Tahoe Resources THO quotes.barchart.com/quotes//THO.TO
Tahoe Resources Inc. THOEF www.otcmarkets.com/stock/THOEF/quote
Financials and Production
$117 million in cash and no debt
115 million shares outstanding
122 million shares fully diluted
Tahoe wasn’t even in existence a year ago, now all of the sudden it’s worth over $1 billion and owns one of the largest, highest grade silver projects in the world.
The company believes that Escobal could rival the Fresnillo mine which produces 34 million oz of silver per year.
Tahoe is still in the early stages of the project, and it will be at least 3 years before the mine enters production. Over the next year they will complete more drilling to better define the resource, as well as explore for new silver veins.
Management is the big selling point here. You basically have the former team who ran Glamis Gold, including Kevin McArthur who was the CEO of Glamis and then Goldcorp. And Goldcorp owns a 40% interest in Tahoe, so they are looking for the company to succeed as well.
What are some negatives? Well, this is the same team that constructed the Marlin mine in Guatemala, which could be shut down due to environmental concerns. Goldcorp claims that there is no proof that the mine is causing damage. Tahoe doesn’t seem to be worried about this effecting Escobal, but I would still be a little concerned.
Also, the shares aren’t exactly cheap, but they aren’t overvalued either. Let’s be conservative and say that Escobal can produce 20 million oz of silver per year. That’s $440 million using current silver prices. I think if this mine was in operation today the company would have about a $2.5 billion market cap. Remember this is very high grade silver, so cash cost will be very low. High margin gold and silver producers always trade at premiums. However, the mine is still 3 years out, so I would say that it currently trades at fair value.
If Escobal produces over 30 million oz of silver then that is a different story. We could be talking a $4 billion market cap for Tahoe, and that’s using current silver prices. In the end who knows how big the mine will be. Odds are though it will become a mine, and it will be at least 15 million oz per year and very low cash cost.
Escobal was discovered by Goldcorp when McArthur was the CEO, so he knows exactly what type of deposit it is and the real potential of it. He basically had insider knowledge, and when you have that type of information, plus about $400 million in cash, you can confidently go out and buy projects like Escobal.
I would imagine that Tahoe Resources will soon become a more popular name among gold and silver investors.