NOTE 5 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 in accordance with U.S. GAAP.

The Company’s 49% attributable share of results of operations from its investment in MSC was a loss of $2.3 million for the three months ended March 31, 2019 (March 31, 2018 – loss of $0.2 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 Argentina 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.

During the three months ended March 31, 2019, the Company did not identify any potential triggering events for impairment in relation to its investment in MSC, and consequently the Company did not record any impairment during the period.

During the three months ended March 31, 2019, the Company received $2.0 million in dividends from MSC, compared to $4.9 million during the same period in 2018.

Changes in the Company’s investment in MSC for the three months ended March 31, 2019 and year ended December 31, 2018 and as follows:

Changes in the Company’s investment in MSC for the three months ended March 31, 2019 and year ended December 31, 2018 are as follows:
	March 31, 2019		December 31, 2018
Investment in MSC, beginning of the period	$	127,814	$	150,064
Attributable net loss from MSC		(1,358)		(10,065)
Amortization of fair value increments		(1,913)		(9,730)
Income tax recovery		961		7,930
Dividend distribution received		(2,020)		(10,385)
Investment in MSC, end of the period	$	123,484	$	127,814

A summary of the operating results from MSC for the three months ended March 31, 2019 and 2018 is as follows:


	Three months ended March 31,
	2019		2018
Minera Santa Cruz S.A. (100%)
Net sales	$	46,203	$	50,662
Production costs applicable to sales		(36,340)		(43,468)
Other operating expenses		(9,403)		(4,059)
Other expenses		(2,443)		(2,118)
Net (loss) income before tax	$	(1,983)	$	1,017
Current and deferred tax expense		(789)		(139)
Net (loss) income	$	(2,772)	$	878

Portion attributable to McEwen Mining Inc. (49%)
Net (loss) income	$	(1,358)	$	430
Amortization of fair value increments		(1,913)		(2,115)
Income tax recovery		961		1,473
Loss from investment in MSC, net of amortization	$	(2,310)	$	(212)

As of March 31, 2019, MSC had current assets of $64.7 million, total assets of $324.9 million, current liabilities of $36.3 million and total liabilities of $72.9 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. Excluding the fair value increments from the purchase price allocation, MSC had current assets of $64.0 million, total assets of $190.1 million, current liabilities of $36.3 million, and total liabilities of $62.9 million as at March 31, 2019.