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Tahoe suspends dividends, output guidance on Escobal licensing woes

Tahoe Resources Inc. said Aug. 8 that it suspended dividend payments and its previously issued full-year production guidance due to the suspension of the mining license at its Escobal silver mine in Guatemala in July, even as it announced a doubling of second-quarter earnings to US$33.5 million, or 11 cents per share, from US$16.7 million, or 5 cents per share.

"The dividend cessation is intended to protect the health of the company's balance sheet and ensure the company has the financial flexibility during the temporary suspension of Escobal operations," Tahoe said in a statement. This measure is expected to save about US$65 million annually.

Previously, the company had also expected to hit a full-year output target of 375,000 to 425,000 ounces of gold and total cash costs of US$700 to US$750 per ounce at its operations in Canada and Peru. The suspension of the guidance was due to uncertainty on the timing of court decisions related to the Escobal license.

This comes as Tahoe reported revenues for the quarter at US$209.6 million, falling 8.2% from US$228.3 million a year prior. Operating costs for the quarter stood at US$135.3 million, down 2.2% from US$138.2 million last year, while quarterly earnings from operations rose 14.2% to US$74.3 million, from US$65.0 million for the year-earlier period.

Capital expenditures in the second quarter totaled US$63.4 million. The company continued to focus on the expansion at Shahuindo and the Bell Creek shaft project, as exploration expenditures in the quarter totaled US$5.9 million.

During the quarter, the company produced 4.1 million ounces of silver, down 28.1% from 5.7 million ounces in the prior-year period, while output of gold rose by 1.8% year over year to 112,000 ounces from 110,000 ounces.

All-in sustaining costs, or AISC, per silver ounce produced increased to US$10.01 from US$8.16 in the year-earlier quarter, and AISC per gold ounce fell to US$925 from US$973.

Sales of silver fell 17.7% year over year to 4.3 million ounces during the quarter, while sales of gold increased 3.6% to 110,300 ounces.

For the half, the company's net income rose by 98.3% to US$108.2 million from US$54.5 million in the year-earlier period.

The company recorded US$460.6 million in revenues, an increase of 27.8% from US$360.4 million a year earlier. The company recorded US$282.2 million in operating costs during the half, up 30.8% from US$215.7 million a year before, with earnings from operations of US$178.5 million, compared with US$111.4 million last year.

During the half, the company produced 9.8 million ounces of silver, down 14.0% year over year from 11.4 million ounces, and output of gold rose by 38.3% to 231,000 ounces from 167,000 ounces.

AISC per silver ounce produced climbed to US$8.91 from US$7.06 in the prior-year period, while AISC per gold ounce fell to US$892 from US$930.

Sales of silver increased 0.8% year over year to 9.9 million ounces during the period, while sales of gold increased by 47.3% to 231,400 ounces.