Mines Management reaches milestone at Montanore

It’s taken more than a decade, but Mines Management (TSX: MGT; NYSE-MKT: MGN) could be on the brink of pushing its Montanore project in northwestern Montana past the permitting finishing line.

The U.S. Forest Service recently issued an environmental impact statement (EIS) for the silver-copper deposit, and is issuing a draft record of decision (ROD) showing its intent to authorize the project, Mines Management says.

With the publication of the EIS and draft ROD, the project enters its final phase of authorization involving approval from the federal government, which the company’s president, Douglas Dobbs, says could take 150 to 180 days, or sometime between July and December of this year. 

“There are never any guarantees in the mining industry, so I can’t say it’s  a certainty, but the Forest Service is saying there’s tentative approval pending the final ROD, so it’s an exciting time for the company,” Dobbs elaborates in an interview. 

The ironic twist to the Montanore story is that it had been fully permitted and was ready to go in 1993, when Mines Management and strategic partner Noranda were advancing the project under a lease agreement. 

But the tale actually started in 1987, when Mines Management bought into the project when it acquired Heidelberg Silver, a company that had been mining in the area since the 1920s, and had claims that overlapped the Montanore deposit when it was discovered and explored by U.S. Borax in the early 1980s.

Noranda bought into the project in 1988 and aggressively advanced Montanore, applying for exploration permits, which were granted, and by 1991 had burrowed 4,500 metres into the side of Shaw mountain.  

But construction ground to a halt in 1991 (falling short of its target by only 1,000 metres), with the fall in metal prices. Noranda nevertheless advanced permitting and engineering work, receiving all of the permits it needed to build and operate the mine in 1993. The project then sat dormant, and by the mid-1990s, metal prices had fallen far enough that Noranda started reclamation activities on the site.

“They plugged the portal into the decline, removed all of the infrastructure and regraded the site back to being a large, grassy meadow,” Dobbs says. “They had lost hope in a recovery of metal prices, and didn’t see the need to go back in.”

At the time, Dobbs says, copper was trading at 75¢ per lb. and silver at US$4 to US$5 per oz.

By the time Noranda deeded title to the deposit to Mines Management in August 2002, Noranda had spent US$100 million on Montanore, estimates Dobbs, who joined the junior late that year. 

“It was the bottom of the metals market when they let it go, and little did we know that metal prices were going to go back up,” he says. “Then silver hit US$15 per oz. in 2007–08.” 

But delays began early on, according to Dobbs. When Mines Management received title to the patented mineral claims that controlled the deposit, it did not get access to the project itself for another three years. “We didn’t get the surface rights, which included the portal, until 2006,” Dobbs recalls. “So it took us three additional years to negotiate that with Noranda.”

Mines Management then started excavating the portal site; reinstalling the infrastructure that Noranda had dismantled; dewatering and rehabilitating the decline; extending the tunnel; and conducting an underground drill program.

That work — authorized by a valid operating permit Mines Management inherited from Noranda — was terminated in 2009, however, when the U.S. Forest Service ordered the company to postpone the activities until approval for the entire project was granted. 

“It’s been quite a journey over the last thirteen years,” Dobbs says. “I think there were times when we questioned the wisdom or desirability of continuing, but it’s such a big project and it had already been approved before, that it really made sense to continue … there were enough positive elements of this project that were definitely worthwhile continuing on.”

Between 2005, when it first submitted its EIS, until today, Mines Management has spent US$75–80 million, of which US$40 million was spent on mine-site development, including a brand-new water treatment plant, and $30 million on permitting.

A preliminary economic assessment completed in 2011 outlined a 15-year mine life, but Dobbs points out that the deposit remains open in three directions for growth and that the resource estimate only includes two of the three mineralized zones found on the property so far.

Measured resources are 4 million tons grading 1.85 oz. per ton and 0.7% copper, and indicated resources measure 77.5 million tons averaging 2.05 oz. silver per ton and 0.8% copper. Inferred resources add 35.08 million tons of 1.85 oz. silver per ton and 0.7% copper.

As soon as it receives federal approval, the next step is to move forward with a final feasibility study, which Dobbs estimates could take two years.

Dobbs says the attitude towards mining in the state has changed, and points to recent moves by major companies to develop projects there.

In late March, Hecla Mining (NYSE: HL) announced that it is acquiring Revett Mining (TSX: RVM; NYSE-MKT: RVM) to advance permitting of the junior’s Rock Creek project, 2 km from Montanore.

And in February, Kennecott Exploration, a subsidiary of Rio Tinto, received funding to resume exploration drilling at a project outside of Potomac.

In other developments, Tintina Resources (TSXV:TAU; US-OTC: TINTF) announced in March that it is starting geotechnical drilling at the company’s flagship Black Butte copper project in central Montana.

“The U.S. Forest Service is really changing its tune,” Dobbs says. “Sentiment for mining in Montana has really changed, and is reflected in some of these big companies stepping up and making big investments in the state.”