INVESTMENT IN MINERA SANTA CRUZ S.A. ("MSC") - SAN JOSE MINE

6 Months Ended

Jun. 30, 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 a loss of $2.7 million and $2.3 million for the three and six months ended June 30, 2015, respectively. This compares to a loss of $2.4 million and income of $4.6 million for the three and six months ended June 30, 2014, respectively. These amounts are net of the amortization of the fair value increments arising from the purchase price allocation and related income tax expense. 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 a reduction in the loss from its investment in MSC for the three and six months ended June 30, 2015.

During the three and six months ended June 30, 2015, the Company received $0.5 million in dividends from MSC, compared to $3.2 million and $7.1 million during the same period in 2014. The Company received an additional dividend payment of 8.1 million Argentine pesos in July 2014, equivalent to approximately $1.0 million based on foreign exchange rates at the date of the dividend receipt.

Changes in the Company’s investment in MSC for the six months ended June 30, 2015 and year ended December 31, 2014 are as follows:

	Six months ended			Year ended
	June 30, 2015			December 31, 2014
	(in thousands)
Investment in MSC, beginning balance	$	177,018		$	212,947
Attributable net (loss) income from MSC	(887		)	(2,597		)
Amortization of fair value increments	(6,088		)	(13,190		)
Income tax recovery	4,652			10,503
Dividends received	(548		)	(9,483		)
Impairment of investment in MSC	—			(21,162		)

Investment in MSC, ending balance	$	174,147		$	177,018

A summary of the operating results from MSC for the three and six months ended June 30, 2015 and 2014 is as follows:

	Three months ended June 30,						Six months ended June 30,
	2015			2014			2015			2014
	(in thousands)						(in thousands)
Minera Santa Cruz S.A. (100%)
Net sales	$	49,858		$	53,234		$	95,749		$	110,123
Production costs applicable to sales	(41,310		)	(41,847		)	(78,173		)	(81,484		)
Net (loss) income	(3,042		)	(390		)	(1,810		)	5,792

Portion attributable to McEwen Mining Inc. (49%)
Net (loss) income	$	(1,491	)	$	(191	)	$	(887	)	$	2,838
Amortization of fair value increments	(3,401		)	(3,429		)	(6,088		)	(6,130		)
Income tax recovery	2,240			1,182			4,652			7,883

(Loss) income on investment in MSC, net of amortization	$	(2,652	)	$	(2,438	)	$	(2,323	)	$	4,591

As at June 30, 2015, MSC had current assets of $97.9 million, total assets of $509.5 million, current liabilities of $46.0 million and total liabilities of $154.0 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 $96.5 million, total assets of $292.7 million, current liabilities of $48.4 million, and total liabilities of $85.7 million as at June 30, 2015.