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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 10-Q

(Mark One)

x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2015

o         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIRES EXCHANGE ACT OF 1934

For the transition period from                to              

Commission File Number: 001-33190

MCEWEN MINING INC.

(Exact name of registrant as specified in its charter)

150 King Street West, Suite 2800, Toronto, Ontario Canada M5H 1J9

(Address of principal executive offices)  (Zip code)

(866) 441-0690

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See definition of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 273,225,345 shares outstanding as of May 7, 2015 (and 27,304,829 exchangeable shares).

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MCEWEN MINING INC.

FORM 10-Q

Index

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PART I

Item 1. FINANCIAL STATEMENTS

MCEWEN MINING INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(UNAUDITED)

(in thousands, except per share)

The accompanying notes are an integral part of these consolidated financial statements.

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MCEWEN MINING INC.

CONSOLIDATED BALANCE SHEETS

(in thousands)

Commitments and Contingencies (note 13)

Subsequent Events (note 14)

The accompanying notes are an integral part of these consolidated financial statements.

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MCEWEN MINING INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(UNAUDITED)

(in thousands)

The accompanying notes are an integral part of these consolidated financial statements.

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MCEWEN MINING INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

The accompanying notes are an integral part of these consolidated financial statements.

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MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2015

(tabular amounts are in thousands of U.S. dollars, unless otherwise indicated)

NOTE 1  NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Basis of Presentation

McEwen Mining Inc. (the “Company” or “McEwen Mining”) was organized under the laws of the State of Colorado on July 24, 1979.  Since inception, the Company has been engaged in the exploration for, development of, production and sale of gold and silver.

The Company operates in Argentina, Mexico, and the United States.  It owns a 49% interest in Minera Santa Cruz S.A. (“MSC”), owner and operator of the producing San José mine in Santa Cruz, Argentina, which is controlled by the majority owner of the joint venture, Hochschild Mining plc (‘‘Hochschild’’). It also owns the El Gallo 1 mine in Sinaloa, Mexico. In addition to its operating properties, the Company also holds interests in numerous exploration stage properties and projects in Argentina, Mexico and the United States.

The interim consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).  Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) has been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures included are adequate to make the information presented not misleading.

In management’s opinion, the unaudited Consolidated Statements of Operations and Comprehensive Income for the three months ended March 31, 2015 and 2014, the Consolidated Balance Sheets as at March 31, 2015 (unaudited) and December 31, 2014, the unaudited Consolidated Statement of Changes in Shareholders’ Equity for the three months ended March 31, 2015 and 2014, and the unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014, contained herein, reflect all adjustments, consisting solely of normal recurring items, which are necessary for the fair presentation of the Company’s financial position, results of operations and cash flows on a basis consistent with that of the Company’s prior audited annual consolidated financial statements.  However, the results of operations for the interim periods may not be indicative of results to be expected for the full fiscal year.  Therefore these financial statements should be read in conjunction with the audited financial statements and notes thereto and summary of significant accounting policies included in the Company’s Form 10-K for the year ended December 31, 2014.  Except as noted below, there have been no material changes in the footnotes from those accompanying the audited consolidated financial statements contained in the Company’s Form 10-K for the year ended December 31, 2014. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.  All inter-company accounts and transactions have been eliminated.

Recently Adopted Accounting Pronouncements

Presentation of Financial Statements and Property, Plant and Equipment — Reporting Discontinued Operations and Disclosures of Components of an Entity:  In April 2014, ASC 205 and ASC 360 guidance was amended to change the requirements for reporting discontinued operations in ASC 205-20. A disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations only if the disposal represents a strategic shift that has, or will have, a major effect on an entity’s operations and financial results when any of the following occurs: (1) the component of an entity or group of components of an entity meets the criteria in ASC 205-20-45-1E to be classified as held for sale; (2) the component of an entity or group of components of an entity is disposed of by sale; or (3) the component of an entity or group of components of an entity is disposed of other than by sale. The update is effective for the Company’s fiscal year beginning January 1, 2015. The new guidance did not have an impact on the Company’s consolidated financial statements.

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MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2015

(tabular amounts are in thousands of U.S. dollars, unless otherwise indicated)

Recently Issued Accounting Pronouncements

Presentation of Financial Statements — Going Concern — Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern: In August 2014, Accounting Standards Codification (“ASC”) 205-40 guidance was amended to provide guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this update shall be effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016, with early application permitted. The Company is evaluating the effect that the updated standard will have on its consolidated financial statements.

Revenue from Contracts with Customers: In May 2014, ASC 606 was issued related to revenue from contracts with customers. Under this guidance, revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The updated standard will replace most existing revenue recognition guidance under GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. Early adoption is not permitted. The standard will be effective for fiscal year beginning after December 15, 2016, including interim reporting periods within that year. The Company is evaluating the effect that the updated standard will have on its consolidated financial statements.

NOTE 2   INVESTMENTS

During the quarter ended March 31, 2015, the Company invested $1.2 million of its cash in marketable equity securities.  Total cost of these marketable equity securities was $1.6 million (December 31, 2014 - $0.4 million). These securities are classified as available-for-sale securities and are valued at fair value. Any resulting gain or loss is recorded to an unrealized income and loss account (accumulated other comprehensive income (loss)) that is reported as a separate line item in the shareholders’ equity section of the balance sheet. The gains and losses for available-for-sale securities are not reported on the statement of operations until the securities are sold or if there is an other than temporary decline in fair value below cost. As at March 31, 2015, the fair value of these securities was $1.9 million, and as a result the Company recorded a loss, net of tax, of $0.2 million to other comprehensive income.

NOTE 3   INVENTORIES

Inventories at March 31, 2015 and December 31, 2014 consist of the following:

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MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2015

(tabular amounts are in thousands of U.S. dollars, unless otherwise indicated)

NOTE 4   ASSET RETIREMENT OBLIGATIONS

The Company is responsible for reclamation of certain past and future disturbances at its properties.  The two most significant properties subject to these obligations are the historic Tonkin property in Nevada and the El Gallo 1 mine in Mexico.

A reconciliation of the Company’s asset retirement obligations for the three months ended March 31, 2015 and for the year ended December 31, 2014 is as follows:

As at March 31, 2015, the current portion of the asset retirement obligation was $2.5 million (December 31, 2014 - $2.4 million).

Amortization of Mineral Property Interests and Asset Retirement Costs

The definition of proven and probable reserves is set forth in SEC Industry Guide 7. If proven and probable reserves exist at the Company’s properties, the relevant capitalized mineral property interests and asset retirement costs are to be charged to expense based on the units of production method upon commencement of production. Since the Company has not completed feasibility or other studies sufficient to characterize the mineralized material at El Gallo 1 as proven or probable reserves under the SEC definition, the amortization of the capitalized mineral property interests and asset retirement costs are charged to expense based on the straight-line method over the estimated useful life of the mine. For the three months ended March 31, 2015, the Company recorded $0.3 million (March 31, 2014 — $0.3 million) of amortization expense related to El Gallo 1, which is included in Production Costs Applicable to Sales in the Statement of Operations and Comprehensive Income for the three months ended March 31, 2015, of which $0.1 million (2014 — $0.1 million) related to the amortization of capitalized asset retirement costs.

NOTE 5   INVESTMENT IN MINERA SANTA CRUZ S.A. (“MSC”) — SAN JOSÉ MINE

The Company’s 49% attributable share of operations from its investment in MSC was income of $0.6 million for the three months ended March 31, 2015 (March 31, 2014 - $3.0 million). These amounts are inclusive of 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 Argentine 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. As a devaluation of the Argentine peso relative to the U.S. dollar results in a recovery of deferred income taxes, the impact has been an increase to the Company’s income from its investment in MSC for the three months ended March 31, 2015.

During the three months ended March 31, 2015, the Company did not receive dividends from MSC, whereas a $3.9 million was received during the same period in 2014.

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MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2015

(tabular amounts are in thousands of U.S. dollars, unless otherwise indicated)

NOTE 5   INVESTMENT IN MINERA SANTA CRUZ S.A. (“MSC”) — SAN JOSÉ MINE (continued)

Changes in the Company’s investment in MSC for the three months ended March 31, 2015 and year ended December 31, 2014 are as follows:

A summary of the operating results from MSC for the three months ended March 31, 2015 and 2014, is as follows:

As at March 31, 2015, MSC had current assets of $106.3 million, total assets of $525.8 million, current liabilities of $51.9 million and total liabilities of $163.8 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, net of impairment charges recorded in the second quarter of 2013 and fourth quarter of 2014. Excluding the fair value increments from the purchase price allocation, net of impairment charges, MSC had current assets of $105 million, total assets of $302.1 million, current liabilities of $55.4 million, and total liabilities of $92 million as at March 31, 2015.

NOTE 6   SHAREHOLDERS’ EQUITY

During the three months ended March 31, 2015, 0.9 million exchangeable shares were converted into common stock.

During the three months ended March 31, 2015, the Company issued 430,295 shares of common stock under an agreement with one of its mining contractors to settle parts of its accounts payable for services rendered above a defined tonnage threshold. The fair value of the common stock at the time of issuance was $0.4 million. The agreement with this mining contractor expired and was renegotiated during the quarter. Under the revised agreement, the Company can no longer make share payments and instead is required to pay in cash.

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MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2015

(tabular amounts are in thousands of U.S. dollars, unless otherwise indicated)

NOTE 7   STOCK-BASED COMPENSATION

During the three months ended March 31, 2015, the Company granted stock options to certain employees for an aggregate of 0.1 million shares of common stock at a weighted average exercise price of $1.06 per share. The options vest equally over a three-year period if the individual remains affiliated with the Company (subject to acceleration of vesting in certain events) and are exercisable for a period of 5 years from the date of issue. During the comparative period in 2014, no stock options were granted to employees or directors. The principal assumptions used in applying the Black-Scholes option pricing model for these awards were as follows:

During the three months ended March 31, 2015, the Company recorded stock option expense of $0.4 million. This compares to $0.4 million for the three months ended March 31, 2014.

NOTE 8   INCOME TAXES

The Company’s income tax expense differs from the amount computed by applying the U.S. federal and state statutory corporate income tax rate of 35% to losses before taxes primarily as a result of valuation allowances being applied to losses and due to changes in the deferred tax liability associated with mineral property interests acquired in the Minera Andes acquisition. While the Company recorded net income during the quarter in Mexico, it does not expect to incur current income taxes payable given the sufficient availability of loss carryforwards.  This deferred tax liability is impacted by fluctuations in the foreign exchange rate between the Argentine peso and U.S. dollar. For the three months ended March 31, 2015, the Company recorded an income tax recovery of $1.2 million as a result of the Argentine peso devaluation, compared to $18.9 million recorded for the three months ended March 31, 2014.

NOTE 9  NET INCOME PER SHARE

Basic net income per share is computed by dividing the net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed similarly except that the weighted average number of common shares is increased to reflect all dilutive instruments.

Below is a reconciliation of the basic and diluted weighted average number of common shares and the computations for basic income per share for the three months ended March 31, 2015 and 2014:

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MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2015

(tabular amounts are in thousands of U.S. dollars, unless otherwise indicated)

For the three months ended March 31, 2015, options to purchase 5 million shares of common stock outstanding at March 31, 2015 (March 31, 2014 — 1.5 million) at an average exercise price of $3.32 per share (March 31, 2014 — $5.95) were not included in the computation of diluted weighted average shares because their exercise price exceeded the average price of the Company’s common stock for three months ended March 31, 2015 and 2014, respectively.

NOTE 10   RELATED PARTY TRANSACTIONS

For the three months ended March 31, 2015, the Company incurred and paid $16,137 (March 31, 2014 - $20,480) to an entity affiliated with the Company’s Chairman and Chief Executive Officer for the use of an aircraft.

NOTE 11   SEGMENTED INFORMATION

McEwen Mining is a mining and minerals exploration, development and production company focused on precious metals in Argentina, Mexico and the United States.  The Company identifies its reportable segments as those consolidated operations that are currently engaged in the exploration for and production of precious metals.  Operations not actively engaged in the exploration for, or production of precious metals, are aggregated at the corporate level for segment reporting purposes.

The financial information relating to the Company’s operating segments as of, and for three months ended March 31, 2015 and 2014 is as follows:

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MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2015

(tabular amounts are in thousands of U.S. dollars, unless otherwise indicated)

NOTE 12   FAIR VALUE ACCOUNTING

Fair value accounting establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).  The three levels of the fair value hierarchy are described below:

Level 1                  Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2                  Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

Level 3                  Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

Assets and liabilities measured at fair value on a recurring basis

The following table identifies the fair value of the Company’s financial assets and liabilities which are recorded at fair value as reported in the Consolidated Balance Sheets at March 31, 2015 and December 31, 2014, by level within the fair value hierarchy.  As required by accounting guidance, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The Company’s investments are marketable equity securities which are exchange traded, are valued using quoted market prices in active markets and are classified within Level 1 of the fair value hierarchy. The fair value of the investments is calculated as the quoted market price of the marketable equity security multiplied by the number of shares held by the Company.

As at December 31, 2014, accounts payable included an accrual of $0.4 million for the fair value of accounts payable that were required to be settled with approximately 319,640 shares of the Company’s common stock.  The Company settled this payable during the three month period ended in March 31, 2015 as discussed in Note 6, Shareholders’ Equity.

The fair value of other financial assets and liabilities were assumed to approximate their carrying values due to their short-term nature and historically negligible credit losses.

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MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2015

(tabular amounts are in thousands of U.S. dollars, unless otherwise indicated)

NOTE 13   COMMITMENTS AND CONTINGENCIES

Surety Bonds

As part of its ongoing business and operations, the Company is required to provide bonding for its environmental reclamation obligations in the United States, as discussed in Note 4, Asset Retirement Obligations. These surety bonds are available for draw down in the event the Company does not perform its reclamation obligations. When the specific reclamation requirements are met, the beneficiary of the surety bonds will cancel and/or return the instrument to the issuing entity. The Company believes it is in compliance with all applicable bonding obligations and will be able to satisfy future bonding requirements, through existing or alternative means, as they arise. As at March 31, 2015, there were $4.8 million of outstanding surety bonds (December 31, 2014 - $4.8 million). The annual financing fees are 1.5% of the value of the surety bonds, with a required initial deposit of 10% ($0.5 million), which is included in Other Assets in the Consolidated Balance Sheet.

NOTE 14   SUBSEQUENT EVENTS

On April 7, 2015, the Company reported approximately 7,000 ounces of gold equivalent in concentrate was stolen from its refinery in Mexico. After analysis, it was determined the amount stolen was approximately 6,350 ounces. The estimated cost of the gold equivalent in concentrate was approximately $2.8 million and is included as in-process inventory as at March 31, 2015.  Insurance claim procedures are currently ongoing and the extent of the insurance proceeds to be received is yet to be determined.

On April 17, 2015, the Company entered into a simple line of credit agreement with Banco Nacional de Comercio Exterior (“Banco Nacional”), subject to final registration and administrative procedures, for an amount up to 90,000,000 Mexican pesos (approximately $5.9 million as of March 31, 2015), secured by the Company’s IVA receivable balance. The Company has six months from the date of execution to withdraw funds, with a repayment term of no more than two years from the date of execution. The applicable interest will be the result of the interest rate determined upon the first withdrawal of funds + TIIE (Interbank Equilibrium Interest Rate in Mexico), payable quarterly. Upon signing the agreement, the Company paid a 1% commission on the total value of the simple credit agreement to Banco Nacional.  No withdrawal has been made as of the date of this filing.

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Item 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In the following discussion, “McEwen Mining”, the “Company”, “we”, “our”, and “us” refers to McEwen Mining Inc. and as the context requires, its consolidated subsidiaries.

The following discussion updates our plan of operation as of May 8, 2015 for the foreseeable future. It also analyzes our financial condition at March 31, 2015 and compares it to our financial condition at December 31, 2014. Finally, the discussion analyzes our results of our operations for the three months ended March 31, 2015, and compares those results to the three months ended March 31, 2014.  With regard to properties or projects that are not in production, we provide some details of our plan of operation. We suggest that you read this discussion in conjunction with MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS contained in our annual report on Form 10-K for the year ended December 31, 2014.

The discussion also presents certain Non-GAAP financial performance measures, such as earnings from mining operations, adjusted net loss, total cash costs, total cash cost per ounce, all-in sustaining costs, all-in sustaining cost per ounce, all-in costs, all-in cost per ounce, and average realized price per ounce, that are important to management in its evaluation of our operating results and which are used by management to compare our performance to what we perceive to be peer group mining companies and relied on as part of management’s decision-making process. Management believes these measures may also be important to investors in evaluating our performance. For a detailed description of each of the Non-GAAP financial performance measures and certain limitations inherent in such measures, please see the discussion under “Non-GAAP Financial Performance Measures”, on page 27.

Reliability of Information: Minera Santa Cruz S.A. (“MSC”), the owner of the San José mine, is responsible for and has supplied to us all reported results from the San José mine.  The financial and technical information contained herein is, with few exceptions as noted, based entirely on information provided to us by MSC.  Our joint venture partner, a subsidiary of Hochschild Mining plc, and its affiliates other than MSC do not accept responsibility for the use of project data or the adequacy or accuracy of this information.

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CAUTIONARY NOTE TO UNITED STATES INVESTORS — INFORMATION CONCERNING PREPARATION OF RESOURCE AND RESERVE ESTIMATES

McEwen Mining Inc. is required to prepare reports under the Canadian Securities Administrators’ National Instrument 43-101 “Standards of Disclosure for Mineral Projects” (“NI 43-101”), under the Canadian securities laws because we are listed on the Toronto Stock Exchange (“TSX”) and subject to Canadian securities laws. These standards are materially different from the standards generally permitted in reports filed with SEC.

Definitions of terms under NI 43-101 differ materially from the definitions of those and related terms in Industry Guide 7 (“Industry Guide 7”) promulgated by the SEC.  Under U.S. standards, mineralization may not be classified as a “reserve” unless a determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made.  Under Industry Guide 7 standards, a “Final” or “Bankable” feasibility study or other report is required to report reserves, the three-year historical average precious metals prices are used in any reserve or cash flow analysis to designate reserves and the primary environmental analysis or report must be filed with the appropriate government authority.

One consequence of these differences is that “reserves” calculated in accordance with Canadian standards may not be “reserves” under Industry Guide 7 standards.  U.S. investors should be aware that McEwen Mining’s properties located in Argentina (with the exception of the San José mine), Mexico and the United States do not have “reserves” as defined by Industry Guide 7 and are cautioned not to assume that any part or all of the disclosed mineralized material will be confirmed or converted into Industry Guide 7 compliant “reserves”.

Further, since we have not established reserves on some of our properties as defined in Industry Guide 7, we have in the past and will continue to expense substantially all design, construction and development costs with regard to those properties, even though these expenditures are expected to have a future economic benefit in excess of one year. Only certain types of property and equipment which have alternative uses or significant salvage value may be capitalized without proven and probable reserves. We also expense our asset retirement obligations on those properties. Companies that have reserves under Industry Guide 7 typically capitalize these costs, and subsequently depreciate or amortize them on a units-of-production basis as reserves are mined. Unlike these other companies, we depreciate or amortize any capitalized costs on a straight-line basis based on the estimated remaining useful life of the mine, as determined by our internal mine plans. As a result of these and other differences, our financial statements may not be comparable to the financial statements of mining companies that have established reserves.

Under NI 43-101, we report measured, indicated and inferred resources, which are measurements that are generally not permitted in filings made with the SEC. The estimation of measured and indicated resources involve greater uncertainty as to their existence and economic feasibility than the estimation of proven and probable reserves under Industry Guide 7. U.S. investors are cautioned not to assume that any part of measured or indicated resources will ever be converted into economically mineable reserves. The estimation of inferred resources involves far greater uncertainty as to their existence and economic viability than the estimation of other categories of resources. It cannot be assumed that all or any part of inferred resources will ever be upgraded to a higher category. Therefore, U.S. investors are also cautioned not to assume that all or any part of inferred resources exist, or that they can be mined legally or economically.

Canadian regulations permit the disclosure of resources in terms of “contained ounces” provided that the tonnes and grade for each resource are also disclosed; however, the SEC only permits issuers to report “mineralized material” in tonnage and average grade without reference to contained ounces. Under U.S. regulations, the tonnage and average grade sometimes disclosed by us would be characterized as mineralized material. We provide such disclosure about our properties to allow a means of comparing our projects to those of other companies in the mining industry, many of which are Canadian and report pursuant to NI 43-101, and to comply with applicable disclosure requirements.

We also note that drill results are not indicative of mineralized material in other areas where we have mining interests. Furthermore, mineralized material identified on our properties does not and may never have demonstrated economic or legal viability.

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Overview

McEwen Mining Inc. was organized under the laws of the State of Colorado on July 24, 1979.  Since inception, the Company has been engaged in the exploration for, production of, and sale of gold and silver.  Our principal assets consist of our 49% interest in the San José mine in Santa Cruz, Argentina; the El Gallo Complex in Sinaloa, Mexico; the Gold Bar Project in Nevada, United States; the Los Azules Project in San Juan, Argentina, and a large portfolio of exploration properties in Argentina, Nevada and Mexico.

In this report, “Au” represents gold; “Ag” represents silver; “oz” represents troy ounce; “gpt” represents grams per metric tonne; “ft.” represents feet; “m” represents meter; “km” represents kilometer; “sq.” represents square; and C$ refers to Canadian dollars. All of our financial information is reported in United States (U.S.) dollars, unless otherwise noted.

Selected Financial and Operating Results

The following table summarizes selected financial and operating results of our Company for the three months ended March 31, 2015 and 2014:

Selected Financial and Operating Results

(1)         Includes portion attributable to us from our 49% interest in the San José mine.

(2)         Silver production is presented as a gold equivalent. Gold equivalent ounces calculations are based on prevailing spot prices at the beginning of the year. The silver to gold ratio used for 2014 was 60:1. For 2015, the silver to gold ratio has been set to 75:1.

(3)         Earnings from mining operations, adjusted net loss, total cash costs, all-in sustaining costs, all-in costs, and average realized prices are non-GAAP financial performance measures with no standardized definition under U.S. GAAP. See “Non-GAAP Financial Performance Measures”, end of page 27 for additional information, including definitions of these terms.

Operating and Financial Highlights

·                  Gold equivalent production in the first quarter of 2015 totaled 33,434 ounces, which includes 18,043 gold equivalent ounces attributable to us from our 49% interest in the San José mine in Argentina, and 15,391 gold equivalent ounces from the El Gallo 1 mine in Mexico. Production increased year-over-year due to higher grades and better recoveries at the El Gallo 1 mine.

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·                  Total cash costs, all-in sustaining costs and all-in costs per gold equivalent ounce sold for the first quarter of 2015 for all of our operations on a consolidated basis totaled $674, $948 and $1,044 per ounce, respectively. Total cash costs and all-in sustaining costs at the San José mine for the first quarter of 2015 totaled $888 and $1,127 per gold equivalent ounce, respectively. Total cash costs and all-in sustaining cash costs at our El Gallo 1 mine totaled $460 and $611 per gold equivalent ounce, respectively. The year-over-year decrease in total cash costs per gold equivalent ounce reflects higher grades of ore processed, particularly at El Gallo 1 mine.  All-in sustaining and all-in costs per gold equivalent ounce also reflect the impact of a greater number of ounces sold at the El Gallo 1, net of a slight decrease in ounces sold at the San José mine over which costs are spread.

·                  Gold equivalent ounces sold in the first quarter of 2015 totaled 37,682 ounces, which includes 18,865 gold equivalent ounces attributable to us from our 49% interest in the San José mine, and 18,817 gold equivalent ounces from El Gallo 1. The year-over-year increase in ounces sold reflects the increase in production at the El Gallo 1 mine.

·                  The average realized price for all of our operations on a consolidated basis in the first quarter of 2015 was $1,213 and $17.02 per ounce of gold and silver sold, respectively. The decrease year-over-year reflects the downward trend of gold and silver prices that has continued through the first quarter of 2015. Average realized prices are presented net of adjustments of provisionally priced sales of concentrates.

·                  We maintain our original production guidance of 50,000 gold equivalent ounces for the year 2015, despite the theft of 6,350 ounces of gold equivalent reported in April 2015. The target guidance is expected to be met as a result of mining higher-grade ore. With production guidance for 2015 at MSC also remaining unchanged, consolidated production guidance remains at an estimated range of 135,000 to 140,000 gold equivalent ounces.

·                  We reported a consolidated net income of $6.0 million, or $0.02 per share for the first quarter of 2015, compared to net income of $17.9 million, or $0.06 per share for the comparable period in 2014. Net income for the first quarter of 2015 reflects lower operating costs due to higher grades and improved efficiencies in the tonnes produces at the El Gallo 1 mine, however realized gold and silver prices decreased by % and % respectively, compared to the first quarter of 2014.

·                  Our adjusted net income for the quarter ended March 31, 2015, which removes the impact of the foreign currency gains and income tax recoveries, both resulting from the devaluation of the Argentine peso relative to the U.S. dollar, was $1.9 million, or $0.01 per share. This compares to an adjusted net loss of $(6.2) million or $(0.02) per share, for the comparable period in 2014.

·                  Our consolidated earnings from mining operations for the quarter ended March 31, 2015 was $17.2 million, compared to earnings of $11.4 million for the comparable period in 2014.

·                 We ended the quarter with $19.3 million in cash, investments and precious metals and no bank debt.

Development and Exploration Activities

El Gallo, Sinaloa, Mexico

El Gallo 1

We completed the construction of the expansion of El Gallo 1 in order to increase capacity from 3,000 tonnes per day to 4,500 tonnes per day in April 2014. Commissioning commenced during the second quarter of 2014, with the expansion fully operational by the fourth quarter of 2014.

Based on a review of our current heap leach design, we have sufficient capacity for ore deliveries until December 2016. We have adjusted our initial budget for sustaining capital and capital expenditures from $3.0 million to approximately $1.7 million, to reflect this expansion deferral.

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El Gallo 2

A final decision to proceed with the construction of El Gallo 2 has not been made. Any decision to proceed would be based on silver price expectations and securing financing on terms that are more favorable than those that were available to us at the time of filing this report. In order to prepare for a possible construction decision in the future, we have been evaluating possible debt financing alternatives and advancing the construction of the ball mill, which is the longest lead time item associated with the mine. Components of the ball mill are now substantially complete. Pending a decision to proceed with the development of El Gallo 2, we are storing the mill components at the manufacturer’s facilities. We expect to disburse the final payment of $1.0 million for the ball mill in the second quarter of 2015.

We are also conducting cost-saving studies to identify opportunities that would allow us to reduce the initial capital investment required while minimizing the impact on potential production. Potential changes include reducing the number of leach tanks and transformers, building a smaller process plant and refinery, and using modular crushers. The El Gallo 2 Feasibility Study, which provided an estimate of $180 million for initial capital expenditures, has not been updated to reflect these possible changes.

For the three months ended March 31, 2015, we spent $0.2 million on mine development costs at El Gallo 2. Expenditures for the remainder of 2015 are expected to total approximately $1.5 million, primarily consisting of the $1.0 million final payment for the construction of the ball mill and related storage costs.

Exploration

El Gallo, Sinaloa, Mexico

As of March 31, 2015, two core drills were operating, and approximately $1.3 million was incurred in exploration expenditures during the quarter.  For 2015, we have budgeted $5.5 million in total exploration costs at El Gallo, which includes drilling of approximately 88,580 ft. (27,000 m). The exploration program will be focused on core drilling, blast hole drilling and surface mapping, which will include rock and soil sampling.

Gold Bar Project, Nevada, U.S.

Gold Bar is located primarily on public lands managed by the BLM. We submitted our Plan of Operations (“Plan”) permit application during the fourth quarter of 2013. The Plan was determined complete and the BLM has determined that an Environmental Impact Statement (“EIS”) is necessary to fulfill the requirements under the National Environmental Policy Act. Upon completion of the EIS, the BLM will be able to proceed with the approval determination of the Plan. A third-party consulting firm has been contracted to assist the BLM in the preparation of an EIS for the Gold Bar project. Due to delays in some of the administrative procedures at the BLM Mount Lewis Field office, final permit approval is expected for the third quarter of 2016.

For 2015, we have budgeted $1.4 million for the Gold Bar project, primarily for the advancement of the EIS, as well as a drill program of approximately 10,000 ft. (3,050 m).  As of March 31, 2015, expenditures on the Gold Bar project totaled $0.1 million for the period.