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OPERATING SEGMENT REPORTING

9 Months Ended

Sep. 30, 2020

NOTE 3 OPERATING SEGMENT REPORTING

McEwen Mining Inc. is engaged in the exploration, development, production and sale of gold and silver and exploration for copper, with operations located in the United States, Canada, Mexico, and Argentina. The Company’s chief operating decisions maker (“CODM”) reviews the operating results, assesses performance and makes decisions about allocation of resources to these segments at the geographic region level or major mine/project where the economic characteristics of the individual mines or projects within a geographic region are not alike. As a result, these operating segments also represent the Company’s reportable segments. The Company’s business activities that are not considered operating segments are included in General and Administrative and other and are provided in this note for reconciliation purposes.

The CODM reviews segment income or loss, defined as gold and silver sales less production costs applicable to sales, depreciation and depletion, advanced projects and exploration costs for all segments except for the MSC segment, which is evaluated based on the attributable equity income or loss. Gold and silver sales and production costs applicable to sales for the reportable segments are reported net of intercompany transactions.

Production costs applicable to sales for the El Gallo project of $11.2 million for the nine months ended September 30, 2020 (same period in 2019 - $14.6 million) include $5.2 million of residual leaching spending in the period, net of $3.1 million capitalized in inventory (same period in 2019 - $5.7 million, net of $2.7 million capitalized in inventory) with the remainder representing costs recorded in the leach pad inventory balances in prior periods.

Capital expenditures include costs capitalized in mineral property interests and plant and equipment in the respective periods.

Significant information relating to the Company’s reportable operating segments is summarized in the tables below:

Three months ended September 30, 2020

USA

Canada

Mexico

MSC

Los Azules

Total

Revenue from gold and silver sales

13,042

10,352

4,001

—

27,395

Production costs applicable to sales

(10,791)

(8,874)

(3,861)

—

(23,526)

Depreciation and depletion

(2,099)

(2,404)

(67)

—

(4,570)

Gross profit (loss)

152

(926)

—

(701)

Advanced projects

(240)

(2,784)

(1,003)

—

(4,027)

Exploration

(2,395)

(1,189)

(427)

—

(412)

(4,423)

Income from investment in Minera Santa Cruz S.A.

—

2,582

—

2,582

Segment (loss) income

(2,483)

(4,899)

(1,357)

2,582

(412)

(6,569)

General and Administrative and other

(3,361)

Loss before income and mining taxes

(9,930)

Capital expenditures

106

488

—

594

Nine months ended September 30, 2020

USA

Canada

Mexico

MSC

Los Azules

Total

Revenue from gold and silver sales

38,129

27,257

11,700

—

77,086

Production costs applicable to sales

(38,863)

(24,231)

(11,173)

—

(74,267)

Depreciation and depletion

(8,527)

(7,336)

(217)

—

(16,080)

Gross (loss) profit

(9,261)

(4,310)

310

—

(13,261)

Advanced projects

(789)

(5,609)

(3,066)

—

(9,464)

Exploration

(5,235)

(4,434)

(463)

—

(1,629)

(11,761)

Impairment of mineral property interests and plant and equipment (note 9)

(83,805)

—

(83,805)

Loss from investment in Minera Santa Cruz S.A.

—

(1,139)

—

(1,139)

Other operating

(1,390)

(578)

—

(1,968)

Segment loss

(100,480)

(14,931)

(3,219)

(1,139)

(1,629)

(121,398)

General and Administrative and other

(8,661)

Loss before income and mining taxes

(130,059)

Capital expenditures

4,712

4,428

—

9,140


Three months ended September 30, 2019	USA		Canada		Mexico		MSC		Los Azules		Total
Revenue from gold and silver sales	$	16,577	$	11,147	$	4,967	$	—	$	—	$	32,691
Production costs applicable to sales		(12,156)		(7,550)		(3,878)		—		—		(23,584)
Depreciation and depletion		(3,790)		(3,589)		(109)		—		—		(7,488)
Gross profit		631		8		980		—		—		1,619

Advanced projects		(46)		(384)		(1,710)		—		—		(2,140)
Exploration		(4,253)		(8,691)		(2)		—		(749)		(13,695)
Loss from investment in Minera Santa Cruz S.A.		—		—		—		(328)		—		(328)
Segment loss	$	(3,668)	$	(9,067)	$	(732)	$	(328)	$	(749)	$	(14,544)
General and Administrative and other												887
Loss before income and mining taxes											$	(13,657)

Capital expenditures	$	1,190	$	2,500	$	—	$	—	$	—	$	3,690


Nine months ended September 30, 2019	USA		Canada		Mexico		MSC		Los Azules		Total
Revenue from gold and silver sales	$	28,941	$	36,139	$	19,577	$	—	$	—	$	84,657
Production costs applicable to sales		(20,798)		(24,025)		(14,609)		—		—		(59,432)
Depreciation and depletion		(6,510)		(10,520)		(471)		—		—		(17,501)
Gross profit		1,633		1,594		4,497		—		—		7,724

Advanced projects		(632)		(384)		(5,865)		—		—		(6,881)
Exploration		(6,155)		(15,174)		(2)		—		(2,386)		(23,717)
Loss from investment in Minera Santa Cruz S.A.		—		—		—		(6,775)		—		(6,775)
Segment loss	$	(5,154)	$	(13,964)	$	(1,370)	$	(6,775)	$	(2,386)	$	(29,649)
General and Administrative and other												(7,541)
Loss before income and mining taxes											$	(37,190)

Capital expenditures	$	17,804	$	10,375	$	—	$	—	$	—	$	28,179

Geographic information

Geographic information includes the long-lived assets balance and revenues presented for the Company’s operating segments, as follows:


	Long-lived Assets				Revenue ⁽¹⁾
	September 30,		December 31,		Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019		2020		2019
USA	$	49,299	$	135,854	$	13,042	$	16,577	$	38,129	$	28,941
Canada		78,161		77,147		10,352		11,147		27,257		36,139
Mexico		20,051		23,551		4,001		4,967		11,700		19,577
Argentina ⁽²⁾		300,252		302,598		—		—		—		—
Total consolidated ⁽³⁾	$	447,763	$	539,150	$	27,395	$	32,691	$	77,086	$	84,657

(1)	Presented based on the location from which the product originated.

(2)	Includes Investment in MSC of $108.8 million as of September 30, 2020 (December 31, 2019 – $110.2 million).

(3)	Total excludes $0.9 million related to the Company's office lease asset as the business activities related to corporate are not considered to be a part of the operating segments.

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

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