What happened 

Shares of gold and silver miner Tahoe Resources (NYSE: TAHO) are up 10% as of 11:00 a.m. EDT today. The reason for the large gain comes from the company's most recent earnings report, which showed record earnings and cash flow.

So what

Tahoe is what you would call a marginal producer of silver and gold. The company's all-in sustaining costs (AISC) for 2017 are expected to be in the range of $1,150 to $1,250 per ounce, which is much higher than many of the mining giants in this industry.

Guld bar and nuggets

Image source: Getty Images.

What that also means is that the company can have the occasional quarter where everything goes right. This was one of those particular quarters. AISC per gold ounce was $860 for the quarter thanks to some favorable mining conditions. Tahoe had similar results for silver as well, where its AISC of $8.11 per ounce of silver was well below its range of $9.50-$10.50 per ounce. 

These lower-than-expected costs led to earnings of $0.24 per share, which was well above consensus analyst expectations of $0.10 per share. When a company generates an earnings beat like that, Wall Street is going to cheer.

Now what

Even though this quarter was impressive, management still expects its full-year costs to fall within its guided AISC. The reason is that the company plans to ramp up capital spending in the second half of the year and that will cause its AISC to rise. 

Tahoe's balance sheet and production growth plan to 2020 look good, but there is one problem that should concern investors: Its overall AISC for both gold and silver are a little too high for comfort. If precious-metals prices were to drop for one reason or another, it would quickly wipe out any profits the company earns today. Perhaps if Tahoe is able to lower its AISC once it completes this growth cycle, then it will be worth another look. Today, though, those higher than average costs is enough to stay away for a while.