November 6, 2018 / 12:04 PM / 12 days ago

For Tahoe Resources, Guatemala troubles underscore tense outlook

Nov 6 (Reuters) - A years-long fight over the future of the world’s second largest silver mine between Tahoe Resources Inc and opponents of the project shows no signs of abating, creating uncertainty for the U.S. miner and its investors.

With environmental and indigenous opponents of Tahoe’s Escobal mine vowing it will never again produce silver, the tension is top of mind for Wall Street, and analysts expect the company to post its fifth consecutive quarterly loss on Tuesday.

Guatemala’s Supreme Court suspended Tahoe’s license to operate Escobal last year, ruling for an anti-mining organization that accused the country’s Ministry of Energy and Mines of failing to properly consult surrounding Xinca indigenous communities about the project.

The ruling was a sharp blow to Reno, Nevada-based Tahoe, which had derived 45 percent of its revenue from Escobal in 2016.

Shares of Tahoe have lost more than half their value since work at the mine was suspended, and the company has lost nearly $100 million in cash to mothball its Guatemala operations. Judges ordered that an indigenous consultation must be completed before Escobal can be brought back online.

That has left Tahoe relying heavily on its Peru and Canadian gold operations.

But Tahoe’s Peru operations have also been troubled. The miner said in August it believed there was a sophisticated attempt to illegally extract gold at its La Arena mine.

Tahoe is set to post a quarterly loss of 7 cents per share on Tuesday, according to IBES data from Refinitiv.

Over the past year, the firm has fired hundreds of workers in a series of rolling layoffs as the Guatemalan government seeks to comply with the court-ordered consultations.

“It’s all very worrying since the (court’s) decision could destroy the already weak legal certainty in Guatemala,” said Javier Zepeda, head of the country’s industrial chamber CIG.

He added it remains unclear how soon the mine will be able to re-open. The company’s executives have said Escobal could reopen in six months or less.

Investors are hopeful it will be quick.

“We’re expecting the process to take six to nine months, but not years,” said Canaccord Genuity analyst Carey MacRury. “For now, they should have enough cash flow to protect their balance sheet.” (Reporting by Ernest Scheyder in Houston; Additional reporting by David Alire Garcia in Guatemala City; Editing by Rosalba O’Brien)

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