Mines Management, Inc. shareholders approved a $3.6 million financing Tuesday. By a 92 percent majority, shareholders approved a provision that a University of Montana finance professor called “risky.”

The agreement approves the July transaction of 4,000 shares of convertible preferred stock to Alpha Capital Anstalt. Those shares may be converted into common stock at a price of 78.66 cents per share. Preferred stock entitles an owner to a higher level of access to a company’s assets. Should Mines Management become insolvent, holders of preferred stock will be paid before holders of common stock.

According to Professor Keith Jacobs, the fact that the conversion price can be adjusted makes full ratchet anti-dilution financing risky. Should Mines Management issue another round of shares, Alpha’s conversion price would drop, expanding its proportion of ownership without costing Alpha another dollar beyond its initial investment. At the current maximum conversion price, Alpha could own slightly more than five million shares of common stock, equating to an ownership stake of about 15 percent.

“Approval of the proposals was an important measure to finalizing terms of the financing completed in July, which will greatly assist the company in completing the permitting process for the Montanore project as it prepares for resumption of underground and pre-development stage activities,” Mines Management CEO Glenn Dobbs said in a statement. “We are appreciative for all of the shareholders who voted and contributed to the successful shareholders’ meeting.”

Mines Management stock opened the day at 58 cents a share. The penny stock dropped to 48 cents a share when the market closed Thursday.

There is limited information about Alpha Capital Anstalt. The company is based in Liechtenstein, a small European country once renowned around the world for its banking secrecy laws.

The site of the Montanore project, overseen by Mines Management Inc., is estimated to contain more than 230 million ounces of silver and nearly 2 billion pounds of copper deposits.

Mines Management is involved in litigation in a state case concerning the legitimacy of claims on the Montanore Mines site held by a group of Idaho residents since the 1980s. Fourteen of those claims were sold this year to Optima Inc., a group that includes Brian Schweitzer, the former governor of Montana, and Frank Duval, the former president of Sterling Mining. Sterling Mining changed its name to Revett Silver in 2003. 

Optima and Mines Management are squaring off in a federal condemnation case. A judge has directed the two sides to enter into a compensation phase to determine a fair dollar value that Mines Management can pay Optima for the right of crossing their claims and accessing the adit, or underground tunnel, into the Montanore Mine.