10-Q 1 mux-20160930x10q.htm 10-Q mux_Current folio_10Q2_10Q3

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2016

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from               to

 

Commission File Number: 001-33190

 

MCEWEN MINING INC.

(Exact name of registrant as specified in its charter)

 

 

 

 

Colorado

 

84-0796160

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

150 King Street West, Suite 2800, Toronto, Ontario Canada M5H 1J9

(Address of principal executive offices) (Zip code)

 

(866) 441-0690

(Registrant’s telephone number, including area code)

 

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒  No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒  No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See definition of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

 

 

 

 

 

 

 

 

Large accelerated filer

 

 

 

Accelerated filer

 

 

 

 

 

 

 

Non-accelerated filer

 

(Do not check if a smaller reporting company)

 

Smaller reporting company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐  No  ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 299,527,826 shares outstanding as of October 31, 2016.

 

 

 


 

MCEWEN MINING INC.

 

FORM 10-Q

 

Index

 

 

 

 

 

 

 

 

Part I        FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1. 

    

Financial Statements

    

3

 

 

 

 

 

 

 

Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended September 30, 2016 and 2015 (unaudited)

 

3

 

 

 

 

 

 

 

Consolidated Balance Sheets at September 30, 2016 (unaudited) and December 31, 2015

 

4

 

 

 

 

 

 

 

Consolidated Statements of Changes in Shareholders’ Equity for the nine months ended September 30, 2016 and 2015 (unaudited)

 

5

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and 2015 (unaudited)

 

6

 

 

 

 

 

 

 

Notes to Consolidated Financial Statements (unaudited)

 

7

 

 

 

 

 

Item 2. 

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

20

 

 

 

 

 

Item 3. 

 

Quantitative and Qualitative Disclosure about Market Risk

 

42

 

 

 

 

 

Item 4. 

 

Controls and Procedures

 

43

 

 

 

 

 

 

 

Part II        OTHER INFORMATION

 

 

 

 

 

 

 

Item 1A. 

 

Risk Factors

 

44

 

 

 

 

 

Item 2. 

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

44

 

 

 

 

 

Item 6. 

 

Exhibits

 

45

 

 

 

 

 

SIGNATURES 

 

 

46

 

 

 

 

2


 

PART I

Item 1.  FINANCIAL STATEMENTS

 

MCEWEN MINING INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(in thousands of U.S. dollars, except per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended  September 30,

 

Nine months ended September 30,

 

 

 

    

2016

    

2015

    

2016

    

2015

 

 

REVENUE:

 

 

 

    

 

 

 

 

 

    

 

 

 

 

Gold and silver sales

 

$

13,423

 

$

22,503

 

$

49,226

 

$

61,545

 

 

 

 

 

13,423

 

 

22,503

 

 

49,226

 

 

61,545

 

 

COSTS AND EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Production costs applicable to sales

 

 

6,409

 

 

11,170

 

 

21,239

 

 

28,912

 

 

Mine development

 

 

934

 

 

112

 

 

2,948

 

 

449

 

 

Exploration

 

 

2,166

 

 

1,830

 

 

5,595

 

 

7,252

 

 

Property holding

 

 

1,892

 

 

2,073

 

 

3,297

 

 

4,061

 

 

General and administrative

 

 

3,233

 

 

2,276

 

 

8,601

 

 

8,761

 

 

Depreciation

 

 

312

 

 

211

 

 

809

 

 

691

 

 

Accretion of asset retirement obligation (note 4)

 

 

125

 

 

110

 

 

382

 

 

342

 

 

(Income) loss from investment in Minera Santa Cruz S.A., net of amortization (note 5)

 

 

(4,693)

 

 

1,641

 

 

(13,789)

 

 

3,964

 

 

Impairment of mineral property interests and property and equipment (note 4)

 

 

 —

 

 

1,198

 

 

 —

 

 

29,740

 

 

Total costs and expenses

 

 

10,378

 

 

20,621

 

 

29,082

 

 

84,172

 

 

Operating income (loss)

 

 

3,045

 

 

1,882

 

 

20,144

 

 

(22,627)

 

 

OTHER INCOME (EXPENSE):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and other income (expense)

 

 

599

 

 

(715)

 

 

754

 

 

2,415

 

 

Gain on sale of assets

 

 

24

 

 

9

 

 

24

 

 

13

 

 

Gain on sale of marketable equity securities (note 2)

 

 

 —

 

 

 —

 

 

22

 

 

 —

 

 

Other-than-temporary impairment on marketable equity securities (note 2)

 

 

 —

 

 

 —

 

 

(882)

 

 

 —

 

 

Unrealized (loss) gain on derivatives (note 2)

 

 

(197)

 

 

 —

 

 

1,522

 

 

 —

 

 

Foreign currency gain (loss)

 

 

130

 

 

(162)

 

 

632

 

 

(366)

 

 

Total other income (expense)

 

 

556

 

 

(868)

 

 

2,072

 

 

2,062

 

 

Income (loss) before income taxes

 

 

3,601

 

 

1,014

 

 

22,216

 

 

(20,565)

 

 

Income tax recovery (note 10)

 

 

607

 

 

1,619

 

 

3,330

 

 

15,103

 

 

Net income (loss)

 

 

4,208

 

 

2,633

 

 

25,546

 

 

(5,462)

 

 

OTHER COMPREHENSIVE INCOME (LOSS):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other-than-temporary impairment on marketable equity securities (note 2)

 

 

 —

 

 

 —

 

 

882

 

 

 —

 

 

Unrealized gain (loss) on marketable equity securities, net of taxes

 

 

290

 

 

(479)

 

 

1,790

 

 

(1,126)

 

 

Comprehensive income (loss)

 

$

4,498

 

$

2,154

 

$

28,218

 

$

(6,588)

 

 

Net income (loss) per share (note 11):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.01

 

$

0.01

 

$

0.09

 

$

(0.02)

 

 

Diluted

 

$

0.01

 

$

0.01

 

$

0.09

 

$

(0.02)

 

 

Weighted average common shares outstanding (thousands) (note 11):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

298,510

 

 

300,530

 

 

298,330

 

 

300,420

 

 

Diluted

 

 

301,045

 

 

300,530

 

 

299,995

 

 

300,420

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return of capital distribution declared per common share (note 8)

 

$

0.005

 

$

 —

 

 

0.005

 

 

0.010

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

3


 

MCEWEN MINING INC.

CONSOLIDATED BALANCE SHEETS

(in thousands of U.S. dollars)

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

December 31,

 

 

  

2016

 

2015

 

 

 

(unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

38,812

 

$

25,874

 

Investments (note 2)

 

 

7,056

 

 

1,032

 

Value added taxes receivable

 

 

3,275

 

 

10,032

 

Inventories (note 3)

 

 

22,337

 

 

14,975

 

Other current assets

 

 

3,323

 

 

2,530

 

Total current assets

 

 

74,803

 

 

54,443

 

Mineral property interests (note 4)

 

 

242,350

 

 

237,245

 

Investment in Minera Santa Cruz S.A. (note 5)

 

 

167,626

 

 

167,107

 

Property and equipment, net (note 6)

 

 

14,525

 

 

15,759

 

Other assets (note 15)

 

 

531

 

 

531

 

TOTAL ASSETS

 

$

499,835

 

$

475,085

 

LIABILITIES & SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

19,057

 

$

18,429

 

Short-term bank indebtedness (note 7)

 

 

 —

 

 

3,395

 

Current portion of asset retirement obligation (note 4)

 

 

174

 

 

215

 

Total current liabilities

 

 

19,231

 

 

22,039

 

Asset retirement obligation, less current portion (note 4)

 

 

7,951

 

 

7,569

 

Deferred income tax liability (note 10)

 

 

24,180

 

 

26,899

 

Other liabilities (note 4)

 

 

1,261

 

 

286

 

Total liabilities

 

$

52,623

 

$

56,793

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

Common stock, no par value, 500,000 shares authorized (in thousands);

 

 

 

 

 

 

 

Common: 299,453 as of September 30, 2016 and 274,421 as of December 31, 2015 issued and outstanding (in thousands)

 

 

 

 

 

 

 

Exchangeable: nil shares as of September 30, 2016 and 24,213 shares as of December 31, 2015 issued and outstanding (in thousands)

 

 

1,359,846

 

 

1,359,144

 

Accumulated deficit

 

 

(914,481)

 

 

(940,027)

 

Accumulated other comprehensive income (loss)

 

 

1,847

 

 

(825)

 

Total shareholders’ equity

 

 

447,212

 

 

418,292

 

TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY

 

$

499,835

 

$

475,085

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

Commitments and contingencies, note 15.

4


 

MCEWEN MINING INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(UNAUDITED)

(in thousands of U.S. dollars and shares)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

Common Stock

 

Comprehensive

 

Accumulated

 

 

 

 

 

    

Shares

  

Amount

  

(Loss) Income

 

Deficit

  

Total

 

Balance, December 31, 2014

 

300,100

 

$

1,360,668

 

$

124

 

$

(919,577)

 

$

441,215

 

Stock-based compensation (note 9)

 

 —

 

 

1,047

 

 

 

 

 

 

1,047

 

Return of capital distribution (note 8)

 

 —

 

 

(1,503)

 

 

 

 

 

 

(1,503)

 

Shares issued for settlement of accounts payable (note 8)

 

430

 

 

443

 

 

 

 

 

 

443

 

Unrealized loss on available-for-sale securities (note 2)

 

 —

 

 

 

 

(1,126)

 

 

 

 

(1,126)

 

Net loss

 

 —

 

 

 

 

 

 

(5,462)

 

 

(5,462)

 

Balance, September 30, 2015

 

300,530

 

$

1,360,655

 

$

(1,002)

 

$

(925,039)

 

$

434,614

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2015

 

298,634

 

$

1,359,144

 

$

(825)

 

$

(940,027)

 

$

418,292

 

Stock-based compensation (note 9)

 

 —

 

 

770

 

 

 

 

 

 

770

 

Return of capital distribution (note 8)

 

 —

 

 

(2,986)

 

 

 

 

 —

 

 

(2,986)

 

Share repurchase (note 8)

 

(558)

 

 

(582)

 

 

 

 

 

 

(582)

 

Exercise of stock options (note 8)

 

1,377

 

 

3,500

 

 

 —

 

 

 —

 

 

3,500

 

Other-than-temporary impairment on marketable equity securities (note 2)

 

 —

 

 

 —

 

 

882

 

 

 

 

882

 

Unrealized gain on available-for-sale securities, net of taxes (note 2)

 

 —

 

 

 

 

1,790

 

 

 

 

1,790

 

Net income

 

 —

 

 

 

 

 

 

25,546

 

 

25,546

 

Balance, September 30, 2016

 

299,453

 

$

1,359,846

 

$

1,847

 

$

(914,481)

 

$

447,212

 

 

The accompanying notes are an integral part of these consolidated financial statements.

5


 

MCEWEN MINING INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands of U.S. dollars)

 

 

 

 

 

 

 

 

 

 

 

Nine months ended September 30,

 

 

    

2016

    

2015

    

Cash flows from operating activities:

 

 

 

 

 

 

 

Cash paid to suppliers and employees

 

$

(37,436)

 

$

(43,168)

 

Cash received from gold and silver sales

 

 

48,355

 

 

59,246

 

Dividends received from Minera Santa Cruz S.A. (note 5)

 

 

13,270

 

 

548

 

Interest received

 

 

222

 

 

10

 

Cash provided by operating activities

 

 

24,411

 

 

16,636

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Proceeds from sale of investments (note 2)

 

 

470

 

 

 —

 

Proceeds from disposal of property and equipment  (note 6)

 

 

994

 

 

13

 

Acquisition of mineral property interests (note 4)

 

 

(5,950)

 

 

 —

 

Additions to property and equipment (note 6)

 

 

(1,086)

 

 

(535)

 

Acquisition of investments (note 2)

 

 

(2,518)

 

 

(1,114)

 

Cash used in investing activities

 

 

(8,090)

 

 

(1,636)

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Proceeds from short-term bank indebtedness (note 7)

 

 

 —

 

 

5,171

 

Repayment of short-term bank indebtedness (note 7)

 

 

(3,395)

 

 

 —

 

Return of capital distribution (note 8)

 

 

(2,986)

 

 

(1,502)

 

Share repurchase (note 8)

 

 

(582)

 

 

 —

 

Proceeds from exercise of stock options (note 8)

 

 

3,500

 

 

 —

 

Cash (used in) provided from financing activities

 

 

(3,463)

 

 

3,669

 

Effect of exchange rate change on cash and cash equivalents

 

 

80

 

 

(147)

 

Increase in cash and cash equivalents

 

 

12,938

 

 

18,522

 

Cash and cash equivalents, beginning of period

 

 

25,874

 

 

12,380

 

Cash and cash equivalents, end of period

 

$

38,812

 

$

30,902

 

 

 

 

 

 

 

 

 

Reconciliation of net income (loss) to cash provided by operating activities:

 

 

 

 

 

 

 

Net income (loss)

 

$

25,546

 

$

(5,462)

 

Adjustments to reconcile net income (loss) from operating activities:

 

 

 

 

 

 

 

(Income) loss from investment in Minera Santa Cruz S.A., net of amortization (note 5)

 

 

(13,789)

 

 

3,964

 

Loss (gain) on disposal of fixed assets (note 6)

 

 

517

 

 

(13)

 

Impairment of mineral property interests and property and equipment (note 4)

 

 

 —

 

 

29,740

 

Other-than-temporary impairment on marketable equity securities (note 2)

 

 

882

 

 

 —

 

Recovery of deferred income taxes

 

 

(3,330)

 

 

(15,103)

 

Gain on sale of marketable securities (note 2)

 

 

(22)

 

 

 —

 

Stock-based compensation

 

 

770

 

 

1,047

 

Depreciation

 

 

809

 

 

691

 

Accretion of asset retirement obligation

 

 

382

 

 

697

 

Amortization of mineral property interests and asset retirement obligations

 

 

1,845

 

 

966

 

Foreign exchange (gain) loss

 

 

(80)

 

 

147

 

Unrealized gain on derivative instrument (note 2)

 

 

(1,522)

 

 

 —

 

Change in non-cash working capital items:

 

 

 

 

 

 

 

Decrease in VAT taxes receivable, net of collection of $9,523 (2015 - $4,062)

 

 

6,759

 

 

884

 

(Decrease) increase in other assets related to operations

 

 

(8,156)

 

 

244

 

Increase (decrease) in liabilities related to operations

 

 

530

 

 

(1,714)

 

Dividends received from Minera Santa Cruz S.A. (note 5)

 

 

13,270

 

 

548

 

Cash provided by operating activities

 

$

24,411

 

$

16,636

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

6


 

Table of Contents

MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September
 30, 2016

(tabular amounts are in thousands of U.S. dollars, unless otherwise indicated)

 

NOTE 1  NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Nature of Operations and Basis of Presentation

 

McEwen Mining Inc. (the “Company” or “McEwen Mining”) was organized under the laws of the State of Colorado on July 24, 1979.  Since inception, the Company has been engaged in the exploration for, development of, production and sale of gold and silver.

 

The Company operates in Mexico, Argentina, and the United States.  It owns and operates the producing El Gallo 1 Mine in Sinaloa, Mexico. It also owns a 49% interest in Minera Santa Cruz S.A. (“MSC”), owner and operator of the producing San José Mine in Santa Cruz, Argentina, which is controlled by the majority owner of the joint venture, Hochschild Mining plc (‘‘Hochschild’’). In addition to its operating properties, the Company holds interests in numerous exploration stage properties and projects in Mexico, Argentina and the United States.

 

The interim consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).  Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures included are adequate to make the information presented not misleading.

 

In management’s opinion, the unaudited Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended September 30, 2016 and 2015, the Consolidated Balance Sheets as at September 30, 2016 (unaudited) and December 31, 2015, the unaudited Consolidated Statement of Changes in Shareholders’ Equity for the nine months ended September 30, 2016 and 2015, and the unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and 2015, contained herein, reflect all adjustments, consisting solely of normal recurring items, which are necessary for the fair presentation of the Company’s financial position, results of operations and cash flows on a basis consistent with that of the Company’s prior audited consolidated financial statements.  However, the results of operations for the interim periods may not be indicative of results to be expected for the full fiscal year.  Therefore, these financial statements should be read in conjunction with the audited financial statements and notes thereto and summary of significant accounting policies included in the Company’s annual report on Form 10-K for the year ended December 31, 2015.  Except as noted below, there have been no material changes in the footnotes from those accompanying the audited consolidated financial statements contained in the Company’s Form 10-K for the year ended December 31, 2015.  The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All inter-company accounts and transactions have been eliminated.

 

Recently Issued Accounting Pronouncements

 

Consolidation (Topic 810) - Interests Held through Related Parties That Are under Common Control: In October 2016 the FASB issued ASU No. 2016-17 which changes the evaluation of whether a reporting entity is the primary beneficiary of a variable interest entity (“VIE”) and how a reporting entity that is a single decision maker of a VIE treats indirect interests in the entity held through related parties that are under common control with the reporting entity. The update to the standard is effective for the Company beginning January 1, 2017, with early application permitted. The Company is currently evaluating the effect the guidance will have on its consolidated financial statements.

 

Income Taxes - Income Taxes (Topic 740) - Intra-Entity Transfers of Assets Other Than Inventory: In October 2016 the FASB issued ASU No. 2016-16, to modify the current exception to income tax accounting that required companies to defer the income tax effect of certain intercompany transactions.  ASU No. 2016-16 only allows companies to defer the income tax effect of intercompany inventory transactions under an exception to the guidance on income taxes that currently applies to intercompany sales and transfers of all assets. The update to the standard is effective for the Company beginning

7


 

Table of Contents

MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September
 30, 2016

(tabular amounts are in thousands of U.S. dollars, unless otherwise indicated)

 

January 1, 2018, with early application permitted as of the beginning of an annual period. The Company is currently evaluating the effect the guidance will have on its consolidated financial statements.

 

Compensation – Statement of Cash Flows (Topic 230) – Classification of Certain Cash Receipts and Cash Payments:  In August 2016, the FASB issued ASU No. 2016-15, which clarifies diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash. The update to the standard is effective for the Company beginning January 1, 2018, with early application permitted. The Company is currently evaluating the effect the guidance will have on its consolidated financial statements.

 

Compensation – Stock Compensation (Topic 718) – Improvements to employee Share-Based Payment Accounting:  In March 2016, the FASB issued ASU No. 2016-09, which changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The update to the standard is effective for the Company beginning June 1, 2017, with early application permitted. The Company is currently evaluating the effect the guidance will have on its consolidated financial statements.

 

Investments - Equity Method and Joint Ventures (Topic 323) - Simplifying the Transition to the Equity Method of Accounting: In March 2016, the FASB issued ASU 2016-07, which affects all entities that have an investment that becomes qualified for the equity method of accounting as a result of an increase in the level of ownership interest or degree of influence. The amendments eliminate the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. The amendments are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The amendments should be applied prospectively upon their effective date to increases in the level of ownership interest or degree of influence that result in the adoption of the equity method. Earlier application is permitted. The Company is currently evaluating the potential impact this guidance will have on its consolidated financial statements.

 

Financial Instruments — Overall (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Financial Liabilities: In January 2016, the FASB issued ASU No. 2016-01, which updates certain aspects of recognition, measurement, presentation and disclosure of financial instruments. ASU 2016-01 will be effective for the Company beginning in its second quarter of 2019. The Company is currently evaluating the potential impact this guidance will have on its consolidated financial statements. 

 

Revenue from Contracts with Customers: In 2016, the FASB issued 3 separate accounting standard updates regarding Topic 606: ASU 2016-08, ASU 2016-10 and ASU 2016-12. These ASUs outline amendments to Topic 606 which is not yet effective, including reporting revenue gross versus net, identifying performance obligations and licensing and narrow-scope improvements and practical expedients. The effective date and transition requirements for the amendments listed in these Updates are the same as the effective date and transition requirements for Topic 606 (and any other Topic amended by Update 2014-09). The Company is currently evaluating the potential impact this guidance will have on its consolidated financial statements.

 

Revenue from Contracts with Customers – Deferral of the Effective Date: In August 2015, the FASB issued ASU 2015-14, which defers the effective date of ASU 2014-09: Revenue from Contracts with Customers (Topic 606). ASU 2014-09 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The effective date of this pronouncement is for fiscal years beginning after December 15, 2017.  Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting

8


 

Table of Contents

MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September
 30, 2016

(tabular amounts are in thousands of U.S. dollars, unless otherwise indicated)

 

period. The Company is currently evaluating the potential impact this guidance will have on its consolidated financial statements.

 

NOTE 2   INVESTMENTS

 

The Company’s investment portfolio consists of marketable equity securities and warrants of certain publicly-traded companies. The Company classifies the marketable equity securities as available-for-sale securities, which are recorded at fair value based upon quoted market prices. The warrants are recorded at fair value using the Black-Scholes option pricing model. The following is a summary of the balances as of September 30, 2016 and December 31, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

Statement of

 

 

 

 

 

 

Opening

 

Additions

 

Disposals

 

Comprehensive

 

Operations

 

Fair Value

 

 

 

balance

 

during

 

during

 

Income

 

(Loss)

 

end of the

 

As of September 30, 2016

   

(January 1)

   

period

   

period

   

(pre-tax)

   

Income

   

period

 

Marketable equity securities

    

$

1,032

    

$

2,172

 

$

(470)

 

$

3,314

 

$

(860)

 

$

5,188

 

Warrants

 

 

 —

 

 

346

 

 

 —

 

 

 —

 

 

1,522

 

 

1,868

 

Investments

 

$

1,032

 

$

2,518

 

$

(470)

 

$

3,314

 

$

662

 

$

7,056

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

Statement of

 

 

 

 

 

 

Opening

 

Additions

 

Disposals

 

Comprehensive

 

Operations

 

Fair Value

 

 

 

balance

 

during

 

during

 

Loss

 

(Loss)

 

end of the

 

As of December 31, 2015

   

(January 1)

   

year

   

year

   

(pre-tax)

   

Income

   

year

 

Marketable equity securities

    

$

1,409

    

$

448

 

$

 —

 

$

(825)

 

$

 —

 

$

1,032

 

Warrants

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

Investments

 

$

1,409

 

$

448

 

$

 —

 

$

(825)

 

$

 —

 

$

1,032

 

 

As of September 30, 2016, the cost of the marketable equity securities and warrants was approximately $2.3 million (December 31, 2015 - $1.9 million).

 

On May 13, 2016, the Company participated in a private placement with Golden Predator Mining Corp. (“Golden Predator”) under which it acquired 3,125,000 units, each unit consisting of one common share and one common share purchase warrant (“warrant”), for a total cost of $0.4 million. Using proportional allocation, the Company allocated $0.2 million as the cost base for each of the common shares and warrants. Subsequently, on July 21, 2016, the Company participated in another private placement with Golden Predator under which it acquired 1,500,000 units, each unit consisting of one common share and one-half of one warrant, for a total cost of $0.9 million. Using proportional allocation, the Company allocated $0.7 million as the cost base to the common shares and $0.2 million to the warrants.

 

As the warrants meet the definition of derivative instruments, unrealized gains or losses arising from their revaluation are recorded in the Consolidated Statement of Operations and Comprehensive Income (Loss). During the three and nine months ended September 30, 2016, the Company recorded an unrealized loss of $0.2 million and an unrealized gain of $1.5 million, respectively.

 

The gains and losses for available-for-sale securities are not reported in Net Income (Loss) of the Consolidated Statement of Operations and Comprehensive Income (Loss) until the securities are sold or if there is an other-than-temporary decline in fair value below cost.

 

During the nine months ended September 30, 2016, the Company sold marketable equity securities for proceeds of $0.5 million.  The Company realized a gain of $0.1 million, which is included in the Consolidated Statement of Operations and Comprehensive Income (Loss). 

 

9


 

Table of Contents

MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September
 30, 2016

(tabular amounts are in thousands of U.S. dollars, unless otherwise indicated)

 

During the nine months ended September 30, 2016, the Company reviewed its investment portfolio to determine if any security was other-than-temporarily impaired (“OTTI”). An OTTI security would require the Company to record an impairment charge in the income statement in the period any such determination is made. In making this judgment, the Company evaluated, among other things, the duration and extent to which the fair value of a security was less than its cost; the financial condition of the issuer and any changes thereto; and the Company’s intent to sell, or whether it will more likely than not be required to sell, the security before recovery of its amortized cost basis.

 

From this assessment, the Company concluded that the fair value of certain marketable equity securities exhibited a prolonged decline in share price due to deterioration of the issuer’s results; therefore, the decline in these marketable equity securities was considered OTTI.  Accordingly, the Company recognized an impairment loss of $nil and $0.9 million in the Consolidated Statement of Operations and Comprehensive Income (Loss), for the three and nine months ended September 30, 2016, respectively. 

 

For the remaining marketable equity securities, the Company recorded a gain, net of tax, in other comprehensive income, of $0.3 million and $1.8 million for the three and nine months ended September 30, 2016. The gain was recorded in accumulated other comprehensive income and is reported as a separate line item in the shareholders' equity section of the balance sheet.  During the three and nine months ended September 30, 2015, the Company recognized a loss, net of tax, in other comprehensive loss of $0.5 million and $1.1 million, respectively. 

 

NOTE 3   INVENTORIES

 

Inventories at September 30, 2016 and December 31, 2015 consist of the following:

 

 

 

 

 

 

 

 

 

 

    

September 30, 2016

    

December 31, 2015

 

Ore on leach pads

    

$

12,430

    

$

7,150

 

In-process inventory

 

 

3,179

 

 

2,830

 

Stockpiles

 

 

520

 

 

1,923

 

Precious metals

 

 

4,975

 

 

1,820

 

Materials and supplies

 

 

1,233

 

 

1,252

 

Inventories

 

$

22,337

 

$

14,975

 

 

 

 

NOTE 4 MINERAL PROPERTY INTEREST AND ASSET RETIREMENT OBLIGATIONS

 

Mineral Property Interests

 

On April 19, 2016, the Company completed the acquisition of the sliding scale net smelter return royalty (the “Royalty”) on the El Gallo 1 Mine and El Gallo 2 project, previously requiring payment of 3.5% of gross revenue less allowable deductions, eventually reducing to 1%. The purchase price consisted of a $5.3 million payment at closing and a deferred payment of $1.0 million on June 30, 2018, conditional that the El Gallo 1 Mine and El Gallo 2 project are in operation at that time.  

 

The total cost of the Royalty was accounted for as an addition to mineral property interests.  The cost was allocated to El Gallo 1 Mine and El Gallo 2 project based on the relative fair value of the future royalty payments for each project. The allocation resulted in approximately $5.1 million allocated to the El Gallo 1 Mine and $1.2 million allocated to the El Gallo 2 project. The $1.0 million conditional deferred payment has been included under non-current other liabilities as of September 30, 2016.  The Royalty ceased accruing at the end of March 2016. 

 

The Company conducts a review of potential triggering events for evaluation of all its mineral projects on a quarterly basis. When events or changes in circumstances indicate that the related carrying amounts may not be recoverable, the Company

10


 

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MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September
 30, 2016

(tabular amounts are in thousands of U.S. dollars, unless otherwise indicated)

 

carries out a review and evaluation of its long-lived assets for impairment, in accordance with its accounting policy.  During the nine months ended September 30, 2016, the Company did not identify events or changes in circumstances affecting the carrying values of its long-lived assets.

 

During the nine months ended September 30, 2015, the Company performed a strategic review of its mineral property interests in Nevada. A decision was made to allow certain non-essential claims and portions of claims, included within the Gold Bar Complex and Tonkin Complex, to lapse on the September 1, 2015 renewal date and therefore reduce property holding costs that otherwise would have been incurred in the third quarter of 2015. This resulted in a pre-tax impairment charge of $20.8 million for the Gold Bar project and $8.9 million for the Tonkin Project, and an income tax recovery of $10.4 million recognized in the Consolidated Statement of Operations and Comprehensive Income (Loss) for the nine months ended September 30, 2015.  

 

Asset Retirement Obligations

 

The Company is responsible for reclamation of certain past and future disturbances at its properties.  The two most significant properties subject to these obligations are the Tonkin property in Nevada and the El Gallo 1 Mine in Mexico.

 

A reconciliation of the Company’s asset retirement obligations for the nine months ended September 30, 2016 and for the year ended December 31, 2015 are as follows:

 

 

 

 

 

 

 

 

 

 

    

Nine months ended September 30, 2016

    

Year ended December 31, 2015

 

Asset retirement obligation liability, beginning balance

 

$

7,784

 

$

7,471

 

Settlements

 

 

(41)

 

 

 —

 

Accretion of liability

 

 

382

 

 

429

 

Adjustment reflecting updated estimates

 

 

 —

 

 

(116)

 

Asset retirement obligation liability, ending balance

 

$

8,125

 

$

7,784

 

 

As at September 30, 2016, the current portion of the asset retirement obligation was $0.2 million (December 31, 2015 - $0.2 million).

 

Amortization of Mineral Property Interests and Asset Retirement Costs

 

The definition of proven and probable reserves is set forth in the SEC Industry Guide 7. If proven and probable reserves exist at any of the Company’s properties, the relevant capitalized mineral property interests and asset retirement costs for that property are charged to expense based on the units of production method upon commencement of production. Since the Company has not completed feasibility or other studies sufficient to characterize the mineralized material at the El Gallo 1 Mine as proven or probable reserves, the amortization of the capitalized mineral property interests and asset retirement costs are charged to the Consolidated Statement of Operations and Comprehensive Income (Loss) based on the most appropriate amortization method, which includes the straight-line or units of production methods over the estimated useful life of the mine.

 

For the three and nine months ended September 30, 2016, the Company recorded $0.7 million and $1.8 million, respectively (September 30, 2015, $0.3 million and $1.0 million, respectively), of amortization expense related to the El Gallo 1 Mine, which is included in Production Costs Applicable to Sales in the Consolidated Statement of Operations and Comprehensive Income (Loss), of which $0.1 million and $0.4 million, respectively, related to the amortization of capitalized asset retirement costs (September 30, 2015 - $0.1 million and $0.3 million, respectively).

 

11


 

Table of Contents

MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September
 30, 2016

(tabular amounts are in thousands of U.S. dollars, unless otherwise indicated)

 

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 $4.7 million and $13.8 million for the three and nine months ended September 30, 2016, respectively (September 30, 2015 – losses of $1.6 million and $4.0 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 nine months ended September 30, 2016.

 

During the three and nine months ended September 30, 2016, the Company received $7.9 million and $13.3 million in dividends from MSC, respectively.  This compares to $nil and $0.5 million received during the three and nine months ended September 30, 2015, respectively.

 

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

 

 

 

 

 

 

 

 

 

 

    

Nine months ended September 30, 2016

    

Year ended

December 31, 2015

 

Investment in MSC, beginning of the period

 

$

167,107

 

$

177,018

 

Attributable net income (loss) from MSC

 

 

15,334

 

 

(2,859)

 

Amortization of fair value increments

 

 

(9,370)

 

 

(10,669)

 

Income tax recovery

 

 

7,825

 

 

15,942

 

Dividend distribution received

 

 

(13,270)

 

 

(548)

 

Impairment of investment in MSC

 

 

 —

 

 

(11,777)

 

Investment in MSC, end of the period

 

$

167,626

 

$

167,107

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended  September 30,

 

Nine months ended September 30,

 

 

    

2016

    

2015

    

2016

    

2015

 

Minera Santa Cruz S.A. (100%)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

 

$

72,116

 

$

45,357

 

$

182,769

 

$

141,106

 

Production costs applicable to sales

 

 

(49,345)

 

 

(41,767)

 

 

(125,904)

 

 

(119,940)

 

Net income (loss)

 

 

12,072

 

 

(3,375)

 

 

31,293

 

 

(5,185)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Portion attributable to McEwen Mining Inc. (49%)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

5,916

 

$

(1,654)

 

$

15,334

 

$

(2,541)

 

Amortization of fair value increments

 

 

(2,914)

 

 

(1,617)

 

 

(9,370)

 

 

(7,705)

 

Income tax recovery

 

 

1,691

 

 

1,630

 

 

7,825

 

 

6,282

 

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

 

$

4,693

 

$

(1,641)

 

$

13,789

 

$

(3,964)

 

 

As of September 30, 2016, MSC had current assets of $112.4 million, total assets of $481.2 million, current liabilities of $54.2 million and total liabilities of $138.9 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

12


 

Table of Contents

MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September
 30, 2016

(tabular amounts are in thousands of U.S. dollars, unless otherwise indicated)

 

recorded in the fourth quarter of 2015. Excluding the fair value increments from the purchase price allocation, MSC had current assets of $111.6 million, total assets of $296.5 million, current liabilities of $58.2 million, and total liabilities of $87.6 million as at September 30, 2016.

 

NOTE 6   PROPERTY AND EQUIPMENT

 

Property and equipment included a deposit with a contractor for the construction of certain equipment pertaining to the El Gallo 2 project, which was accounted for under construction-in-process. In the second quarter of 2016, the Company reached an agreement with the contractor, whereby the Company was refunded the deposit less costs incurred for the equipment design. The total amount of the deposit was $1.5 million, of which $1.0 million was refunded. The remaining $0.5 million was recorded under development costs in the Consolidated Statement of Operations and Comprehensive Income (Loss).  

 

As of September 30, 2016, property and equipment was $14.5 million (December 31, 2015 - $15.8 million), net of accumulated depreciation of $5.4 million (December 31, 2015 - $4.7 million).

 

NOTE 7   SHORT-TERM BANK INDEBTEDNESS

 

On May 29, 2015, Compañía Minera Pangea (“CMP”), a wholly-owned subsidiary of the Company, finalized a line of credit agreement with Banco Nacional de Comercio Exterior (“Banco Nacional”), for an amount up to 90,000,000 Mexican pesos (approximately $5.9 million as of May 29, 2015), which was secured by CMP’s Value Added Tax (“VAT”) receivable balance.  The applicable interest rate was equal to: (i) two and one-half percent (2.5%) per annum plus (ii) the 91 day Interbank Equilibrium Interest Rate (“TIIE”) rate, as published by the Bank of Mexico, payable quarterly. Upon signing the agreement, CMP paid a 1% commission on the total value of the simple credit agreement to Banco Nacional. 

 

On June 1, 2015, CMP drew down the entire 90,000,000 Mexican pesos, equivalent to $5.2 million as of December 31, 2015, on the line of credit. During the year ended December 31, 2015, CMP collected 34,654,201 Mexican pesos (equivalent to $2.0 million as of December 31, 2015) of VAT receivable, from which 2,903,100 Mexican pesos were applied against the accrued interest and the remaining 31,751,101 Mexican pesos (approximately $1.8 million as of December 31, 2015) were applied against the principal.

 

On January 13, 2016, CMP paid the remaining balance of the indebtedness in the amount of 58,248,899 Mexican Pesos (approximately $3.4 million).  Upon the final payment, the line of credit agreement was terminated.

 

NOTE 8   SHAREHOLDERS’ EQUITY

 

During the nine months ended September 30, 2016, 1,377,085 shares of common stock were issued upon exercise of stock options under the Equity Incentive Plan, at a weighted average exercise price of $2.56 per share for proceeds of $3.5 million.  In comparison, there were no exercises of stock options during the same period of 2015.

 

On June 18, 2015, the Board of Directors declared an annual return of capital distribution of $0.01 per share of common stock, payable semi-annually.  The first semi-annual return of capital distribution payment of $0.005 was made on August 17, 2015, the second payment of $0.005 was made on February 12, 2016 and the third payment of $0.005 was made on August 29, 2016, each for a total of $1.5 million. Return of capital distributions are paid to holders of the Company’s common stock and exchangeable shares. 

 

On October 1, 2015, the Board of Directors approved a share repurchase program authorizing the Company to purchase up to 15,000,000 shares of its common stock over a twelve month period, with an authorized maximum of $15.0 million to be spent on the repurchases. Under the program, purchases of common stock may be made from time-to-time in the

13


 

Table of Contents

MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September
 30, 2016

(tabular amounts are in thousands of U.S. dollars, unless otherwise indicated)

 

open market, subject to compliance with applicable U.S. and Canadian laws. The timing and amounts of any purchase are based on market conditions and other factors including share price, regulatory requirements and capital availability.  Further, the repurchase program may be suspended, discontinued or modified at any time, at the discretion of the Board of Directors. During the nine months ended September 30, 2016 the Company repurchased 557,991 shares of common stock (December 31, 2015 - 1,896,442) at a total cost of $0.6 million (December 31, 2015 - $1.8 million), all of which have been cancelled. The share repurchase program approved by the Board of Directors expired on September 30, 2016.

 

On March 11, 2015, the Company issued 430,295 shares of common stock under an agreement with one of its mining contractors to settle parts of its accounts payable for services rendered. The fair value of the common stock at the time of issuance was $0.4 million. The agreement with this mining contractor expired and was renegotiated during 2015 and under the revised agreement, the Company can no longer make share payments and instead is required to pay in cash.

 

At the annual meeting held on May 31, 2016, the holders of exchangeable shares of McEwen Mining-Minera Andes Acquisition Corp., a wholly-owned subsidiary of the Company (“MAQ”), voted to amend its Articles of Incorporation to allow early redemption of all outstanding exchangeable shares for common stock of the Company.  On July 25, 2016, the Company announced that MAQ had established a redemption date of August 23, 2016 in respect of all of its outstanding exchangeable shares and that McEwen Mining (Alberta) ULC ("McEwen (Alberta)") elected to exercise its overriding redemption call right to acquire all of the outstanding exchangeable shares (other than exchangeable shares held by the Company and its subsidiaries) on the business day immediately prior to the redemption date, being August 22, 2016.  On August 22, 2016, McEwen (Alberta) acquired all of the exchangeable shares not yet redeemed for purchase consideration of one share of the Company’s common stock per exchangeable share. Following the redemption, MAQ applied to have the exchangeable shares delisted from the Toronto Stock Exchange (“TSX”).  During the nine months ended September 30, 2016, 24.2 million exchangeable shares were converted into common stock (December 31, 2015 – 4.3 million).  At September 30, 2016, the Company or its subsidiaries had no outstanding exchangeable shares not exchanged and not owned (December 31, 2015 – 24.2 million).

 

NOTE 9   STOCK-BASED COMPENSATION

 

During the nine months ended September 30, 2016, 0.6 million stock options were granted to certain employees at a weighted average exercise price of $3.99 per share.  In comparison, during the nine months ended September 30, 2015, the Company granted stock options to certain employees for an aggregate of 0.1 million shares of common stock at a weighted average exercise price of $1.07 per share. The options vest equally over a three-year period (subject to acceleration of vesting in certain events) if the individual remains affiliated with the Company and are exercisable for a period of 5 years from the date of issue.

 

The principal assumptions used in applying the Black-Scholes option pricing model for these awards were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended  September 30,

 

 

Nine months ended September 30,

 

 

 

2016

 

 

2015

  

  

2016

 

 

2015

  

Risk-free interest rate

 

1.15

%

 

 —

%

 

1.15

%

 

1.10

%

Dividend yield

 

0.25

%

 

 —

%

 

0.25

%

 

 —

%

Volatility factor of the expected market price of common stock

 

74

%

 

 —

%

 

74

%

 

74

%

Weighted-average expected life of option

 

5 years

 

 

 —

 

 

5 years

 

 

3.5 years

 

Weighted-average grant date fair value

 

2.36

 

 

 —

 

 

2.36

 

 

0.56

 

 

During the three and nine months ended September 30, 2016, the Company recorded stock option expense of $0.3 million and $0.8 million respectively.  This compares to $0.3 million and $1.0 million for the three and nine months ended September 30, 2015.

14


 

Table of Contents

MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September
 30, 2016

(tabular amounts are in thousands of U.S. dollars, unless otherwise indicated)

 

 

NOTE 10  INCOME TAXES

 

The Company’s income tax expense differs from the amount computed by applying the U.S. federal and state statutory corporate income tax rate of 35% to income before taxes primarily resulting from valuation allowances being applied to losses, changes in recognition of certain deferred tax assets, changes in the deferred tax liability associated with mineral property interests acquired in the Minera Andes acquisition and changes due to impairment of mineral property interests. The deferred tax liability is impacted primarily by fluctuations in the foreign exchange rate between the Argentine peso and U.S. dollar.

 

For the three and nine months ended September 30, 2016, the Company recorded an income tax recovery of $0.4 million and $2.7 million, respectively, as a result of the Argentine peso devaluation. In comparison, for the three and nine months ended September 30, 2015, the Company recorded an income tax recovery of $0.9 million and $2.9 million, respectively, resulting from the devaluation of the Argentine peso. 

 

For the three and nine months ended September 30, 2015, the Company recorded an income tax recovery of $10.4 million, corresponding to the impairment of mineral property interests described in Note 4, Mineral Property Interest and Asset Retirement Obligations.

 

NOTE 11   INCOME (LOSS) PER SHARE

 

Basic net income (loss) per share is computed by dividing the net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed similarly except that the weighted average number of common shares is increased to reflect all dilutive instruments.

 

Below is a reconciliation of the basic and diluted weighted average number of common shares and exchangeable shares outstanding and the computations for basic and diluted net income per share for the three and nine months ended September 30, 2016 and 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended  September 30,

 

Nine months ended September 30,

 

 

    

2016

    

2015

    

2016

    

2015

  

 

 

(amounts in thousands, except net income (loss) per share)

 

Net income (loss)

 

$

4,208

 

$

2,633

 

$

25,546

 

$

(5,462)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

298,510

 

 

300,530

 

 

298,330

 

 

300,420

 

Effect of employee stock-based awards

 

 

2,535

 

 

 —

 

 

1,665

 

 

 —

 

Diluted shares outstanding:

 

 

301,045

 

 

300,530

 

 

299,995

 

 

300,420