EX-99.1 2 exhibit991-fs2018q2.htm EXHIBIT 99.1 Exhibit







tahoesmalla01.jpg


CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
For the three and six months ended June 30, 2018 and 2017



CONDENSED INTERIM CONSOLIDATED STATEMENTS
OF FINANCIAL POSITION
(Expressed in thousands of United States dollars) - Unaudited
 
 
Notes
 
June 30
2018

 
December 31,
2017

ASSETS
 
 
 
 
 
 
Current
 
 
 
 
 
 
Cash and cash equivalents
 
6
 
$
69,744

 
$
125,665

Trade and other receivables
 
7
 
42,758

 
39,617

Inventories
 
8
 
127,729

 
128,381

Other
 
 
 
6,526

 
5,412

 
 
 
 
246,757

 
299,075

Non-current
 
 
 
 
 
 
Mineral interests, plant and equipment, net
 
9
 
2,679,021

 
2,616,789

Sales tax and other receivables
 
 
 
55,638

 
47,196

Restricted cash
 
 
 
4,106

 
5,124

Deferred tax asset
 
 
 
369

 
369

Goodwill
 
9a
 
112,085

 
112,085

 
 
 
 
2,851,219

 
2,781,563

Total Assets
 
 
 
$
3,097,976

 
$
3,080,638

 
 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
 
Current
 
 
 
 
 
 
Accounts payable and accrued liabilities
 
10
 
$
115,602

 
$
110,084

Lease obligations
 
12
 
3,713

 
6,146

Debt
 
11
 
—

 
35,000

Income tax payable
 
 
 
4,259

 
2,277

Reclamation provision
 
13
 
104

 
487

Other
 
 
 
1,836

 
1,836

 
 
 
 
125,514

 
155,830

Non-current
 
 
 
 
 
 
Lease obligations
 
12
 
13

 
1,608

Revolving Debt
 
11
 
75,000

 
—

Reclamation provision
 
13
 
64,001

 
62,569

Deferred tax liability
 
 
 
223,029

 
230,184

Other
 
 
 
3,899

 
5,559

Total Liabilities
 
 
 
491,456

 
455,750

SHAREHOLDERS' EQUITY
 
 
 
 
 
 
Share capital
 
18e
 
2,792,238

 
2,788,234

Share-based payment reserve
 
18
 
20,132

 
20,090

Deficit
 
 
 
(205,850
)
 
(183,436
)
Total Shareholders' Equity
 
 
 
2,606,520

 
2,624,888

Total Liabilities and Shareholders' Equity
 
 
 
$
3,097,976

 
$
3,080,638

Contingencies (note 26)
 
 
 
 
 
 
APPROVED BY THE DIRECTORS
 
 
 
 
 
 
 
"James Voorhees"
 
"Dan Rovig"
 
James Voorhees
 
Dan Rovig
 
PRESIDENT AND CEO
 
LEAD INDEPENDENT DIRECTOR
 

See accompanying notes to the condensed interim consolidated financial statements
1
Tahoe Resources Inc.


CONDENSED INTERIM CONSOLIDATED STATEMENTS
OF OPERATIONS AND TOTAL COMPREHENSIVE (LOSS) INCOME
(Expressed in thousands of United States dollars, except per share and share information) - Unaudited
 
 
 
 
Three Months Ended June 30,
 
 
Six Months Ended June 30,
 
 
 
Notes
 
2018

 
2017

 
2018

 
2017

Revenues
 
14, 22
 
$
127,132

 
$
209,576

 
$
267,074

 
$
460,622

Operating costs
 
 
 
 
 
 
 
 
 
 
Production costs
 
15, 22
 
69,654

 
92,206

 
147,334

 
189,595

Royalties
 
22
 
1,091

 
5,451

 
1,986

 
13,098

Care and maintenance
 
16, 22
 
8,057

 
—

 
18,408

 
—

Depreciation and depletion
 
22
 
35,053

 
37,634

 
72,073

 
79,475

Total operating costs
 
 
 
113,855

 
135,291

 
239,801

 
282,168

Mine operating earnings
 
 
 
13,277

 
74,285

 
27,273

 
178,454

Other operating expenses
 
 
 
 
 
 
 
 
 
 
Exploration
 
 
 
4,446

 
5,937

 
7,151

 
10,131

General and administrative
 
17
 
13,705

 
11,373

 
25,546

 
23,065

Total other operating expenses
 
 
 
18,151

 
17,310

 
32,697

 
33,196

(Loss) earnings from operations
 
 
 
(4,874
)
 
56,975

 
(5,424
)
 
145,258

Other (income) expense
 
 
 
 
 
 
 
 
 
 
Interest income
 
 
 
(27
)
 
(161
)
 
(166
)
 
(275
)
Interest expense
 
11
 
2,116

 
608

 
3,544

 
1,674

Foreign exchange loss
 
 
 
429

 
383

 
78

 
933

Other (income) expense
 
 
 
(676
)
 
957

 
(130
)
 
1,840

Total other expense
 
 
 
1,842

 
1,787

 
3,326

 
4,172

(Loss)/Earnings before income taxes
 
 
 
(6,716
)
 
55,188

 
(8,750
)
 
141,086

Tax expense
 
 
 
 
 
 
 
 
 
 
Current income tax expense
 
19
 
10,639

 
12,179

 
20,820

 
27,651

Deferred income tax (recovery) expense
 
19
 
(1,802
)
 
9,522

 
(7,155
)
 
5,252

(Loss) Earnings and total comprehensive income
 
  
 
$
(15,553
)
 
$
33,487

 
$
(22,415
)
 
$
108,183

(Loss) Earnings per share
 
 
 
 
 
 
 
 
 
 
Basic
 
20
 
$
(0.05
)
 
$
0.11

 
$
(0.07
)
 
$
0.35

Diluted
 
20
 
$
(0.05
)
 
$
0.11

 
$
(0.07
)
 
$
0.35

Weighted average shares outstanding
 
 
 
 
 
 
 
 
 
 
Basic
 
20
 
313,252,594

 
312,786,759

 
313,222,341

 
312,430,033

Diluted
 
20
 
313,252,594

 
312,869,386

 
313,222,341

 
312,510,497






See accompanying notes to the condensed interim consolidated financial statements
2
Tahoe Resources Inc.


CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in thousands of United States dollars) - Unaudited
 
 
 
 
Three Months Ended June 30,
 
 
Six Months Ended June 30,
 
 
 
Notes
 
2018

 
2017

 
2018

 
2017

OPERATING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
(Loss) earnings for the period
 
 
 
$
(15,553
)
 
$
33,487

 
$
(22,415
)
 
$
108,183

Adjustments for:
 
 
 
 
 
 
 
 
 
 
Interest expense
 
 
 
2,116

 
608

 
3,544

 
1,674

Income tax expense
 
19
 
8,837

 
21,701

 
13,665

 
32,903

Items not involving cash:
 
 
 
 
 
 
 
 
 
 
Depreciation and depletion
 
 
 
32,423

 
40,615

 
70,081

 
83,595

Loss on disposition of plant and equipment
 
 
 
87

 
290

 
192

 
622

Share-based payments
 
18
 
2,922

 
1,733

 
4,057

 
3,266

Unrealized foreign exchange loss
 
 
 
446

 
359

 
100

 
731

Accretion
 
13
 
564

 
653

 
1,127

 
1,322

Cash provided by operating activities before changes in working capital
 
 
 
31,842

 
99,446

 
70,351

 
232,296

Changes in working capital
 
21
 
(8,091
)
 
16,062

 
(16,074
)
 
(19,615
)
Cash provided by operating activities
 
 
 
23,751

 
115,508

 
54,277

 
212,681

Income taxes paid
 
 
 
(5,550
)
 
(19,440
)
 
(13,929
)
 
(38,035
)
Net cash provided by operating activities
 
 
 
18,201

 
96,068

 
40,348

 
174,646

INVESTING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
Mineral interests, plant and equipment additions
 
 
 
(74,400
)
 
(63,445
)
 
(130,565
)
 
(111,573
)
Net cash used in investing activities
 
 
 
(74,400
)
 
(63,445
)
 
(130,565
)
 
(111,573
)
FINANCING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
Proceeds from issuance of common shares on exercise of share options
 
 
 
—

 
168

 
—

 
914

Dividends paid to shareholders
 
 
 
—

 
(15,519
)
 
—

 
(30,293
)
Loan origination fees and other
 
 
 
232

 
(114
)
 
(3
)
 
(229
)
Interest paid
 
 
 
(1,663
)
 
(494
)
 
(2,856
)
 
(1,446
)
Payments on finance leases
 
12
 
(1,852
)
 
(2,451
)
 
(3,886
)
 
(5,111
)
Repayment of loans
 
11
 
—

 
—

 
(35,000
)
 
—

Borrowings on revolving debt
 
11
 
75,000

 
—

 
75,000

 
—

Net cash provided by (used in) financing activities
 
 
 
71,717

 
(18,410
)
 
33,255

 
(36,165
)
Effect of exchange rates on cash and cash equivalents
 
 
 
594

 
1,026

 
1,041

 
360

Increase (decrease) in cash and cash equivalents
 
 
 
16,112

 
15,239

 
(55,921
)
 
27,268

Cash and cash equivalents, beginning of period
 
 
 
53,632

 
175,397

 
125,665

 
163,368

Cash and cash equivalents, end of period
 
6
 
$
69,744

 
$
190,636

 
$
69,744

 
$
190,636

Supplemental cash flow information (note 21)

See accompanying notes to the condensed interim consolidated financial statements
3
Tahoe Resources Inc.


CONDENSED INTERIM CONSOLIDATED STATEMENTS
OF CHANGES IN EQUITY
(Expressed in thousands of United States dollars, except share information) - Unaudited
 
 
Notes
 
Number of Shares

 
Share Capital

 
Share-Based Payment Reserves

 
Deficit

 
Total

At January 1, 2018
 
 
 
312,775,761

 
$
2,788,234

 
$
20,090

 
$
(183,436
)
 
$
2,624,888

(Loss) and total comprehensive loss
 
 
 
—

 
—

 
—

 
$
(22,415
)
 
(22,415
)
Shares issued under the Share Plan
 
18
 
460,925

 
4,004

 
(3,449
)
 
1

 
556

Share-based payments
 
18
 
—

 
—

 
3,491

 
—

 
3,491

At June 30, 2018
 
 
 
313,236,686

 
$
2,792,238

 
$
20,132

 
$
(205,850
)
 
$
2,606,520

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
Number of Shares

 
Share Capital

 
Share-Based Payment Reserves

 
Deficit

 
Total

At January 1, 2017
 
 
 
311,362,031

 
$
2,775,068

 
$
18,629

 
$
(221,543
)
 
$
2,572,154

Earnings and total comprehensive income
 
 
 
—

 
—

 
—

 
108,183

 
108,183

Shares issued under the Share Plan
 
18
 
290,750

 
3,837

 
(3,182
)
 
—

 
655

Shares issued on exercise of stock options
 
18
 
112,136

 
1,340

 
(425
)
 
—

 
915

Share-based payments
 
18
 
—

 
—

 
2,702

 
—

 
2,702

Dividends paid to shareholders
 
 
 
854,351

 
7,142

 
—

 
(37,435
)
 
(30,293
)
At June 30, 2017
 
 
 
312,619,268

 
2,787,387

 
17,724

 
(150,795
)
 
2,654,316




See accompanying notes to the condensed interim consolidated financial statements
4
Tahoe Resources Inc.


NOTES TO THE CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
(Expressed in thousands of United States dollars, except as otherwise stated) - Unaudited
Three and six months ended June 30, 2018 and 2017

1. OPERATIONS

Tahoe Resources Inc. ("Tahoe") was incorporated under the Business Corporations Act (British Columbia) on November 10, 2009. These condensed interim consolidated financial statements ("interim financial statements") include the accounts of Tahoe and its subsidiaries (together referred to as the "Company"). The Company's principal business activities are the operation of mineral properties for the mining of precious metals and the exploration, development and acquisition of mineral interests in the Americas. As at June 30, 2018 the Company's Escobal mine continues to be on care and maintenance pending resolution of legal proceedings in Guatemala.

The Company's registered office is located at 1500 Royal Centre, 1055 West Georgia Street, P.O. Box 11117, Vancouver, BC V6E 4N7, Canada.

The Audit Committee of the Company's Board of Directors authorized issuance of these interim financial statements on August 1, 2018.

2. BASIS OF PREPARATION

These interim financial statements have been prepared in accordance with International Accounting Standard 34 - Interim Financial Reporting using accounting policies consistent with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS"). As such, certain disclosures required by IFRS have been condensed or omitted. These interim financial statements should be read in conjunction with the Company's audited consolidated financial statements and the notes thereto as at and for the years ended December 31, 2017 and 2016 ("consolidated financial statements"). The Company's interim results are not necessarily indicative of its results for a full year.

3. SIGNIFICANT ACCOUNTING POLICIES

a) Basis of measurement

These interim financial statements have been prepared using the same accounting policies and methods of application as those disclosed in note 3 to the Company's consolidated financial statements, except as described in note 4.

b) Currency of presentation

These interim financial statements are presented in United States dollars ("USD"), which is the functional and presentation currency of the Company and all of its subsidiaries. Certain values are presented in Canadian dollars and described as CAD.

c) Basis of consolidation

The accounts of the subsidiaries controlled by the Company are included in the interim financial statements from the date that control commenced until the date that control ceases. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

Condensed Interim Consolidated Financial Statements
5
Tahoe Resources Inc.




NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(expressed in 000's of USD, except as otherwise stated) - Unaudited

The principal subsidiaries (operating mine sites and projects) of the Company and their geographic locations at June 30, 2018 are as follows:
Direct Parent Company
 
Location
 
Ownership
Percentage
 
Mining Properties and Development Projects Owned
Minera San Rafael, S.A.
 
Guatemala
 
100%
 
Escobal mine
La Arena S.A.
 
Peru
 
100%
 
La Arena mine,
 
 
 
 
 
 
La Arena II Project
Shahuindo S.A.C.
 
Peru
 
100%
 
Shahuindo mine
Lake Shore Gold Corp.
 
Canada
 
100%
 
Bell Creek mine,
 
 
 
 
100%
 
Timmins West,
 
 
 
 
100%
 
Thunder Creek,
 
 
 
 
100%
 
144 Gap,
 
 
 
 
100%
 
Fenn-Gib Project
 
 
 
 
100%
 
Juby Project,
 
 
 
 
79%
 
Whitney Project
Intercompany assets, liabilities, equity, income, expenses and cash flows arising from intercompany transactions are eliminated in full on consolidation.

4. CHANGES IN ACCOUNTING POLICIES AND STANDARDS

a) Application of new or amended accounting standards effective January 1, 2018

i. New or amended standards adopted in the Company's consolidated financial statements.

The Company has adopted the following new or amended IFRS standards for the annual period beginning on January 1, 2018. The Company has determined there to be no material impact on its interim financial statements:

•IFRS 9 - Financial Instruments; and
•IFRS 15 - Revenue from Contracts with Customers
In July 2014, the IASB issued the final version of IFRS 9 “Financial Instruments” (“IFRS 9”), which replaces IAS 39 “Financial Instruments: Recognition and Measurement” (“IAS 39”). IFRS 9 is effective for annual periods beginning on or after January 1, 2018.
IFRS 9 provides a revised model for classification and measurement of financial assets, including a new “expected credit loss” impairment model. The revised model for classifying financial assets results in classification according to their contractual cash flow characteristics and the business models under which they are held. IFRS 9 introduces a reformed approach to hedge accounting. IFRS 9 also largely retains the existing requirements in IAS 39 for the classification of financial liabilities.
The key requirements of IFRS 9 as they relate to the Company include the following:
•Subsequent to initial measurement at fair value, all recognized financial assets that are within the scope of IFRS 9 are required to be subsequently measured at amortized cost or fair value. Financial assets that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortized cost in subsequent periods. Financial assets that have a business model whose objective is achieved by both collecting the contractual cash flows and selling financial assets are generally measured at fair value through other comprehensive income (“FVTOCI”). All other financial assets are measured at fair value through profit and loss (“FVTPL”) in subsequent accounting periods. In addition, on initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’s FVTOCI, with only dividend income generally recognized in profit or loss. Transaction costs for financial assets held at FVTPL are expensed, for all other financial assets, they are recognized at fair value at initial measurement less any directly attributable transaction costs.
•Financial liabilities are designated as either: (i) fair value through profit or loss; or (ii) other financial liabilities. All financial liabilities are classified and subsequently measured at amortized cost except for financial liabilities at FVTPL. The classification determines the method by which the financial liabilities are carried on the balance

Condensed Interim Consolidated Financial Statements
6
Tahoe Resources Inc.




NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(expressed in 000's of USD, except as otherwise stated) - Unaudited

sheet subsequent to inception and how changes in value are recorded. Accounts payable and accrued liabilities and long-term debt are classified as other financial liabilities and carried on the balance sheet at amortized cost.
•For the impairment of financial assets, IFRS 9 requires an ‘expected credit loss’ model to be applied which requires a loss allowance to be recognized based on expected credit losses. This applies to financial assets measured at amortized cost. The expected credit loss model requires an entity to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in initial recognition. In other words, it is no longer necessary for a credit event to have occurred before credit losses are recognized.
Impacts of change in accounting policy
•None of the Company's classification of its financial instruments have changed significantly as a result of the adoption of the new standard under a retrospective basis without the restatement of the comparative period.
•The Company has assessed the impairment of its receivables using the expected credit loss model, and no material difference was noted, and no impairment has been recognized upon transition and at June 30, 2018.
•There are no transitional impacts regarding financial liabilities in regards to classification and measurement.
In May 2014, the IASB issued IFRS 15 “Revenue from Contracts with Customers” (“IFRS 15”). IFRS 15 replaces IAS 11 “Construction Contracts”, IAS 18 “Revenue”, IFRIC 13 “Customer Loyalty Programmes”, IFRIC 15 “Agreements for the Construction of Real Estate”, IFRIC 18 “Transfer of Assets from Customers” and SIC 31 “Revenue - Barter Transactions Involving Advertising Services”, and is effective for annual periods beginning on or after January 1, 2018.
The standard contains a single model that applies to contracts with customers and two approaches to recognizing revenue: at a point in time or over time. The model features a contract‐based five‐step analysis of transactions to determine whether, how much and when revenue is recognized. New estimates and judgmental thresholds have been introduced, which may affect the amount and/or timing of revenue recognized.
Sales of concentrates are recognized and revenue is recorded at market prices following the transfer of control to the customer, provided that the Company has a present right to payment, has transferred physical possession of the asset to the customer, and the customer has the significant risks and rewards of ownership. The Company satisfies its performance obligations upon delivery of the concentrates. The Company’s concentrates are sold under a pricing arrangement where final prices are determined by quoted market prices in a period subsequent to the date of sale. Until prices are final, revenues are recorded based on forward commodity prices of metals for the expected period of final settlement. Also, subsequent variations in the final determination of the metal concentrate weight, assay and price are recognized as revenue adjustments as they occur until finalized.
Impact of change in accounting policy
The Company adopted IFRS 15 on a modified retrospective basis and has determined that there is no impact of the change in the accounting for revenue at the transition date or the three and six months ended June 30, 2018, specifically as the Company did not have any concentrate revenues receivable as the Escobal mine is on care and maintenance.
Significant judgments in applying accounting policies related to revenue recognition
Each contract with the customer outlines the terms of the sales of concentrates, including the delivery terms, customer acceptance, the timing of the transfer of the substantive risks and rewards of ownership to the customer, transfer of title, which are evaluated to determine when the customer obtains control of the concentrate. Significant judgements also include the determination of transaction price of each contract, which include the forward commodity price, concentrate weight, quantity, and assay.
b) Future accounting standards and interpretations

The following IFRS standards, and amendments to standards and interpretations, are not yet effective for the three and six months ended June 30, 2018, and have not been applied in preparing these interim financial statements.

The Company is currently evaluating the impact the following standards are expected to have on its consolidated financial statements:

i. New or amended standards effective January 1, 2019 and thereafter.

IFRS 16 - Leases

Condensed Interim Consolidated Financial Statements
7
Tahoe Resources Inc.




NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(expressed in 000's of USD, except as otherwise stated) - Unaudited

IFRS 16 was issued by the IASB on January 13, 2016, and will replace IAS 17, Leases. The new Standard will bring most leases on-balance sheet for lessees under a single model, eliminating the distinction between operating and finance leases. Lessor accounting however, remains largely unchanged and the distinction between operating and finance leases is retained. IFRS 16 is effective for annual reporting periods beginning on or after January 1, 2019. The Company is currently in process of evaluating the impact of IFRS 16 on its consolidated financial statements.
5. CRITICAL JUDGEMENTS AND ESTIMATES IN APPLYING ACCOUNTING POLICIES

The preparation of interim financial statements in conformity with IFRS requires management to make judgments and estimates that affect the application of accounting policies and the reported amounts of assets, liabilities, contingent liabilities, income and expenses. Actual results could differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and applied prospectively.

Information about critical judgments and estimates in applying accounting policies that have the most significant effect on the amounts recognized in the interim financial statements for the three and six months ended June 30, 2018 are consistent with those applied and disclosed in note 5 of the consolidated financial statements, except as described in note 4. The Company's interim results are not necessarily indicative of its results for a full year.

6. CASH AND CASH EQUIVALENTS
 
 
 
 
June 30,
2018

 
December 31,
2017

Cash
 
 
 
$
69,744

 
$
125,134

Cash equivalents
 
 
 
—

 
531

 
 
 
 
$
69,744

 
$
125,665


7. TRADE AND OTHER RECEIVABLES
 
 
June 30,
2018

 
December 31,
2017

Trade receivables
 
$
6,092

 
$
—

Sales tax receivable
 
31,377

 
28,138

Income tax receivable
 
3,985

 
10,005

Other
 
1,304

 
1,474

 
 
42,758

 
39,617


8. INVENTORIES
 
 
June 30,
2018

 
December 31,
2017

Supplies
 
$
60,055

 
$
57,195

Stockpile
 
21,345

 
23,029

Work in process
 
24,846

 
21,129

Finished goods
 
21,483

 
27,028

 
 
$
127,729

 
$
128,381

The cost of inventories recognized as an expense for the three and six months ended June 30, 2018 was $104,707 and $219,407, respectively (three and six months ended June 30, 2017: $129,840 and $269,070, respectively) and is included in total operating costs.

Condensed Interim Consolidated Financial Statements
8
Tahoe Resources Inc.




NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(expressed in 000's of USD, except as otherwise stated) - Unaudited

9. MINERAL INTERESTS
 
 
Mineral Interests
 
 
 
 
 
 
Depletable

 
Non-
Depletable

 
Plant &
Equipment

 
Total

Cost
 
 
 
 
 
 
 
 
Balance at January 1, 2018
 
$
1,581,941

 
$
668,863

 
$
1,032,709

 
$
3,283,513

Additions
 
22,167

 
21,365

 
93,695

 
137,227

Disposals
 
—

 
—

 
(2,530
)
 
(2,530
)
Transfers(1)
 
8,172

 
(8,172
)
 
—

 
—

Change in reclamation provision
 
301

 
—

 
—

 
301

Balance at June 30, 2018
 
$
1,612,581

 
$
682,056

 
$
1,123,874

 
$
3,418,511

Accumulated depreciation and depletion
 
 
 
 
 
 
 
 
Balance at January 1, 2018
 
$
(482,044
)
 
$
(2,049
)
 
$
(182,631
)
 
$
(666,724
)
Depletion and depreciation
 
(49,932
)
 
—

 
(25,163
)
 
(75,095
)
Disposals
 
—

 
—

 
2,329

 
2,329

Balance at June 30, 2018
 
$
(531,976
)
 
$
(2,049
)
 
$
(205,465
)
 
$
(739,490
)
Carrying amount at
 
 
 
 
 
 
 
 
June 30, 2018
 
$
1,080,605

 
$
680,007

 
$
918,409

 
$
2,679,021

 
 
Mineral Interests
 
 
 
 
 
 
Depletable

 
Non-
Depletable

 
Plant &
Equipment

 
Total

Cost
 
 
 
 
 
 
 
 
Balance at January 1, 2017
 
$
1,524,323

 
$
637,644

 
$
899,513

 
$
3,061,480

Additions
 
47,952

 
43,184

 
141,011

 
232,147

Disposals
 
—

 
—

 
(8,204
)
 
(8,204
)
Transfers(2)
 
13,013

 
(13,402
)
 
389

 
—

Change in reclamation provision
 
(3,347
)
 
1,437

 
—

 
(1,910
)
Balance at December 31, 2017
 
$
1,581,941

 
$
668,863

 
$
1,032,709

 
$
3,283,513

Accumulated depreciation and depletion
 
 
 
 
 
 
 
 
Balance at January 1, 2017
 
$
(365,248
)
 
$
—

 
$
(139,279
)
 
$
(504,527
)
Depletion and depreciation
 
(116,796
)
 
(2,049
)
 
(50,491
)
 
(169,336
)
Disposals
 
—

 
—

 
7,139

 
7,139

Balance at December 31, 2017
 
$
(482,044
)
 
$
(2,049
)
 
$
(182,631
)
 
$
(666,724
)
Carrying amount at
 
 
 
 
 
 
 
 
December 31, 2017
 
$
1,099,897

 
$
666,814

 
$
850,078

 
$
2,616,789

(1)
The updated resource statements published in January 2018 reflect an increase to the depletable base at the Shahuindo mine of 152,923 ounces. These ounces were transferred from non-depletable to depletable mineral interests.
(2)
The updated resource statements published in January 2017 reflect an increase to the depletable base at the Timmins West mine of 72,904 ounces. These ounces were transferred from non-depletable to depletable mineral interests.


Condensed Interim Consolidated Financial Statements
9
Tahoe Resources Inc.




NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(expressed in 000's of USD, except as otherwise stated) - Unaudited

A summary by segment of the net carrying amount of mineral interests is as follows:
 
 
Mineral Interests
 
 
 
 
 
 
 
 
Depletable

 
Non-Depletable(1)

 
Plant & Equipment

 
June 30,
2018

 
December 31, 2017

Escobal
 
$
487,293

 
$
27,266

 
$
260,564

 
$
775,123

 
$
776,365

La Arena
 
1,089

 
219,155

 
199,150

 
419,394

 
433,177

Shahuindo
 
288,722

 
50,480

 
243,330

 
582,532

 
527,825

Timmins mines
 
303,501

 
383,106

 
215,365

 
901,972

 
879,422

 
 
$
1,080,605

 
$
680,007

 
$
918,409

 
$
2,679,021

 
$
2,616,789

(1)      Non-depletable mineral interests include exploration and evaluation projects and land.

On July 5, 2017 the Company received notice of a temporary suspension of the Escobal mining license, in response to which the Company immediately commenced legal actions to restore its license. Given the current temporary nature of the suspension, the restoration of the license and the ongoing legal appeals, the Company determined that the Escobal assets were not impaired at December 31, 2017. During Q2 2018 there were no other events or changes in circumstances that would indicate either an impairment or the reversal of impairments previously taken of the Company's assets. The Company will continue to evaluate whether there has been any impairment to Escobal assets as developments relating to the suspension of the Escobal mining license and mining operations occur.

a) Goodwill

Goodwill typically arises on the Company's business combinations due to: i) the ability of the Company to capture certain synergies through management of the acquired operation within the Company; and ii) the requirement to record a deferred tax liability for the difference between the assigned fair values and the tax bases of assets acquired and liabilities assumed.
The carrying amount of goodwill has been allocated to the following cash generating units ("CGUs") and is included in the respective operating segment assets:
 
 
La Arena Phase II(1)

 
Timmins Exploration Potential(2)

 
Total

January 1, 2017
 
$
57,468

 
$
54,617

 
$
112,085

Additions
 
—

 
—

 
—

December 31, 2017
 
$
57,468

 
$
54,617

 
$
112,085

Additions
 
—

 
—

 
—

June 30, 2018
 
$
57,468

 
$
54,617

 
$
112,085

(1)
The La Arena Phase II CGU is included in the La Arena operating segment in non-depletable mineral interests.
(2)
The allocation of goodwill associated with the acquisition of Lake Shore Gold was finalized during 2016 and was allocated 100% to the Timmins Exploration Potential CGU which is included in the Timmins mines operating segment in non-depletable mineral interests.

10. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
 
 
June 30,
2018

 
December 31, 2017

Trade payables
 
$
61,073

 
$
49,487

Accrued trade and other payables
 
23,237

 
25,685

Royalties
 
14,257

 
16,000

Accrued payroll and related benefits
 
17,035

 
18,912

 
 
$
115,602

 
$
110,084



Condensed Interim Consolidated Financial Statements
10
Tahoe Resources Inc.




NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(expressed in 000's of USD, except as otherwise stated) - Unaudited

11. DEBT
 
 
 
2018

 
2017

Balance at January 1, 2018 and 2017
 
 
$
35,000

 
$
35,000

Borrowings/additions
 
 
75,000

 
—

Repayments
 
 
(35,000
)
 
—

Ending balance at June 30, 2018 and December 31, 2017
 
 
$
75,000

 
$
35,000

The Company's debt facilities contain covenants that, among other things, restrict the ability of the Company and its subsidiaries to incur additional debt, merge, consolidate, transfer, lease or otherwise dispose of all or substantially all of its assets to any other entity.

Revolving credit facility

On February 20, 2018 the Company announced the closing of its Second Amended and Restated Revolving Facility with its bank syndicate for a $175 million revolving credit facility plus a $25 million accordion feature, for total access of $200 million in capital. The revised facility matures on July 19, 2021. The Second Amended and Restated Revolving Facility is structured on the strength of Tahoe’s gold business alone, and access to the facility does not rely on the operation of the Escobal mine.

The facility bears interest on a sliding scale of LIBOR plus between 2.25% to 3.25% or a base rate plus 1.25% to 2.25%, which is determined based upon the Company's consolidated net leverage ratio. Standby fees for the undrawn portion of the facility are also on a similar sliding scale basis of between 0.5063% and 0.7313%.

As at June 30, 2018, the Company has drawn $75 million on the Second Amended and Restated Revolving Facility and continues to have access to the remaining $100 million and $25 million accordion feature. The Company was in compliance with all covenants at June 30, 2018.

12. LEASE OBLIGATIONS
 
 
2018

 
2017

Balance at January 1, 2018 and 2017
 
$
7,754

 
$
15,946

Payments
 
(3,886
)
 
(9,456
)
Accrued interest
 
111

 
451

Foreign exchange (gain) loss
 
(253
)
 
813

Ending balance at June 30, 2018 and December 31, 2017
 
$
3,726

 
$
7,754


 
 
June 30,
2018

 
December 31,
2017

Current portion
 
$
3,713

 
$
6,146

Non-current portion
 
13

 
1,608

 
 
$
3,726

 
$
7,754




Condensed Interim Consolidated Financial Statements
11
Tahoe Resources Inc.




NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(expressed in 000's of USD, except as otherwise stated) - Unaudited

13. RECLAMATION PROVISION
 
 
2018

 
2017

Balance at January 1, 2018 and 2017
 
$
63,056

 
$
64,219

Accretion expense
 
1,125

 
2,640

Revisions in estimates and obligations
 
(76
)
 
(3,803
)
Ending balance at June 30, 2018 and December 31, 2017
 
$
64,105

 
$
63,056


 
 
June 30,
2018

 
December 31, 2017

Current portion(1)
 
$
104

 
$
487

Non-current portion
 
64,001

 
62,569

 
 
$
64,105

 
$
63,056

(1)
As at the period ended June 30, 2018, the Company estimates that it will incur reclamation costs on the Whitney Project in the following twelve months. As a result, a portion of the reclamation provision has been reclassified to current liabilities.

The Company's environmental permits require that it reclaim any land it disturbs during mine development, construction and operations. Although the timing and the amount of the actual expenditures are uncertain, the Company has estimated the undiscounted cash flows related to the future reclamation obligations arising from its activities to June 30, 2018 to be $93,338 which is unchanged from December 31, 2017.

In determining the discount rate to be used in the calculations of the present value of the future reclamation obligations, the Company combines risk and inflation rates specific to the country in which the reclamation will take place. The discount rates used in the calculations were between 4.00% and 6.00%.

There were no changes in the three months ended June 30, 2018 to the partial guarantees for the closure obligations of the Shahuindo and Timmins mines. The letter of credit remained at $13,297 for La Arena and $10,390 for Shahuindo and the bond remained at $9,495 for the Timmins mines.
14. REVENUES
 
 
Three Months Ended June 30,
 
 
Six Months Ended June 30,
 
 
 
2018

 
2017

 
2018

 
2017

Silver
 
$
573

 
$
63,407

 
$
1,229

 
$
164,688

Gold
 
126,559

 
137,445

 
265,852

 
277,197

Lead
 
—

 
3,007

 
(7
)
 
6,766

Zinc
 
—

 
5,717

 
—

 
11,971

 
 
$
127,132

 
$
209,576

 
$
267,074

 
$
460,622


a) Concentrate revenues

The Company has contracts with a number of customers for its concentrate sales. Revenues reflect final settlements which can be positive or negative. For the three and six months ended June 30, 2018, the Company had no concentrate revenues (2017: $73,417 and $186,523, respectively).
The concentrate revenues by customer for the three and six months ended June 30, 2018 and 2017 are as follows:
 
 
Three Months Ended June 30,
 
 
Six Months Ended June 30,
 
 
 
2018

 
2017

 
2018

 
2017

Customer 1
 
—
%
 
40
%
 
—
%
 
40
%
Customer 2
 
—
%
 
24
%
 
—
%
 
25
%
Customer 3
 
—
%
 
20
%
 
—
%
 
19
%
Customer 4
 
—
%
 
14
%
 
—
%
 
13
%
Other customers
 
—
%
 
2
%
 
—
%
 
3
%
Total concentrate revenues
 
—
%
 
100
%
 
—
%
 
100
%


Condensed Interim Consolidated Financial Statements
12
Tahoe Resources Inc.




NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(expressed in 000's of USD, except as otherwise stated) - Unaudited

b) Doré revenues

The Company has contracts with customers for its doré sales. The Company's top three doré customers account for 99% and 86% of doré revenues for the three and six months ended June 30, 2018, respectively, (three and six months ended June 30, 2017: three customers accounted for 90% and 91% of doré revenues, respectively). For the three and six months ended June 30, 2018, doré sales comprised 100% of total gold sales (three and six months ended June 30, 2017: 99% and 98%, respectively). The doré revenues by customer for the three and six months ended June 30, 2018 and 2017 are as follows:
 
 
Three Months Ended June 30,
 
 
Six Months Ended June 30,
 
 
 
2018

 
2017

 
2018

 
2017

Customer 1
 
38
%
 
42
%
 
42
%
 
42
%
Customer 2
 
43
%
 
23
%
 
29
%
 
29
%
Customer 3
 
18
%
 
25
%
 
15
%
 
20
%
Other customers
 
1
%
 
10
%
 
14
%
 
9
%
Total doré revenues
 
100
%
 
100
%
 
100
%
 
100
%
The Company has determined that the loss of any single customer or curtailment of purchases by any one customer would not have a material adverse effect on the Company's financial performance, financial condition and cash flows due to the nature of the refined metals market.
15. PRODUCTION COSTS
 
 
Three Months Ended June 30,
 
 
Six Months Ended June 30,
 
 
 
2018

 
2017

 
2018

 
2017

Raw materials and consumables
 
$
27,847

 
$
39,229

 
$
54,904

 
$
85,870

Salaries and benefits
 
21,208

 
24,415

 
44,158

 
49,038

Contractors and outside services
 
22,755

 
26,232

 
42,469

 
50,513

Other expenses
 
898

 
5,578

 
2,699

 
8,584

Changes in inventory
 
(3,054
)
 
(3,248
)
 
3,104

 
(4,410
)
 
 
$
69,654

 
$
92,206

 
$
147,334

 
$
189,595


16. CARE AND MAINTENANCE
 
 
Three Months Ended June 30,
 
 
Six Months Ended June 30,
 
 
 
2018

 
2017

 
2018

 
2017

Raw materials and consumables
 
$
881

 
$
—

 
$
1,491

 
$
—

Salaries and benefits
 
4,173

 
—

 
9,495

 
—

Contractors and outside services
 
2,740

 
—

 
6,779

 
—

Other expenses
 
263

 
—

 
643

 
—

 
 
$
8,057


$
—


$
18,408


$
—


17. GENERAL AND ADMINISTRATIVE EXPENSES
 
 
 
 
Three Months Ended June 30,
 
 
Six Months Ended June 30,
 
 
 
Notes
 
2018

 
2017

 
2018

 
2017

Salaries and benefits
 
 
 
$
6,211

 
$
5,560

 
$
12,488

 
$
10,246

Share-based payments
 
18
 
2,921

 
1,720

 
4,047

 
3,290

Consulting and professional fees
 
 
 
1,831

 
1,296

 
3,901

 
2,642

Administrative and other
 
 
 
2,742

 
2,797

 
5,110

 
6,887

 
 
 
 
$
13,705

 
$
11,373

 
$
25,546

 
$
23,065



Condensed Interim Consolidated Financial Statements
13
Tahoe Resources Inc.




NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(expressed in 000's of USD, except as otherwise stated) - Unaudited

18. SHARE-BASED PAYMENTS AND OTHER RELATED INFORMATION

The Company's equity compensation plans are designed to attract and retain individuals and to reward them for current and expected future performance. The Company's share-based compensation arrangements are denominated in CAD and include Tahoe Share Plan Options, the Rio Alto replacement options issued on April 1, 2015 upon completion of the acquisition of Rio Alto and the Lake Shore Gold replacement options issued on April 1, 2016 upon completion of the acquisition of Lake Shore Gold (collectively, the "Share Options"), as well as Deferred Share Awards ("DSAs"), Restricted Share Awards ("RSAs"), Performance Share Awards ("PSAs"), and Share Appreciation Rights ("SARs")(collectively with the Share Options, referred to as the "Share Plan").

At June 30, 2018, the Company has the following share-based payment arrangements:

a)     Share Options

The Share Plan entitles key management personnel, senior employees, and consultants to the option to purchase shares in the Company. Under the terms of this program, Share Options are exercisable at the market close price of the Company's shares on the day prior to the grant date. The Share Options vest based on vesting terms set by the Compensation Committee of the Board of Directors and vest in three equal tranches with the first tranche vesting on the first anniversary, the second on the second anniversary, and the third on the third anniversary of the grant date.

The number and weighted average exercise price in CAD of Share Options outstanding at June 30, 2018 and December 31, 2017 are as follows:
 
 
Weighted average exercise price

 
Number of
Share Options

Outstanding at January 1, 2017
 
$
14.55

 
3,211,745

Granted
 
9.91

 
1,407,000

Exercised
 
10.82

 
(112,136
)
Forfeited
 
13.68

 
(307,000
)
Expired
 
17.37

 
(332,584
)
Outstanding at December 31, 2017
 
$
12.79

 
3,867,025

Granted
 
6.65

 
472,800

Forfeited
 
13.12

 
(127,433
)
Expired
 
16.36

 
(426,000
)
Outstanding at June 30, 2018
 
$
11.61

 
3,786,392

The following table summarizes information about Share Options outstanding and exercisable at June 30, 2018 (exercise range and prices in CAD):
Exercise price range
 
Outstanding

 
Weighted average exercise price

 
Weighted average remaining life (years)

 
Exercisable

 
Weighted average exercise price

 
Weighted average remaining life (years)

2.80-9.67
 
708,770

 
$
7.00

 
3.86

 
163,970

 
$
7.99

 
0.56

9.68-10.59
 
1,104,000

 
$
10.00

 
3.70

 
510,000

 
$
10.00

 
3.70

10.60-12.56
 
992,000

 
$
12.35

 
2.73

 
709,667

 
$
12.37

 
2.70

12.57-15.74
 
836,622

 
$
15.34

 
1.86

 
803,622

 
$
15.42

 
1.80

15.75-23.37
 
145,000

 
$
19.91

 
2.02

 
82,000

 
$
20.10

 
1.13

2.80-23.37
 
3,786,392

 
$
11.61

 
3.00

 
2,269,259

 
$
12.88

 
2.40

During the three and six months ended June 30, 2018, the Company recorded $840 and $1,491 of share based compensation expense relating to Share Options in general and administrative expenses (three and six months ended June 30, 2017: $623 and $1,446).

Condensed Interim Consolidated Financial Statements
14
Tahoe Resources Inc.




NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(expressed in 000's of USD, except as otherwise stated) - Unaudited

b)     DSAs and RSAs

The Share Plan permits DSAs and RSAs (collectively referred to as "Share Awards") to be issued to directors, key management personnel and senior employees. Upon vesting, shares in the Company are issued at no exercise price. Compensation cost for DSAs and RSAs is measured based on the closing price of the stock one day prior to the grant date.

i.     DSAs

The DSAs vest based on service-related vesting terms set by the Compensation Committee of the Board of Directors and can therefore vary grant to grant. In general, however, DSAs vest in three equal tranches with the first tranche vesting on the first anniversary, the second on the second anniversary, and the third on the third anniversary of the grant date (the "general DSA vesting terms"). During the three and six months ended June 30, 2018, the Company recorded $583 and $1,058 of share based compensation expense relating to DSAs in general and administrative expenses (three and six months ended June 30, 2017: $442 and $1,190).

The number of DSAs outstanding at June 30, 2018 and December 31, 2017 is as follows:
Outstanding at January 1, 2017
463,000

Granted
195,000

Shares issued
(215,000
)
Cancelled/forfeited
(26,000
)
Outstanding at December 31, 2017
417,000

Granted
272,010

Shares issued
(238,000
)
Outstanding at June 30, 2018
451,010



ii.     RSAs

The RSAs vest immediately on the grant date and are issued at that time. Consequently, there are no RSAs outstanding at June 30, 2018 and December 31, 2017.

The Company granted 285,975 RSAs during the three and six months ended June 30, 2018 for total share based compensation expense of $1,453 (three and six months ended June 30, 2017: 72,000 and 75,750 RSAs were granted and $620 and $655 expense recorded).

c)     PSAs

The Share Plan permits Performance Share Awards (“PSAs”) to be issued to employees, Executive Officers and consultants of the Company. Non-employee Directors are not eligible to participate in or receive awards pursuant to the PSA Plan. All PSA's are settled through the issuance of shares upon vesting.

The PSAs are expected to cliff-vest three years from the date of grant (the “Entitlement Date”), except for any grants made in 2018, which vest 50% after year two and 50% after year three. The vesting requirements are based on certain performance criteria over the vesting period established by the Company.

During the three and six months ended June 30, 2018, the Company recorded $45 of share based compensation expense relating to PSAs in general and administrative expenses (three and six months ended June 30, 2017: nil). PSA's are recorded at fair value based on the application of a Monte Carlo pricing model at the date of grant.

The number of PSAs outstanding at June 30, 2018 and December 31, 2017 is as follows:
Outstanding at December 31, 2017
—

Granted
471,800

Outstanding at June 30, 2018
471,800




Condensed Interim Consolidated Financial Statements
15
Tahoe Resources Inc.




NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(expressed in 000's of USD, except as otherwise stated) - Unaudited



d)     Inputs for measurement of fair values

The grant date fair values (CAD) of Share Options are measured using the Black-Scholes Model and are denominated in CAD.

There were 472,800 Share Options granted during the three and six months ended June 30, 2018 (three and six months ended June 30, 2017: 15,000 and 1,320,000).

The weighted average inputs used and grant date fair values (CAD) of Share Options granted during the three and six months ended June 30, 2018 and 2017 are as follows:
 
 
Three Months Ended June 30,
 
 
Six Months Ended June 30,
 
 
 
2018

 
2017

 
2018

 
2017

Share price
 
$
6.57

 
$
11.06

 
$
6.57

 
$
9.68

Exercise price
 
$
6.65

 
$
11.16

 
$
6.65

 
$
9.39

Expected volatility(1)
 
59
%
 
51
%
 
59
%
 
51
%
Expected life (years)
 
3.50

 
3.50

 
3.50

 
3.50

Expected dividend yield
 
—
%
 
2.80
%
 
—
%
 
3.32
%
Risk-free interest rate
 
2.03
%
 
0.81
%
 
2.03
%
 
1.06
%
Forfeiture rate
 
7.67
%
 
6.94
%
 
7.67
%
 
7.10
%
Fair value
 
$
2.86

 
$
3.51

 
$
2.86

 
$
2.77

(1)
The expected volatility assumption is based on the historical volatility of the Company's Canadian dollar common shares on the Toronto Stock Exchange.

e)     Authorized share capital

The Company's authorized share structure is as follows:

•
Unlimited number of authorized common shares without par value;
•
Common shares are without special rights or restrictions attached;
•
Common shares have voting rights;
•
Common shareholders are entitled to receive dividend payments; and
•
Common shareholders are entitled to elect to reinvest their dividend payments through the Company's dividend reinvestment program.
At June 30, 2018, there were 313,236,686 common shares of the Company issued and outstanding (December 31, 2017: 312,775,761).

Condensed Interim Consolidated Financial Statements
16
Tahoe Resources Inc.






19. INCOME TAX EXPENSE

The reconciliation of income taxes at statutory rates with the reported taxes is as follows:

 
 
Three Months Ended June 30,
 
 
Six Months Ended June 30,
 
 
 
2018

 
2017

 
2018

 
2017

(Loss) Earnings before income taxes
 
$
(6,716
)
 
$
55,188

 
$
(8,750
)
 
$
141,086

Statutory tax rate
 
27.00
%
 
26.00
%
 
27.00
%
 
26.00
%
Income tax (recovery) expense
 
$
(1,813
)
 
$
14,349

 
$
(2,362
)
 
$
36,682

Reconciling items:
 
 
 
 
 
 
 
 
Difference between statutory and foreign tax rates
 
4,030

 
(1,032
)
 
8,501

 
(5,852
)
Non-deductible share-based payments
 
196

 
1,160

 
668

 
1,395

Impact of foreign exchange on deferred income tax assets and liabilities
 
2,446

 
2,607

 
1,710

 
(4,361
)
Non-deductible expenses
 
142

 
4,400

 
378

 
4,842

Change in unrecognized deferred tax assets
 
1,272

 
217

 
2,206

 
197

Other
 
2,564

 
—

 
2,564

 
—

Income tax expense
 
$
8,837

 
$
21,701

 
$
13,665

 
$
32,903


20. EARNINGS (LOSS) PER SHARE
 
 
Three Months Ended June 30, 2018
 
Three Months Ended June 30, 2017
 
 
(Loss)

 
Weighted average shares outstanding

 
(Loss) per share

 
Earnings

 
Weighted average shares outstanding

 
Earnings
per share

Basic EPS(1)
 
$
(15,553
)
 
313,252,594

 
$
(0.05
)
 
$
33,487

 
312,786,759

 
$
0.11

Dilutive securities:
 
 
 
 
 
 
 
 
 
 
 
 
Share options
 
—

 
—

 
—

 
—

 
82,627

 
—

Diluted EPS
 
$
(15,553
)
 
313,252,594

 
$
(0.05
)
 
$
33,487

 
312,869,386

 
$
0.11

(1)
The weighted average shares outstanding used in the basic earnings per share calculation includes the dilutive impact of 451,010 DSAs (three months ended June 30, 2017: 417,000 DSAs).

For the three months ended June 30, 2018, 3,786,392 Shares Options and 451,010 DSAs were outstanding of which 3,751,032 and nil, respectively were anti-dilutive (three months ended June 30, 2017: 4,113,475 Share Options and 417,000 DSAs outstanding, of which 2,675,635 and nil, respectively were anti-dilutive) because the underlying exercise prices exceeded the average market price for the three months ended June 30, 2018 of CAD$6.50 (three months ended June 30, 2017: CAD$11.71).

 
 
Six Months Ended June 30, 2018
 
Six Months Ended June 30, 2017
 
 
(Loss)

 
Weighted average shares outstanding

 
(Loss) per share

 
Earnings

 
Weighted average shares outstanding

 
Earnings
per share

Basic EPS(1)
 
$
(22,415
)
 
313,222,341

 
$
(0.07
)
 
$
108,183

 
312,430,033

 
$
0.35

Dilutive securities:
 
 
 
 
 
 
 
 
 
 
 
 
Share options
 
—

 
—

 
—

 
—

 
80,464

 
—

Diluted EPS
 
$
(22,415
)
 
313,222,341

 
$
(0.07
)
 
$
108,183

 
312,510,497

 
$
0.35

(1)
The weighted average shares outstanding used in the basic earnings per share calculation includes the dilutive impact of 451,010 DSAs (six months ended June 30, 2017: 417,000 DSAs).

For the six months ended June 30, 2018, 3,786,392 Shares Options and 451,010 DSAs were outstanding of which 3,762,732 and nil, respectively were anti-dilutive (six months ended June 30, 2017: 4,113,475 Share Options and 417,000 DSAs outstanding, of which 2,675,635 and nil, respectively were anti-dilutive) because the underlying exercise prices exceeded

See accompanying notes to the condensed interim consolidated financial statements
17
Tahoe Resources Inc.
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(expressed in 000's of USD, except as otherwise stated) - Unaudited

the average market price for the six months ended June 30, 2018 of CAD$6.14 (three months ended June 30, 2017: CAD$11.71).


21. SUPPLEMENTAL CASH FLOW INFORMATION
 
 
Three Months Ended June 30,
 
 
Six Months Ended June 30,
 
 
 
2018

 
2017

 
2018

 
2017

Trade and other receivables
 
$
2,121

 
$
7,928

 
$
(9,192
)
 
$
7,667

Inventories
 
(1,025
)
 
(5,134
)
 
(1,565
)
 
(3,142
)
Other current assets
 
(3,207
)
 
2,231

 
(1,110
)
 
641

Other non-current assets
 
(6,389
)
 
(4,141
)
 
(7,424
)
 
(9,411
)
Accounts payable and accrued liabilities, and other non- current liabilities
 
409

 
15,178

 
3,217

 
(15,370
)
Changes in working capital
 
$
(8,091
)
 
$
16,062

 
$
(16,074
)
 
$
(19,615
)

22. SEGMENTED INFORMATION

All of the Company's operations are within the mining sector. The Company produces silver, gold, lead and zinc from mines located in Guatemala, Peru and Canada. Due to the geographic and political diversity of the countries in which the Company operates, each operating segment is responsible for achieving specified business results within a framework of global corporate policies and standards. Regional management in each country provides support to the operating segments, including but not limited to financial, human resources, and exploration assistance. Each operating segment has a budgeting process which it uses to measure the results of operation and exploration activities.
The operating, exploration and financial results of individual operating segments are reviewed by the Company's executive management. As a group, the executive management of the Company is considered to be the chief operating decision maker ("CODM") in order to make decisions about the allocation of resources and to assess their performance. The CODM determined that for review, an operating segment must be one whose principal business activities are the operation of mineral properties for the mining of precious metals and the exploration, development and acquisition of mineral interests.
There has been no change to the Company's reportable operating segments during the three and six months ended June 30, 2018.
Escobal care and maintenance costs, which comprise the cost of maintaining the Escobal mine during the temporary shut down and include environmental costs, salaries and legal fees form a component of total operating costs.

Condensed Interim Consolidated Financial Statements
18
Tahoe Resources Inc.




NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(expressed in 000's of USD, except as otherwise stated) - Unaudited

Significant information relating to the Company's operating segments as at June 30, 2018 and for the three and six months ended June 30, 2018 is summarized as follows:
 
 
June 30, 2018(1)
 
 
Escobal(2)

 
La Arena

 
Shahuindo

 
Timmins
mines

 
Total

Mineral interests and plant and equipment
 
$
775,122

 
$
419,395

 
$
582,532

 
$
901,972

 
$
2,679,021

Goodwill
 
—

 
57,468

 
—

 
54,617

 
112,085

Total assets
 
890,455

 
532,119

 
678,027

 
997,375

 
3,097,976

Total liabilities(3)
 
$
67,885

 
$
71,887

 
$
(447,876
)
 
$
(183,352
)
 
$
(491,456
)
 
 
Three Months Ended June 30, 2018(1)
 
 
Escobal

 
La Arena

 
Shahuindo

 
Timmins
mines

 
Total

Revenues
 
$
—

 
$
48,241

 
$
28,150

 
$
50,741

 
$
127,132

Production costs
 
—

 
23,134

 
15,919

 
30,601

 
69,654

Royalties
 
(17
)
 
—

 
—

 
1,108

 
1,091

Care and Maintenance(4)
 
8,057

 
—

 
—


—

 
8,057

Depreciation and depletion
 
992

 
13,365

 
4,461

 
16,235

 
35,053

Mine operating earnings
 
(9,032
)
 
11,742

 
7,770

 
2,797

 
13,277

Capital expenditures
 
$
206

 
$
8,686

 
$
40,722

 
$
26,888

 
$
76,502


 
 
Six Months Ended June 30, 2018(1)
 
 
Escobal

 
La Arena

 
Shahuindo

 
Timmins
mines

 
Total

Revenues
 
$
(7
)
 
$
112,707

 
$
53,274

 
$
101,100

 
$
267,074

Production costs
 
—

 
52,299

 
30,514

 
64,521

 
147,334

Royalties
 
—

 
—

 
—

 
1,986

 
1,986

Care and Maintenance(4)
 
18,408

 
—

 
—

 
—

 
18,408

Depreciation and depletion
 
1,752

 
27,771

 
10,319

 
32,231

 
72,073

Mine operating earnings
 
(20,167
)
 
32,637

 
12,441

 
2,362

 
27,273

Capital expenditures
 
$
1,670

 
$
14,887

 
$
66,057

 
$
54,380

 
$
136,994


(1)
Balances presented are before intercompany transaction eliminations.
(2)
Escobal segment includes corporate and other.
(3)
Includes intercompany payables and receivables to reconcile to the total liabilities on the statement of financial position.
(4)
Due to the suspension of mining operations following the suspension of the Escobal mining license in the beginning of the third quarter of 2017 care and maintenance costs, which comprise the cost of maintaining the Escobal mine and include environmental costs, salaries and legal fees have been incurred.
Significant information relating to the Company's reportable operating segments as at December 31, 2017 and for the three and six months ended June 30, 2017 is summarized as follows:
 
 
December 31, 2017(1)
 
 
Escobal

 
La Arena

 
Shahuindo

 
Timmins
mines

 
Total

Mineral interests and plant and equipment
 
$
776,364

 
$
433,178

 
$
527,826

 
$
879,421

 
$
2,616,789

Goodwill
 
—

 
57,468

 
—

 
54,617

 
112,085

Total assets
 
906,434

 
573,566

 
621,985

 
978,653

 
3,080,638

Total liabilities (2)
 
$
81,208

 
$
160,979

 
$
(539,512
)
 
$
(158,425
)
 
$
(455,750
)


Condensed Interim Consolidated Financial Statements
19
Tahoe Resources Inc.




NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(expressed in 000's of USD, except as otherwise stated) - Unaudited

 
 
Three Months Ended June 30, 2017(1)
 
 
Escobal

 
La Arena

 
Shahuindo

 
Timmins
mines

 
Total

Revenues
 
$
73,416

 
$
56,741

 
$
25,801

 
$
53,618

 
$
209,576

Production costs
 
23,739

 
28,793

 
13,831

 
25,843

 
92,206

Royalties
 
4,179

 
—

 
—

 
1,272

 
5,451

Depreciation and depletion
 
14,451

 
4,979

 
3,871

 
14,333

 
37,634

Mine operating earnings
 
31,047

 
22,969

 
8,099

 
12,170

 
74,285

Capital expenditures
 
$
9,147

 
$
6,428

 
$
16,712

 
$
31,357

 
$
63,644


 
 
Six Months Ended June 30, 2017(1)
 
 
Escobal

 
La Arena

 
Shahuindo

 
Timmins
mines

 
Total

Revenues
 
$
186,523

 
$
115,775

 
$
45,250

 
$
113,074

 
$
460,622

Production costs
 
56,535

 
54,400

 
25,122

 
53,538

 
189,595

Royalties
 
10,267

 
—

 
—

 
2,831

 
13,098

Depreciation and depletion
 
29,052

 
10,947

 
9,975

 
29,501

 
79,475

Mine operating earnings
 
90,669

 
50,428

 
10,153

 
27,204

 
178,454

Capital expenditures
 
$
19,062

 
$
12,319

 
$
25,031

 
$
55,772

 
$
112,184


(1)
Balances presented are before intercompany transaction eliminations.
(2)
Includes intercompany payables and receivables to reconcile to the total liabilities on the statement of financial position

23. FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments consist of cash and cash equivalents, restricted cash, trade and other receivables, other financial assets, accounts payable and accrued liabilities, debt and lease obligations, and are categorized as follows:

•
Cash and cash equivalents, restricted cash, trade and other receivables, and other financial assets are classified as loans and receivables and are measured at amortized cost;
•
Trade and other receivables which are subject to provisional pricing adjustments and investments are measured at fair value through profit and loss; and
•
Accounts payable and accrued liabilities, debt and lease obligations are classified as other financial liabilities.
Fair value ("FV") estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
The analysis of financial instruments that are measured subsequent to initial recognition at fair value can be categorized into Levels 1 through 3 based upon the degree to which the inputs used in the fair value measurement are observable.
Level 1 - inputs to the valuation methodology are quoted (adjusted) for identical assets or liabilities in active markets.
Level 2 - inputs to valuation methodology include quoted market prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Condensed Interim Consolidated Financial Statements
20
Tahoe Resources Inc.




NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(expressed in 000's of USD, except as otherwise stated) - Unaudited

At June 30, 2018 and December 31, 2017, the levels in the FV hierarchy into which the Company's financial assets and liabilities are measured and recognized on the statement of financial position at fair value are categorized as follows:
 
 
June 30, 2018
 
December 31, 2017
 
 
Level 1

 
Level 2

 
Level 3

 
Level 1

 
Level 2

 
Level 3

Investments(1)
 
$
47

 
$
—

 
$
—

 
$
320

 
$
—

 
$
—

Trade receivables
 
—

 
6,092

 
—

 
—

 
—

 
—

 
 
$
47

 
$
6,092

 
$
—

 
$
320

 
$
—

 
$
—

(1)
Investments are included in other current assets.
The carrying value of cash and cash equivalents, restricted cash, accounts payable and accrued liabilities, debt and lease obligations approximate their fair value given the short term to maturity.
There were no transfers between Level 1 and Level 2 during the three and six months ended June 30, 2018.
24. FINANCIAL RISK MANAGEMENT

The Company has exposure to certain risks resulting from its use of financial instruments. These risks include credit risk, liquidity risk and market risk.

a) Credit Risk

Credit risk is the risk that the counterparty to a financial instrument will cause a loss for the Company by failing to meet its obligations. Credit risk for the Company is primarily related to trade and other receivables, sales tax receivable and cash and cash equivalents.

There has been no significant change to the Company's exposure to credit risk since December 31, 2017 and the Company deems this risk to be minimal.

b) Liquidity Risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company's approach to managing liquidity is to ensure, to the extent possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation. To further mitigate this risk, the Company has the Second Amended and Restated Revolving Credit Facility in place in the amount of $175 million (note 11).

Other than the repayment of $35 million in debt and the draw of $75 million of the Second Amended and Restated Revolving Facility, there have been no significant changes to the Company’s undiscounted commitments during the three and six months ended June 30, 2018. The Company's deems exposure to liquidity risk to be minimal.

c) Market Risk

The market risk of the Company is composed of three main risks: foreign exchange risk, interest rate risk, and price risk.

i. Foreign Exchange Risk

The Company is exposed to foreign exchange or currency risk on balances that are denominated in a currency other than the USD. These include cash and cash equivalents, sales tax receivable, accounts payable and accrued liabilities and taxes payable.

There has been no significant change to the Company's exposure to foreign exchange risk since December 31, 2017 and the Company deems this risk to be at an acceptable level.

ii. Interest Rate Risk

Interest rate risk is the risk that the Company's future cash flows and fair values will fluctuate as a result of changes in market interest rates. At June 30, 2018, the Company's interest-bearing financial instruments are related to cash and cash equivalents, the Second Amended and Restated Revolving Facility and finance

Condensed Interim Consolidated Financial Statements
21
Tahoe Resources Inc.




NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(expressed in 000's of USD, except as otherwise stated) - Unaudited

leases. $75 million has been drawn on the Second Amended and Restated Revolving Facility and interest expenses of $382 have been accrued for the three and six months ended June 30, 2018 (note 11).

The Company deems this interest rate risk to be minimal.

iii. Price Risk

Price risk is the risk that the fair value of the Company's financial instruments will fluctuate due to changes in market prices.

The Company has not entered into any hedging contracts. There has been no significant change to the Company's exposure to price risk since December 31, 2017 and the Company deems this risk to be at an acceptable level.
25. CAPITAL MANAGEMENT

The Company's strategy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to support future development of the business. The Company seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowing and the advantages and security afforded by a sound capital position.

The capital structure of the Company consists of common equity, comprising share capital and reserves net of accumulated deficit, and debt, which includes the Second Amended and Restated Revolving Facility and finance leases.
 
 
Notes
 
June 30,
2018

 
December 31,
2017

Shareholders' equity
 
 
 
$
2,606,520

 
$
2,624,888

Debt
 
11
 
—

 
35,000

Revolving debt
 
11
 
75,000

 
—

Lease obligations
 
12
 
3,726

 
7,754

 
 
 
 
2,685,246

 
2,667,642

Cash and cash equivalents
 
6
 
(69,744
)
 
(125,665
)
Restricted cash
 
 
 
(4,106
)
 
(5,124
)
 
 
  
 
$
2,611,396

 
$
2,536,853


The Company's overall capital management strategy remains unchanged from the year ended December 31, 2017.

26. CONTINGENCIES

Due to the complexity and nature of the Company's operations, various legal, tax, and regulatory matters are outstanding from time to time. In the event that management's estimate of the future resolution of these matters changes, the Company will recognize the effects of the changes in its consolidated financial statements on the date such changes occur. There were no significant changes to the Company's contingencies as disclosed in note 27 of its audited consolidated financial statements for the year ended December 31, 2017.

Condensed Interim Consolidated Financial Statements
22
Tahoe Resources Inc.