—			22,268,710			(1,117,306	)		(15,208,078	)		66,679		6,022,854
	Common stock issued for cash		9,386,600		9,387	—			—			41,487,899			—			—			—		41,497,286
	Issuance of stock options		—		—	—			—			480,993			—			—			—		480,993
	Revaluation of stock options		—		—	—			—			462,527			—			—			—		462,527
	Comprehensive loss:
		Adjustment to net unrealized gain on marketable securities	—		—	—			—			—			—			—			54,672		54,672
		Net loss	—		—	—			—			—			—			(8,333,066	)		—		(8,333,066	)
		Comprehensive loss																					(8,278,394	)
BALANCES, DECEMBER 31, 2007			22,236,067	$	22,236	—		$	—		$	64,700,129		$	(1,117,306	)	$	(23,541,144	)	$	121,351	$	40,185,266

See accompanying notes to consolidated financial statements.

36

Mines Management, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

				Years Ended December 31,									From Inception August 12, 2002 Through December 31, 2007
				2007			2006			2005
Increase (Decrease) in Cash and Cash Equivalents
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net loss			$	(8,333,066	)	$	(5,983,545	)	$	(5,210,010	)	$	(23,541,144	)
	Adjustments to reconcile net loss to net cash used in operating activities:
		Issuance of stock options			943,520			937,895			1,004,349			5,015,855
		Stock received for services			—			—			—			(11,165	)
		Depreciation			283,564			54,810			22,655			375,830
		Impairment of mineral properties			504,492			—			—			504,492
	Changes in assets and liabilities:
		Interest receivable			(16,236	)		36,954			(49,692	)		(80,662	)
		Prepaid expenses and deposits			(120,376	)		(40,949	)		(2,180	)		(190,994	)
		Accounts payable			1,644,501			171,012			112,483			1,948,566
		Payroll payable			15,674			—			—			15,674
		Severance payable			—			(20,000	)		(60,000	)		—
		State income taxes payable			—			—			(345	)		(164	)
		Payroll taxes payable			3,950			(14,499	)		3,979			4,319
			Net cash used in operating activities		(5,073,977	)		(4,858,322	)		(4,178,761	)		(15,959,393	)
CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchase of fixed assets				(6,102,461	)		(348,509	)		(161,528	)		(6,691,572	)
	Proceeds from disposition of fixed assets				2,269			—			—			2,269
	Construction in progress				(3,092,374	)		—			—			(3,092,374	)
	(Purchase) Sale of certificates of deposit				1,768,977			(211,561	)		(122,932	)		(2,601,276	)
	Increase in mineral properties				—			—			—			(144,312	)
		Net cash used in investing activities			(7,423,589	)		(560,070	)		(284,460	)		(12,527,265	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from sales of common stock				41,497,286			1,513,750			6,686,520			58,182,695
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS					28,999,720			(3,904,642	)		2,223,299			29,696,037
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD					743,652			4,648,294			2,424,995			47,335
CASH AND CASH EQUIVALENTS, END OF PERIOD				$	29,743,372		$	743,652		$	4,648,294		$	29,743,372

See accompanying notes to consolidated financial statements.

37

NOTE 1—ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Organization:

        Mines Management, Inc. (the Company) is a publicly held Idaho corporation incorporated in 1947. The Company acquires, explores, and develops mineral properties principally in North America. The Company performed exploration activities in South America in 2002.

        The Company formed Newhi, Inc., a wholly owned subsidiary, for the purpose of merger with Heidelberg Silver Mining Company, Inc. In the merger, completed on April 15, 1988, Heidelberg Silver Mining Company, Inc. was merged into Newhi, Inc. To effect the merger, the Company issued 367,844 shares of its previously unissued common stock. Also in connection with this merger, the Company issued 11,117 shares of common stock and paid $4,446 as a finder's fee. Montanore Mineral Corporation and Montmin Corporation were acquired in conjunction with a stock transfer agreement with Noranda Finance Corporation as described more fully in note 9.

Summary of Significant Accounting Policies:

a.

Principles of consolidation

The accompanying consolidated financial statements include the accounts of Mines Management, Inc., and its wholly-owned subsidiaries, Newhi, Inc., Montanore Mineral Corporation, and Montmin Corporation. Intercompany balances and transactions have been eliminated.

b.

Cash and cash equivalents

Cash and cash equivalents include cash on hand, cash in banks, investments in certificates of deposit with original maturities of 90 days or less, and money market funds.

c.

Available for sale securities

Available for sale securities are recorded at fair value, with unrealized gains or losses recorded as a component of equity, unless the value of the security is considered impaired. Realized gains and losses and non-temporary impairments in value are recorded in the statement of operations.

d.

Fair value of financial instruments

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

e.

Property and equipment

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

f.

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

38

NOTE 1—ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)

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.

g.

Asset impairment

The Company evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amount may not be recoverable. If the sum of estimated future net cash flows on an undiscounted basis is less than the carrying amount of the related asset grouping, asset impairment is considered to exist. The related impairment loss is measured by comparing estimated future net cash flows on a discounted basis to the carrying amount of the asset. Changes in significant assumptions underlying future cash flow estimates may have a material effect on the Company's financial position and results of operations. As of December 31, 2007, the Company has identified and recognized an impairment loss as described more fully in note 3.

h.

Asset retirement obligations

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

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

i.

Deferred Income Taxes

Deferred income tax is provided for differences between the bases of assets and liabilities for financial and income tax reporting. A deferred tax asset, subject to a valuation allowance, is recognized for estimated future tax benefits of tax-basis operating losses being carried forward.

j.

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. The Company uses the "modified prospective method" of transition as described under SFAS No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure. Under this method, compensation cost is recognized for awards granted and for awards modified, repurchased or cancelled in the period after adoption. Compensation cost is also recognized for the unvested portion of awards granted prior to adoption. The Company recognized stock-based compensation of $943,520 (of which $148,188 was for services performed by outside parties), $937,895 (of which

39

NOTE 1—ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)

$38,635 was for services performed by outside parties), and $1,004,349 (of which $560,569 was for services performed by outside parties) for the years ended December 31, 2007, 2006, and 2005, respectively.

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 three years presented is based on the historical volatility of the Company's common stock 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.

	Years Ended December 31,
	2007		2006		2005
Weighted average risk-free interest rate	3.19	%	4.67	%	3.56	%
Weighted average volatility	56.39	%	59.02	%	70.48	%
Expected dividend yield	—		—		—
Weighted average expected life (in years)	2.00		2.00		2.00

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

k.

Net loss per share

Basic and diluted loss per share is computed using the weighted average number of shares outstanding during the periods. Stock options and warrants outstanding are antidilutive and are not considered in the computation.

l.

Reclassifications

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

m.

Assumptions and use of estimates

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

n.

New accounting standards

FASB has issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement standard for the financial statement recognition and measurement of an income tax position taken or expected to be taken in a tax return. In addition, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company presently recognizes income tax positions based on management's estimate of whether it is reasonably possible that a liability has been incurred for unrecognized income tax benefits by applying FASB Statement No. 5, Accounting for Contingencies.

40

NOTE 1—ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)

The provisions of FIN 48 will be effective for the Company on January 1, 2008. The provisions of FIN 48 are to be applied to all tax positions upon initial application of this standard. Only tax positions that meet the more likely than not recognition threshold at the effective date may be recognized or continue to be recognized upon adoption. The cumulative effect of applying the provisions of FIN 48 will be reported as an adjustment to the opening balance of retained earnings for the fiscal year of adoption. The adoption of FIN 48 is not expected to have a material impact on the Company's financial position, results of operations, or cash flows.

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurement. SFAS No. 157 also emphasizes that fair value is a market based measurement, not an entity specific measurement, and sets out a fair value hierarchy with the highest priority being quoted prices in active markets. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. The adoption of SFAS No. 157 is not expected to have a material impact on the Company's financial position, results of operations, or cash flows.

In February 2007, FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 permits companies to elect to follow fair value accounting for certain financial assets and liabilities in an effort to mitigate volatility in earnings without having to apply complex hedge accounting provisions. The standard also establishes presentation and disclosure requirements designed to facilitate comparison between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. SFAS No. 159 is not expected to have a material impact on the Company's financial position, results of operations, or cash flows.

In December 2007, FASB issued SFAS No. 141 (revised 2007), Business Combinations (No. 141(R). SFAS No. 141(R), among other things, establishes principles and requirements for how the acquirer in a business combination (i) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquired business, (ii) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase, and (iii) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination.

In December 2007, FASB issued SFAS No. 160, Noncontrolling Interest in Consolidated Financial Statements, an Amendment of ARB No. 51. SFAS No. 160 establishes accounting and reporting standards for noncontrolling interests in a subsidiary and for the deconsolidation of a subsidiary. Minority interest will be recharacterized as noncontrolling interests and classified as a component of equity. It also establishes a single method of accounting for changes in a parent's ownership interest in a subsidiary and requires expanded disclosures. This statement is effective for fiscal years beginning on or after December 15, 2008, with early adoption prohibited. The Company does not expect the adoption of this statement will have a material impact on its financial position or results of operations.

NOTE 2—STOCKHOLDERS' EQUITY:

Common Stock:

        In 2003, the Company sold 1,152,007 common shares for $1,267,207 ($1.10 per share). In connection with the stock sales, the Company granted warrants to purchase up to 1,152,007 common

41

NOTE 2—STOCKHOLDERS' EQUITY: (Continued)

shares at $1.20 per share through two years from the date of issue. Cumulative warrants exercised relating to this issue were 1,152,007 shares at each of December 31, 2007, 2006, and 2005.

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

        In 2005, the Company sold 1,016,667 common shares for $6,100,002 ($6.00 per share). In connection with the stock sales, the Company granted warrants to purchase up to 737,084 shares of common stock at $8.25 per share through five years from the initial exercise date. At December 31, 2007, no warrants have been exercised. The Company paid a cash finder's fee of 7% of the gross purchase price received in the offering. The finder also received a 3.75% warrant compensation, or warrants to purchase 228,750 common shares at $8.25 per share through October 20, 2010. These warrants were repriced at $5.00 per share in April 2007 in accordance with the terms of the 2005 warrant agreement.

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

        On April 20, 2007 the Company completed a public offering of 6,000,000 units at a price of $5.00 per unit, resulting in gross proceeds of $30,000,000 ($28,200,000 net proceeds). Each unit is comprised of one share of common stock and one-half of one common stock purchase warrant, with each full warrant being exercisable for five years to purchase one share of common stock at a price of $5.75 per share. The warrants are listed on the TSX and are tradable in US dollars under the symbol MGT.GT.U.

        The underwriters were granted an over-allotment option, exercisable for a period of 30 days following the closing, to acquire up to an additional 900,000 units. On May 7, 2007, the underwriters exercised the over-allotment option for 836,600 units. The total offering was therefore 6,836,600 units for gross proceeds to the Company of $34,183,000, or $32,124,697 in net proceeds to the Company, after deducting underwriting commissions but before deducting offering expenses. At December 31, 2007, no warrants have been exercised.

        On November 2, 2007 the Company sold 2,500,000 common shares at a price of $4.00 per share, resulting in gross proceeds of $10,000,000 ($9,966,740 net proceeds before deducting legal fees). In connection with the stock sale, the Company entered into a Right of First Refusal agreement (the "ROFR") which grants a twenty-year right of first proposal and a right to match third-party proposals, to purchase all or any portion of silver mined, produced or recovered by the Company (including any company acquired by the Company during the period) in the State of Montana. The ROFR does not apply to trade sales and spot sales in the ordinary course of business or forward sales, in each case, for which no upfront payment is received by the Company.

Preferred Stock:

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

42

NOTE 3—MINING PROPERTIES:

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

	December 31, 2007		December 31, 2006		December 31, 2005
Montanore	$	-0-	$	278,519	$	278,519
Advance		-0-		2,139		2,139
Iroquois		-0-		223,834		223,834
	$	-0-	$	504,492	$	504,492

Montanore:

        The Montanore property is located in northwestern Montana and includes 18 mining claims covering 355 acres plus one 5-acre patented mill site. In August 2002, the Company acquired a controlling interest in the Montanore silver and copper deposit in Sanders County, Montana. The Company received a quitclaim deed from Noranda Mineral Corp. (Noranda) when Noranda elected to withdraw from the project. The mineral rights acquired by the Company are subject to a $0.20 per ton royalty, and a 5% net profits royalty which would commence after the operator has recovered all of its exploration and development costs. In December 2002, the Company received a quitclaim deed to all intellectual property connected with studies that Noranda carried out on the project.

        During 2007, the Company determined that the carrying value of this property should be written off due to the fact that a significant portion of the balance represented exploration costs inappropriately capitalized in prior years.

Advance and Iroquois:

        The Advance property consists of 720 acres of patented mineral rights. Although the Company does not own the overlying surface rights to its patented mineral rights, it does have right of access to explore and mine. The Iroquois property consists of 64 acres of patented mineral and surface rights and 15 unpatented mining claims containing 300 acres.

        During 2007, the Company evaluated the carrying values of these properties and determined to record an impairment adjustment of $225,973 based on its assessment of the likely commercial value of the future cash flows from the properties.

NOTE 4—CONSTRUCTION IN PROGRESS:

        The Company is in the process of constructing a water treatment plant at the proposed Montanore mine site in Libby, Montana. This project was substantially complete as of December 31, 2007 with approximately $1,338,000 included in construction in progress as of December 31, 2007.

        Construction has also begun on the underground electrical, pumping, and ventilation systems at the Libby adit at the Montanore project. The anticipated cost of these projects is expected to total $2,517,000 with approximately $1,492,000 included in construction in progress as of December 31, 2007.

        Also included in construction in progress as of December 31, 2007 are $215,000 and $47,000 in costs associated with the construction of a lined waste repository and storage facilities, respectively, at the Montanore mine site. Estimated total cost of these projects is $217,000 and $87,500, respectively.

43

NOTE 5—INVESTMENTS:

        The Company owns a $115,684 certificate of deposit which matures in September 2008 and has an interest rate of 3.64%. The Company also owns a $1,124,055 certificate of deposit which is pledged as security for a Letter of Credit to the Montana Department of Environmental Quality for the reclamation guarantee for the Montanore expansion evaluation program. This certificate has a maturity date of January 3, 2008 and automatically renews annually. It currently earns interest at a rate of 5.28%. The Company owns six $226,923 certificates of deposit for a total of $1,361,537. These investments mature in 2009 and earn interest at rates of 4.21%.

        The Company owns 45,000 free-trading shares of Bitterroot Resources, Ltd. (BTT), a public Canadian corporation traded on the Toronto Venture Exchange. The shares are held as "available for sale." This investment is being recorded at fair market value with a corresponding adjustment to stockholders' equity. The shares had a market value of $15,484, $28,213, and $15,057 at December 31, 2007, 2006, and 2005, respectively. The Company also owns 196,000 free-trading shares of Pancontinental Uranium Corporation (previously Centram Exploration Ltd.), a public Canadian corporation traded on the Toronto Venture Exchange. The shares are held as "available for sale." The shares were received in year 2002 in exchange for administrative services provided by the Company. The 196,000 free-trading shares had a market value of $117,032, $49,631, and $10,089 at December 31, 2007, 2006, and 2005, respectively.

NOTE 6—STOCK OPTIONS:

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

        Under both 2003 Stock Option Plans, the option exercise price may not be less than 100% of the fair market value per share on the date of grant. Stock options are exercisable within ten years from the date of the grant of the option. Vesting of the options granted under both plans is at the discretion of the Board of Directors.

        In November 2007, the Board of Directors adopted, subject to shareholder approval, the 2007 Equity Incentive Plan (the "2007 Plan"), which provides for the issuance of both qualified and nonqualified stock options and restricted shares to directors, employees and consultants of the Company. Up to 3,000,000 shares of the Company's authorized but unissued common stock are available for issuance under the 2007 Plan. On December 17, 2007, the Company issued 750,000 stock options under the 2007 Plan to directors and officers, subject to shareholder approval. The options had an exercise price of $2.99 per share, representing the share price at the close of trading on December 17, 2007, with 50% of the options vesting on June 1, 2008 and 50% vesting on June 1, 2009.

        The Company has a policy of re-pricing stock options when the market price of the stock is $1.00 below the exercise price of the outstanding option. The newly issued option has the same vesting schedule and expiration date as the option that is cancelled. During 2007, the Company cancelled and reissued 1,670,000 stock options held by 12 employees, including officers and directors. As a result of those actions, the Company recognized additional compensation expense of $462,527 for the year ended December 31, 2007. On May 16, 2007, 505,000 options having an exercise price of $5.01 per share were

44

NOTE 6—STOCK OPTIONS: (Continued)

cancelled and replaced by options having an exercise price of $3.90 per share, the closing price of the Company's common stock on May 16, 2007. On July 6, 2007, 505,000 options with exercise prices of $4.34 and $4.65 per share were cancelled and an equal number of options were issued having an exercise price of $3.33 per share, the closing price of the Company's stock on July 6, 2007. On August 16, 2007, 660,000 options having exercise prices ranging from $3.90 to $3.95 per share were cancelled and replaced by options having an exercise price of $2.82 per share, the closing price of the Company's common stock on August 16, 2007.

        A summary of the option activity under the Plans as of December 31, 2007, and changes during the year then ended, is presented below:

	Number of Options		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1, 2006	2,199,000		$	3.70
Granted	411,000		$	3.13
Forfeited or expired	(474,000	)	$	3.81
Outstanding at December 31, 2007	2,136,000		$	2.68	2.32	$	3,097,710
Exercisable at December 31, 2007	1,846,000		$	2.62	1.81	$	2,268,210

        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 years presented is based on the historical volatility of the Company's common stock 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.

	Years Ended December 31,
	2007		2006		2005
Weighted average risk-free interest rate	3.19	%	4.67	%	3.56	%
Weighted average volatility	56.39	%	59.02	%	70.48	%
Expected dividend yield	—		—		—
Weighted average expected life (in years)	2.00		2.00		2.00

        The weighted average grant-date fair value of options granted during the years 2007, 2006, and 2005 was $1.00, $1.78, and $1.94, respectively. There were no options exercised during the year ended December 31, 2007. The total intrinsic value of the options exercised during the years ended December 31, 2006 and 2005, was $1,318,609 and $986,748, respectively.

45

NOTE 6—STOCK OPTIONS: (Continued)

        A summary of the status of the Company's nonvested options as of December 31, 2007, and changes during the year then ended, is presented below:

	Number of Options		Weighted-Average Grant-Date Fair Value
Nonvested at January 1, 2006	320,000		$	1.74
Granted	940,000		$	1.14
Vested	(110,000	)	$	1.36
Forfeited	(110,000	)	$	1.65
Nonvested at December 31, 2007	1,040,000		$	1.04

        As of December 31, 2007, there was $995,570 of unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plans. That cost is expected to be recognized over a weighted-average period of one year. The total fair value of shares vested during the years ended December 31, 2007, 2006, and 2005 was $149,200, $89,000, and $-0-, respectively.

        During 2007, the Company cancelled and reissued 360,000 nonvested stock options held by 7 employees, including officers and directors, as a result of the Company's policy of re-pricing stock options when the market price of the stock is $1.00 below the exercise price of the outstanding option. As a result, the Company recognized $42,900 of compensation expense for the year ended December 31, 2007.

        Total compensation costs recognized for stock-based employee compensation awards was $795,332, $899,260, and $443,780 for the years ended December 31, 2007, 2006, and 2005, respectively. Total costs recognized for stock-based compensation awards for services performed by outside parties was $148,188, $38,635, and $560,569 for the years ended December 31, 2007, 2006, and 2005, respectively. Cash received from options exercised under all share-based payment arrangements for the years ended December 31, 2007, 2006, and 2005 was $-0-, $879,250, and $39,500, respectively.

NOTE 7—CONCENTRATION OF CREDIT RISK:

        The Company maintains its cash and cash equivalents in two financial institutions. Balances are insured by the Federal Deposit Insurance Corporation up to $100,000.

NOTE 8—DEFERRED INCOME TAX:

        At December 31, 2007, 2006, and 2005, the Company had deferred tax assets that were fully reserved by valuation allowances. Following are the components of such assets and allowances:

				Years Ended December 31,
				2007		2006		2005
Deferred tax assets arising from:
	Net operating loss carryforwards			$	3,018,000	$	1,770,000	$	959,000
	Stock option compensation				752,000		610,000		460,000
	Accrued severance compensation				—		—		2,000
					3,770,000		2,380,000		1,421,000
		Less valuation allowance			3,770,000		2,380,000		1,421,000
			Net deferred tax assets	$	—	$	—	$	—

46

NOTE 8—DEFERRED INCOME TAX: (Continued)

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

        At December 31, 2007, the Company had federal tax-basis net operating loss carryforwards totaling approximately $19,172,000 which will expire in various amounts from 2008 through 2027.

NOTE 9—BUSINESS COMBINATION:

        On May 31, 2006, Noranda Finance Inc., as transferor, the Company and Newhi, Inc., a wholly-owned subsidiary of the Company, as transferee, executed a stock transfer agreement pursuant to which Noranda Finance Inc. transferred to Newhi, Inc. all the issued and outstanding shares of capital stock of its subsidiaries, Noranda minerals Corp. and Normin Corp. Noranda Minerals Corp. and Normin Corp. hold certain licenses and permits relating to the Montanore Project, including the Montana State hard Rock Permit #00150 and MPDES permit MT-00320279, which stayed in place following the transfer. No cash consideration was paid to the transferor in the transaction, but Newhi submitted a $30,000 cash bond to the Montana Department of Environmental Quality to replace the reclamation bond covering the Montanore Project that had previously been posted by the Noranda entities. In addition, the Company and the transferee agreed to indemnify the transferor for all past, present and future liabilities, including litigation, environmental and reclamation liabilities, relating to the transferred subsidiaries and their assets. As of the date of the acquisition, none of these were probable liabilities. Subsequent to the acquisition, the names of the acquired subsidiaries were changed to Montanore Mineral Corporation and Montmin Corporation, respectively.

        Because no cash was paid and no liquidated liabilities assumed in the transaction, the Company's balance sheet did not change to reflect the transaction, except that a $30,000 asset was included in "Prepaid expenses and deposits" to reflect the cash bond posted.

NOTE 10—SETTLEMENT AGREEMENT:

        On August 11, 2005, Mines Management was named as a co-defendant along with Noranda Minerals, Normin Corp. and Newhi, Inc. in a lawsuit filed by Montana Reserves Company (MRC) in the Superior Court of the State of Washington in Spokane County, Washington. The action sought damages in connection with the conveyance of the Montanore property from Noranda to Newhi, and challenged the computation of a net proceeds royalty payable to MRC pursuant to a Royalty Agreement between Noranda and MRC in respect to the Montanore property. On October 18, 2007, the Company agreed to purchase the net proceeds royalty from MRC for $500,000 cash, in consideration of the dismissal with prejudice of all claims. The settlement agreement was executed on November 6, 2007 and the settlement amount was included in administrative expenses on the Statement of Operations for the year ended December 31, 2007.

47

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

        None.

ITEM 9A.    CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

        We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the "Exchange Act") is recorded, processed, summarized and reported within the time period specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to the Company's management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required financial disclosure.

        The management of the Company, under the supervision and with the participation of the Company's Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the Company's disclosure controls and procedures, pursuant to Exchange Act Rules 13a-15(e) or 15d-15(e) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by this report.

Management's Report on Internal Control over Financial Reporting

        The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed 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 and includes those policies and procedures that:

•

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets,



•

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company, and



•

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        Management has assessed the effectiveness of its internal control over financial reporting as of December 31, 2007. In making its assessment of the effectiveness of internal control over financial reporting, management used the criteria described in "Internal Control—Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission.

48

        Based on its assessment using those criteria, management concluded that Mines Management maintained effective internal control over financial reporting as of December 31, 2007.

        Management's assessment of the effectiveness of Mines Management's internal control over financial reporting as of December 31, 2007, has been audited by LeMaster & Daniels LLP, our independent registered accounting firm, as stated in their report which appears herein.

Changes in Internal Control over Financial Reporting

        There was no change in the Company's internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 that occurred during the Company's last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

ITEM 9B.    OTHER INFORMATION

        None.

49

PART III

ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

        Reference is made to the information set forth under the captions "Election of Directors" and "Executive Officers" in our definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, which information is incorporated by reference to this Annual Report on Form 10K.

ITEM 11.    EXECUTIVE COMPENSATION

        Reference is made to the information set forth under the captions "Directors Compensation" and "Executive Compensation" in the proxy statement and is incorporated herein by reference to this Annual Report on Form 10K.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

        Reference is made to the information set forth under the captions "Security Ownership of Principal Shareholders and Management" in the proxy statement, which information is incorporated by reference in this Annual Report on Form 10K.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        Reference is made to the information set forth under the captions "Certain Transactions" in the proxy statement, which information is incorporated by reference in this Annual Report on Form 10K.

ITEM 14.    PRINCIPAL ACCOUNTING FEES AND SERVICES

        Reference is made to the information set forth under the captions "Audit Committee Report" in the proxy statement, which information is incorporated by reference in this Annual Report on Form 10K.

50

PART IV

ITEM 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

(a)

Documents filed as part of this report on Form 10-K or incorporated by reference:

(1)

Our consolidated financial statements on page 23 of this report.

(2)

Financial Statement Schedules (omitted because they are either not required, are not applicable, or the required information is disclosed in the notes to the financial statements or related notes).

(3)

The following exhibits are filed with this Annual Report on Form 10-K or incorporated by reference.

EXHIBITS

Exhibit Number	Description of Exhibits
3.1	Articles of Incorporation of Mines Management, Inc., as amended.(1)(2)
3.2	Bylaws of Mines Management, Inc.(3)
4.1	Specimen of Certificate of Common Stock, par value $0.001(4)
4.2	Securities Purchase Agreement dated October 21, 2005.(5)
4.3	Form of Warrant issued pursuant to the Securities Purchase Agreement.(5)
4.4	Registration Rights Agreement dated October 21, 2005.(5)
4.5	Warrant Agreement dated April 16, 2007 between Mines Management, Inc. and Computershare Shareholder Services, Inc. and Computershare Trust Company, N.A.(10)
4.6	Subscription Agreement dated November 2, 2007 between Mines Management, Inc. and Silver Wheaton Corp.(11)
4.7	Registration Rights Agreement dated November 2, 2007 between Mines Management, Inc. and Silver Wheaton Corp.(11)
4.8	Amendment No. 1 to Registration Rights Agreement dated March 12, 2008 between Mines Management, Inc. and Silver Wheaton Corp.
10.1	Right of First Refusal Agreement dated November 2, 2007 between Mines Management, Inc. and Silver Wheaton Corp.(11)
10.2	Employment Agreement dated August 7, 2007 between Mines Management, Inc. and Douglas Dobbs.(12)
10.3	Employment Agreement dated August 7, 2007 between Mines Management, Inc. and Glenn M. Dobbs.(12)
10.4	Employment Agreement dated August 7, 2007 between Mines Management, Inc. and James H. Moore.(12)
10.5	Mines Management, Inc., 1998 Stock Option Plan.(6)
10.6	Mines Management, Inc., 1998 Incentive Stock Option Plan.(6)
10.7	Mines Management, Inc., 2003 Stock Option Plan.(7)
10.8	Mines Management, Inc., 2003 Consultant Stock Compensation Plan.(7)

51

14	Code of Ethics.(9)
21	Subsidiaries of the Registrant.
23.1	Consent of Mine Development Associates, Inc.(8)
23.2	Consent of LeMaster & Daniels PLLC.
31.1	Certification of Chief Executive Officer of Periodic Report pursuant to Rule 13a-14(a) and Rule 15d-14(a)(Section 302 of the Sarbanes-Oxley Act of 2002).
31.2	Certification of Chief Financial Officer of Periodic Report pursuant to Rule 13a-14(a) and Rule 15d-14(a)(Section 302 of the Sarbanes-Oxley Act of 2002).
32.1	Certificate of Principal Executive Officer pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002).
32.2	Certificate of Principal Financial Officer pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002).

(1)

Incorporated by reference to Form 10SB12G filed November 12, 1998.

(2)

Incorporated by reference to Form 10-Q filed August 12, 2005.

(3)

Incorporated by reference to Form 10SB12G filed November 12, 1998.

(4)

Incorporated by reference to Form S-3 filed June 12, 2006.

(5)

Incorporated by reference to Form 8-K filed October 24, 2005.

(6)

Incorporated by reference to Form S-8 filed April 24, 2003.

(7)

Incorporated by reference to Form S-8 filed June 10, 2005.

(8)

Incorporated by reference to Form 10-K filed March 12, 2007.

(9)

Incorporated by reference to Form 10-KSB filed March 1, 2004.

(10)

Incorporated by reference to Form 8-K filed April 20, 2007.

(11)

Incorporated by reference to Form 10-Q filed November 8, 2007.

(12)

Incorporated by reference to Form 10-Q filed August 9, 2007.

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SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed March 14, 2008 on its behalf by the undersigned, thereunto duly authorized.

MINES MANAGEMENT, INC. Registrant
By:	/s/  GLENN M. DOBBS By: Glenn M. Dobbs President and Chief Executive Officer

        Pursuant to the requirements of the Securities Act of 1934, this Report has been signed by the following persons on behalf of the Registrant, in the capacities and on the dates indicated.

Signature	Title	Date
/s/  GLENN M. DOBBS Glenn M. Dobbs	President, Chief Executive Officer and Director (Principal Executive Officer)	March 14, 2008
/s/  ROY G. FRANKLIN Roy G. Franklin	Director	March 14, 2008
/s/  ROBERT L. RUSSELL Robert L. Russell	Director	March 14, 2008
/s/  JERRY POGUE Jerry Pogue	Director	March 14, 2008
/s/  RUSSELL C. BABCOCK Russell C. Babcock	Director	March 14, 2008
/s/  JAMES H. MOORE James H. Moore	Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)	March 14, 2008

53

EXHIBIT INDEX

Exhibit Number	Description of Exhibits
3.1	Articles of Incorporation of Mines Management, Inc., as amended.(1)(2)
3.2	Bylaws of Mines Management, Inc.(3)
4.1	Specimen of Certificate of Common Stock, par value $0.001(4)
4.2	Securities Purchase Agreement dated October 21, 2005.(5)
4.3	Form of Warrant issued pursuant to the Securities Purchase Agreement.(5)
4.4	Registration Rights Agreement dated October 21, 2005.(5)
4.5	Warrant Agreement dated April 16, 2007 between Mines Management, Inc. and Computershare Shareholder Services, Inc. and Computershare Trust Company, N.A.(10)
4.6	Subscription Agreement dated November 2, 2007 between Mines Management, Inc. and Silver Wheaton Corp.(11)
4.7	Registration Rights Agreement dated November 2, 2007 between Mines Management, Inc. and Silver Wheaton Corp.(11)
4.8	Amendment No. 1 to Registration Rights Agreement dated March 12, 2008 between Mines Management, Inc. and Silver Wheaton Corp.
10.1	Right of First Refusal Agreement dated November 2, 2007 between Mines Management, Inc. and Silver Wheaton Corp.(11)
10.2	Employment Agreement dated August 7, 2007 between Mines Management, Inc. and Douglas Dobbs.(12)
10.3	Employment Agreement dated August 7, 2007 between Mines Management, Inc. and Glenn M. Dobbs.(12)
10.4	Employment Agreement dated August 7, 2007 between Mines Management, Inc. and James H. Moore.(12)
10.5	Mines Management, Inc., 1998 Stock Option Plan.(6)
10.6	Mines Management, Inc., 1998 Incentive Stock Option Plan.(6)
10.7	Mines Management, Inc., 2003 Stock Option Plan.(7)
10.8	Mines Management, Inc., 2003 Consultant Stock Compensation Plan.(7)
14	Code of Ethics.(9)
21	Subsidiaries of the Registrant.
23.1	Consent of Mine Development Associates, Inc.(8)
23.2	Consent of LeMaster & Daniels PLLC.
31.1	Certification of Chief Executive Officer of Periodic Report pursuant to Rule 13a-14(a) and Rule 15d-14(a)(Section 302 of the Sarbanes-Oxley Act of 2002).
31.2	Certification of Chief Financial Officer of Periodic Report pursuant to Rule 13a-14(a) and Rule 15d-14(a)(Section 302 of the Sarbanes-Oxley Act of 2002).
32.1	Certificate of Principal Executive Officer pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002).

32.2
Certificate of Principal Financial Officer pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002).

(1)

Incorporated by reference to Form 10SB12G filed November 12, 1998.

(2)

Incorporated by reference to Form 10-Q filed August 12, 2005.

(3)

Incorporated by reference to Form 10SB12G filed November 12, 1998.

(4)

Incorporated by reference to Form S-3 filed June 12, 2006.

(5)

Incorporated by reference to Form 8-K filed October 24, 2005.

(6)

Incorporated by reference to Form S-8 filed April 24, 2003.

(7)

Incorporated by reference to Form S-8 filed June 10, 2005.

(8)

Incorporated by reference to Form 10-K filed March 12, 2007.

(9)

Incorporated by reference to Form 10-KSB filed March 1, 2004.

(10)

Incorporated by reference to Form 8-K filed April 20, 2007.

(11)

Incorporated by reference to Form 10-Q filed November 8, 2007.

(12)

Incorporated by reference to Form 10-Q filed August 9, 2007.

EX-4.8

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Exhibit 4.8

AMENDMENT NO. 1 TO REGISTRATION RIGHTS AGREEMENT

        The first sentence of Section 2.1(a) of the Registration Rights Agreement dated November 2, 2007 (the "Agreement"), by and between Mines Management, Inc. (the "Company") and Silver Wheaton Corp. will be amended to read as follows:

        (a)   Registration. The Company shall prepare and file with the Commission as soon as practicable but in any event within forty-five (45) days after the Closing Date (the "Filing Deadline") and use its commercially reasonable efforts to have declared effective as soon as practicable thereafter (but in any event no later than 11:59 p.m. on March 31, 2008 ("Effectiveness Deadline")), a registration statement on Form S-3 (or, if the Company is not then eligible to use Form S-3, another appropriate form) providing for the resale by the Holders of all of the Registrable Securities (the "Shelf Registration Statement").

        Except as modified herein, the Agreement shall remain in full force and effect.

AGREED TO AND ACCEPTED THIS 12th DAY OF MARCH, 2008		AGREED TO AND ACCEPTED THIS 12th DAY OF MARCH, 2008
Silver Wheaton Corp.		Mines Management, Inc.
/s/  NOLAN WATSON		/s/  JAMES H. MOORE
By:	Nolan Watson Chief Financial Officer	By:	James H. Moore Chief Financial Officer

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AMENDMENT NO. 1 TO REGISTRATION RIGHTS AGREEMENT

EX-21

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Exhibit 21

SUBSIDIARIES OF THE REGISTRANT

Newhi, Inc. (WA)

Montanore Mineral Corporation (DE)
Montanore Corporation (DE)

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SUBSIDIARIES OF THE REGISTRANT

EX-23.2

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Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

        We consent to the reference to our firm under the caption "Experts" in the Registration Statements on Forms S-8 (File Nos. 333-125701 and 333-104724) and Forms S-3 (File Nos. 333-129784, 333-114258, 333-134992 and 333-148069) of Mines Management, Inc. and to the incorporation by reference therein of our report dated March 12, 2008 with respect to the consolidated financial statements of Mines Management, Inc. included in its Annual Report (Form 10-K) for the year ended December 31, 2007 as filed with the Securities and Exchange Commission.

LeMaster & Daniels PLLC

/s/  LEMASTER & DANIELS PLLC

March 12, 2008

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CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

EX-31.1

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EXHIBIT 31.1

CERTIFICATION

I, Glenn M. Dobbs, certify that:

1.

I have reviewed this Form 10-K of Mines Management, Inc. (the "registrant");



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)) 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 (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.



5.

The registrant's other certifying officer 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 the registrant's board of directors (or persons performing the equivalent functions):



(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: March 14, 2008

/s/  GLENN M. DOBBS Glenn M. Dobbs
Chief Executive Officer

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CERTIFICATION

EX-31.2

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EXHIBIT 31.2

CERTIFICATION

I, James H. Moore, certify that:

1

I have reviewed this Form 10-K of Mines Management, Inc. (the "registrant");



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)) 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 (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.



5.

The registrant's other certifying officer 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 the registrant's board of directors (or persons performing the equivalent functions):



(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: March 14, 2008

/s/  JAMES H. MOORE James H. Moore
Chief Financial Officer

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CERTIFICATION

EX-32.1

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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 Annual Report of Mines Management, Inc. (the "Company") on Form 10-K for the period ended December 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of 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.

Date: March 14, 2008

/s/  GLENN M. DOBBS Glenn M. Dobbs
Chief Executive Officer

        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.

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CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

EX-32.2

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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 Annual Report of Mines Management, Inc. (the "Company") on Form 10-K for the period ended December 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of 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.

Date: March 14, 2008

/s/  JAMES H. MOORE James H. Moore
Chief Financial Officer

        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.

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CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002