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OPERATING SEGMENT REPORTING

6 Months Ended

Jun. 30, 2020

NOTE 3 OPERATING SEGMENT REPORTING

McEwen Mining Inc. is engaged in the exploration, development, production and sale of gold and silver and exploration for copper, with operations located 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 income (loss), 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.

Production costs applicable to sales for the El Gallo project of $7.3 million for the six months ended June 30, 2020 (same period in 2019 - $10.7 million) include $3.1 million of residual leaching spending in the period, net of $2.0 million capitalized in inventory (same period in 2019 - $3.8 million, net of $1.8 million capitalized in inventory) with the remainder representing costs recorded in the leach pad inventory balances in prior periods.

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:

Three months ended June 30, 2020

USA

Canada

Mexico

MSC

Los Azules

Total

Revenue from gold and silver sales

10,770

4,166

3,355

—

18,291

Production costs applicable to sales

(11,039)

(8,150)

(3,165)

—

(22,354)

Depreciation and depletion

(2,565)

(2,184)

(63)

—

(4,812)

Gross (loss) profit

(2,834)

(6,168)

127

—

(8,875)

Advanced projects

(183)

(1,760)

(944)

—

(2,887)

Exploration

(2,031)

(840)

(36)

—

(641)

(3,548)

Loss from investment in Minera Santa Cruz S.A.

—

(1,045)

—

(1,045)

Other operating

(1,390)

(578)

—

(1,968)

Segment loss

(6,438)

(9,346)

(853)

(1,045)

(641)

(18,323)

General and Administrative and other

(1,521)

Loss before income and mining taxes

(19,844)

Capital expenditures

2,799

211

—

3,010

Six months ended June 30, 2020

USA

Canada

Mexico

MSC

Los Azules

Total

Revenue from gold and silver sales

25,088

16,905

7,698

—

49,691

Production costs applicable to sales

(28,071)

(15,357)

(7,313)

—

(50,741)

Depreciation and depletion

(6,428)

(4,932)

(150)

—

(11,510)

Gross (loss) profit

(9,411)

(3,384)

235

—

(12,560)

Advanced projects

(548)

(2,826)

(2,063)

—

(5,437)

Exploration

(2,840)

(3,245)

(36)

—

(1,217)

(7,338)

Impairment of mineral property interests and plant and equipment (note 9)

(83,805)

—

(83,805)

Loss from investment in Minera Santa Cruz S.A.

—

(3,721)

—

(3,721)

Other operating

(1,390)

(578)

—

(1,968)

Segment loss

(97,994)

(10,033)

(1,864)

(3,721)

(1,217)

(114,829)

General and Administrative and other

(5,300)

Loss before income and mining taxes

(120,129)

Capital expenditures

4,606

3,940

—

8,546


Three months ended June 30, 2019	USA		Canada		Mexico		MSC		Los Azules		Total
Revenue from gold and silver sales	$	11,522	$	16,049	$	8,812	$	—	$	—	$	36,383
Production costs applicable to sales		(7,835)		(10,639)		(6,225)		—		—		(24,699)
Depreciation and depletion		(2,568)		(4,221)		(218)		—		—		(7,007)
Gross profit		1,119		1,189		2,369		—		—		4,677

Advanced projects		(390)		—		(1,705)		—		—		(2,095)
Exploration		(1,292)		(4,062)		—		—		(518)		(5,872)
Loss from investment in Minera Santa Cruz S.A.		—		—		—		(4,137)		—		(4,137)
Segment (loss) income	$	(563)	$	(2,873)	$	664	$	(4,137)	$	(518)	$	(7,427)
General and Administrative and other												(6,088)
Loss before income and mining taxes											$	(13,515)

Capital expenditures	$	3,606	$	4,518	$	—	$	—	$	—	$	8,124


Six months ended June 30, 2019	USA		Canada		Mexico		MSC		Los Azules		Total
Revenue from gold and silver sales	$	12,364	$	24,992	$	14,610	$	—	$	—	$	51,966
Production costs applicable to sales		(8,643)		(16,475)		(10,730)		—		—		(35,848)
Depreciation and depletion		(2,720)		(6,931)		(362)		—		—		(10,013)
Gross profit		1,001		1,586		3,518		—		—		6,105

Advanced projects		(586)		—		(4,155)		—		—		(4,741)
Exploration		(1,902)		(6,483)		—		—		(1,637)		(10,022)
Loss from investment in Minera Santa Cruz S.A.		—		—		—		(6,447)		—		(6,447)
Segment loss	$	(1,487)	$	(4,897)	$	(637)	$	(6,447)	$	(1,637)	$	(15,105)
General and Administrative and other												(8,428)
Loss before income and mining taxes											$	(23,533)

Capital expenditures	$	16,614	$	7,875	$	—	$	—	$	—	$	24,489

Geographic information

Geographic information includes the long-lived assets balance and revenues presented for the Company’s operating segments, as follows:


	Long-lived Assets				Revenue ⁽¹⁾
	June 30,		December 31,		Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019		2020		2019
USA	$	50,906	$	135,854	$	10,770	$	11,522	$	25,088	$	12,364
Canada		76,697		77,147		4,166		16,049		16,905		24,992
Mexico		20,139		23,551		3,355		8,812		7,698		14,610
Argentina ⁽²⁾		297,670		302,598		—		—		—		—
Total consolidated ⁽³⁾	$	445,412	$	539,150	$	18,291	$	36,383	$	49,691	$	51,966

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

(2)	Includes Investment in MSC of $106.2 million as of June 30, 2020 (December 31, 2019 – $110.2 million).

(3)	Total excludes $1.1 million related to the Company's office lease asset as the business activities related to corporate are not considered to be a part of the operating segments.