Tahoe Resources 6K Condensed Interim Consolidated Financial Statements | SEC 4 Nov 16

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

For the three and nine months ended September 30, 2016 and 2015

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CONDENSED INTERIM CONSOLIDATED STATEMENTS
OF FINANCIAL POSITION
(Expressed in thousands of United States dollars) – Unaudited

			September 30,			December 31,
	Notes		2016			2015
ASSETS
Current
Cash and cash equivalents	7	$	142,426		$	108,667
Trade and other receivables	8		75,052			43,234
Inventories	9		113,923			70,080
Other			7,537			6,220
			338,938			228,201
Non-current
Mineral interests and plant and equipment	10		2,442,208			1,674,512
Sales tax and other receivables			59,311			37,404
Restricted cash			4,723			2,500
Deferred tax asset			662			2,376
Goodwill	10a		187,376			57,468
			2,694,280			1,774,260
Total Assets		$	3,033,218		$	2,002,461
LIABILITIES
Current
Accounts payable and accrued liabilities	11	$	113,991		$	99,748
Debt	12		35,000			35,000
Lease obligations	13		9,865			6,151
Income tax payable			9,442			9,981
Other			2,383			-
			170,681			150,880
Non-current
Lease obligations	13		9,375			7,711
Reclamation provision	14		63,541			39,524
Deferred tax liability			194,967			134,641
Other			8,297			5,674
Total Liabilities			446,861			338,430
SHAREHOLDERS’ EQUITY
Share capital	18e		2,772,243			1,914,676
Share-based payment reserve	18		17,300			19,372
Deficit			(203,186	)		(270,017	)
Total Shareholders’ Equity			2,586,357			1,664,031
Total Liabilities and Shareholders’ Equity		$	3,033,218		$	2,002,461

Commitments and Contingencies (notes 24b and 26)

APPROVED BY THE DIRECTORS

“Ron Clayton”	“Kevin McArthur”
Ron Clayton	Kevin McArthur
CEO AND DIRECTOR	EXECUTIVE CHAIR

See accompanying notes to the condensed interim consolidated financial statements.

Condensed Interim Consolidated Financial Statements

CONDENSED INTERIM CONSOLIDATED STATEMENTS
OF OPERATIONS AND TOTAL COMPREHENSIVE INCOME
(Expressed in thousands of United States dollars, except per share and share information) – Unaudited

			Three Months Ended					Nine Months Ended
					September 30,						September 30,
	Notes		2016		2015			2016			2015
Revenues	15, 22	$	234,721	$	145,736		$	595,105		$	364,830
Operating costs
Production costs	16		90,263		72,537			241,517			174,989
Royalties	22		4,912		8,258			15,068			29,431
Depreciation and depletion	22		27,909		24,819			82,241			55,576
Total operating costs			123,084		105,614			338,826			259,996
Mine operating earnings			111,637		40,122			256,279			104,834

Other operating expenses
Exploration			4,721		3,322			7,458			5,856
General and administrative	17		7,491		10,682			38,019			31,557
Total other operating expenses			12,212		14,004			45,477			37,413
Earnings from operations			99,425		26,118			210,802			67,421

Other (income) expense
Interest income			-		(56	)		(2,055	)		(83	)
Interest expense			832		692			2,885			2,851
Loss on debenture conversion	6		-		-			32,304			-
Foreign exchange loss (gain)			3,317		1,111			(129	)		380
Other expense (income)			332		1,450			(417	)		1,383
Total other (income) expense			4,481		3,197			32,588			4,531

Earnings before income taxes			94,944		22,921			178,214			62,890
Current income tax expense	19		19,900		10,662			52,021			32,912
Deferred income tax expense (benefit)	19		12,033		(996	)		8,632			(5,828	)
Earnings and total comprehensiveincome		$	63,011	$	13,255		$	117,561		$	35,806

Earnings per share
Basic	20	$	0.20	$	0.06		$	0.42		$	0.18
Diluted	20	$	0.20	$	0.06		$	0.42		$	0.18

Weighted average sharesoutstanding
Basic	20		311,407,472		227,372,229			282,335,384			200,969,554
Diluted	20		312,107,596		227,590,131			282,672,248			201,213,140

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						Nine Months Ended
						September 30,						September 30,
	Notes		2016			2015			2016			2015
OPERATING ACTIVITIES
Net earnings for the period		$	63,011		$	13,255		$	117,561		$	35,806
Adjustments for:
Interest expense			968			675			4,449			3,039
Payment on extinguishment of currency swap	13		(1,939	)		-			(1,939	)		-
Income tax expense	19		31,933			9,666			60,653			27,084
Items not involving cash:
Depreciation and depletion			27,505			25,370			84,291			56,458
Loss on disposition of plant and equipment			228			976			35			941
Loss (gain) on currency swap	13		264			514			(803	)		871
Share-based payments	18		1,160			1,351			5,764			4,486
Shares issued as transaction costs			-			-			5,332			-
Unrealized foreign exchange loss			2,318			910			1,823			484
Loss on debenture conversion	6		-			-			32,304			-
Accretion			539			245			1,787			713
Cash provided by operating activities before changes in working capital			125,987			52,962			311,257			129,882
Changes in working capital	21		(26,278	)		13,938			(115,234	)		14,555
Cash provided by operating activities			99,709			66,900			196,023			144,437
Income taxes paid			(21,030	)		(14,210	)		(54,373	)		(31,523	)
Net cash provided by operating activities			78,679			52,690			141,650			112,914

INVESTING ACTIVITIES
Mineral interests additions	10		(59,649	)		(38,070	)		(126,535	)		(77,430	)
Cash acquired through acquisition	6		-			-			70,187			61,713
Net cash used in investing activities			(59,649	)		(38,070	)		(56,348	)		(15,717	)

FINANCING ACTIVITIES
Proceeds from issuance of common shares on exercise of share options			4,075			1,284			19,563			26,535
Borrowings on credit facility	12b		-			-			35,000			-
Repayments of loan	12a		-			-			(35,000	)		(50,000	)
Dividends paid to shareholders	20		(18,654	)		(13,627	)		(50,730	)		(36,077	)
Loan origination fees			(113	)		(59	)		(342	)		(264	)
Interest paid			(855	)		(611	)		(3,908	)		(2,782	)
Payments on finance leases	13		(13,370	)		(1,644	)		(19,117	)		(3,279	)
Other			1,345			-			1,816			-
Net cash used in financing activities			(27,572	)		(14,657	)		(52,718	)		(65,867	)

Effect of exchange rates on cash and cash equivalents			(739	)		(1,636	)		1,175			(1,133	)
(Decrease) increase in cash and cashequivalents			(9,281	)		(1,669	)		33,759			30,197
Cash and cash equivalents,beginning of period			151,707			112,222			108,667			80,356
Cash and cash equivalents,end of period	7	$	142,426		$	110,553		$	142,426		$	110,553
Supplemental cash flow information (note 21)

See accompanying notes to the condensed interim consolidated financial statements.

Condensed Interim Consolidated Financial Statements

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

		Number of		Share
	Notes	Shares		Capital		Reserves			Deficit			Total
At January 1, 2016		227,401,681	$	1,914,676	$	19,372		$	(270,017	)	$	1,664,031
Earnings and comprehensiveincome		-		-		-			117,561			117,561
Shares issued under the Share Plan	18	229,000		3,553		(2,766	)		-			787
Shares issued as transaction costs	6	455,019		5,332		-			-			5,332
Shares issued on acquisitionof Lake Shore Gold	6	69,239,629		676,670		8,436			-			685,106
Shares issued on conversion of PSUson acquisition of Lake Shore Gold	6	211,442		2,131		-			-			2,131
Shares issued on conversion andredemption of convertibledebentures	6	10,733,675		137,997		-			-			137,997
Shares issued on exerciseof stock options	18	2,724,978		31,884		(12,321	)		-			19,563
Share-based payments	18	-		-		4,579			-			4,579
Dividends paid to shareholders	20	-		-		-			(50,730	)		(50,730	)
At September 30, 2016		310,995,424	$	2,772,243	$	17,300		$	(203,186	)	$	2,586,357

		Number of		Share
	Notes	Shares		Capital		Reserves			Deficit			Total
At January 1, 2015		147,644,671	$	1,014,656	$	11,793		$	(148,389	)	$	878,060
Earnings and comprehensive income		-		-		-			35,806			35,806
Shares issued under the Share Plan	18	190,167		3,667		(2,938	)		-			729
Shares issued on acquisition of Rio Alto		75,991,381		856,198		11,536			-			867,734
Shares issued on exercise of stock options	18	1,402,708		15,608		(5,654	)		-			9,954
Shares issued on exercise of warrants		2,011,244		22,690		-			-			22,690
Share-based payments	18	-		-		3,748			-			3,748
Dividends paid to shareholders	20	-		-		-			(36,077	)		(36,077	)
At September 30, 2015		227,240,171	$	1,912,819	$	18,485		$	(148,660	)	$	1,782,644

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 nine months ended September 30, 2016 and 2015

1.	OPERATIONS
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	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 wholly owned 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.

	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 November 3, 2016.

2.	BASIS OF PREPARATION

	These interim financial statements have been prepared in accordance with International Accounting Standard 34 -Interim Financial Reportingusing 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, 2015 and 2014 (“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 disclosed below and in note 4 below. The following accounting policies were expanded, adopted or applied as a result of the acquisition of Lake Shore Gold Corp. (“Lake Shore Gold”) on April 1, 2016 with no material impact to the Company’s interim financial statements:

	i.	Note 3c) Basis of consolidationhas been expanded to include investments in associates and joint ventures as follows:

		An associate is an entity over which the Company has significant influence and that is neither a subsidiary nor an interest in a joint venture. The Company is presumed to have significant influence if it holds, directly or indirectly, 20% or more of the voting power of the investee. If the Company holds less than 20% of the voting power, other relevant factors are examined by the Company to determine whether it has significant influence.

		The factors that may enable the exercise of significant influence include but are not limited to: the proportion of seats on the board of directors being assigned to the Company; the nature of the business decisions that require unanimous consent of the directors; the ability to influence the operating, strategic and financing decisions; and the existing ownership composition regarding the Company’s ability to exercise significant influence.

See accompanying notes to the condensed interim consolidated financial statements.

Condensed Interim Consolidated Financial Statements

NOTES TO THE INTERIM FINANCIAL STATEMENTS(expressed in 000’s of USD, except as otherwise stated)

	ii.	Note 3h) Mineral interests, plant and equipmenthas been expanded to align the Company’s significant accounting policy for depreciation and depletion of mineral interests, plant and equipment with that of Lake Shore Gold as follows:

		Upon declaration of commercial production, the carrying amounts of mineral interests are depleted using the unit-of-production method (“UOP”) over the estimated life of mine based on proven and probable mineral reserves and, if appropriate, the portion of mineral resources where it is considered highly probable that those mineral resources will be economically extracted. The Company considers the portion of mineral resources highly probable to be economically extracted (converted to reserves) as being that for which the drill program and interpretation of results are near completion and which are included in the current mine plan.

		If commercial production commences prior to the determination of proven and probable mineral reserves, depletion is calculated based on the mineable portion of the resource as defined in the life of mine plan.

		For the three and nine months ended September 30, 2016, all of the Company’s operating mines were depleted using the UOP method over the estimated life of mine based on proven and probable reserves and the portion of resources expected to be converted to mineral reserves (depletion at Shahuindo began May 1, 2016, the commencement of commercial production) (three and nine months ended September 30, 2015: all operating mines, which included the Escobal and La Arena mines, were depleted using the UOP method over the estimated life of mine based on proven and probable reserves).

	iii.	Note 3l) Financial instrumentshas been expanded with descriptions of financial asset and liability groups and now includes financial assets at fair value through profit or loss (“FVTPL”) and available for sale (“AFS”) financial assets as follows:

		Financial assets and liabilities are recognized when the Company or its subsidiaries become party to the contracts that give rise to them and are classified as loans and receivables, financial instruments at FVTPL, held-to-maturity, available for sale financial assets and other liabilities, as appropriate. The Company considers whether a contract contains an embedded derivative when the entity first becomes a party to it. The embedded derivatives are separated from the host contract if the host contract is not measured at FVTPL and when the economic characteristics and risks are not closely related to those of the host contract. Reassessment only occurs if there is a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required.

		Financial assets at fair value through profit or loss

		Financial assets at FVTPL include financial assets held for trading and financial assets designated upon initial recognition as at FVTPL. A financial asset is classified in this category principally for the purpose of selling in the short term, or if so designated by management. The Company holds warrants in certain public companies; the warrants are considered derivatives and measured at fair value, with changes in fair value at each period end recorded in net earnings. Transaction costs are expensed as incurred.

		Available for sale financial assets

		AFS financial assets are those non-derivative financial assets that are designated as such or are not classified as loans and receivables, held-to-maturity investments or financial assets at FVTPL. AFS financial assets are measured at fair value upon initial recognition and at each period end, with unrealized gains or losses being recognized as a separate component of equity in other comprehensive income until the investment is derecognized or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is included in net earnings. The Company has classified its investments in certain public companies as AFS.

See accompanying notes to the condensed interim consolidated financial statements.

6	Tahoe Resources Inc.

NOTES TO THE INTERIM FINANCIAL STATEMENTS(expressed in 000’s of USD, except as otherwise stated)

Loans and receivables

Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are initially recognized at the transaction value and subsequently carried at amortized cost using the effective interest method. Gains and losses are recognized in the statement of comprehensive income when the loans and receivables are derecognized or impaired, as well as through the amortization process. Interest income is recognized by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

Other financial liabilities

Other financial liabilities, including loans and borrowings, are recognized initially at fair value, net of transaction costs. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortized cost using the effective interest method. Gains and losses are recognized in net earnings when the liabilities are derecognized as well as through the amortization process. Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the statement of financial position date, and are derecognized when, and only when, the Company’s obligations are discharged or they expire.

Derivative instruments

Derivative instruments, including embedded derivatives, are recorded at fair value on initial recognition and at each subsequent reporting period. Any gains or losses arising from changes in fair value on derivatives are recorded in the statement of comprehensive income.

Fair values

The fair value of quoted investments is determined by reference to market prices at the close of business on the statement of financial position date. Where there is no active market, fair value is determined using valuation techniques. These include using recent arm’s length market transactions; reference to the current market value of another instrument which is substantially the same; discounted cash flow analysis; and, pricing models.

Financial instruments that are measured subsequent to initial recognition are grouped into a hierarchy based on the degree to which the fair value is observable as follows:

	•	Level 1 fair value measurements are quoted prices (unadjusted) in active markets for identical assets or liabilities;
	•	Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
	•	Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Impairment of financial assets

Financial assets, other than those recorded at FVTPL, are assessed for indicators of impairment at each period end. A financial asset is considered impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investments have been adversely impacted.

If an available for sale asset is impaired, the change in fair value is transferred to net earnings in the period, including cumulative gains or losses previously recognized in other comprehensive income or loss. Reversals of impairment in respect of equity instruments classified as available for sale are not recognized in net earnings but included in other comprehensive income.

See accompanying notes to the condensed interim consolidated financial statements.

Condensed Interim Consolidated Financial Statements

NOTES TO THE INTERIM FINANCIAL STATEMENTS(expressed in 000’s of USD, except as otherwise stated)

	iv.	Note 3u) Other comprehensive income (loss)has been added as follows:

		Other comprehensive income (loss) is the change in the Company’s net assets that results from transactions, events and circumstances from sources other than the Company’s shareholders and includes items that are not included in net profits such as unrealized gains and losses on financial assets classified as AFS, net of income taxes and gains or losses on certain derivative instruments.

	v.	Note 3v) IAS 19–Employee benefitshas been added as follows:

		The Company has a defined contribution pension plan which covers certain of the Company’s employees. Under the plan provisions, the Company contributes a fixed percentage of the employees’ salaries to the pension plan. The employees are able to direct the contributions into a variety of investment funds offered by the plan. Pension costs associated with the

		Company’s required contributions under the plan are recognized as an expense when the employees have rendered service entitling them to the contribution and are charged to earnings or loss, or capitalized to mining interests for employees directly involved in the specific projects.

	vi.	Note 3w) IAS 28–Investments in associates and joint ventureshas been added as follows:

		The Company’s investments in associates are accounted for using the equity method of accounting. Under the equity method, the Company’s investment in an associate is initially recognized at cost and subsequently increased or decreased to recognize the Company's share of earnings and losses of the associate and for impairment losses after the initial recognition date. The Company’s share of an associate’s losses that are in excess of its investment in the associate are recognized only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate. The Company's share of earnings and losses of associates are recognized in net earnings during the period.

		After application of the equity method, the Company determines whether it is necessary to recognize an impairment loss on the Company’s investment in an associate. The Company determines at each statement of financial position date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Company calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognizes the amount in net earnings. When a group entity transacts with an associate of the Company, profits and losses are eliminated to the extent of the Company’s interest in the relevant associate.

	b)	Currency of presentation

		The 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.

See accompanying notes to the condensed interim consolidated financial statements.

8	Tahoe Resources Inc.

NOTES TO THE INTERIM FINANCIAL STATEMENTS(expressed in 000’s of USD, except as otherwise stated)

The principal subsidiaries (operating mine sites and projects) of the Company and their geographic locations at September 30, 2016 are as follows:

			Mining Properties and
		Ownership	Development Projects
Direct Parent Company	Location	Percentage	Owned
Minera San Rafael, S.A.	Guatemala	100%	El Escobal mine
La Arena S.A.	Peru	100%	La Arena mine
Shahuindo S.A.C.	Peru	100%	Shahuindo mine
Lake Shore Gold Corp.	Canada	100%	Bell Creek mine,
(acquired April 1, 2016)		100%	Timmins West,
		100%	Thunder Creek,
		100%	144 Gap,
		100%	Fenn-Gib Project
Temex Resources Corp.	Canada	100%	Juby Project
(acquired April 1, 2016)		79%	Whitney Project

During the three months ended September 30, 2016, the Company divested of the majority of its ownership interest in Northern Superior Resources, previously accounted for using the equity method. The remaining interest is accounted for as an AFS asset.

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

Application of new or amended accounting standards effective January 1, 2016

	i.	New or amended standards adopted inthe Company’s interim financial statements.

		The Company has evaluated the following new or amended IFRS standards and has applied them for periods beginning on or after January 1, 2016. The Company has determined there to be no material impact on the interim financial statements upon adoption:

	•	IFRS 5 – Non-Current Assets Held For Sale and Discontinued Operations;
	•	IFRS 7 – Financial Instruments: Disclosures;
	•	IFRS 10 – Consolidated Financial Statements;
	•	IFRS 11 – Joint Arrangements;
	•	IFRS 12 – Disclosure of Interest in Other Entities;
	•	IAS 1 – Presentation of Financial Statements;
	•	IAS 16 – Property, Plant and Equipment;
	•	IAS 28 – Investments in Associates and Joint Ventures;
	•	IAS 34 – Interim Financial Reporting; and
	•	IAS 38 – Intangible Assets.

	b)	Future accounting standards and interpretations

		A number of new IFRS standards, and amendments to standards and interpretations, are not yet effective for the three and nine months ended September 30, 2016, 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:

New or amended standards effective January 1, 2017.

	•	IAS 7 – Statement of Cash Flows; and
	•	IAS 12 – Income Taxes.

ii.

New or amended standards effective January 1, 2018 and thereafter.

	•	IFRS 9 – Financial Instruments;
	•	IFRS 15 – Revenue from Contracts with Customers; and
	•	IFRS 16 – Leases.

See accompanying notes to the condensed interim consolidated financial statements.

Condensed Interim Consolidated Financial Statements

NOTES TO THE INTERIM FINANCIAL STATEMENTS(expressed in 000’s of USD, except as otherwise stated)

5.	CRITICAL JUDGMENTS 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 nine months ended September 30, 2016 are consistent with those applied and disclosed in note 5 of the consolidated financial statements, except for the following critical judgments and estimates re- assessed as a result of the acquisition of Lake Shore Gold.

	a)	Currency of presentation

		The Company acquired a 100% interest in Lake Shore Gold on April 1, 2016. The Company assessed the criteria and indicators under IFRS at the date of acquisition and determined the functional currency to be the USD. The functional currency is accounted for in accordance with IAS 21 – the effects of changes in exchange rates and was applied from the date of acquisition.

	b)	Estimated material in the mineral reserves

		The figures for mineral reserves and mineral resources are determined in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”), issued by the Canadian Securities Administrators. NI 43-101 lays out the standards of disclosure for mineral projects including rules relating to the determination of mineral reserves and mineral resources. Management assesses the estimated mineral reserves and mineral resources used in the calculation of depletion at least annually, or whenever facts and circumstances warrant that an assessment should be made. Changes to estimates of mineral reserves and mineral resources and depletable costs including changes resulting from revisions to the Company's mine plans and changes in metal price forecasts can result in a change in future depletion rates.

6.	BUSINESS COMBINATION

Acquisition of 100% interest in Lake Shore Gold

	i.	Terms of the business combination

		On April 1, 2016 (the “Acquisition Date”), the Company completed the previously announced acquisition of Lake Shore Gold pursuant to a statutory plan of arrangement (the “Arrangement”). The Arrangement was approved by shareholders of the Company and the shareholders of Lake Shore Gold on March 31, 2016 and received final court approval on April 1, 2016.

		The Arrangement was completed pursuant to the terms of a definitive arrangement agreement dated February 8, 2016 between the Company and Lake Shore Gold (the “Arrangement Agreement”). Pursuant to the terms of the Arrangement Agreement, Lake Shore Gold became a wholly-owned subsidiary of the Company on April 1, 2016 and all of the issued and outstanding common shares of Lake Shore Gold (each a “Lake Shore Gold Share”) were transferred to the Company in consideration for the issuance by the Company of 0.1467 of a common share for each Lake Shore Gold Share (each whole common share a “Tahoe Share”).

		In connection with the closing of the Arrangement, the Company issued an aggregate of 69,239,629 Tahoe Shares to the former shareholders of Lake Shore Gold. The Company authorized the issuance of up to an additional 1,621,877 Tahoe Shares issuable upon the exercise of former stock options to acquire Lake Shore Gold Shares.

See accompanying notes to the condensed interim consolidated financial statements.

10	Tahoe Resources Inc.

NOTES TO THE INTERIM FINANCIAL STATEMENTS(expressed in 000’s of USD, except as otherwise stated)

Total consideration paid was based on the April 1, 2016 opening price of Tahoe Shares on the TSX of CAD$12.75 and a CAD to USD foreign exchange rate of 0.7665, and is comprised of the following:

	Shares
	Issued/Issuable		Consideration
Fair value estimate of the Tahoe share consideration	69,239,629	$	676,670
Fair value estimate of the consideration for options⁽¹⁾	1,621,877		8,436
Total consideration	70,861,506	$	685,106

⁽¹⁾

The fair value of the options was determined using the Black-Scholes option pricing model. Where applicable, the inputs and ranges used in the measurement of the fair value (CAD) of the options are as follows:

Share price (CAD) at April 1, 2016	$	12.75
Exercise price (CAD)	$	2.79-25.97
Expected volatility		48.41%-62.60%
Expected life (years)		0.04-4.67
Expected dividend yield		2.46%
Risk-free interest rate		0.54-0.62%%
Fair value (CAD)	$	0.00-9.65
April 1, 2016 CAD to USD exchange rate	$	0.77
Fair value (USD)	$	0.01-7.40

This acquisition has been accounted for as a business combination with Tahoe as the acquirer. As at the date of these interim financial statements, the allocation of the purchase price has not been finalized as management is in the process of determining the fair values of identifiable assets and liabilities assumed, measuring the associated deferred income tax assets and liabilities, and determining the value of goodwill.

The preliminary purchase price has been allocated to the following identifiable assets and liabilities based on their estimated fair values:


Cash and cash equivalents	$	70,187
Trade and other receivables		4,930
Inventories		13,774
Other current and non-current assets		3,876
Property, plant and equipment		174,747
Mineral interests and exploration potential		513,044
Goodwill⁽¹⁾		129,908

Accounts payable, accrued liabilities and other⁽²⁾		(45,246	)
Lease obligation		(16,589	)
Reclamation provision		(5,601	)
Convertible debentures		(105,693	)
Deferred tax liability		(52,231	)
Total net assets acquired	$	685,106

	⁽¹⁾	Goodwill of $129,908 was recognized due to the deferred tax liability generated on the business combination and the consideration in excess of the identified fair values of the assets acquired and the liabilities assumed. This excess was the result of the appreciation of Tahoe’s share price between the February 9, 2016 announcement of the share exchange ratio and the closing price on April 1, 2016 upon completion of the business combination. The total amount of goodwill that is expected to be deductible for tax purposes is $nil.
	⁽²⁾	Accounts payable, accrued liabilities and other includes a liability of $2,131 relating to PSUs which were outstanding and not converted prior to the acquisition on April 1, 2016. The PSUs were converted into 211,442 commons shares of the Company during the nine months ended September 30, 2016.

Lake Shore Gold’s principal mining properties are its 100% owned Bell Creek and Timmins West gold mines (together the “Timmins mines”) located in northeastern Ontario, Canada (note 22).

Since the Acquisition Date, the revenues and net earnings of Lake Shore Gold included in these interim financial statements are $96,887 and $16,567, respectively. The net earnings include the impact of the $32,304 non-cash loss recognized on the redemption of the convertible debentures. Total transaction costs incurred relating to the acquisition and included in general and administrative expenses for the three and nine months ended September 30, 2016 are $64 and $11,085, respectively. Included in these transaction costs are 455,019 common shares of the Company issued with a value of $5,332.

See accompanying notes to the condensed interim consolidated financial statements.

Condensed Interim Consolidated Financial Statements

NOTES TO THE INTERIM FINANCIAL STATEMENTS(expressed in 000’s of USD, except as otherwise stated)

		Had the acquisition occurred on January 1, 2016, the total pro-forma consolidated revenues and net earnings of the Company for the nine months ended September 30, 2016 would have been $642,511 and $92,031, respectively.

		The acquisition supports the Company’s growth strategy by adding high-quality, high-margin operating assets which will increase the sustainable production level, contribute to cash flow and diversify the Company’s operations.

	ii.	Convertible debentures

		Lake Shore Gold had outstanding a class of 6.25% convertible unsecured debentures (the “Debentures”), which were governed by an indenture dated September 7, 2012, as supplemented effective April 1, 2016. On April 1, 2016, as a result of the completion of Tahoe’s acquisition of Lake Shore Gold, Lake Shore Gold gave notice of its offer to purchase in exchange for Tahoe Shares, all of its outstanding Debentures at 100% of the principal amount plus accrued and unpaid interest (the “Change of Control Offer”).

		Concurrently with the Change of Control Offer, Lake Shore Gold gave notice of its election to redeem the Debentures on May 16, 2016 at a price equal to their principal amount plus accrued and unpaid interest. Lake Shore Gold elected to satisfy its obligation to repay the principal amount of the Debentures by issuing Tahoe Shares to the holders of the Debentures. The number of Tahoe Shares to be issued was determined by dividing the aggregate principal amount of the outstanding Debentures redeemed by 95% of the volume weighted average trading price of Tahoe Shares for the 20 trading days ended on and including May 9, 2016.

		Debentureholders maintained the right to convert the Debentures at any time prior to May 13, 2016 at a conversion price of CAD$9.5433 per Tahoe Share, being a conversion rate of 104.7856 Tahoe Shares per $1,000 principal amount of the Debentures. An aggregate of 10,611,411 Tahoe Shares were issued pursuant to the exercise of conversion rights available to the debentureholders. The Debentures remaining outstanding after voluntary conversions were redeemed by Lake Shore Gold on May 16, 2016 for an aggregate of 122,264 Tahoe Shares, and the Debentures were delisted from trading on the Toronto Stock Exchange at the close of business that day. As a result of the redemption of the remaining debentures during the nine months ended September 30, 2016, the Company recognized a non-cash loss of $32,304 as a result of the appreciation of Tahoe’s share price between the closing price on April 1, 2016 and completion of the redemption on May 16, 2016.

7.	CASH AND CASH EQUIVALENTS

		September 30,		December 31,
		2016		2015
Cash	$	141,899	$	108,140
Cash equivalents		527		527
	$	142,426	$	108,667

8.	TRADE AND OTHER RECEIVABLES

		September 30,		December 31,
		2016		2015
Trade receivables	$	47,675	$	17,239
Sales tax receivable		25,282		23,935
Other		2,095		2,060
	$	75,052	$	43,234

See accompanying notes to the condensed interim consolidated financial statements.

12	Tahoe Resources Inc.

NOTES TO THE INTERIM FINANCIAL STATEMENTS(expressed in 000’s of USD, except as otherwise stated)

9.	INVENTORIES

		September 30,		December 31,
		2016		2015
Supplies	$	55,376	$	41,658
Stockpile		9,387		2,230
Work in process		35,977		17,228
Finished goods		13,183		8,964
	$	113,923	$	70,080

	The cost of inventories recognized as an expense for the three and nine months ended September 30, 2016 was $118,172 and $323,758, respectively (three and nine months ended September 30, 2015: $97,356 and $230,565, respectively) and is included in total operating costs.

10.	MINERAL INTERESTS

Mineral Interests

Non-

Plant &

Depletable

Equipment

Total

Cost

Balance at January 1, 2016

714,011

737,108

595,377

2,046,496

Acquired mineral interests⁽¹⁾⁽²⁾

276,519

236,525

174,747

687,791

Additions

50,344

3,588

97,982

151,914

Disposals

(4,294

)

(4,294

)

Transfers⁽³⁾

444,042

(444,042

)

Change in reclamationprovision

16,625

Balance at September 30, 2016

1,501,541

533,179

863,812

2,898,532

Accumulated depreciation anddepletion

Balance at January 1, 2016

(169,160

)

(121,000

)

(81,824

)

(371,984

)

Additions

(45,729

)

(42,473

)

(88,202

)

Disposals

3,862

Transfers⁽³⁾

(121,000

)

121,000

Balance at September 30, 2016

(335,889

)

(120,435

)

(456,324

)

Carrying amount atSeptember 30, 2016

1,165,652

533,179

743,377

2,442,208

		Mineral Interests
					Non-			Plant &
		Depletable			Depletable			Equipment			Total
Cost
Balance at January 1, 2015	$	551,787		$	27,257		$	317,691		$	896,735
Acquired mineral interests⁽⁴⁾⁽⁵⁾		136,006			669,016			206,248			1,011,270
Additions		20,201			31,961			72,467			124,629
Disposals		-			-			(1,029	)		(1,029	)
Change in reclamation
provision		6,017			8,874			-			14,891
Balance at December 31, 2015	$	714,011		$	737,108		$	595,377		$	2,046,496
Accumulated depreciation and
depletion
Balance at January 1, 2015	$	(25,949	)	$	-		$	(42,044	)	$	(67,993	)
Additions		(44,211	)		-			(40,734	)		(84,945	)
Impairment		(99,000	)		(121,000	)		-			(220,000	)
Disposals		-			-			954			954
Balance at December 31, 2015	$	(169,160	)	$	(121,000	)	$	(81,824	)	$	(371,984	)
Carrying amount at December 31, 2015	$	544,851		$	616,108		$	513,553		$	1,674,512

	⁽¹⁾	Acquired mineral interests relate to the acquisition of Lake Shore Gold on April 1, 2016.
	⁽²⁾	Non-depletable mineral interests acquired as part of the acquisition of Lake Shore Gold on April 1, 2016 include the Whitney, Fenn-Gib and Juby projects, and other exploration potential.

See accompanying notes to the condensed interim consolidated financial statements.

Condensed Interim Consolidated Financial Statements

NOTES TO THE INTERIM FINANCIAL STATEMENTS(expressed in 000’s of USD, except as otherwise stated)

	⁽³⁾	Upon declaration of commercial production on May 1, 2016, the carrying value of mineral interests and the impairment associated with the Shahuindo project included in non-depletable mineral interests was transferred to depletable mineral interests.
	⁽⁴⁾	Acquired mineral interest relate to the acquisition of Rio Alto on April 1, 2015.
	⁽⁵⁾	Non-depletable mineral interests acquired as part of the acquisition of Rio Alto on April 1, 2015 include the La Arena sulfide project, the Shahuindo project and other exploration potential.

A summary by segment of the carrying amount of mineral interests is as follows:

		Mineral Interests
				Non-			Plant &		September 30,		December 31,
		Depletable		Depletable⁽²	⁾		Equipment		2016		2015
Escobal	$	501,385	$	27,264		$	263,143	$	791,792	$	813,919
La Arena		35,035		214,394			203,200		452,629		438,833
Shahuindo		324,608		53,000			92,741		470,349		421,760
Timmins mines⁽¹⁾		304,624		238,521			184,293		727,438		-
	$	1,165,652	$	533,179		$	743,377	$	2,442,208	$	1,674,512

	⁽¹⁾	The Timmins mines were acquired on April 1, 2016 as part of the Lake Shore Gold acquisition and are therefore not included in the carrying amounts at December 31, 2015.
	⁽²⁾	Non-depletable mineral interests include exploration and evaluation projects.

	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 and is included in the respective operating segment assets:

		La Arena		Timmins
		Sulfide		Mines⁽¹	⁾		Total
January 1, 2015	$	-	$	-		$	-
Additions		57,468		-			57,468
December 31, 2015	$	57,468	$	-		$	57,468
Additions		-		129,908			129,908
September 30, 2016	$	57,468	$	129,908		$	187,376

⁽¹⁾

The allocation of goodwill associated with the acquisition of Lake Shore Gold has not yet been finalized and for the purposes of this table, it has been allocated 100% to the Timmins mines until an appropriate allocation has been determined.

11.

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

			September 30,		December 31,
	Notes		2016		2015
Trade payables		$	78,247	$	45,079
Accrued trade, royalty and other payables			32,278		36,881
Accrued payroll and related benefits	18c		3,466		17,788
		$	113,991	$	99,748

12.

DEBT

		September 30,			December 31,
		2016			2015
Beginning balance	$	35,000		$	49,804
Borrowings/additions (b)		35,000			35,000
Repayments (a)		(35,000	)		(50,000	)
Commitment fees and other		-			196
	$	35,000		$	35,000

See accompanying notes to the condensed interim consolidated financial statements.

14	Tahoe Resources Inc.

NOTES TO THE INTERIM FINANCIAL STATEMENTS(expressed in 000’s of USD, except as otherwise stated)

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.

	a)	Loan

		As part of the acquisition of Rio Alto on April 1, 2015, the Company acquired debt in the form of a $35,000 credit facility agreement (the “Loan”). The funds were used for general working capital purposes. As security for the Loan, the Company granted a charge over the shares of its subsidiary Empresa de Energia Yamobamba S.A.C. and the rights of collection of future cash flows derived from metal sales at the La Arena mine.

		The Loan had an original one-year term, maturing June 16, 2015 and bearing interest at 30-day LIBOR plus 2.60%. Upon maturity, the Loan was extended by an additional nine months to March 16, 2016 and was further amended to reflect a maturity date of April 16, 2016. All other terms remained per the original contract.

		On April 8, 2016, the Loan was repaid using the proceeds of a new credit facility (note 12b)).

	b)	Credit facility

		On April 8, 2016, the Company signed a credit agreement with an international bank for a credit facility (the “Facility”) for an aggregate amount of $35 million. The Facility bears interest at LIBOR plus 2.25% on the portion drawn. This rate was reset on October 11, 2016. The Facility has a two- year term, maturing April 9, 2018.

		On April 8, 2016, proceeds from the Facility were used to repay the $35 million Loan which was acquired as part of the acquisition of Rio Alto on April 1, 2015. The Company is currently in compliance with all covenants associated with the Facility.

	c)	Revolving credit facility

		On August 10, 2015, the Company signed a credit agreement with a syndicate of international banks for a revolving credit facility (the “Revolving Facility”) for an aggregate amount of $150 million. Based on certain financial ratios, the Revolving Facility bears interest on the portion drawn, 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 based on 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 0.56% and 0.81% and were $212 and $622 for the three and nine months ended September 30, 2016 (three and nine months ended September 30, 2015: $118 and $118, respectively). The term for the Revolving Facility is three years. Proceeds from the Facility may be used for general corporate purposes.

		As at September 30, 2016, the Company had not drawn on the Revolving Facility. The Company is currently in compliance with all covenants associated with the Revolving Facility.

13.

LEASE OBLIGATIONS

		September 30,			December 31,
		2016			2015
Beginning balance	$	13,862		$	-
Additions⁽¹⁾		24,531			20,016
Payments⁽²⁾		(19,421	)		(5,729	)
Accrued interest		386			159
Foreign exchange gain		(118	)		(584	)
Ending balance	$	19,240		$	13,862

	⁽¹⁾	Current year additions include $16,589 related to finance leases acquired as a result of the Lake Shore Gold business combination on April 1, 2016 and $7,942 in other additions. Prior year additions include $19,340 related to a sale-leaseback transaction and $676 in other finance leases.
	⁽²⁾	Payments include the retirement of the sale-leaseback transaction of $10,420.

See accompanying notes to the condensed interim consolidated financial statements.

Condensed Interim Consolidated Financial Statements

NOTES TO THE INTERIM FINANCIAL STATEMENTS(expressed in 000’s of USD, except as otherwise stated)

		September 30,		December 31,
		2016		2015
Current portion	$	9,865	$	6,151
Non-current portion		9,375		7,711
	$	19,240	$	13,862

	As part of the acquisition of Lake Shore Gold on April 1, 2016, the Company acquired finance lease obligations related to equipment and vehicles, expiring between 2016 and 2018 with interest rates between 0.9% and 6.9%. The Company has the option to purchase the equipment and vehicles leased at the end of the terms of the leases for a nominal amount. The Company’s obligations under the finance leases are secured by the lessor’s title to the leased assets. The fair value of the finance lease liabilities approximates their carrying amount.

	In addition to the finance leases acquired as part of the Lake Shore Gold acquisition, the Company also acquired a finance lease obligation in the form of a sale-leaseback transaction whereby the Company sold certain mobile equipment for CAD$7,300 and leased them back for a period of 36 months. The sale-leaseback bears interest at 3.7% and is paid through 12 quarterly instalments of principal and interest with the final payment having been paid on October 1, 2016. Upon final payment, the Company elected the option to purchase all the equipment in early 2017 for CAD$1,314.

14.	RECLAMATION PROVISION

		September 30,		December 31,
		2016		2015
Beginning balance	$	39,524	$	3,529
Accretion expense		1,787		1,003
Additions to reclamation provision⁽¹⁾		5,605		28,975
Revisions in estimates and obligations		16,625		6,017
Ending balance	$	63,541	$	39,524

⁽¹⁾

Current year additions relate to the Timmins mines acquired as a result of the Lake Shore Gold acquisition on April 1, 2016. Prior year additions relate to the La Arena and Shahuindo mines as a result of the Rio Alto acquisition on April 1, 2015.

	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 September 30, 2016 to be $96,743 (December 31, 2015: $69,401).

	In determining the discount rate to be used in the calculation 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 present value of the combined future obligation has increased by $16,625 during the nine months ended September 30, 2016 (December 31, 2015: $6,017) as a result of the impact of the change in estimates in mine life, estimated reclamation costs, discount and inflation rates.

15.	REVENUES

		Three Months Ended				Nine Months Ended
				September 30,				September 30,
		2016		2015		2016		2015
Silver	$	93,349	$	74,477	$	254,981	$	204,245
Gold		133,950		66,239		318,066		141,658
Lead		2,472		2,003		6,964		6,797
Zinc		4,950		3,017		15,094		12,130
	$	234,721	$	145,736	$	595,105	$	364,830

See accompanying notes to the condensed interim consolidated financial statements.

16	Tahoe Resources Inc.

NOTES TO THE INTERIM FINANCIAL STATEMENTS(expressed in 000’s of USD, except as otherwise stated)

	a)	Concentrate revenues

		The Company has contracts with a number of customers for its concentrate sales. For the three and nine months ended September 30, 2016, the Company’s top four concentrate customers account for 98% and 98% of concentrate revenues, respectively (three and nine months ended September 30, 2015: top four customers accounted for 95% and 96%, of concentrate revenues, respectively).

		The concentrate revenues by customer for the three and nine months ended September 30, 2016 and 2015 are as follows:

	Three Months Ended		Nine Months Ended
		September 30,		September 30,
	2016	2015	2016	2015
Top customer 1	28%	27%	31%	35%
Top customer 2	27%	26%	24%	25%
Top customer 3	22%	24%	25%	20%
Top customer 4	21%	18%	18%	16%
Other customers	2%	5%	2%	4%
Total concentrate revenues	100%	100%	100%	100%

	b)	Doré revenues

		The Company has contracts with customers for its doré sales. The Company’s top two doré customers account for 94% and 93% of doré revenues for the three and nine months ended September 30, 2016, respectively (three and nine months ended September 30, 2015: one customer accounted for 100% of doré revenues). For the three and nine months ended September 30, 2016, doré sales comprised 98% and 97% of total gold sales, respectively (three and nine months ended September 30, 2015: 95% and 95%, respectively). The doré revenues by customer for the three and nine months ended September 30, 2016 are as follows:

	Three Months Ended		Nine Months Ended
		September 30,		September 30,
	2016	2015	2016	2015
Top customer 1	53%	100%	62%	100%
Top customer 2	41%	-	31%	-
Other customers	6%	-	7%	-
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 results of operations, financial condition and cash flows due to the nature of the refined metals market.

16.

PRODUCTION COSTS

		Three Months Ended					Nine Months Ended
					September 30,					September 30,
		2016			2015		2016			2015
Consumption of raw materials and consumables	$	47,094		$	31,801	$	118,653		$	83,505
Salaries and benefits		31,421			14,994		66,038			34,437
Contractors and outside services		29,463			16,129		71,380			37,337
Other expenses		(1,308	)		2,668		7,104			5,536
Changes in inventory		(16,407	)		6,945		(21,658	)		14,174
	$	90,263		$	72,537	$	241,517		$	174,989

See accompanying notes to the condensed interim consolidated financial statements.

Condensed Interim Consolidated Financial Statements

NOTES TO THE INTERIM FINANCIAL STATEMENTS(expressed in 000’s of USD, except as otherwise stated)

17.

GENERAL AND ADMINISTRATIVE EXPENSES

		Three Months Ended				Nine Months Ended
				September 30,				September 30,
		2016		2015		2016		2015
Salaries and benefits	$	3,628	$	6,003	$	9,285	$	12,291
Share-based payments		1,141		1,321		5,744		4,447
Consulting and professional fees		1,836		1,108		6,728		3,755
Transaction costs (note 6)		64		160		11,085		5,889
Administrative and other		822		2,090		5,177		5,175
	$	7,491	$	10,682	$	38,019	$	31,557

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”) and Share Appreciation Rights (“SARs”) (collectively with the Share Options, referred to as the “Share Plan”).

	At September 30, 2016, 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. The Share Options 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 September 30, 2016 and December 31, 2015 are as follows:

		Weighted average	Number of
		exercise price	Share Options
Outstanding at January 1, 2015	$	14.49	1,547,659
Granted		12.97	4,561,579
Exercised		8.80	(1,561,218	)
Forfeited		16.91	(264,000	)
Expired		12.62	(215,563	)
Outstanding at December 31, 2015		14.92	4,068,457
Granted		9.21	2,933,876
Exercised		9.10	(2,797,338	)
Forfeited		13.83	(267,100	)
Expired		17.03	(578,691	)
Outstanding at September 30, 2016⁽¹⁾	$	14.49	3,359,204

⁽¹⁾

Includes the replacement options granted on April 1, 2016 as a result of the acquisition of Lake Shore Gold (note 6) and the replacement options granted on April 1, 2015 as a result of the acquisition of Rio Alto which remain unexercised as at September 30, 2016.

See accompanying notes to the condensed interim consolidated financial statements.

18	Tahoe Resources Inc.

NOTES TO THE INTERIM FINANCIAL STATEMENTS(expressed in 000’s of USD, except as otherwise stated)

The following table summarizes information about Share Options outstanding and exercisable at September 30, 2016 (exercise range and prices in CAD):

				Weighted	Weighted			Weighted	Weighted
				average	average			average	average
	Exercise price			exercise	remaining			exercise	remaining
	range	Outstanding		price	life (years)	Exercisable		price	life (years)
$	2.80-12.19	249,494	$	7.81	2.03	249,494	$	7.81	2.03
$	12.20-12.57	1,021,000	$	12.38	4.44	-	$	-	-
$	12.58-14.93	438,982	$	13.06	1.60	363,982	$	13.07	1.00
$	14.94-16.01	818,900	$	15.68	3.52	237,000	$	15.68	3.52
$	16.02-23.68	830,828	$	18.69	1.65	728,828	$	18.35	1.36
		3,359,204	$	14.49	2.98	1,579,304	$	15.07	1.71

		During the three and nine months ended September 30, 2016, 299,430 and 2,797,338 Share Options were exercised and the cash proceeds received were $4,075 and $19,563, respectively, (three and nine months ended September 30, 2015: 256,742 and 1,427,992 Share Options exercised for cash proceeds of $1,276 and $9,945, respectively).

		During the three and nine months ended September 30, 2016, the Company recorded $480 and $2,383, respectively, of compensation expense relating to Share Options in general and administrative expenses (three and nine months ended September 30, 2015: $611 and $1,637, respectively).

	b)	DSAs and RSAs

		The Share Plan permits DSAs and RSAs (collectively referred to as “Share Awards”) to be issued to 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”).

		The number of DSAs outstanding at September 30, 2016 and December 31, 2015 is as follows:

Outstanding at January 1, 2015	285,667
Granted	219,000
Shares issued	(140,667	)
Cancelled/forfeited	(14,000	)
Outstanding at December 31, 2015	350,000
Granted	342,000
Shares issued	(169,000	)
Cancelled/forfeited	(45,000	)
Outstanding at September 30, 2016	478,000

There were 18,000 and 342,000 DSAs granted during the three and nine months ended September 30, 2016, respectively, with a weighted average fair market value of CAD$20.84 and CAD$13.02 (three and nine months ended September 30, 2015: nil and 219,000 DSAs granted with a weighted average fair market value of CAD$15.68) .

During the three and nine months ended September 30, 2016, nil and 169,000 DSAs vested and common shares of the Company were issued to the recipients under the provisions of the Share Plan. As a result $nil and $2,766, respectively, was transferred to share capital from share based payments reserve (three and nine months ended September 30, 2015: nil and 137,667 DSAs vested, respectively, and $nil and $2,938, respectively, was transferred to share capital).

See accompanying notes to the condensed interim consolidated financial statements.

Condensed Interim Consolidated Financial Statements

NOTES TO THE INTERIM FINANCIAL STATEMENTS(expressed in 000’s of USD, except as otherwise stated)

		During the three and nine months ended September 30, 2016, the Company recorded $665 and $2,086 of compensation expense relating to DSAs in general and administrative expenses (three and nine months ended September 30, 2015: $889 and $2,270, respectively).

	ii.	RSAs

		The RSAs vest immediately on the grant date and are issued at that time. Consequently, there are no RSAs outstanding at September 30, 2016 and December 31, 2015.

		The Company granted nil and 60,000 RSAs during the three and nine months ended September 30, 2016 (three and nine months ended September 30, 2015: nil and 52,500) for total compensation expense of $nil and $787 (three and nine months ended September 30, 2015: $nil and $730) which was recorded in general and administrative expenses.

	c)	SARs

		The Company grants SARs to employees that entitle the employees to a cash settlement. The amount of the cash settlement is determined based on the difference between the strike price and the closing share price of the Company on the exercise date. The SARs have a term of five years from the award date and vest in five equal tranches with the first tranche vesting immediately, the second on the first anniversary, the third on the second anniversary, the fourth on the third anniversary, and the fifth on the fourth anniversary of the grant date. Prior to the cash settlement, unvested and vested SARs are valued using the Black-Scholes Model.

		The number of SARs outstanding and exercisable at September 30, 2016 and December 31, 2015 is as follows:

	Number of SARs
Outstanding at January 1, 2015	73,000
Issued	30,000
Exercised	(60,000	)
Outstanding at December 31, 2015	43,000
Issued	135,000
Exercised	(23,000	)
Expired/forfeited	(1,000	)
Outstanding at September 30, 2016	154,000

Exercisable at December 31, 2015	2,000
Exercisable at September 30, 2016	12,000

At September 30, 2016, vested SARs had a weighted average intrinsic value of CAD$(0.55) per share (December 31, 2015: CAD$(5.36) per share) and the Company has recognized other current and non-current liabilities for SARs of $56 and $123, respectively (December 31, 2015: $32 and $9, respectively).

During the three and nine months ended September 30, 2016, the Company recorded $15 and $508, respectively, of compensation expense relating to SARs in general and administrative expenses (three and nine months ended September 30, 2015: $(25) and $189, respectively).

The following table summarizes information about SARs outstanding and exercisable at September 30, 2016 (grant price range in CAD):

Grant price		Exercised/
range	Issued	Cancelled		Outstanding	Exercisable
$6.40-12.87	407,000	(281,000	)	126,000	12,000
$13.35-16.57	60,000	(60,000	)	-	-
$18.00-23.31	107,500	(79,500	)	28,000	-
	574,500	(420,500	)	154,000	12,000

See accompanying notes to the condensed interim consolidated financial statements.

20	Tahoe Resources Inc.

NOTES TO THE INTERIM FINANCIAL STATEMENTS(expressed in 000’s of USD, except as otherwise stated)

d)	Inputs for measurement of fair values

	The grant date fair values (CAD) of Share Options and SARs and the re-measurement fair value of SARs are measured based on the Black-Scholes Model and are denominated in CAD.

	i.	Share Options

		There were 45,000 and 2,933,876 Share Options granted during the three and nine months ended September 30, 2016, respectively (three and nine months ended September 30, 2015: nil and 4,561,579).

		The weighted average inputs used and grant date fair values (CAD) of Share Options granted during the three and nine months ended September 30, 2016 and 2015 are as follows:

		Three Months Ended				Nine Months Ended
				September 30,				September 30,
		2016		2015		2016		2015
Share price	$	21.55	$	-	$	12.87	$	15.45
Exercise price	$	21.55	$	-	$	9.20	$	13.74
Expected volatility⁽¹⁾		51%		-		51%		48%
Expected life (years)		4.17		-		3.00		2.04
Expected dividend yield		1.47%		-		2.43%		2.05%
Risk-free interest rate		0.59%		-		0.57%		0.50%
Pre-vest forfeiture rate		5.84%		-		4.08%		1.14%
Fair value	$	7.75	$	-	$	5.64	$	4.64

⁽¹⁾

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

	ii.	SARs

		There were nil and 135,000 SARs granted during the three and nine months ended September 30, 2016, respectively (three and nine months ended September 30, 2015: 20,000 and 20,000, respectively).

		The fair value of SARs (CAD) has been re-measured at September 30, 2016. Expected volatility, interest rate and share price have been updated with changes in the fair value being recognized in earnings or loss during the period.

		The weighted average inputs used and grant date fair values (CAD) of SARs granted during the three and nine months ended September 30, 2016 and 2015 are as follows:

		Three Months Ended				Nine Months Ended
				September 30,				September 30,
		2016		2015		2016		2015
Share price	$	-	$	10.31	$	12.64	$	10.31
Exercise price	$	-	$	15.62	$	12.38	$	15.62
Expected volatility		-		52%		52%		52%
Expected life (years)		-		5.00		5.00		5.00
Risk-free interest rate		-		0.68%		0.61%		0.68%
Fair value	$	-	$	4.29	$	5.74	$	4.29

The weighted average inputs used and re-measurement date fair values (CAD) of SARs as at September 30, 2016 and 2015 are as follows:

		September 30,		September 30,
		2016		2015
Share price	$	16.82	$	10.31
Exercise price	$	14.05	$	15.62
Expected volatility		51%		52%
Expected life (years)		4.05		2.69
Risk-free interest rate		0.57%		0.68%
Fair value	$	7.67	$	2.35

See accompanying notes to the condensed interim consolidated financial statements.

Condensed Interim Consolidated Financial Statements

NOTES TO THE INTERIM FINANCIAL STATEMENTS(expressed in 000’s of USD, except as otherwise stated)

	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; and
	•	Common shareholders are entitled to receive dividend payments.

At September 30, 2016, there were 310,995,424 common shares of the Company issued and outstanding (December 31, 2015: 227,401,681). Refer to note 6 for a description of the increase in common shares outstanding attributable to the acquisition of Lake Shore Gold.

19.

INCOME TAX EXPENSE

		Three Months Ended					Nine Months Ended
				September 30,					September 30,
		2016		2015			2016		2015
Current income tax expense
Current period	$	19,900	$	10,662		$	52,021	$	32,912
Deferred tax benefit
Origination and reversal of temporary differences		12,033		(996	)		8,632		(5,828	)
Income tax expense	$	31,933	$	9,666		$	60,653	$	27,084

	a)	Income tax reconciliation

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

		Three Months Ended						Nine Months Ended
					September 30,						September 30,
		2016			2015			2016			2015
Earnings before income taxes	$	94,944		$	22,921		$	178,214		$	62,890
Statutory tax rate		26.00%			26.00%			26.00%			26.00%
Income tax expense		24,685			5,959			46,336			16,351
Reconciling items:
Difference between statutory and foreign tax rates		(4,139	)		(1,490	)		(6,195	)		(3,775	)
Non-deductible share-based payments		116			-			474			-
Impact of foreign exchange on deferred income tax assets and liabilities		4,090			-			(612	)		-
Non-deductible expenses		6,815			1,978			23,501			5,384
Change in unrecognized deferred tax assets		353			1,566			(274	)		5,107
Effect of other taxes paid		-			1,697						3,948
Other		13			(44	)		(2,577	)		69
Income tax expense	$	31,933		$	9,666		$	60,653		$	27,084

See accompanying notes to the condensed interim consolidated financial statements.

22	Tahoe Resources Inc.

NOTES TO THE INTERIM FINANCIAL STATEMENTS(expressed in 000’s of USD, except as otherwise stated)

20.

EARNINGS PER SHARE

Three Months Ended

Three Months Ended

September 30, 2016

September 30, 2015

Weighted

Weighted

��

average

Earnings

average

Earnings

Net

shares

per

Net

per

Earnings

outstanding

share

Earnings

outstanding

Basic EPS⁽¹⁾

63,011

311,407,472

0.20

13,255

227,372,229

0.06

Dilutive securities:

Share options

700,124

217,902

Diluted EPS

63,011

312,107,596

0.20

13,255

227,590,131

0.06

⁽¹⁾

The weighted average shares outstanding used in the basic earnings per share calculation includes the dilutive impact of 478,000 DSAs (three months ended September 30, 2015: 353,000 DSAs).

At September 30, 2016, 3,359,204 Shares Options and 478,000 Share Awards were outstanding of which 326,828 and nil, respectively, for the three months ended September 30, 2016 were anti-dilutive (three months ended September 30, 2015: nil and nil, respectively) because the underlying exercise prices exceeded the average market price for the three months ended September 30, 2016 of CAD$19.30 (three months ended September 30, 2015: CAD$11.64) .

Nine Months Ended

Nine Months Ended

September 30, 2016

September 30, 2015

Weighted

Weighted

average

Earnings

average

Earnings

Net

shares

per

Net

per

Earnings

outstanding

share

Earnings

outstanding

Basic EPS⁽¹⁾

117,561

282,335,384

0.42

35,806

200,969,554

0.18

Dilutive securities:

Share options

336,864

243,586

Diluted EPS

117,561

282,672,248

0.42

35,806

201,213,140

0.18

(1)

The weighted average shares outstanding used in the basic earnings per share calculation includes the dilutive impact of 478,000 DSAs (nine months ended September 30, 2015: 353,000 DSAs).

At September 30, 2016, 3,359,204 Shares Options and 478,000 Share Awards were outstanding of which 830,828 and nil, respectively for the nine months ended September 30, 2016 were anti-dilutive (nine months ended September 30, 2015: 4,173,660 and nil, respectively) because the underlying exercise prices exceeded the average market price for the nine months ended September 30, 2016 of CAD$16.00 (nine months ended September 30, 2015: CAD$14.82) .

During the three and nine months ended September 30, 2016, the Company declared and paid to its shareholders dividends of $0.02 per common share per month, for total dividends of $18,654 and $50,730, respectively (three and nine months ended September 30, 2015: $13,627 and $36,077, respectively).

Subsequent to September 30, 2016, the Company declared and paid dividends of $0.02 per common share for the month of October for total dividends paid of $5,863. As a result of shareholder enrolment in the Dividend Reinvestment Plan during October 2016, $359 was reinvested for a total issuance of 30,689 common shares of the Company.

See accompanying notes to the condensed interim consolidated financial statements.

Condensed Interim Consolidated Financial Statements

NOTES TO THE INTERIM FINANCIAL STATEMENTS(expressed in 000’s of USD, except as otherwise stated)

21.

SUPPLEMENTAL CASH FLOW INFORMATION

		Three Months Ended						Nine Months Ended
					September 30,						September 30,
		2016			2015			2016			2015
Trade and other receivables	$	(6,885	)	$	(5,526	)	$	(26,888	)	$	(18,660	)
Inventories		(7,583	)		5,043			(28,828	)		10,836
Other current assets		(361	)		1,572			(1,318	)		2,831
Other non-current assets		(11,528	)		(21,596	)		(21,968	)		(24,467	)
Accounts payable and accrued liabilities, and other non-current liabilities		79			34,445			(36,232	)		44,015
Changes in working capital	$	(26,278	)	$	13,938		$	(115,234	)	$	14,555

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 Corporate office provides support to the operations and exploration activities with respect to financial, legal, human resources and technical support.

	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.

	Due to the acquisition of Lake Shore Gold during the nine months ended September 30, 2016 and the commencement of commercial production at Shahuindo on May 1, 2016, the CODM reassessed the operating segments as reported at December 31, 2015 and determined that the significant additions to operations during the period would be reviewed and evaluated separately and would therefore be reported as individual operating segments. At December 31, 2015, the Company’s operating segments included a silver segment (the Escobal mine) and a gold segment (the La Arena mine). Effective April 1, 2016, the reportable operating segments include Escobal, La Arena, Shahuindo and the Timmins mines.

	Revenues generated from the sale of silver in concentrate are from the Company’s Escobal mine in Guatemala. Revenues generated from the sale of gold in doré are generated at the La Arena and Shahuindo mines in Peru and the Timmins mines in Canada. Mineral interests, plant and equipment are situated in Guatemala, Peru and Canada.

	Substantially all of the cash and cash equivalents are denominated in USD and are held in Canada and Peru. The corporate office located in Reno, Nevada, USA, provides financial, human resource and technical support to the mining and exploration activities.

See accompanying notes to the condensed interim consolidated financial statements.

24	Tahoe Resources Inc.

NOTES TO THE INTERIM FINANCIAL STATEMENTS(expressed in 000’s of USD, except as otherwise stated)

Significant information relating to the Company’s reportable operating segments as at and for the three and nine months ended September 30, 2016 is summarized as follows:

September 30, 2016⁽¹⁾⁽²⁾

Timmins

Escobal

La Arena

Shahuindo

mines

Total

Mineral interests and plantand equipment

791,792

452,629

470,349

727,438

2,442,208

Goodwill

57,468

129,908

187,376

Total assets⁽⁴⁾

974,879

600,188

533,735

924,416

3,033,218

Total liabilities⁽⁴⁾

(28,941

)

87,472

274,420

113,910

446,861

Three Months Ended September 30, 2016⁽¹⁾⁽²⁾

Timmins

Escobal

La Arena

Shahuindo

mines

Total

Revenues

103,461

63,951

9,550

57,759

234,721

Production costs

31,794

27,270

5,595

25,604

90,263

Royalties

3,671

1,241

4,912

Depreciation anddepletion

12,244

5,472

2,485

7,708

27,909

Mine operating earnings

55,751

31,208

1,471

23,207

111,637

Capital expenditures⁽³⁾

6,601

9,456

19,355

21,013

56,425

Nine Months Ended September 30, 2016⁽¹⁾⁽²⁾

Timmins

Escobal

La Arena

Shahuindo

mines

Total

Revenues

285,286

181,842

31,090

96,887

595,105

Production costs

94,736

88,878

11,738

46,165

241,517

Royalties

12,937

2,131

15,068

Depreciation anddepletion

40,301

18,047

4,468

19,425

82,241

Mine operating earnings

137,311

74,916

14,886

29,166

256,279

Capital expenditures⁽³⁾

19,189

22,547

52,397

56,767

150,900

	⁽¹⁾	The Timmins mines were acquired on April 1, 2016 as part of the Lake Shore Gold acquisition. Results of operations are not included prior to April 1, 2016.
	⁽²⁾	Shahuindo declared commercial production effective May 1, 2016. All pre-operating revenues from production at Shahuindo have been credited against construction capital through April 30, 2016.
	⁽³⁾	Capital expenditures in the Timmins mines segment includes the acquisition of the 2% net smelter return (“NSR”) royalty related to production at the Bell Creek mine for $12,500.
	⁽⁴⁾	Balances presented are before intercompany transaction eliminations not included in segmented disclosure,

Significant information relating to the Company’s reportable operating segments as at December 31, 2015 and for the three and nine months ended September 30, 2015 is summarized as follows:

		December 31, 2015^(1)(2)(3)
								Timmins
		Escobal		La Arena		Shahuindo		mines		Total
Mineral interests and plant and equipment	$	813,919	$	438,833	$	421,760	$	-	$	1,674,512
Goodwill		-		57,468		-		-		57,468
Total assets		970,726		562,020		469,715		-		2,002,461
Total liabilities	$	35,759	$	82,403	$	220,268	$	-	$	338,430

See accompanying notes to the condensed interim consolidated financial statements.

Condensed Interim Consolidated Financial Statements

NOTES TO THE INTERIM FINANCIAL STATEMENTS(expressed in 000’s of USD, except as otherwise stated)

		Three Months Ended September 30, 2015^(1)(2)(3)
								Timmins
		Escobal		La Arena		Shahuindo		mines		Total
Revenues	$	82,569	$	63,167	$	-	$	-	$	145,736
Production costs		38,255		34,282		-		-		72,537
Royalties		8,258		-		-		-		8,258
Depreciation and depletion		13,504		11,315		-		-		24,819
Mine operating earnings		22,552		17,570		-		-		40,122
Capital expenditures	$	9,555	$	8,656	$	22,220	$	-	$	40,431

		Nine Months Ended September 30, 2015^(1)(2)(3)
								Timmins
		Escobal		La Arena		Shahuindo		mines		Total
Revenues	$	230,467	$	134,363	$	-	$	-	$	364,830
Production costs		96,265		78,724		-		-		174,989
Royalties		29,431		-		-		-		29,431
Depreciation and depletion		35,718		19,858		-		-		55,576
Mine operating earnings		69,053		35,781		-		-		104,834
Capital expenditures	$	25,908	$	21,384	$	51,264	$	-	$	98,556

	⁽¹⁾	The Timmins mines were acquired on April 1, 2016 as part of the Lake Shore Gold acquisition. Results of operations are not included prior to April 1, 2016.
	⁽²⁾	La Arena and Shahuindo were acquired on April 1, 2015 as part of the Rio Alto acquisition. Results of operations of La Arena and Shahuindo are not included prior to April 1, 2015.
	⁽³⁾	Shahuindo declared commercial production effective May 1, 2016. All pre-operating revenues from production at Shahuindo have been credited against construction capital through April 30, 2016.

23.	FAIR VALUE OF FINANCIAL INSTRUMENTS

	The Company’s financial instruments consist of cash and cash equivalents, restricted cash, trade and other receivables, sales tax and other non-current 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, sales tax and
		other non-current 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
		currency swaps are measured at FVTPL; 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.

See accompanying notes to the condensed interim consolidated financial statements.

26	Tahoe Resources Inc.

NOTES TO THE INTERIM FINANCIAL STATEMENTS(expressed in 000’s of USD, except as otherwise stated)

At September 30, 2016 and December 31, 2015, 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:

		September 30, 2016						December 31, 2015
		Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Investments⁽¹⁾	$	15	$	-	$	-	$	544	$	-	$	-
Provisionally priced trade receivables		-		45,666				-		17,239		-
Currency swap⁽²⁾		-		-		-		-		-		2,742
	$	15	$	45,666	$	-	$	544	$	17,239	$	2,742

	⁽¹⁾	Investments are included in other current assets.
	⁽²⁾	The currency swap was retired during August 2016 and previously included in other non-current liabilities (note 13).

	The carrying value of cash and cash equivalents, restricted cash, sales tax and other non-current receivables, 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 nine months ended September 30, 2016.

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 and cash and cash equivalents.

		There has been no significant change to the Company’s exposure to credit risk since De cember 31, 2015 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.

		There has been no significant change to the Company’s exposure to liquidity risk since December 31, 2015 and the Company deems this risk to be minimal.

		The other non-current liabilities consist of the non-current portion of the SARs and severance provisions related to the Lake Shore Gold acquisition.

See accompanying notes to the condensed interim consolidated financial statements.

Condensed Interim Consolidated Financial Statements

NOTES TO THE INTERIM FINANCIAL STATEMENTS(expressed in 000’s of USD, except as otherwise stated)

The Company’s significant undiscounted commitments at September 30, 2016 are as follows:

								September 30,		December 31,
								2016		2015
		1 year		2-5 years		5+ years		Total		Total
Accounts payable and accrued liabilities and other current liabilities	$	113,991	$	-	$	-	$	113,991	$	99,748
Debt		35,000		-		-		35,000		35,000
Income tax payable		9,442		-		-		9,442		9,981
Lease and contractual agreements		9,865		9,375		-		19,240		9,477
Commitments to purchase equipment, services, materials and supplies		74,483		6,636		-		81,119		85,230
Other non-current liabilities		-		8,297		-		8,297		5,674
Reclamation provision		-		1,044		95,699		96,743		69,401
	$	242,781	$	25,352	$	95,699	$	363,832	$	314,511

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 currency risk on cash and cash equivalents, sales tax receivable and accounts payable that are denominated in a currency other than the USD.

		There has been no significant change to the Company’s exposure to foreign exchange risk since December 31, 2015 and the Company deems this risk to be minimal.

	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 September 30, 2016, the Company’s interest- bearing financial instruments are related to cash and cash equivalents, the Facility, the Revolving Facility and finance leases. There has been no significant change to the Company’s exposure to interest rate risk since December 31, 2015 and the Company deems this 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. There has been no significant change to the Company’s exposure to price risk since December 31, 2015 and the Company deems this risk to be at an acceptable level and has entered into no hedging contracts.

25.	CAPITAL MANAGEMENT

	The Company’s policy 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 Facility and finance leases.

See accompanying notes to the condensed interim consolidated financial statements.

28	Tahoe Resources Inc.

NOTES TO THE INTERIM FINANCIAL STATEMENTS(expressed in 000’s of USD, except as otherwise stated)

			September 30,			December 31,
	Notes		2016			2015
Shareholders’ equity		$	2,586,357		$	1,664,031
Debt	12		35,000			35,000
Lease obligations	13		19,240			13,862
			2,640,597			1,712,893
Less: cash and cash equivalents	7		(142,426	)		(108,667	)
Less: restricted cash			(4,723	)		(2,500	)
		$	2,493,448		$	1,601,726

	The Company’s overall capital management strategy remains unchanged from the year ended December 31, 2015.

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.

See accompanying notes to the condensed interim consolidated financial statements.

Condensed Interim Consolidated Financial Statements

Tahoe Resources Inactive 6-KCondensed Interim Consolidated Financial Statements