Mines Management president ‘elated’ with Montanore approval

VANCOUVER — After 11 years, Mines Management (TSX: MGT; NYSE-MKT: MGN) has finally scored a long-awaited approval from U.S. Federal and State agencies to develop its US$552.3-million Montanore silver-copper deposit in northwestern Montana.

The U.S. Forest Service and the Montana Department of Environmental Quality conditionally approved an operation of up to 18,143 tonnes per day, as outlined in the joint final environmental impact statement (EIS) announced in December.

“It’s taken a long time, but we’ve finally made it through,” Douglas Dobbs, president of Mines Management, tells The Northern Miner during a phone interview, noting that the decision was backed by four years of environmental analysis, two EIS drafts and at least three rounds of public comment.

“The agencies put it out to do excessive amounts of public input and comment just to make sure the project is as transparent as possible, and that nobody could ever charge them with subversion of the American public,” he says. “So it’s gone through a large amount of public review, and as a result we’ve made some major changes to the project.”

The most notable changes include switching locations of the mill site and tailings impoundment, along with a “couple of round turns” on the road and power line routes to help reduce any impact to the environment.

“We can’t say whether the changes will make major economic changes to the project, but they certainly streamline certain processes and reduce the impact to the environment, so in that respect we’re happy,” he adds, mentioning that with permitting in place, the company will pursue a bankable feasibility study over the next two years.

The feasibility work would build on a 2011 preliminary economic assessment (PEA), which envisaged an 11,339-tonne-per-day operation over an initial 15-year mine life, producing 6.4 million oz. silver and 51 million lb. copper per year.

Assuming a base-scenario of US$15 per oz. silver and US$2.50 per lb. copper, the project would have an 11.5% internal rate of return (IRR) and a US$228.7-million pre-tax net present (NPV) value.

“We believe that the next 24 months will give us the opportunity to go through the feasibility process and at the end of it, have a shovel-ready project perhaps at a time when the mineral markets are much more robust than they are today,” Dobbs says.

If silver and copper prices rise to US$18 per oz. and US$3.10 per lb., the pre-tax NPV for the project jumps to US$646.9 million, and the IRR doubles to 20.7%, according to the PEA report.

The study assumes 86.3% and 90% silver and copper recoveries, but notes that more metallurgical testing is needed to predict final concentrate grade for the project.

Mines Management isn’t the only aspiring miner in the district — just 2 km from the Montanore is Hecla Mining’s (NYSE: HL) Rock Creek deposit, where the miner is working through permitting process and advancing towards feasibility.

Rock Creek has inferred resources of 229 million oz. silver and 2.02 billion lb. copper, within 124.3 million tonnes of 51.9 grams silver and 0.7% copper.

Combined with Montanore, total undeveloped resources at both deposits top 460 million oz. silver and 4 billion lb. copper, making it one of the richest stratabound-hosted districts in the nation, according to a U.S. Geological Survey report.

Montanore has measured and indicated resources of 166.3 million oz. silver and 1.2 billion lb. copper within 73.9 million tonnes of 63.5 grams silver per tonne and 0.8% copper, using a 31.1-gram silver cut-off.

Inferred resources add another 65.1 million oz. silver and 497.5 million lb. copper, within 31.8 million tonnes of 57.5 grams silver and 0.7% copper.

The geological story behind Montana’s silver-copper deposits dates back to the Proterozoic — a time when chemically reactive sedimentary horizons found deep beneath the surface soaked up much of the metal circulating within migrating brines.

As time passed, the highly prospective north-trending belt and its silver-copper occurrences became exposed across thousands of square kilometres, from northwestern Montana to northern Idaho, and beyond into Canada.

In the U.S., the belt became known as the “Western Montana” copper belt. Similar in style and age to the world-class African copper belt, the belt hosts a class of deposits in and of itself, with equally as impressive footprints.

Dobbs explains that the 10.6-metre thick stratabound mineralization at Montanore skylights at surface, and extends down-dip to at least 3.7 km at a 15° to 30° angle, where it remains open in three directions.

Dobbs says that a large amount of infrastructure exists on the property — a legacy of Noranda Mines who had bought into the project in 1988, and burrowed 4,500 metres worth of decline into the deposit, before collapsing metal prices in the early 1990s forced the company to reclaim the site.

“We have 1,500 metres left to go before we get under the deposit and start the definition drilling, which will upgrade the resources into reserves and answer a lot of geotechnical questions,” he says. “One of the things the agencies are concerned about is whether underground mining could drain mountain lakes, so we want to demonstrate to them that the rock in the area doesn’t transmit much water.”

The feasibility study and underground development could cost the company anywhere between US$20 million and US$30 million to complete, Dobbs predicts, but now that permits are approved, he expects that discussions about project financing can reach “new levels.”

“We’ll look for strategic partners and investors, along with the possibility of a financing, so we’re really looking at all the alternatives that are open to us now that we’ve completed the project permitting,” he adds.

“We’re just elated, and the community couldn’t be more thrilled. It’s actually a county in Montana that has the highest unemployment rate, and they view the project as being a significant contributor of high-paying jobs for their future,” he continues. “We have a good relationship with the community and we’re gratified with the support they have given us, and patience in getting through this process.”