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Mining License Suspended For Tahoe's Big Escobal Silver Mine

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(Kitco News) - A provisional Guatemalan court ruling has resulted in the suspension of the mining license for Tahoe Resources Inc.’s (TSX: THO, NYSE: TAHO) flagship Escobal mine, the company reported late Wednesday.

Escobal is one the largest silver mines in the world, producing 21.2 million ounces of silver concentrate during 2016, according to Tahoe’s website.

Tahoe said it will take all legal steps possible to have the ruling reversed, including an appeal to the Constitutional Court. Company officials said that based on similar cases in the past, they estimate the Constitutional Court would rule on the appeal within two to four months. The company is seeking to have the license reinstated during this time.

In the meantime, Tahoe said it can no longer confirm prior 2017 production guidance and is re-evaluating multi-year guidance. Previously, the company’s website estimated Escobal output this year at between 18 million and 21 million ounces.

Tahoe said the organization CALAS brought an action against the country’s Ministry of Energy and Mines alleging that the government violated the Xinca indigenous people’s right of consultation prior to granting the Escobal mining license to Tahoe’s Guatemalan subsidiary, Minera San Rafael.

Escobal mine operations (Photo courtesy of Tahoe Resources)

Tahoe maintained that consultation obligations were met during the license process for Escobal, also arguing that the last official census showed that the San Rafael community is 98.6% non-indigenous.

“We are extremely disappointed in the court’s ruling suspending the license because we believe that there are no indigenous communities affected by Escobal’s operations,” said Ron Clayton, president and chief executive officer of Tahoe Resources.

Meanwhile, he continued, the ruling will adversely affect “shareholders, partners, employees, vendors and community populations, as tax and royalty payments, along with purchases of operating supplies, will be suspended during any period that the mine is not operating.”

Once Tahoe formally receives the order suspending the license for Escobal, the mine will be placed on standby but maintained so that production can be resumed quickly if the suspension is reversed, the company said. Assuming there is a three-month suspension, Tahoe said production of 5.1 million silver ounces would be deferred to future periods.

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