XML 61 R17.htm IDEA: XBRL DOCUMENT v2.4.0.6
SHAREHOLDERS' EQUITY
 12 Months Ended
Dec. 31, 2012
SHAREHOLDERS' EQUITY  
SHAREHOLDERS' EQUITY

NOTE 11 SHAREHOLDERS' EQUITY

Common Stock

        On October 29, 2012, the Company announced the launch of a transferrable rights offering backstopped by Mr. McEwen, the Company's Chairman and CEO, in which all existing holders of common stock of McEwen Mining and existing holders of Exchangeable Shares have the opportunity to participate on an equal and proportional basis in purchasing additional common stock or Exchangeable Shares at a price of $2.25 (or C$2.24) per share, which represented a 50% discount to the closing share price prior to the announcement. Shareholders would receive one right for each share of common stock or Exchangeable Share and 10 rights were needed to purchase an additional share of the same class. Mr. McEwen purchased 2.8 million shares of common stock and 3.9 million Exchangeable Shares for a total cost of $15.1 million. Upon completion of the rights offerings in December 2012, the Company issued an additional 19.6 million shares of common stock and 7.8 million Exchangeable Shares for proceeds of approximately $60.4 million, net of $1.2 million in expenses.

        On January 19, 2012, at a special meeting of shareholders, the Company's shareholders approved the Second Amended and Restated Articles of Incorporation which, among other things, increased the authorized capital of the Company to 500,000,000 shares of common stock, and added one share of Series B Special Voting Preferred Stock. The Series B Special Voting Preferred Stock facilitates the creation and issuance of the Exchangeable Shares.

        On February 24, 2011, the Company sold 17.25 million shares of common stock at a price of $6.50 per share (before the underwriters' commissions and expenses), which includes the exercise of the underwriters' over-allotment option of 2.25 million shares of common stock, in a public offering pursuant to a registration statement filed with U.S securities regulators and a prospectus filed with Canadian securities regulators. Gross proceeds from the 17.25 million shares sold in the offering totaled $112.1 million. Proceeds to the Company, net of commissions and expenses, were approximately $105.4 million.

        During 2012, the Company issued 1.5 million shares of common stock (2011—0.2 million) upon exercise of stock options under the Equity Incentive Plan as well as for exercise of stock options assumed by the Company in the acquisition of Minera Andes, at exercise prices ranging from $0.91 to $3.35 (2011—$0.91 to $5.86) per share for proceeds of $3.9 million (2011—$0.8 million). During 2012, the Company also issued 83,000 (2011—84,000) shares of common stock as part payment for mining concessions in Mexico.

        In November 2012, McEwen Mining and TNR Gold Corp. entered into a settlement agreement regarding outstanding litigation with respect to the Los Azules Copper Project. The Los Azules Copper Project is located in the high Andes within the San Juan region of Argentina. Minera Andes, a wholly-owned subsidiary of McEwen Mining, has held exploration and mineral exploitation rights to properties in the Los Azules region (the "Minera Andes Properties") since the late 1990s. In the early 2000s, the exploration and exploitation rights to the properties north of the Minera Andes Properties (the "Solitario Properties") were held by Solitario Argentina SA ("Solitario"), a wholly owned subsidiary of TNR Gold Corp., a junior mining company based in Vancouver, British Columbia, Canada (together "TNR"). Litigation related to the Los Azules Copper project was first commenced in 2008 with numerous amendments to the claims made in the intervening period. In this litigation, Solitario claimed, among other things, that: (i) the expenditure requirement of $1,000,000 had not been made, thereby seeking return of the Solitario Properties (or in the alternate damages); (ii) the 36-month time period that appeared in the Xstrata-Solitario Agreement was not the commercial intention of the parties and that this agreement should be rectified to remove the reference to the 36-month timeframe. As an alternative, TNR claimed that they could prior to April 23, 2010, waive the requirement that a feasibility study be completed and back-in to the Solitario Properties before a feasibility study was ever completed; and (iii) Escorpio IV was not included as part of the Xstrata-Solitario Agreement and therefore should not be transferred to Xstrata upon the exercise of the option. The parties to the litigation agreed that all claims and counterclaims would be discontinued or resolved. The material terms of the settlement included that: (i) TNR would receive 1,000,000 common shares of McEwen Mining; (ii) TNR would transfer the Escorpio IV claim to McEwen Mining; and (iii) the Xstrata-Solitario Agreement will be amended so TNR will retain a Back-in Right for up to 25% of the equity in the Solitario Properties. The Back-in Right is only exercisable after the completion of a feasibility study. To exercise, TNR must pay two times the expenses attributable to the back-in percentage (i.e. paying 2 × 25% all of the costs attributable to the Solitario Properties). Upon backing-in, TNR may elect to continue to participate in the project or be diluted down to a 0.6% NSR on Solitario Properties. As at December 31, 2012, the shares haven't been issued and as a result, the Company recorded a litigation settlement liability of $3.8 million, which was the fair value of the 1,000,000 shares on that date. Subsequent to the year end, these shares were issued to TNR.

Exchangeable Shares and 2012 Acquisition Related Transactions

        In connection with the acquisition of Minera Andes in January 2012 discussed in Note 3 above, the Company issued 127.3 million Exchangeable Shares. With the addition of 7.8 million Exchangable Shares issued relating to the rights offering completed in December 2012, the total Exchangable Shares issued during 2012 was 135.1 million. The exchangeable shares, by virtue of the redemption and exchange rights attached to them and the provisions of certain voting and support agreements, provide the holders with the economic and voting rights that are, as nearly as practicable, equivalent to those of a holder of shares of common stock of the Company.

        Accordingly, remaining Exchangeable Shares are included as part of the consolidated share capital of the Company. The voting rights associated with the exchangeable shares are exercised by a trustee as the owner of the one outstanding share of the Company's Series B Special Voting Preferred Stock ("Special Voting Share") pursuant to the provisions of a Voting and Exchange Trust Agreement. The Special Voting Share entitles the holder thereof to an aggregate number of votes equal to the number of Exchangeable Shares issued and outstanding from time to time and which are not owned by McEwen Mining or any subsidiary.

        Except as otherwise provided by law, the holder of the Special Voting Share and the holders of the Company's common stock vote together as one class on all matters submitted to a vote of shareholders. The holder of the Special Voting Share has no special voting rights, and its consent is not required, except to the extent it is entitled to vote with the holders of shares of common stock for taking any corporate action. Through December 31, 2012, approximately 51.8 million Exchangeable Shares had been converted into an equivalent amount of common stock of the Company. At December 31, 2012, total outstanding Exchangeable Shares not exchanged totaled 83.4 million.

        In connection with the acquisition of Minera Andes, the Company assumed stock options covering 1,735,650 shares of common stock. Following the exercise of 1,062,000 options and expiration of 48,000 during 2012, a total of 625,650 options remain exercisable at December 31, 2012.

Exchangeable Shares and 2007 Acquisitions Related Transactions

        On March 26, 2012, the Company announced that its subsidiary, US Gold Canadian Acquisition Corporation, had established a redemption date of May 30, 2012, in respect of all of its outstanding exchangeable shares relating to the acquisitions from 2007 ("2007-Exchangeable Shares"). As of May 30, 2012, 2.5 million of the remaining 2007-Exchangeable Shares were redeemed in exchange for the issuance of 2.5 million shares of common stock and there were nil outstanding as at December 31, 2012.

        In connection with the 2007 acquisitions, the Company assumed stock options covering 812,918 shares of common stock. Following the exercise of 383,825 options and expiration of 34,500 options from 2007 to 2012, a total of 394,593 options remain exercisable at December 31, 2012.