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INVESTMENT IN MINERA SANTA CRUZ S.A. ("MSC") - SAN JOSE MINE
 6 Months Ended
Jun. 30, 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 $4.1 million and $9.1 million for the three and six months ended June 30, 2016, respectively (June 30, 2015 – losses of $2.7 million and $2.3 million, respectively). These amounts include the amortization of the fair value increments arising from 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 in 2012. 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 and six months ended June 30, 2016.

 

During the three and six months ended June 30, 2016, the Company received $2.8 million and $5.4 million in dividends from MSC, respectively.  This compares to $0.5 million received during the three and six months ended June 30, 2015.

 

Changes in the Company’s investment in MSC for the six months ended June 30, 2016 and year ended December 31, 2015 are as follows:

 

 

 

 

 

 

 

 

 

 

    

Six months ended June 30, 2016

    

Year ended December 31, 2015

 

Investment in MSC, beginning of the period

 

$
167,107

 

$
177,018

 

Attributable net income (loss) from MSC

 

 
9,418

 

 
(2,859)

 

Amortization of fair value increments

 

 
(6,456)

 

 
(10,669)

 

Income tax recovery

 

 
6,134

 

 
15,942

 

Dividend distribution received

 

 
(5,396)

 

 
(548)

 

Impairment of investment in MSC

 

 

 —

 

 
(11,777)

 

Investment in MSC, end of the period

 

$
170,807

 

$
167,107

 

 

A summary of the operating results from MSC for the three and six months ended June 30, 2016 and 2015 is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended  June 30,

 

Six months ended June 30,

 

 

    

2016

    

2015

    

2016

    

2015

 

Minera Santa Cruz S.A. (100%)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

 

$
58,581

 

$
49,858

 

$
110,653

 

$
95,749

 

Production costs applicable to sales

 

 
(38,832)

 

 
(41,310)

 

 
(76,559)

 

 
(78,173)

 

Net income (loss)

 

 
10,973

 

 
(3,042)

 

 
19,221

 

 
(1,810)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Portion attributable to McEwen Mining Inc. (49%)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$
5,377

 

$
(1,491)

 

$
9,418

 

$
(887)

 

Amortization of fair value increments

 

 
(2,774)

 

 
(3,401)

 

 
(6,456)

 

 
(6,088)

 

Income tax recovery

 

 
1,530

 

 
2,240

 

 
6,134

 

 
4,652

 

Income (loss) from investment in MSC, net of amortization

 

$
4,133

 

$
(2,652)

 

$
9,096

 

$
(2,323)

 

 

As of June 30, 2016, MSC had current assets of $107.8 million, total assets of $484.1 million, current liabilities of $43.7 million and total liabilities of $135.4 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 $107.0 million, total assets of $293.4 million, current liabilities of $49.1 million, and total liabilities of $81.9 million as at June 30, 2016.