As of 11AM on August 25 the stock for Tahoe Resources Inc. (TSX:THO)(NYSE:TAHO) had fallen 19% as the company reported it learned through unconfirmed sources that the Guatemalan Constitutional Court upheld a lower court’s decision to provisionally suspend the mining license of Tahoe’s subsidiary, Minera San Rafael. The decision was in response to a lawsuit filed by human rights organization CALAS against the Guatemalan Ministry of Energy and Mines. The group alleges that indigenous groups’ rights were violated when the permit was granted.
The news first hit on July 6 and battered the stock price by 33% the same day. The company was forced to walk back on its 2017 outlook because of the lost production at the mine. The mine in question produced $200 million in revenue in the second quarter of 2017, including the production of 4 million ounces of silver and 110,000 ounces of gold. The stock has now fallen 56% in 2017 as of August 25. The share price was already facing volatility in the face of falling precious metals prices since the latter half of 2016.
Top government officials in Guatemala have challenged the decision as it stands to have a major economic impact. Critics claim the suspension has already damaged the lives of thousands of workers and families. It is safe to say that even after this decision this saga is far from over, but investors would be wise to steer clear of Tahoe Resources as this legal battle continues.
