Why Tahoe Resources Inc. Stock Skyrocketed Today

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What happened

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Shares of Tahoe Resources Inc. (NYSE: TAHO) skyrocketed 33.4% on Monday, after the precious-metals mining company announced that the Guatemalan Supreme Court has decided to reinstate its Escobal mining license.

For perspective, the ruling reverses an unfavorable preliminary decision to suspend the license, which came in response to anti-mining organization CALAS and its allegation that the country's Ministry of Energy and Mines (MEM) had unlawfully awarded it to Tahoe's Guatemalan subsidiary, Minera San Rafael. More specifically, CALAS claimed that MEM violated the Xinca indigenous people's right of consultation before issuing the license.

More recently, late last month Tahoe stock also plunged after the company warned that its latest appeal, which would have enabled it to continue operations at the mine while the situation was resolved in court, was expected to be denied.

So what

That's not to say Tahoe is completely in the clear just yet. As part of the decision, the country's Ministry of Energy and Mines will be required to conduct a consultation with Xinca communities within certain geographic areas, and then report the results of that consultation "to the satisfaction of the Court within 12 months."

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Tahoe further said it expects that a number of "interested parties," including CALAS and the Xinca Parliament, might appeal this ruling to Guatemala's Constitutional Court. The Constitutional Court would then be expected to rule on any appeals by the end of the year. 

Now what

In the meantime, Tahoe warned that while its restored license affords it the right to immediately commence Escobal operations, it still faces an illegal roadblock at Casillas, which is preventing operations from starting. 

"While we support the rights of all peoples to peacefully protest, we do not support the illegal blockage of public highway by non-locals, which has had a devastating economic impact on our employees, contractors, and communities," elaborated Tahoe CEO Ron Clayton. "Once the road is reopened at Casillas, we will resume full operations without disruption and put our valued employees and vendors back to work, support the economy of our local communities, and return value to our shareholders."

Finally, Tahoe reminded investors that until its operations begin, it can only access $75 million of its $300 million revolving credit facility and "may continue to be subject to events of default." Tahoe Resources also expects to update its previously suspended guidance for its gold operations, including exploration, later this month.

As such, Tahoe investors still face a number of significant risks that could easily wipe out today's gains. But for now, this is a significant step in the right direction toward resuming its Escobal operations, and it's no surprise to see the stock up big in response.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.