EQUITY METHOD INVESTMENTS

12 Months Ended

Dec. 31, 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

In October 2023, McEwen Copper closed on financings with FCA Argentina S.A., an Argentinian subsidiary of Stellantis N.V., and Nuton LLC, a Rio Tinto Venture (“Nuton”), issuing 1,900,000 common shares at ARS 42 billion and 152,615 common shares at $4.0 million, respectively. Additionally, the Company sold 232,000 common shares of McEwen Copper to Nuton for an aggregate purchase price of $6.0 million. Subsequent to the closing of the transactions above, the Company’s ownership decreased to 47.7%. As a result, the Company concluded it no longer controlled McEwen Copper and, accordingly, deconsolidated the entity with the effective date of October 10, 2023.

As a result of the deconsolidation, the carrying amount of the various assets, liabilities and non-controlling interest of McEwen Copper were derecognized. The material amounts deconsolidated were $45.7 million of cash and cash equivalents, $44.2 million of investments, $171.9 million of mineral property interests and plant and equipment, $7.9 million of accounts payable and accrued liabilities, and $86.8 million of non-controlling interest. There were no other material impacts to the Consolidated Balance Sheets resulting from deconsolidation of McEwen Copper.

The remaining interest of 47.7% in McEwen Copper was accounted for under the equity method. The initial carrying amount of the equity investment in McEwen Copper of $384.0 million was determined based on recent private placements of the common shares of McEwen Copper. Due to the temporary differences between the financial reporting basis of liabilities and assets of McEwen Copper and the related tax basis for such liabilities and assets, the Company also recognized $37.8 million of deferred tax liability on its equity investments in McEwen Copper.

The Company recognized a gain on deconsolidation of approximately $222.2 million, which is included in other income on the Statement of Operations. McEwen Copper remains a related party to the Company after deconsolidation.

On July 12, 2024, the Company and Mr. McEwen participated in the first tranche of private placement financing for McEwen Copper, purchasing 466,667 and 166,667 common shares, respectively, for a total investment of $14.0 million and $5.0 million, respectively. Following this transaction, the Company's ownership in McEwen Copper increased from 47.7% to 48.3%. Subsequently, on October 24, 2024, McEwen Copper completed the second tranche of its offering, raising $37.0 million, which included a $35.0 million investment from Nuton. As a result, the Company's ownership in McEwen Copper decreased from 48.3% to 46.4%. The decrease in ownership was accounted for as a notional disposition of shares, resulting in a $5.8 million dilution gain recognized in earnings.

A summary of the operating results for McEwen Copper for the year ended December 31, 2024, and for the period from October 10, 2023 to December 31, 2023, is as follows:

	Period ended December 31,
	2024		2023
McEwen Copper (100%)
Advanced projects	$	(114,544)	$	(36,475)
Other expenses		(6,196)		(4,684)
Foreign exchange gain (loss)		2,631		(99,338)
Interest and other income(1)		19,130		19,356
Loss before tax	$	(98,979)	$	(121,141)
Current and deferred taxes		—		—
Net loss	$	(98,979)	$	(121,141)
Portion attributable to McEwen Mining Inc.
Loss from investment in McEwen Copper	$	(46,977)	$	(57,821)

(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 years ended December 31, 2024 and 2023, are as follows:

	Year ended December 31,
	2024		2023
Investment, beginning of year	$	326,147	$	—
Additional investment in McEwen Copper		14,000		—
Dilution gain		5,777		—
Deconsolidation of McEwen Copper		—		383,968
Attributable net loss from McEwen Copper		(46,977)		(57,821)
Investment, end of year	$	298,947	$	326,147

A summary of the key assets and liabilities of McEwen Copper as at December 31, 2024 and 2023, is as follows:

As at	December 31, 2024		December 31, 2023
Current assets	$	34,067	$	104,195
Total assets	$	226,329	$	281,353
Current liabilities	$	(14,656)	$	(23,988)
Total liabilities	$	(14,856)	$	(24,287)

As at December 31, 2024, the Company's investment in McEwen Copper exceeded its proportionate share of the underlying net assets by $199.7 million. This basis difference is attributable to equity-method goodwill and not amortized.

Equity Method Investment in MSC

A summary of the operating results of MSC for the years ended December 31, 2024, 2023, and 2022, is as follows:

	Year ended December 31,
	2024		2023			2022
Minera Santa Cruz S.A. (100%)
Revenue from gold and silver sales	$	310,411	$	254,926	$	254,698
Production costs applicable to sales		(215,065)		(177,234)		(182,195)
Depreciation and depletion		(51,188)		(58,935)		(32,200)
Gross profit		44,158		18,757		40,303
Exploration		(11,257)		(9,346)		(8,946)
Other expense(1)		(1,717)		(3,977)		(19,715)
Net income before tax	$	31,184	$	5,434	$	11,642
Current and deferred tax (expense) recovery		(6,548)		3,051		1,221
Net income	$	24,636	$	8,485	$	12,863
Portion attributable to McEwen Mining Inc.
Net income	$	12,072	$	4,157	$	6,303
Amortization of fair value increments		(3,088)		(4,612)		(4,155)
Income tax recovery		37		517		628
Income from investment in MSC, net of amortization	$	9,021	$	62	$	2,776

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

The income from 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 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 years.

Changes in the Company’s investment in MSC for the years ended December 31, 2024 and 2023, are as follows:

	Year ended December 31,
	2024		2023
Investment, beginning of year	$	93,218	$	93,451
Attributable net income from MSC		12,072		4,157
Amortization of fair value increments		(3,088)		(4,612)
Income tax recovery		37		517
Dividend distribution received		(385)		(295)
Investment, end of year	$	101,854	$	93,218

A summary of the key assets and liabilities of MSC as at December 31, 2024 and 2023, is as follows:

As at	December 31, 2024		December 31, 2023
Current assets	$	144,327	$	101,572
Total assets	$	233,003	$	196,617
Current liabilities	$	(57,373)	$	(44,785)
Total liabilities	$	(89,594)	$	(77,742)

As at December 31, 2024, the Company's investment in MSC exceeded its proportionate share of the underlying net assets by $31.6 million. This basis difference is primarily attributable to mineral property interests and amortized on a unit of production basis.