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

9 Months Ended

Sep. 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 results of operations from its investment in MSC was a loss of $1.6 million and $4.0 million for the three and nine months ended September 30, 2015, respectively. This compares to a loss of $4.4 million and income of $0.2 million for the three and nine months ended September 30, 2014, respectively. These amounts include 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 a reduction in the loss from the Company’s investment in MSC for the three and nine months ended September 30, 2015.

During the three and nine months ended September 30, 2015, the Company received $nil and $0.5 million in dividends from MSC, compared to $2.4 million and $9.5 million during the same period in 2014.

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


	Nine months ended September 30, 2015		Year ended December 31, 2014
Investment in MSC, beginning of the year	$	177,018	$	212,947
Attributable net loss from MSC		(2,541)		(2,597)
Amortization of fair value increments		(7,705)		(13,190)
Income tax recovery		6,282		10,503
Dividend distribution received		(548)		(9,483)
Impairment of investment in MSC		—		(21,162)
Investment in MSC, end of the year	$	172,506	$	177,018

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

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


	Three months ended September 30,				Nine months ended September 30,
	2015		2014		2015		2014
Minera Santa Cruz S.A. (100%)
Net Sales	$	45,357	$	38,263	$	141,106	$	148,386
Production costs applicable to sales		(41,767)		(36,136)		(119,940)		(117,620)
Net (loss) income		(3,375)		(5,488)		(5,185)		304

Portion attributable to McEwen Mining Inc. (49%)
Net (loss) income	$	(1,654)	$	(2,689)	$	(2,541)	$	149
Amortization of fair value increments		(1,617)		(3,522)		(7,705)		(9,652)
Income tax recovery		1,630		1,770		6,282		9,653
(Loss) income from investment in MSC, net of amortization	$	(1,641)	$	(4,441)	$	(3,964)	$	150

As of September 30, 2015, MSC had current assets of $96.6 million, total assets of $503.1 million, current liabilities of $51.3 million and total liabilities of $151.1 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 $95.6 million, total assets of $289.7 million, current liabilities of $53.7 million, and total liabilities of $86.1 million as at September 30, 2015.