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

3 Months Ended

Mar. 31, 2022

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

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

NOTE 9 INVESTMENT IN MINERA SANTA CRUZ S.A. (“MSC”) – SAN JOSÉ MINE

The Company accounts for investments over which it exerts significant influence but does not control through majority ownership using the equity method of accounting. In applying the equity method of accounting to the Company’s investment in MSC, MSC’s financial statements, which are originally prepared by MSC in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, have been adjusted to conform with U.S. GAAP. As such, the summarized financial data presented under this heading is presented in accordance with U.S. GAAP.

A summary of the operating results for MSC for the three months ended March 31, 2022, and 2021 is as follows:

​

​	​	​	​	​	​	​
​	​	Three months ended March 31,
​		2022		​	2021
Minera Santa Cruz S.A. (100%)	​	​	​	​	​	​
Revenue from gold and silver sales	​	$	39,207	​	$	53,303
Production costs applicable to sales	​	​	(31,789)	​	​	(36,367)
Depreciation and depletion	​	​	(6,896)	​	​	(6,953)
Gross profit	​	​	522	​	​	9,983
Exploration	​	​	(1,735)	​	​	(2,236)
Other expenses(1)	​	​	(3,880)	​	​	(5,536)
Net income (loss) before tax	​	$	(5,093)	​	$	2,211
Current and deferred tax expense	​	​	3,807	​	​	(1,629)
Net income (loss)	​	$	(1,286)	​	$	582
​	​	​	​	​	​	​
Portion attributable to McEwen Mining Inc. (49%)	​	​	​	​	​	​
Net income (loss)	​	$	(630)	​	$	285
Amortization of fair value increments	​		(613)	​		(1,071)
Income tax recovery	​	​	123	​	​	212
Loss from investment in MSC, net of amortization	​	$	(1,120)	​	$	(574)

​

(1) Other expenses include foreign exchange, accretion of asset retirement obligations, other finance-related expenses.

​

The loss from investment in MSC attributable to the Company includes amortization of the fair value increments arising from the initial purchase price allocation and related income tax recovery. The income tax recovery reflects the impact of the devaluation of the Argentine peso against the U.S. dollar on the peso-denominated deferred tax liability recognized at the time of acquisition, as well as income tax rate changes over the periods.

​

Changes in the Company’s investment in MSC for the three months ended March 31, 2022 and year ended December 31, 2021 are as follows:

​

​	​	​	​	​	​
​	Three months ended March 31, 2022			Year ended December 31, 2021
Investment in MSC, beginning of period	$	90,961	​	$	108,326
Attributable net (loss) income from MSC	​	(630)	​	​	132
Amortization of fair value increments		(613)	​		(8,331)
Income tax recovery	​	123	​	​	666
Dividend distribution received		—	​		(9,832)
Investment in MSC, end of period	$	89,841	​	$	90,961

​

During the three months ended March 31, 2022, the Company received $nil in dividends from MSC (three months ended March 31, 2021 – $5.0 million).

A summary of the key assets and liabilities of MSC on a 100% basis as at March 31, 2022, before and after adjustments to fair value on acquisition and amortization of the fair value increments arising from the purchase price allocation, are as follows:

​

​	​	​	​	​	​	​	​	​	​
As at March 31, 2022	​	Balance excluding FV increments		​	Adjustments		​	Balance including FV increments
Current assets	​	$	85,336	​	$	889	​	$	86,225
Total assets	​	$	176,818	​	$	88,710	​	$	265,528
​	​	​	​	​	​	​	​	​	​
Current liabilities	​	$	(51,574)	​	$	—	​	$	(51,574)
Total liabilities	​	$	(79,865)	​	$	(2,326)	​	$	(82,191)

​

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- References

No definition available.

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- Definition

The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 323
-URI http://asc.fasb.org/topic&trid=2196965

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