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Tahoe stock slides on fears of Guatemalan intervention

Production at Tahoe’s Escobal project in Guatemala is due to start in 2014 and is estimated to hit 20 million ounces of silver a year for more than 10 years.


Shares of Tahoe Resources Inc. tumbled on Thursday amid fears that reforms to mining laws in Guatemala could put its star project in peril before it produces its first silver bar, underscoring growing global nervousness over resource nationalism.

Tahoe shares fell more than 22 per cent on the Toronto Stock Exchange on Thursday, even as the company sought to reassure markets following media reports that government-proposed mining law reforms in Guatemala would allow the state to take up to a 40 per cent stake in new mining projects.

Government-proposed mining law reforms in Guatemala, "should not affect its Escobal project," Tahoe said.

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High expectations around the company's flagship Escobal project, located 70 kilometers from Guatemala City, have helped prop up Tahoe shares in an otherwise wallowing market for mining equities, in part because of the company's knack for staying on track, fulfilling promises and targets.

Production is due to start in 2014 and is estimated to hit 20 million ounces of silver a year for more than 10 years.

"Company communications with high-level officials in Guatemala's Ministry of Energy and Mines (MEM) indicate that the government has no intention of acquiring an interest in the Escobal project or other mining projects in the country," chief executive officer Kevin McArthur said in a statement.

"The government of Guatemala has not made any approach to the company regarding this proposed reform, nor do we expect it to. Full permitting for the 100 per cent owned Escobal project is still anticipated in the second half of 2012."

Resource nationalism has become a growing theme in the global mining industry as countries seek to derive more benefits from their natural resources, and miners seek rewards for their discoveries.

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About the Author
Mining Reporter

Pav Jordan is a mining reporter for the Report on Business. More


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