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OPERATING SEGMENT REPORTING

12 Months Ended

Dec. 31, 2019

NOTE 3 OPERATING SEGMENT REPORTING

McEwen Mining is a mining and minerals production and exploration company focused on precious metals in the United States, Canada, Mexico and Argentina. The Company’s chief operating decisions maker (“CODM”) reviews the operating results, assesses performance and makes decisions about allocation of resources to these segments at the geographic region level or major mine/project where the economic characteristics of the individual mines or projects are not alike. As a result, these operating segments also represent the Company’s reportable segments. The Company’s business activities that are not considered operating segments are included in General and Administrative and other and are provided in this note for reconciliation purposes.

The CODM reviews segment (loss) income, defined as gold and silver sales less production costs applicable to sales, depreciation and depletion, advanced projects, and exploration costs, for all segments except for the MSC segment which is evaluated based on the attributable equity income or loss. Gold and silver sales and production costs applicable to sales for the reportable segments are reported net of intercompany transactions.

The Canada segment includes assets and liabilities of Black Fox Complex and Lexam VG Gold Inc. (“Lexam”), acquired on August 25, 2017 and April 26, 2017, respectively, since the date of acquisition (Note 22). All of the assets acquired are located in Timmins, Ontario, Canada and are managed together as a single operating segment by the CODM. The composition of segments reflects the distinct economic characteristic of each mine/project.

During 2019, the El Gallo Project incurred $11.6 million of operating expenditures, of which $3.4 million is capitalized to inventory as at December 31, 2019, resulting in $8.2 million being included in production cost applicable to sales. The remaining balance of production costs applicable to sales of $10.3 million corresponds to opening leach pad inventory costs that are included as production costs applicable to sales.

Capital expenditures include costs capitalized in mineral property interests and plant and equipment in the respective periods.

Significant information relating to the Company’s reportable operating segments is summarized in the tables below:

Year ended December 31, 2019

USA

Canada

Mexico

MSC

Los Azules

Total

Revenue from gold and silver sales

43,847

50,058

23,114

—

117,019

Production costs applicable to sales

(33,614)

(31,121)

(18,545)

—

(83,280)

Depreciation and depletion

(10,934)

(13,271)

(548)

—

(24,753)

Gross profit

(701)

5,666

4,021

—

8,986

Advanced projects

(649)

(1,636)

(7,235)

—

(9,520)

Exploration

(8,554)

(25,779)

—

(3,411)

(37,744)

Loss from investment in Minera Santa Cruz S.A.

—

(8,754)

—

(8,754)

Segment loss

(9,904)

(21,749)

(3,214)

(8,754)

(3,411)

(47,032)

General and Administrative and other

(16,559)

Loss before income and mining taxes

(63,591)

Capital expenditures

18,806

11,464

—

30,270


Year ended December 31, 2018	USA		Canada		Mexico		MSC		Los Azules		Total
Revenue from gold and silver sales	$	—	$	62,024	$	66,151	$	—	$	—	$	128,175
Production costs applicable to sales		—		(43,095)		(37,919)		—		—		(81,014)
Depreciation and depletion		—		(12,972)		(2,107)		—		—		(15,079)
Gross profit		—		5,957		26,125		—		—		32,082

Advanced projects		(7,959)		—		(7,104)		—		—		(15,063)
Exploration		(5,174)		(22,032)		(2,241)		—		(7,129)		(36,576)
Loss from investment in Minera Santa Cruz S.A.		—		—		—		(11,865)		—		(11,865)
Segment (loss) income	$	(13,133)	$	(16,075)	$	16,780	$	(11,865)	$	(7,129)	$	(31,422)
General and Administrative and other												(16,218)
Loss before income and mining taxes											$	(47,640)

Capital expenditures	$	84,713	$	12,584	$	171	$	—	$	—	$	97,468


Year ended December 31, 2017	USA		Canada		Mexico		MSC		Los Azules		Total
Revenue from gold and silver sales	$	—	$	11,620	$	55,845	$	—	$	—	$	67,465
Production costs applicable to sales		—		(8,151)		(35,198)		—		—		(43,349)
Depreciation and depletion		—		(1,737)		(2,299)		—		—		(4,036)
Gross profit		—		1,732		18,348		—		—		20,080

Advanced projects		(6,686)		—		(4,443)		—		—		(11,129)
Exploration		(2,132)		(1,661)		(5,610)		—		(9,221)		(18,624)
Loss from investment in Minera Santa Cruz S.A.		—		—		—		(44)		—		(44)
Impairment of mineral property interests and property and equipment		—		—		(711)		—		—		(711)
Segment (loss) income	$	(8,818)	$	71	$	7,584	$	(44)	$	(9,221)	$	(10,428)
General and Administrative and other												(15,575)
Loss before income and mining taxes											$	(26,003)

Capital expenditures	$	6,271	$	4,301	$	939	$	—	$	—	$	11,511

Geographic information

Geographic information includes the following long-lived assets balances and revenues presented for the Company’s operating segments:


	Long-lived Assets				Revenue⁽¹⁾
	December 31,		December 31,		Year ended December 31,
	2019		2018		2019		2018		2017
USA	$	135,854	$	127,617	$	43,847	$	—	$	—
Canada		77,147		84,119		50,058		62,024		11,620
Mexico		23,551		26,524		23,114		66,151		55,845
Argentina⁽²⁾		302,598		319,305		—		—		—
Total consolidated ⁽³⁾	$	539,150	$	557,565	$	117,019	$	128,175	$	67,465

(1)	Presented based on the location from which the product originated.

(2)	Includes Investment in MSC of $110.2 million as of December 31, 2019 (December 31, 2018 - $127.8 million).

(3)	Total excludes $1.0 million related to the Company’s ROU office lease asset as the business activities related to corporate are not considered to be a party of the operating segments.

As gold and silver can be sold through numerous gold and silver market traders worldwide, the Company is not economically dependent on a limited number of customers for the sale of its product. In 2019, 2018 and 2017, sales to Bank of Nova Scotia were $103.6 million (89%), $123.5 million (96%), and $65.9 million (94%), respectively, of total gold and silver sales.