Mines Management Inc., a U.S.-based silver mining company, said Monday its second-quarter loss grew as declining expenses were offset by less valuable derivatives.

The company lost $1.6 million, or 6 cents per share, in the three months ended in June, compared to a net loss in the year-earlier quarter of $1.2 million, or 5 cents per share.

The $400,000 increase in net loss in the second quarter of 2011 is attributable to a decrease of $700,000 in the gain recognized from the fair value of warrant derivatives.

This was partially offset by a reduction in operating expenses from the second quarter of 2010, principally a $300,000 decrease in consultant fees paid to Mine and Quarry Engineering for work on the preliminary economic assessment and the completion of the Grizzly Bear study during 2010.

Significant progress has been made to advance the Montanore Silver-Copper Project through the re-permitting process, said CEO Glenn Dobbs.

We anticipate completion of the Supplemental Draft Environmental Impact Study in the near term, and commencement of the final phase of permitting following shortly thereafter. We remain in excellent financial condition as we move closer to the completion of permitting of the Montanore Project, and look forward to commencement of the underground delineation drilling program.

Shares of Mines Management were up 1 cent to $1.81 in morning trading.