Haul truck at the Montanore silver-copper deposit in Montana

Haul truck at the Montanore silver-copper deposit in Montana

A low-profile junior company called Mines Management (MGT-T) recently announced approval for its Montana silver-copper mine project from the U.S. Forest Service and Montana environmental dept.

How they released the news hints at why they remain low-profile: it’s major material news, green-lighting a deposit that contains an estimated 230 million ounces of silver and more than 1.7 billion pounds of copper. But it was released after market close on Friday, Feb. 12. That was the Friday before a market holiday, to boot.

The stock shot up from .63 to .91 on the news, but has since drifted back to about 77 cents. Its YTD return is about 57%.

To be fair, the company is doing a live webinar for investors and analysts on Tuesday, Feb. 23 at 8 a.m. PST. Here’s the info on that.

Mines Management did a PEA in 2011 at prices of $15/oz Ag and $2.50/lb Cu that showed a NPV of $228.7M and IRR of 11.5% at a 5% discount rate. The 5% discount rate is made less objectionable by the presence of significant infrastructure on site, including a heavy equipment and an adit.

Gold’s poor cousin hasn’t been feeling the love lately from the golden boy. Silver used to offer powerful leverage to gold, both on the up and down side. But the relationship appears to have broken down – this year gold has risen 14% while silver is up only 10%.

That dampens interest in silver plays such as this one, but the copper endowment at Montanore is an important detail. The 230 million ounces of silver have an average grade of 56 g/t and the average copper grade is a respectable .74%.

And there remains much to be done for Mines Management. The adit must be extended another 1.3 km to the deposit and de-watered. It needs a water treatment circuit built and feasibility-stage work done, including metallurgy and final engineering and geotechnical work.

However, the project is fighting the US dollar since it competes with projects in Canada, for example, that benefit from King Dollar. There are also compelling advanced-stage copper projects in Montana, such as the Tintina Resources (TAU-V) high-grade Black Butte copper deposit.

So Montanore is probably marginal at current metals prices. But it’s one to watch if the tailwinds for gold and silver continue in 2016 and beyond.

There are also experienced miners in the region, a prolific silver-producing area with high unemployment. And some of those will come from the nearby shuttered Troy mine, which was operated by Revett Mining (which had Silver Wheaton and Trafigura as major shareholders).

That brings me to Hecla Mining (HL on the NYSE)‘s opportunistic acquisition of Revett Mining (formerly RVM) a year ago.

The acquisition meant the closure of Revett’s Troy mine, which was already on care and maintenance due to low metals prices and rockfall issues. But as Revett CEO John Shanahan pointed out in this article, the takeover also meant the best chance to develop Revett’s nearby Rock Creek deposit.

And Rock Creek was the real prize for Coeur d’Alene-based Hecla. The deposit (all Inferred) contains an estimated 228 million ounces of silver at average grades of 48 g/t Ag and more than 1 billion pounds of copper at average grades of .7%.

However, Rock Creek faced fierce opposition from environmentalists while Revett owned it, something that Hecla now inherits. Hecla is working on a feasibility study and plans an underground room-and-pillar operation.

The project is in the permitting stage, with the Draft Supplemental Environmental Impact Statement (SEIS) from the U.S. Forest Service expected for public comment this year. The final SEIS will form the basis of a revised record of decision — the final approval received last week by Mines Management on Montanore.

Hecla’s cost to pick up Rock Creek? About $US20 million in stock, for one of the largest undeveloped silver and copper deposits in North America.

Montanore fits that description as well, making Mines Management one to watch with precious metals prices in a strong uptrend to kick off 2016.

Mines Management (MGT-T)
P
rice: 0.77
Shares outstanding: 29.8 million
Market cap: $22.9 million

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