Tahoe shares surge after Guatemala ruling

Shares in Tahoe Resources (TSX:THO)(NYSE:TAHO) surged on Monday after a Guatemalan court  reinstated the company’s license to operate its giant Escobal silver mine.

Shares in the Canadian miner gained as much as 49% at the start of trade before closing up 33% for a $1.5 billion market capitalization in the New York Stock Exchange. Escobal is the world's third largest primary silver mine with production of 21.2 million ounces of silver in concentrate in 2016.

Vancouver-based Tahoe said the Guatemalan Supreme Court decision reverses an earlier ruling that went against its subsidiary Minera San Rafael (MEM), 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. In a statement Tahoe said as part of its decision, the court ordered MEM to consult with the Xinca indigenous communities under the International Labour Organization's Convention 169 within a certain geographic area and "report results of the consultation to the satisfaction of the court within 12 months":

Although Tahoe believes that MEM complied with ILO Convention 169 before it issued the Escobal license, it will fully support MEM in any of its future indigenous engagement and will encourage MEM to involve independent ILO 169 experts to assist in this process.

Tahoe  pointed out that it expects the ruling to be appealed and that while the court allowed Escobal operations to commence immediately the main road to the mine near the town of Casillas continues to be blocked by protestors. The mining licenses of Escobal well as the smaller Juan Bosco operation were suspended July 5 but protests have been curtailing operations since June.

Escobal began commercial production in 2014 and drove Tahoe’s record cash flow during its first quarter 2017 results, but last month the company was forced to suspend dividends after reporting a sharp drop in gold and silver production. The underground operation, located in southeast Guatemala, about 3 km from San Rafael Las Flores, generated a record .

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.