NOTE 11 STOCK BASED COMPENSATION

Stock Options

The Company has a non-qualified stock option and stock grant plan, under which equity awards may be granted to employees, consultants, advisors, and directors (the "Plan"). The Plan is administered by the Board of Directors or committee, which determines the terms pursuant to which any option is granted. The Board of Directors or committee may delegate to certain officers the authority to grant awards to certain employees (other than such officers), consultants and advisors. The number of shares of common stock reserved for issuance thereunder is 13.5 million shares, with no more than 1 million shares subject to grants of options to an individual in a calendar year. The plan also provides for the grant of incentive options under Section 422 of the Internal Revenue Code (the "Code"), which provide potential tax benefits to the recipients compared to non-qualified options.

The following table summarizes information about stock options under the Plan outstanding at December 31, 2014:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Intrinsic Value
	(in thousands, except per share and year data)
Balance at December 31, 2011		3,870		$	3.24		7.3
Granted		300		$	5.80
Exercised		(445	)	$	1.84			$	596
Forfeited		(128	)	$	6.27
Expired		(36	)	$	7.96

Balance at December 31, 2012		3,561		$	3.47		6.6
Granted		1,728		$	2.26
Exercised		(48	)	$	1.97			$	47
Forfeited		(400	)	$	4.57

Balance at December 31, 2013		4,841		$	2.96		5.2
Granted		1,731		$	2.90
Exercised		(1,499	)	$	1.29			$	438
Forfeited		(422	)	$	4.39

Balance at December 31, 2014		4,650		$	3.35		4.4	$	11


Exercisable at December 31, 2014		1,954		$	4.12		4.5	$	11

Stock options have been granted to key employees, directors and others under the Plan. Options to purchase shares under the Plan were granted at or above market value as of the date of the grant. During the year ended December 31, 2014, the Company granted stock options to certain employees and directors for an aggregate of 1.7 million shares of common stock (2013—1.7 million, 2012—0.3 million) at a weighted average exercise price of $2.90 per share (2013—$2.26, 2012—$5.80). The options vest equally over a three-year period if the individual remains affiliated with the Company (subject to acceleration of vesting in certain events) and are exercisable for a period of 5 years (2012—5 years, 2012—10 years) from the date of issue.

The fair value of the options granted under the Plan was estimated at the date of grant, using the Black-Scholes Option Valuation Model, with the following weighted-average assumptions:

	2014	2013	2012
Risk-free interest rate	1.01%	0.50% to 0.86%	0.97%
Dividend yield	n/a	n/a	n/a
Volatility factor of the expected market price of common stock	70%	66% to 69%	75%
Weighted-average expected life of option	3.5 years	3.5 years	6.0 years
Weighted-average grant date fair value	$1.45	$1.02	$3.80

During the year ended December 31, 2014, the Company recorded stock option expense of $1.3 million (2013—$1.4 million, 2012—$3.4 million).

At December 31, 2014, there was $1.8 million (2013—$1.1 million) of unrecognized compensation expense related to 2.7 million (2013—2.0 million) unvested stock options outstanding. This cost is expected to be recognized over a weighted-average period of approximately 1.6 years (2013—1.4 years).

The following tables summarize information about stock options outstanding and exercisable at December 31, 2014 for the Company's Plan, the replacement options from the acquisition of Minera Andes in 2012, and the replacement options from the acquisition of Nevada Pacific Gold Ltd. in 2007. C$ refers to Canadian dollars.

McEwen Mining Inc.

	Options Outstanding						Options Exercisable
Range of Exercise Price	Number Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Number Exercisable		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
$0.75 - $2.25		1,515,334	$	2.18		3.2		676,665	$	2.09		2.9
$2.26 - $2.75		381,800	$	2.50		4.9		331,800	$	2.51		5.0
$2.76 - $3.25		1,706,500	$	2.90		4.6		—		n/a		n/a
$3.26 - $6.50		516,500	$	5.01		5.3		416,500	$	4.82		4.9
$6.51 - $8.31		529,500	$	7.16		6.0		529,500	$	7.16		6.0

Total		4,649,634	$	3.35		4.4		1,954,465	$	4.12		4.5

Nevada Pacific Gold Ltd.

	Options Outstanding						Options Exercisable
Range of Exercise Price	Number Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Number Exercisable		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
C$4.25 - C$4.50		40,500	C$	4.30		1.2		40,500	C$	4.30		1.2
C$4.51 - C$4.75		110,343	C$	4.74		1.9		110,343	C$	4.74		1.9
C$4.76 - C$5.00		2,300	C$	4.91		2.1		2,300	C$	4.91		2.1
C$5.01 - C$6.70		46,000	C$	6.70		1.4		46,000	C$	6.70		1.4

Total		199,143	C$	5.11		1.6		199,143	C$	5.11		1.6

Minera Andes Inc.

	Options Outstanding						Options Exercisable
Range of Exercise Price	Number Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Number Exercisable		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
C$2.00 - C$2.50		256,650	C$	2.27		0.4		256,650	C$	2.27		0.4
C$2.51 - C$3.00		45,000	C$	2.51		0.4		45,000	C$	2.51		0.4

Total		301,650	C$	2.30		0.4		301,650	C$	2.30		0.4

Shares issued to supplier for mining services

As detailed in Note 2, Summary of Significant Accounting Policies—Stock Based Compensation, the Company entered into an agreement with one of its mining contractors to pay for a portion of mining services with shares of common stock of the Company. As at December 31, 2014, the Company was required to issue a cumulative total of approximately 712,830 common shares, of which approximately 393,190 were issued in the year ended December 31, 2014. The fair value of the remaining 319,640 outstanding common shares of $0.4 million is included in accounts payable and accrued liabilities on the Consolidated Balance Sheet as at December 31, 2014. The agreement was subsequently terminated on February 1, 2015.