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FAIR VALUE ACCOUNTING | 12 Months Ended
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Dec. 31, 2014
FAIR VALUE ACCOUNTING |
FAIR VALUE ACCOUNTING | NOTE 17 FAIR VALUE ACCOUNTING Assets and liabilities measured at fair value on a recurring basis The following tables set forth the fair value of the Company's assets and liabilities measured at fair value on a recurring basis (at least annually) by level within the fair value hierarchy as at December 31, 2014 and 2013. As required by accounting guidance, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
|  | 2014 |
|  | Total |  | Level 1 |  | Level 2 |  | Level 3 |
|  | (in thousands) |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |
Investments |  | $ | 1,082 |  | $ | 1,082 |  | $ | — |  | $ | — |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
|  | $ | 1,082 |  | $ | 1,082 |  | $ | — |  | $ | — |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
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Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |
Portion of accounts payable and accrued liabilities recorded at fair value |  | $ | 355 |  | $ | 355 |  | $ | — |  | $ | — |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
|  | $ | 355 |  | $ | 355 |  | $ | — |  | $ | — |
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|  | 2013 |
|  | Total |  | Level 1 |  | Level 2 |  | Level 3 |
|  | (in thousands) |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |
Investments |  | $ | 2 |  | $ | 2 |  | $ | — |  | $ | — |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
|  | $ | 2 |  | $ | 2 |  | $ | — |  | $ | — |
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Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |
Portion of accounts payable and accrued liabilities recorded at fair value |  | $ | 177 |  | $ | 177 |  | $ | — |  | $ | — |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
|  | $ | 177 |  | $ | 177 |  | $ | — |  | $ | — |
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The Company's investments are marketable equity securities which are exchange traded are valued using quoted market prices in active markets and as such are classified within Level 1 of the fair value hierarchy. The fair value of the investments is calculated as the quoted market price of the marketable equity security multiplied by the quantity of shares held by the Company. As at December 31, 2014, accounts payable included an accrual of $0.4 million (2013—$0.2 million) for the fair value of accounts payable that are required to be settled with approximately 319,640 shares of common stock (2013—90,300 shares of common stock), as discussed in Note 11, Stock Based Compensation—Shares Issued to Supplier for Mining Services. The fair value of these accounts payable is assumed to approximate the fair value of the underlying shares with which they will be settled. As the Company's stock is quoted on an active market, this liability is classified within Level 1 of the fair value hierarchy. The fair value of other financial assets and liabilities were assumed to approximate their carrying values due to their short-term nature and historically negligible credit losses. Assets and liabilities measured at fair value on a non-recurring basis As discussed in Note 6, Mineral Property Interests and Asset Retirement Obligations, and Note 7, Investment in Minera Santa Cruz S.A. ("MSC")—San José Mine, the Company recorded several impairment charges in the year ended December 31, 2014 and 2013. In the second and fourth quarter of 2014, the Company recorded an impairment charge of $120.4 million and $107.9 million, respectively, in relation to the Los Azules project. In both quarters, the estimated fair value of Los Azules was determined using an In-Situ Multiple based on the observed market value per pound of copper equivalent for recent comparable transactions, with a predominant weighting being given to a specific transaction which took place in the second quarter of 2014, as described in Note 6. In addition, in its impairment analysis for the fourth quarter of 2014, the Company applied a discount of 35% to the In-Situ Multiple, in order to reflect the decline in the observed market value of comparable transactions from June 2014 (date of the last impairment test) to December 31, 2014. Further, although McEwen owns 100% of Los Azules, a Back-In Right Option held by TNR existed on the Los Azules project as at June 30, 2014. This Back-In Right Option was subsequently replaced by a 0.4% NSR, as described in Note 10, Shareholders' Equity, as at December 31, 2014. The fair value of the Back-In Right Option and NSR, estimated using the Market Approach, were deducted from the fair value of the Company's interest in Los Azules in the impairment analyses as at June 30, 2014 and December 31, 2014, respectively. An impairment loss of $21.2 million was also recorded with respect to the Company's investment in MSC. To estimate the fair value of the Company's investment in MSC, the Company used a combined approach, which uses a discounted cash flow model for the operating mine and a market approach for the fair value of exploration properties. Further, a discount of 20% was applied to the observable market value per acre for the Argentina exploration properties to reflect the country risk associated with early-stage exploration lands located in Argentina at the date of assessment. The Company also recorded impairment charges totaling $31.4 million, $25.4 million and $1.9 million relating to its Gold Bar, Tonkin and North Battle Mountain properties. The fair value of these properties was determined using the observed market value per acre and per ounce of gold equivalent mineralized material. Further, as a result of the Company's decision to focus on its core projects, the Company recorded impairments of its non-core Nevada and Argentina properties of $39.7 million and $27.0 million, respectively. In the second and fourth quarters of 2013, the Company recorded impairment charges related to certain of its mineral property interests in Nevada and Argentina, as well as its investment in MSC, as discussed in Notes 6 and 7, respectively. The estimated fair values of the Nevada and Argentina mineral property interests were determined using observed market values per acre in the respective regions. Further, a discount of 40% was applied to the observable market value per acre for the Argentina exploration properties to reflect the country risk associated with early-stage exploration lands located in Argentina at the date of impairment. The country risk, observed at the date of impairment, is based on the decline in observable enterprise values of publicly traded exploration companies located in Argentina compared to those of other publicly traded exploration companies located in South America. With respect to the Company's investment in MSC, the estimated fair value as at June 30, 2013 was determined using a discounted cash flow approach. As at December 31, 2013, the Company revised its approach to estimate the fair value of its investment in MSC to take into consideration the vend in of the Company's and Hochchilds' properties in the fourth quarter of 2013. The combined approach uses a discounted cash flow to determine the fair value of the operating mine and a market approach to determine the fair value of the exploration properties. The following table sets forth a summary of the quantitative and qualitative information related to the unobservable inputs used in the calculation of the Company's non-recurring Level 3 fair value measurements for the year ended December 31, 2014 and 2013.
|  | 2014
|  | Date of Fair Value Measurement |  | Valuation Technique |  | Unobservable Input |  | Range / Weighted Average
Los Azules Copper Project |  | December 31, 2014 |  | Market value per pound of copper equivalent mineralized material |  | Discount to reflect decline in observed market value of comparable transactions from June 2014 (date of the last impairment test) to December 31, 2014 |  | 35%
Investment in MSC |  | December 31, 2014 |  | Discounted cash flow for operating mine |  | Discount Rate Long Term Gold Price Long Term Silver Price Argentina Inflation Index United States Inflation Index |  | 10% $1,300 per ounce $20.50 per ounce 11.9% 2.1%
Investment in MSC |  | December 31, 2014 |  | Market value per acre for exploration properties |  | Discount to observed market value pre acre to reflect Argentina country risk |  | 20%
|  | 2013
|  | Date of Fair Value Measurement |  | Valuation Technique |  | Unobservable Input |  | Range / Weighted Average
Mineral property interests |  |  |  |  |  |  |  |  |
Telken Tenements Este Tenements Piramides Tenements Tobias Tenements Cerro Mojon Tenements La Merced Tenements Cabeza de Vaca Tenements El Trumai Tenements Martes 13 Tenements Celestina Tenements Other Santa Cruz Exploration Properties |  |  | June 30, 2013 |  | Market value per acre |  | Discount to observed market value pre acre to reflect Argentina country risk |  | 40%
Investment in MSC |  |  | June 30, 2013 |  | Discounted cash flow |  | Discount Rate Long Term Gold Price Long Term Silver Price Argentina Inflation Index United States Inflation Index |  | 10.0% $1,300 per ounce $22.75 per ounce 10.0% 1.7%
The following non financial assets and the Company's investment in MSC were measured at fair values on a non-recurring basis as part of the Company's impairment assessments during the year ended December 31, 2014 and 2013.
|  |  |  | 2014 |
|  | Date of Fair Value Measurement |
|  | Total |  | Level 1 |  | Level 2 |  | Level 3 |  | Total Loss |
|  |  |  | (in thousands) |
Mineral property interests |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Los Azules Copper Project |  | December 31, 2014 |  | $ | 202,889 |  | $ | — |  | $ | — |  | $ | 202,889 |  | $ | 228,301 |
Tonkin Complex |  | December 31, 2014 |  |  | 20,423 |  |  | — |  |  | — |  |  | 20,423 |  |  | 31,391 |
Gold Bar Complex |  | December 31, 2014 |  |  | 51,577 |  |  | — |  |  | — |  |  | 51,577 |  |  | 25,435 |
North Battle Mountain Complex |  | December 31, 2014 |  |  | 2,227 |  |  | — |  |  | — |  |  | 2,227 |  |  | 1,921 |
Investment in MSC |  | December 31, 2014 |  |  | 177,018 |  |  | — |  |  | — |  |  | 177,018 |  |  | 21,162 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
|  |  |  | $ | 454,134 |  | $ | — |  | $ | — |  | $ | 454,134 |  | $ | 308,210 |
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|  |  |  | 2013 |
|  | Date of Fair Value Measurement |
|  | Total |  | Level 1 |  | Level 2 |  | Level 3 |  | Total Loss |
|  |  |  | (in thousands) |
Mineral property interests |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Limo Complex |  | December 31, 2013 |  | $ | 23,438 |  | $ | — |  | $ | — |  | $ | 23,438 |  | $ | 19,450 |
Other United States Properties |  | December 31, 2013 |  |  | 9,610 |  |  | — |  |  | — |  |  | 9,610 |  |  | 9,497 |
Telken Tenements(1) |  | June 30, 2013 |  |  | 26,442 |  |  | — |  |  | — |  |  | 26,442 |  |  | 13,792 |
Este Tenements(1) |  | June 30, 2013 |  |  | 5,337 |  |  | — |  |  | — |  |  | 5,337 |  |  | 2,784 |
Piramides Tenements(1) |  | June 30, 2013 |  |  | 9,736 |  |  | — |  |  | — |  |  | 9,736 |  |  | 5,079 |
Tobias Tenements(1) |  | June 30, 2013 |  |  | 11,645 |  |  | — |  |  | — |  |  | 11,645 |  |  | 6,074 |
Investment in MSC |  | June 30, 2013 |  |  | 176,282 |  |  | — |  |  | — |  |  | 176,282 |  |  | 95,878 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
|  |  |  | $ | 262,490 |  | $ | — |  | $ | — |  | $ | 262,490 |  | $ | 152,554 |
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(1) | The fair values for the Telken, Este, Piramides and Tobias Tenements were determined prior to the transfer of these properties to MSC as part of the vend-in agreement between the Company and Hochschild, as described in Note 7, Investment in Minera Santa Cruz S.A. ("MSC")—San José Mine. In the fourth quarter of 2013, these tenements were transferred to MSC and were therefore not included in the Company's mineral property interests as at December 31, 2013.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=28364263&loc=d3e13537-108611 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=28364263&loc=d3e13433-108611 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=25499696&loc=d3e19207-110258 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=28364263&loc=d3e13504-108611 + Details
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