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	$	—	$	—


Liabilities:
Portion of accounts payable and accrued liabilities recorded at fair value	$	355	$	355	$	—	$	—

	$	355	$	355	$	—	$	—

	2013
	Total		Level 1		Level 2		Level 3
	(in thousands)
Assets:
Investments	$	2	$	2	$	—	$	—

	$	2	$	2	$	—	$	—


Liabilities:
Portion of accounts payable and accrued liabilities recorded at fair value	$	177	$	177	$	—	$	—

	$	177	$	177	$	—	$	—

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	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

		2013
	Date of Fair Value Measurement	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

(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.