Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Shares in Latin America-focused Tahoe Resources (TSX:THO)(NYSE:TAHO) collapsed Friday after a Guatemalan court upheld the suspension of the company’s license to operate Escobal, the world’s third largest silver mine.
The Canadian miner said the court decision responds to an appeal filed by its Guatemalan subsidiary, Minera San Rafael, in an action brought by the anti-mining group, CALAS, against the country’s Ministry of Energy and Mines in May.
The organization alleged Tahoe violated the local indigenous people’s right of consultation in advance of granting the Escobal mining license to Tahoe’s local unit.
Originally, Tahoe was prepared to face a three-month mine suspension, period during which 5.1 million ounces of silver production were expected to be deferred, about $10 million lost, not to mention the fact the company would have to review its previously issued guidance.
Tahoe was prepared to face a three-month mine suspension, period during which 5.1 million ounces of silver production would be deferred, and about $10 million in fixed costs would be spent.
Today’s ruling means operations at the Escobal mine will have to remain halted longer than expected. At the same time, the company said the main road to the mine continues to be blocked by protestors and, despite ongoing efforts to solve outstanding issues with locals, the blockage “shows no signs of immediate resolution.”
As a result, the miner said that together with reevaluating its previous multi-year guidance, is now reviewing the financial impact to its longer term capital and exploration programs.
Until operations are resumed, Tahoe will not be able to access the full capacity of the revolving credit facility entered on July 18, 2017, and may continue to be subject to events of default, it said in the statement.
Shares tanked on the news, trading almost 19% lower in Toronto to Cdn$5.58 at 10:15AM ET. In New York, the stock was down more than 19% to 4.42 at 10:30AM local time. Year to date, Tahoe has lost more than 50% of it value.
Escobal, the world’s third largest silver mine, began commercial production in 2014 and recently drove Tahoe’s record cash flow and strong first quarter 2017 results.
The underground operation, located in southeast Guatemala, about 3 km from San Rafael Las Flores, generated last year a record 21.2 million ounces of silver in concentrate.
But it has also been a source of polemic. In June, protesters blocked access to the mine, delaying shipments and supplies. Tahoe is also facing action in Canada’s court system by a group of Guatemalan for alleged violence at a protest outside Escobal in 2013.
The mining licenses of the Tahoe’s Escobal unit as well as the smaller Juan Bosco unit have both been suspended since July 5.
4 Comments
Kenneth Viney
Drug money is not enough for the local elite. Expropriation is next. Worked in Columbia.
donald koontz
that is 90 million to start, now an unknown further charge–short the dying company, whose terror tactics will result in total collapse of the company,, shades of the us food industry in central and south america
Slvrizgold
Dying company? lol. What do they have? $180M in the bank? Several hundred thousand ozs of annual gold production in three other camps at about $1000 AISC? Sure if they don’t get the mine back the stock will re-crater. But that’s all months away. Right now I say hold your nose and buy at the all time low with a tight stop if you’re worried. Maybe next year they sort through this mess and place some “precious persuasion” in the appropriate greasy palms and they restart and it pops in 2 days to $10, and if silver is $25-35 look for a huge quarterly dividend and a it prints $20+. Their gold assets aren’t the best, but at $1500 gold they’ll be terrific. Or Guatamala could become the next Venezuela (if it isn’t already lol) and it craters to $2-3. In any case there’s time for a trade before a resolution, which will take several months minimum according to all the sources.
Dennis Reardon
Greetings.
I am urgently looking for positive investment opportunities and running business partnerships for my investors to invest in Real Estate, Construction, Transportation, Agriculture, Mining and Business Services etc.
My investors have available required investment capital and looking for any investment opportunities to invest in like a silent partner i need serious business investment opportunities with income generating value i am looking more on long term partnership investments which have good profit margin and need additional capital for expansion. Email: [email protected]
I look forward to your response.
Regards.
Dennis Reardon