The market appears to have responded relatively positively to the cost-cutting move as the company’s share price rose 1.3 percent on the TSX following the news, closing at C$6.23 for the day.
The company’s mining license was suspended on July 5 of last year after CALAS, a non-governmental organization, filed a claim against Guatemala’s Ministry of Energy and Mines. CALAS alleged that the ministry violated the Xinca indigenous people’s right of consultation before it granted the mining license for Escobal.
The Guatemalan Supreme Court reinstated Escobal’s mining license in September, but on October 25 the Guatemalan Constitutional Court heard an appeal of the license reinstatement. Tahoe says a ruling was supposed to follow within five calendar days of the appeal, but thus far there has been no ruling. As it has been unable to resume mining, the company decided to move forward with the 250 terminations.
“We are very disappointed to reduce our workforce at this time, but this is a natural consequence to the prolonged inaction in the legal system,” said Ron Clayton, president and CEO of Tahoe.
Tahoe Resources said Minera San Rafael, its Guatemalan subsidiary, employed 1,030 people before Escobal’s license was suspended, with 97 percent of the workers being Guatemalan. The firm noted that if the Guatemalan Constitutional Court upholds the reinstatement of the license for Escobal, then “further workforce reductions may be avoided.”
Clayton added, “[w]e are hopeful that the Constitutional Court will honor their own legal procedures and precedents and urge them to provide a fair and transparent ruling quickly that demonstrates Guatemala remains open for responsible foreign investment. A productive Escobal is in the best interests of all of our stakeholders, including the Government of Guatemala, the local communities, our employees, our suppliers, and Tahoe’s shareholders.”
If mining is allowed to resume, Tahoe would look to restore its workforce. The BC-registered company also operates gold mines in Canada and Peru.
Tahoe’s current difficulties are not the first it has faced at Escobal. The firm has seen opposition from locals, including a group that blocked a mine access road last June. Tahoe is also involved in a lawsuit filed by seven protesters who were allegedly shot at the mine site with rubber bullets by private security personnel after approaching the area peacefully in April 2013. The BC Court of Appeal has ruled that the case will be heard in BC.
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Securities Disclosure: I, Melissa Shaw, hold no direct investment interest in any company mentioned in this article.
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