XML 53 R13.htm IDEA: XBRL DOCUMENT v2.4.0.6
INVESTMENT IN MINERA SANTA CRUZ S.A. ("MSC") - SAN JOSE MINE
 9 Months Ended
Sep. 30, 2012
INVESTMENT IN MINERA SANTA CRUZ S.A. ("MSC") - SAN JOSE MINE  
INVESTMENT IN MINERA SANTA CRUZ S.A. ("MSC") - SAN JOSE MINE

NOTE 7   INVESTMENT IN MINERA SANTA CRUZ S.A. (“MSC”) — SAN JOSÉ MINE

 

As discussed above in Note 1, the Company acquired a 49% interest in MSC, owner and operator of the San José Silver-Gold Mine in Santa Cruz, Argentina.  The Company’s share of earnings and losses from its investment in MSC is included in the consolidated statement of operations and comprehensive loss and includes 49% of MSC’s net income of $12.9 million and $18.5 million for the three months ended and period ended September 30, 2012, respectively.  Since the acquisition closed on January 24, 2012, MSC reported to the Company only its net income from January 25, 2012 to September 30, 2012.

 

Based on the preliminary purchase price allocation, the investment in MSC was originally attributed with an estimated fair value of $225.0 million during the first and second quarter of 2012.  During the third quarter of 2012, the preliminary purchase price allocation was adjusted and increased the estimated fair value of the investment in MSC to $261.2 million.  The adjustment affected the composition of the fair value allocation to MSC’s assets, resulting in a reduction in amortization reported for the first and second quarter of 2012.  Below is a reconciliation of the adjustment for the first and second quarter of 2012.

 

 

 

For three months ended

 

For three months ended

 

For the six months ended

 

 

 

March 31, 2012

 

June 30, 2012

 

June 30, 2012

 

 

 

(in thousands)

 

Amortization of fair value increments, as reported

 

$

2,804

 

$

1,803

 

$

4,607

 

Adjustment

 

(1,914

)

(544

)

(2,458

)

Amortization of fair value increments, as adjusted

 

$

890

 

$

1,259

 

$

2,149

 

 

 

 

 

 

 

 

 

Net loss, as reported

 

$

(19,202

)

$

(21,251

)

$

(40,453

)

Adjustment

 

1,914

 

544

 

2,458

 

Net loss, as adjusted

 

$

(17,288

)

$

(20,707

)

$

(37,995

)

 

The change in the Company’s investment in MSC during the period ended September 30, 2012 is summarized as follows:

 

 

 

As at

 

 

 

 

 

 

September 30, 2012

 

 

 

 

 

 

(in thousands)

 

 

 

 

Investment in MSC, beginning of period

 

$

—

 

 

 

 

Fair value of investment in MSC from acquisition of Minera Andes

 

261,186

 

 

 

 

Income from equity investment

 

18,505

 

 

 

 

Amortization of fair value increments

 

(3,746

)

 

 

 

Dividends

 

(4,765

)

 

 

 

Investment in MSC, end of period

 

$

271,180

 

 

 

 

 

 

 

Three Months Ended

 

Period Ended

 

 

 

September 30, 2012

 

September 30, 2012

 

 

 

(in thousands)

 

(in thousands)

 

Summary of MSC’s financial information from operations

 

 

 

 

 

Sales - MSC 100%

 

$

116,299

 

$

212,902

 

Net income - MSC 100%

 

26,343

 

37,765

 

McEwen Mining’s portion - 49%

 

12,908

 

18,505

 

Income on investment in MSC

 

$

12,908

 

$

18,505

 

Amortization of fair value increments

 

(1,597

)

(3,746

)

Income on investment in MSC, net of amortization

 

$

11,311

 

$

14,759

 

 

As at September 30, 2012, MSC had current assets of $151.7 million, total assets of $839.8 million, current liabilities of $99.4 million and total liabilities of $303.0 million.  These balances include the increase in fair value and amortization of the fair value increments arising from the preliminary purchase price allocation.

 

On July 30, 2012, the Company received a dividend from MSC of 9.8 million Argentine pesos ($2.2 million).

 

On September 28, 2012, MSC declared a dividend of 25.0 million Argentine pesos ($5.3 million), of which 12.25 million Argentine pesos ($2.6 million) was payable to the Company, and was subsequently received on October 4, 2012.