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BUSINESS ACQUISITION
 12 Months Ended
Dec. 31, 2014
BUSINESS ACQUISITION  
BUSINESS ACQUISITION

 

NOTE 3 BUSINESS ACQUISITION

        On January 24, 2012, the Company completed the acquisition of Minera Andes through a court-approved plan of arrangement under Alberta, Canada law (the "Arrangement"), under which Minera Andes, a Canadian company, became an indirect wholly-owned subsidiary of the Company.

        On the closing date of the Arrangement, holders of Minera Andes' common stock received a number of exchangeable shares of McEwen Mining—Minera Andes Acquisition Corp. ("Exchangeable Shares"), an indirect wholly-owned Canadian subsidiary of the Company, equal to the number of Minera Andes shares, multiplied by the exchange ratio of 0.45. In the aggregate, former Minera Andes shareholders received 127,331,498 Exchangeable Shares. After closing of the Arrangement, the name of the Company was changed to McEwen Mining Inc. The Company's common stock began trading on the NYSE and TSX under the symbol "MUX" and the Exchangeable Shares began trading on the TSX under the symbol "MAQ" on January 27, 2012.

        The Exchangeable Shares are exchangeable for the Company's common stock on a one-for-one basis. Option holders of Minera Andes received replacement options entitling them to receive, upon exercise, shares of the Company's common stock, reflecting the exchange ratio of 0.45 with the appropriate adjustment of the exercise price per share. The option life and vesting period of the replacement options did not change from the option life granted under the Minera Andes option plan. The estimated fair value of the vested portion of the replacement options of $3.2 million was included as part of the purchase price consideration at their fair values based on the Black-Scholes option pricing model.

        The acquisition was accounted for using the acquisition method in accordance with ASC Topic 805, Business Combinations, with the Company being identified as the acquirer. The measurement of the purchase consideration was based on the market price of the Company's common stock on January 24, 2012, which was $5.22 per share. The total purchase price, including the fair value of the options, amounted to $667.8 million. The total transaction costs incurred through December 31, 2012 by the Company was $5.4 million, of which $3.9 million was reported in the year ended December 31, 2011 in general and administrative expenses, and $1.5 million for the year ended December 31, 2012 in acquisition costs in the Consolidated Statements of Operations and Comprehensive Loss.

        The allocation of the purchase price, based on the estimated fair value of assets acquired and liabilities assumed on January 24, 2012, is summarized in the following table:

                                                                                                                                                                                    

 

 

 

 

 

 

(in thousands)

 

Purchase price:

 

 

 

 

Exchangeable shares of McEwen Mining-Minera Andes Acquisition Corp. 

 

$
664,671

 

Stock options of McEwen Mining Inc. 

 

 
3,175

 

​

​

​  

​  

​

 

 

$
667,846

 

​

​

​  

​  

​

​

​

​  

​  

​  

Net assets acquired:

 

 

 

 

Cash and cash equivalents

 

$
31,385

 

Short-term investments

 

 
4,952

 

Other current assets

 

 
9,828

 

Inventories

 

 
1,362

 

Mineral property interests

 

 
539,092

 

Investment in Minera Santa Cruz S.A. 

 

 
262,883

 

Equipment

 

 
1,647

 

Accounts payable

 

 
(5,323

)

Deferred income tax liability

 

 
(177,980

)

​

​

​  

​  

​

 

 

$
667,846

 

​

​

​  

​  

​

​

​

​  

​  

​  

 

        The fair value of mineral property interests exceeded the carrying value of the underlying assets for tax purposes by approximately $508.5 million. The resulting estimated deferred income tax liability originally associated with this temporary difference was approximately $178.0 million, which was included in the allocation of purchase price above.

        The purchase consideration was allocated to the fair value of assets acquired and liabilities assumed, based on an independent valuation report and management's best estimates.