6 Reasons Wall Street Likes Tahoe Resources Inc.

Do you want exposure to upside in precious metals? Consider Tahoe Resources Inc. (TSX:THO)(NYSE:TAHO) for upside potential of 75%.

| More on:
The Motley Fool
You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

When it comes to precious metals miners, you’ll probably immediately think of Barrick Gold Corp. or Goldcorp Inc.

However, you may be surprised that Wall Street analysts are more bullish on Tahoe Resources Inc. (TSX:THO)(NYSE:TAHO), which is a mid-cap miner with a focus on developing long-term, low-cost assets in the Americas to produce silver and gold.

Here are some reasons why.

Quality assets in the Americas

Tahoe Resources’s asset base is anchored by the large-scale, high-grade Escobal mine in Guatemala, which is the world’s third-largest silver mine.

It also has low-cost, growing gold operations in Peru (including the La Arena and Shahuindo mines) and the Timmins Gold Camp in Ontario.

Low-cost, high-margin production

In 2016, Tahoe Resources produced 21.3 million ounces of silver, which exceeded the company’s guidance of 18-21 million ounces. It produced 385,111 ounces of gold, which was in line with its guidance of 370,000-430,000 ounces. The all-in sustaining costs are expected to be US$8-9 per ounce for silver and US$950-1,000 per ounces for gold.

Barrick gold_mine_16-9

Dividend

It’s rare for a miner to pay a decent dividend in the current market. Tahoe Resources offers you just that. It pays a monthly dividend that yields nearly 2.7%.

Positive 2017 guidance

In a January press release, Ron Clayton, the president and CEO, said, “We are ramping up development of multiple projects, which are expected to drive growth in gold production starting in 2018. Key capital projects include …  further development of Shahuindo as we move that mine towards full production. We are targeting higher production from both our Canadian operations and Shahuindo to offset reduced gold output at La Arena, while Escobal is poised for another excellent year.”

This year, the miner expects to produce 18-21 million ounces of silver and 375,000-425,000 of gold with all-in sustaining costs of US$9.50-10.50 for silver and US$1,150-1,250 for gold.

Trades at a discounted valuation

Tahoe Resources trades at a price-to-cash-flow of eight compared to its normal multiple of 12. Also, it trades at about 1.1 times its book value, whereas its five-year average is 2.7 times.

Some analysts believe the precious metals miner can trade above $21, which implies an upside potential of 75% from the $12 level.

Strong management team

Tahoe Resources was founded by Kevin McArthur, who has more than 30 years of experience in the industry in operational and senior management roles. McArthur was the former president and CEO of Goldcorp until his retirement in 2008 and is Tahoe Resources’s executive chair.

Clayton has more than 30 years of mine-operating experience and led the construction of the Escobal mine as Tahoe Resources’s first COO. Before joining the company, he was senior vice president, operations, and the general manager of several underground mines for Hecla Mining Company.

Summary

Tahoe Resources is an attractive opportunity. It has an upside potential of 75% and offers a 2.7% yield. However, it’s also more volatile than the average stock, and investors need to be prepared for a wild ride.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Kay Ng owns shares of Goldcorp and Tahoe Resources.

More on Dividend Stocks

Happy couple being attended by office worker at office
Dividend Stocks

BCE Stock: A Great Pick to Boost Your RRSP Retirement Fund

BCE (TSX:BCE)(NYSE:BCE) stock is a dirt-cheap telecom stock with a huge dividend yield to keep RRSP investors happy.

Read more »

Money growing in soil , Business success concept.
Dividend Stocks

Want Easy Passive Income? These 2 Canadian Dividend Aristocrats Deliver

Passive income stars like Slate Grocery REIT (TSX:SGR.U) should be on your watch list.

Read more »

stock research, analyze data
Dividend Stocks

RRSP Investors: 1 Cheap TSX Dividend Stock to Buy Now and Own for 35 Years

RRSP investors can still find top TSX dividend stocks to buy at discounted prices.

Read more »

Cogs turning against each other
Dividend Stocks

2 of the Safest Stocks (With Dividends) to Buy in Canada Now

Here are two of the safest stocks investors in Canada can buy now.

Read more »

edit Businessman using calculator next to laptop
Dividend Stocks

2 Top Canadian Value Stocks Worth Buying Right Now

Here's why Alimentation Couche-Tard (TSX:ATD) and Toronto-Dominion Bank (TSX:TD)(NYSE:TD) are two top value stocks to consider right now.

Read more »

Happy shoppers look at a cellphone.
Dividend Stocks

2 Bargain Stocks You Can Buy Today and Hold Forever

Here's why Fortis (TSX:FTS)(NYSE:FTS) and Manulife (TSX:MFC)(NYSE:MFC) are two bargain stocks I think are worth considering right now.

Read more »

Retirement plan
Dividend Stocks

Passive Income: How Canadian Couples Can Earn $747 Tax-Free per Month for Life

Canadian couples can take advantage of their TFSA contribution space to create a significant stream of tax-free passive income.

Read more »

Golden crown on a red velvet background
Dividend Stocks

3 Canadian Dividend Aristocrats to Buy for Passive Income Forever

Passive-income stocks like BCE (TSX:BCE)(NYSE:BCE) should be on your radar.

Read more »