What happened

Shares of precious metals miner Tahoe Resources (NYSE:TAHO) dropped over 22% today after the company provided an update about its Escobal mine in Guatemala. As of 2:27 p.m. EDT, the stock was down 17.7%.

So what

To recap, in May a non-governmental organization (NGO) asserted that Guatemala's Ministry of Energy and Mines unlawfully awarded an operating license for the mine to the company's subsidiary in the country. The challenge worked its way up the court system until the Supreme Court of Guatemala agreed with the NGO and suspended the license until the situation was resolved in court. 

Today's drop is in response to the newest twist. The company alerted shareholders that its latest appeal to the court -- that would have allowed operations at Escobal to continue until the situation was resolved in court -- is expected to be denied, although the information is from unconfirmed sources. An official hearing is scheduled for Aug. 28, which is when the news will conceivably be confirmed. 

However, the Constitutional Court will issue an ultimate decision within the next several months, which means Tahoe Resources and its shareholders will remain in limbo for the foreseeable future.

A business man holding out his flat hand, which has a bar chart showing declines on it.

Image source: Getty Images.

Now what

The Escobal mine accounted for 99% of the company's total silver production and about 2% of total gold production in the first half of 2017. In other words, it's a significant component of the overall business of Tahoe Resources, especially when diversifying revenue streams away from gold production.

That explains the market's strong negative reaction to the news in the last several months. It also explains why management suspended its full-year 2017 guidance -- a move announced during the second-quarter 2017 conference call weeks ago.

That said, there may be some good news for investors. The most recent press release stated that the Constitutional Court will make a decision in the next few months, which hints at a much shorter period of time to resolve the issue than the 12 months to 18 months originally provided in early July.

Additionally, Tahoe Resources said that top officials in the Guatemalan government are dismayed by the recent developments and are even working to get the suspension reversed. That makes sense: Thousands of workers are out of work, which means they aren't getting paid, which puts a lot of families at risk, which puts pressure on the government to get to the bottom of things as soon as possible.

I figured most of the bad news from the Escobal fiasco was priced in when Tahoe Resources provided its last update in early July, so today's additional drop is a little surprising. Then again, volatility is what happens to stocks that get sucked into the vortex of uncertainty. If the company's version of events is true, then this issue may be resolved sooner than originally expected. However, there's no way for investors to know what the various branches of the Guatemalan government will do. This remains a risky stock.

Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.