Silver mining company Tahoe Resources Inc.’s shares dropped yesterday following reports that Guatemalan President Otto Pérez Molina is considering reforms to 55 articles of the Constitution, including one reform that would allow the government to seize up to 40 percent stake in new mining projects in the country.
Shareholders of Tahoe Resources, which is headquartered in Nevada, expressed concern that the company’s flagship Escobal mining project in southeast Guatemala would be subject to this partial nationalization. As a result, stocks plunged nearly 20 percent on the New York Stock Exchange and 18 percent on the Toronto Stock Exchange, after an initial drop of 39 percent Thursday morning.
Tahoe Resources CEO Kevin McArthur quickly dismissed the rumors, saying, “The government of Guatemala has not made any approach to the Company regarding this proposed reform, nor do we expect it to.” Another company spokesperson said that conversations with the Guatemalan Ministry of Mines and Energy confirmed that the law would not apply to companies already operating in the country. Though the Escobal project is still in the development stage, the fact that it has broken ground should exempt it from the new reforms.
President Pérez Molina’s cabinet has been discussing the constitutional reforms with various public- and private-sector stakeholders this week. Depending on the feedback it receives, the proposal may be amended before being formally presented to Congress for debate on July 9.