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INVESTMENT IN MINERA SANTA CRUZ S.A. ("MSC") - SAN JOSE MINE
 3 Months Ended
Mar. 31, 2015
INVESTMENT IN MINERA SANTA CRUZ S.A. ("MSC") - SAN JOSE MINE  
INVESTMENT IN MINERA SANTA CRUZ S.A. ("MSC") - SAN JOSE MINE

 

NOTE 5   INVESTMENT IN MINERA SANTA CRUZ S.A. (“MSC”) — SAN JOSÉ MINE

 

The Company’s 49% attributable share of operations from its investment in MSC was income of $0.6 million for the three months ended March 31, 2015 (March 31, 2014 - $3.0 million). These amounts are inclusive of the amortization of the fair value increments arising from the purchase price allocation and related income tax recovery. Included in the income tax recovery is the impact of fluctuations in the exchange rate between the Argentine peso and the U.S. dollar on the peso-denominated deferred tax liability associated with the investment in MSC recorded as part of the acquisition of Minera Andes. As a devaluation of the Argentine peso relative to the U.S. dollar results in a recovery of deferred income taxes, the impact has been an increase to the Company’s income from its investment in MSC for the three months ended March 31, 2015.

 

During the three months ended March 31, 2015, the Company did not receive dividends from MSC, whereas a $3.9 million was received during the same period in 2014.

 

Changes in the Company’s investment in MSC for the three months ended March 31, 2015 and year ended December 31, 2014 are as follows:

 

 

 

Three months ended

 

Year ended

 

 

 

March 31, 2015

 

December 31, 2014

 

 

 

(in thousands)

 

Investment in MSC, beginning balance

 

$
177,018

 

$
212,947

 

Attributable net income (loss) from MSC

 
604

 
(2,597

)

Amortization of fair value increments

 
(2,687

)
(13,190

)

Income tax recovery

 
2,412

 
10,503

 

Dividend distribution received

 

—

 
(9,483

)

Impairment of investment in MSC

 

—

 
(21,162

)

Investment in MSC, ending balance

 

$
177,347

 

$
177,018

 

 

A summary of the operating results from MSC for the three months ended March 31, 2015 and 2014, is as follows:

 

 

 

Three months ended March 31,

 

 

 

2015

 

2014

 

 

 

(in thousands)

 

Minera Santa Cruz S.A. (100%)

 

 

 

 

 

Net sales

 

$
45,891

 

$
56,889

 

Production costs applicable to sales

 
(36,863

)
(39,637

)

Net income

 
1,232

 
6,182

 

 

 

 

 

 

 

Portion attributable to McEwen Mining Inc. (49%)

 

 

 

 

 

Net income on investment in MSC

 

$
604

 

$
3,029

 

Amortization of fair value increments

 
(2,687

)
(2,701

)

Income tax recovery

 
2,412

 
6,701

 

Income from investment in MSC, net of amortization

 

$
329

 

$
7,029

 

 

As at March 31, 2015, MSC had current assets of $106.3 million, total assets of $525.8 million, current liabilities of $51.9 million and total liabilities of $163.8 million on an unaudited basis. These balances include the adjustments to fair value and amortization of the fair value increments arising from the purchase price allocation, net of impairment charges recorded in the second quarter of 2013 and fourth quarter of 2014. Excluding the fair value increments from the purchase price allocation, net of impairment charges, MSC had current assets of $105 million, total assets of $302.1 million, current liabilities of $55.4 million, and total liabilities of $92 million as at March 31, 2015.