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

3 Months Ended

Mar. 31, 2016

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

INVESTMENT IN MINERA SANTA CRUZ S.A. (“MSC”) - SAN JOSÉ 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 income of $5.0 million for the three months ended March 31, 2016 (March 31, 2015 - $0.3 million). 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 an increase in the income from the Company’s investment in MSC for the three months ended March 31, 2016.

During the three months ended March 31, 2016, the Company received $2.6 million in dividends from MSC, compared to $nil during the same period in 2015.

Changes in the Company’s investment in MSC for the three months ended March 31, 2016 and year ended December 31, 2015 are as follows:


	Three months ended March 31, 2016		Year ended December 31, 2015
Investment in MSC, beginning of the period	$	167,107	$	177,018
Attributable net income (loss) from MSC		4,042		(2,859)
Amortization of fair value increments		(3,682)		(10,669)
Income tax recovery		4,603		15,942
Dividend distribution received		(2,626)		(548)
Impairment of investment in MSC		—		(11,777)
Investment in MSC, end of the period	$	169,444	$	167,107

A summary of the operating results from MSC for the three months ended March 31, 2016 and 2015 is as follows:


	Three months ended March 31,
	2016		2015
Minera Santa Cruz S.A. (100%)
Net Sales	$	52,072	$	45,891
Production costs applicable to sales		(37,727)		(36,863)
Net income		8,248		1,232

Portion attributable to McEwen Mining Inc. (49%)
Net income	$	4,042	$	604
Amortization of fair value increments		(3,682)		(2,687)
Income tax recovery		4,603		2,412
Income from investment in MSC, net of amortization	$	4,963	$	329

As of March 31, 2016, MSC had current assets of $94.0 million, total assets of $480.5 million, current liabilities of $36.3 million and total liabilities of $134.8 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 fourth quarter of 2015. Excluding the fair value increments from the purchase price allocation, net of impairment charges, MSC had current assets of $93.0 million, total assets of $284.2 million, current liabilities of $47.1 million, and total liabilities of $83.7 million as at March 31, 2016.