This is Why Tahoe Resources’ Stock Fell Drastically Today

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Shares of silver-and-gold-focused mining company Tahoe Resources (NYSE:$TAHO) have dropped dramatically — prices have declined more than 32% as of 10:45 A.M. EDT on July 6, 2017. The reason for such a fall can be largely attributed to the license suspension issued by Guatemala’s Supreme Court on the Tahoe’s Escobal mine. The Escobal mine is the world’s third-largest silver mine. As a result, Tahoe could feel a great impact regarding its silver production rate this year.

The suspension followed after anti-mining organization Centro de Accion Legal Ambiental y Social de Guatemala (CALAS) filed a claim against Guatemala’s Ministry of Energy and Mines. In the claim — filed in late May — CALAS said that the Ministry had not properly communicated with local groups surrounding the Escobal mine before granting Tahoe Resources the license to mine there. As a result, the Supreme Court of Guatemala has ordered a temporary suspension of Tahoe’s license to mine at Escobal in order to review these claims.

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In response, Tahoe has said that it will be appealing the decision of a suspension to the Constitutional Court effective immediately. While the rule on the appeal could occur within two to four months, the process as a whole could take up to a year or a year and a half. As well, there are no absolute guarantees that the Constitutional Court will give back Tahoe’s license to mine in Escobal after its appeal.

The mining giant has now included a three-month suspension period in its guidance — estimating a delay in production of about 5.1 million ounces of silver. If the license remains suspended for longer than three months, however, there could be more damage on Tahoe’s production and financial results. This could very well lead to the company lowering its high dividend. Investors shouldn’t be too worried yet, though, as Tahoe confirmed its July dividend as of July 6, 2017. As well, the mining company currently has around $165 million in cash to help cushion its fall as it attempts to reinstate the license to mine at Escobal.

Still, news of the suspension has lead a number of analysts to downgrade the stock. Amongst these analysts is TD Securities (TSE:$TD), who changed Tahoe’s original buy status to hold. BMO Capital (TSE:$BMO) has also changed the status for the Tahoe stock from outperform to market perform. A big reason for these downgrades is the uncertainty of just exactly when Tahoe’s license could be reinstated and production can resume at the Escobal mine.

Although Tahoe has expressed confidence in its ability to resume production at the Escobal mine, several investors have checked out of the company’s stock due to the possibility that Tahoe’s mining suspension could turn out to be permanent. The Escobal mine is Tahoe’s flagship mine, and losing the license to mine there could largely impact Tahoe’s finances, production, and share prices. As such, if you were planning to invest in Tahoe, now many not be the best time because of the vast uncertainty of the company’s future.

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