Mines Management posts Montanore PEA

Mines Management (mgt-t, mgn-x) has outlined an economic mine plan for its Montanore silver-copper project, but questions remain about getting the project permitted.
The large underground project is in the Cabinet Mountains wilderness area of northwestern Montana, which has complicated and extended the permitting process.
If approved, however, the 12,500-short-ton-per-day operation should produce an average of 6.4 million oz. silver and 51.1 million lbs. copper annually for 15 years.
Those production numbers work out to a pretax net present value (NPV) of US$485.6 million, with a 5% discount, and an internal rate of return (IRR) of 17.4%, both using a long-term US$15 per oz. silver price and a US$3.10 per lb. copper price. Factoring in mid-November 2010 metal prices, the pretax NPV jumps to US$1.3 billion and the IRR to 32.3%, with a 5% discount.
The preliminary economic assessment (PEA) estimates initial capital expenditures of US$552.3 million, which includes three declines and a conventional grinding and flotation facility. The company plans to use inclined room-and-pillar mining.
As of a 2005 estimate, the project hosts 81.5 million measured and indicated short tons grading 2.04 oz. silver per ton and 0.75% copper, for 166.3 million contained oz. silver and 1.2 billion lbs. copper, as well as an inferred resource of 35 million tons carrying 1.85 oz. silver per ton and 0.71% copper for a further 65.1 million oz. silver and 497.5 million lbs. copper.
The study estimates average grades during mining of 1.88 oz. silver per ton and 0.72% copper over the 15-year mine life, with higher grades in the first four years. Silver recoveries are estimated at 86% and copper recovery at 90%.
The company is working through a long permitting process that started in 2005, three years after acquiring the project from Noranda. The project sits within the Kootenai National Forest, with both the U.S. Forest Service and the U.S. Army Corps of Engineers needing to grant approval.
Concerns have been raised through the environmental review process over the location and impact of the tailings facility, the construction of a 230-kilovolt transmission line to the site, the effect on the local grizzly bear habitat, as well as the general impact of the project on the mountainous wilderness area.
This is the second time the project has gone through environmental permitting, with the project having actually been fully permitted in the early 1990s by Noranda. At that time, low metal prices apparently led to the company abandoning the project after spending US$116 million developing it and driving a 14,000-ft. exploration adit. When Mines Management secured the project the operating permit was transferred, but other permits including environmental approval had to be re-secured.
The project is subject to a 20¢ per ton production royalty.
Mines Management’s share price was unchanged on the day the PEA news was released at $3.31, with negligible trading. But a week later, its shares closed up at $4.01. The company has 23 million shares outstanding and a 52-week trading range of $1.56-$4.12.