EQUITY METHOD INVESTMENTS

6 Months Ended

Jun. 30, 2024

EQUITY METHOD INVESTMENTS

EQUITY METHOD INVESTMENTS

NOTE 9 EQUITY METHOD INVESTMENTS

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 investments in McEwen Copper and 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 US GAAP.

Equity method investment in McEwen Copper

A summary of the operating results for McEwen Copper for the three and six months ended June 30, 2024, is as follows:

		Three months ended		Six months ended
		June 30, 2024		June 30, 2024
McEwen Copper (100%)
Advanced projects	$	(37,547)	$	(85,730)
Other expenses		(1,835)		(3,851)
Foreign exchange income (loss)		310		(3,682)
Interest and other income(1)		3,841		20,295
Loss before tax	$	(35,231)	$	(72,968)
Current and deferred taxes		—		—
Net loss	$	(35,231)	$	(72,968)
Portion attributable to McEwen Mining (47.7%)
Net loss on investment in McEwen Copper	$	(16,816)	$	(34,828)

(1) Interest and other income include gains on marketable securities and other finance-related income.

Changes in the Company’s investment in McEwen Copper for the six months ended June 30, 2024, and for the year ended December 31, 2023, are as follows:

	Six months ended		Year ended
	June 30, 2024		December 31, 2023
Investment, beginning of period	$	326,147	$	—
Deconsolidation of McEwen Copper		—		383,968
Attributable net loss from McEwen Copper		(34,828)		(57,821)
Investment, end of period	$	291,319	$	326,147

A summary of the key assets and liabilities of McEwen Copper as at June 30, 2024, before and after adjustments for fair value increments arising from the purchase price allocation, is as follows:

	Balance excluding				Balance including
As at June 30, 2024	fair value increments		Adjustments		fair value increments
Current assets	$	20,423	$	—	$	20,423
Total assets	$	203,671	$	262,494	$	466,165
Current liabilities	$	(21,938)	$	—	$	(21,938)
Total liabilities	$	(22,188)	$	—	$	(22,188)

Equity method investment in MSC

A summary of the operating results for MSC for the three and six months ended June 30, 2024, and 2023 is as follows:

	Three months ended June 30,				Six months ended June 30,
	2024		2023		2024		2023
Minera Santa Cruz S.A. (100%)
Revenue from gold and silver sales	$	74,348	$	67,712	$	140,274	$	113,452
Production costs applicable to sales		(48,220)		(46,931)		(96,105)		(88,055)
Depreciation and depletion		(14,723)		(14,363)		(23,649)		(22,593)
Gross profit		11,405		6,418		20,520		2,804
Exploration		(3,018)		(2,846)		(5,122)		(4,798)
Other expense(1)		(2,451)		(7,911)		(950)		(11,145)
Income (loss) before tax	$	5,936	$	(4,339)	$	14,448	$	(13,139)
Current and deferred tax recovery (expense)		4,514		4,828		(333)		8,143
Net income (loss)	$	10,450	$	489	$	14,115	$	(4,996)
Portion attributable to McEwen Mining Inc. (49%)
Net income (loss)	$	5,120	$	239	$	6,918	$	(2,448)
Amortization of fair value increments		(667)		(1,269)		(1,377)		(2,153)
Income tax recovery		248		116		438		226
Income (loss) from investment in MSC, net of amortization	$	4,701	$	(914)	$	5,979	$	(4,375)

(1) Other expenses include foreign exchange gains and losses, accretion of asset retirement obligations and other finance-related expenses.

The income or loss from the investment in MSC attributable to the Company includes amortization of the fair value increments arising from the initial purchase price allocation and related income tax recovery. The income tax recovery reflects the impact of the devaluation of the Argentine peso against the U.S. dollar on the peso-denominated deferred tax liability recognized at the time of acquisition, as well as income tax rate changes over the periods.

Changes in the Company’s investment in MSC for the six months ended June 30, 2024, and for the year ended December 31, 2023, are as follows:

	Six months ended		Year ended
	June 30, 2024		December 31, 2023
Investment, beginning of period	$	93,218	$	93,451
Attributable net income from MSC		6,918		4,157
Amortization of fair value increments		(1,377)		(4,612)
Income tax recovery		438		517
Dividend distribution received		(383)		(295)
Investment, end of period	$	98,814	$	93,218

A summary of the key assets and liabilities of MSC as at June 30, 2024 before and after adjustments for fair value increments arising from the purchase price allocation, are as follows:

	Balance excluding				Balance including
As at June 30, 2024	fair value increments		Adjustments		fair value increments
Current assets	$	117,716	$	1,005	$	118,721
Total assets	$	210,900	$	68,970	$	279,870
Current liabilities	$	(42,792)	$	—	$	(42,792)
Total liabilities	$	(78,945)	$	654	$	(78,291)