The Q2 numbers are in, and Tahoe Resources exceeded both production and
cash flow expectations in the first half of 2016, according to analysts
following the company. Based on those numbers-and with management changes
also in place-the experts believe the company will continue to outperform.
For analyst Chris Thompson, writing in an Aug. 10 Raymond James research
report on Tahoe
Resources Inc. (TAHO:NYSE; THO:TSX), "2Q16 represented as key
quarter for Tahoe Resources, as it closed the acquisition of Lake Shore Gold,
declared commercial production at Shahuindo, and continued to deliver strong
operating results (generating significant FCF [free cash flow]) at Escobal
and La Arena."
"Our investment thesis for THO remains firmly intact, satisfied by
the company offering a unique combination of fully funded organic growth,
ongoing FCF generation, a strong balance sheet, and a healthy dividend
yield," the analyst continued.
According to Tahoe's Aug. 9 press release, which outlines the company's H1/16
performance, the Escobal mine in Guatemala produced "metal
concentrates" containing 5.7 Moz silver, 2,711 oz gold, 2,699 tonnes
lead and 4,037 tonnes zinc during Q2/16.
This "exceeded our expectations of 5.3 Moz Ag or 5.7 Moz Ag Eq on
higher grades while cash cost bettered our estimates of US$6.96/oz Ag or
US$8.05/oz Ag Eq," Geordie Mark of Haywood Securities wrote in an Aug.
11 research report.
"The company is underpinned by production from Escobal, which is a
top tier asset in terms of its resource endowment and Ag grade, which
together support the potential for healthy operating margins over a
protracted period," Mark wrote, adding that gold production at La Arena
and Shahuindo in Peru and at Tahoe's Canadian assets was in line with, or
exceeded, Haywood's expectations.
In his Aug. 10 research note, Dundee Capital Markets analyst Ron Stewart
observed, "Strong Q2 production led to better than expected financial
results as Tahoe's core assets continue to perform well. We view Tahoe as a
top tier intermediate precious metals company given its high quality and low
cost operations, growth profile, strong balance sheet, sustainable dividend
and disciplined M&A strategy."
Reflecting on earnings that beat his firm's estimates, Andrew Kaip of BMO
Capital Markets expects Tahoe's Q2 results to "set the stage for a good
Q3/16."
Kaip also noted, "Strong silver production was driven by
higher-than-expected silver grades at Escobal (509 g/t) [and] the company now
expects to achieve the top end of silver guidance of 18-21 Moz."
Tahoe's Q1/16 acquisition of Lake Shore Gold and its assets in Canada,
including the Timmins mines, resulted in the addition of production from
those assets in the second-quarter numbers, Cosmos Chiu of CIBC noted in an
Aug. 10 research report.
Also commenting on the impact of the Lake Shore acquisition, Mark noted,
"Integration of the Bell Creek and Timmins West gold mines into the
company's portfolio bolsters Tahoe's production profile, whereby the
Company's strong balance sheet can be deployed to consolidate further its
production base in east Canada. The collective production profile and
margins, of the aforementioned assets, establish Tahoe as a growing mid-tier
precious metals producer."
Tahoe has also announced management changes, including the election of Ron
Clayton as president and CEO, and Elizabeth McGregor as vice president and
CFO. "The appointment of Mr. Clayton to the position of CEO should be
viewed positively given his intimate knowledge of the company," Chiu
wrote.
