Chapter 2

It didn't take Kevin McArthur long to figure out that he wasn't going to be satisfied playing a lot of golf.

And it didn't take him much longer to figure out that he wasn't going to be satisfied solely as a member of corporate boards, either.

So McArthur, who spearheaded the sale of Reno-based Glamis Gold Corp. for $9.5 billion in 2006, is back into the role he likes best: Building a new mining company around a promising discovery.

Tahoe Resources Inc. last month completed an initial public offering that raised more than $382 million (Canadian), and the company is putting $65 million of the money to work on a mining property in southeast Guatemala.

The company will begin feasibility studies a preliminary economic analysis will be finished in the second half of this year and begin working to win permits on the Escobal project.

McArthur had been aware of the property since 1998, when Glamis Gold, which he headed as chief executive officer, acquired Mar-West Resources Ltd.

The big attraction of the Mar-West deal was a Honduran property that became the big San Martin gold mine.

Escobal didn't get much attention until 2007 when GoldCorp Inc., which had acquired Glamis a year earlier, conducted further exploration and identified a deposit of at least 100 million ounces of silver.

But GoldCorp, true to its name, wasn't particularly interested in a silver property and began shopping it.

McArthur, who'd been on the sidelines since retiring as Goldcorp's president and CEO at the end of 2008, itched to get back into the game.

He assembled a team that's heavily flavored with veterans of Glamis Gold and made his pitch to GoldCorp.

The deal?

Tahoe Resources would pay $253.3 million in cash to GoldCorp. To give GoldCorp a piece of the potential upside in the property, GoldCorp will hold a 40 percent equity position in Tahoe Resources.

The upside could be large. From the results of three years of exploratory drilling, Tahoe Resources believes Escobal is among the largest high-grade silver deposits ever discovered.

Preliminary studies indicate the mine might produce 16 million ounces of silver a year with a 16-year mine life.

With the IPO completed it raised $348 million (Canadian) plus another $34.8 million when the initial offering was over-subscribed Tahoe Resources' stock now trades on the Toronto Stock Exchange.

(A graduate of the mining school at the University of Nevada, Reno, McArthur and his wife, Michelle, gave the school a donation equal to the cash value of the stock he was granted in the IPO. The couple gave $600,000 to improvementsUNR's tennis facilities and another $600,000 to be added to the Mackay School of Earth Sciences and Engineering's Goldcorp Endowed Chair in Minerals Engineering.)

Although the company's operational headquarters are in Reno, its legal headquarters are in Vancouver for a simple reason: McArthur didn't want the hassles of dealing with the Sarbanes-Oxley requirements that face publicly held companies in the United States.

The Tahoe Resources staff of 12 in Reno probably will grow to 20 or 30 once Escobal begins production. That's currently scheduled for 2014.

From now until then, Tahoe Resources has a lot of work to do more drilling to get a better idea about the property's reserves, crunching the numbers on a feasibility study, preparing documents for the necessary permits.

The permitting, McArthur says, carries some uncertainties. Guatemalan officials are writing a new national mining law, one that is likely to increase the current 1 percent royalty rate to 3 to 5 percent.

The higher rate isn't a concern to McArthur, especially because half of royalty payments probably will be directed to local communities.

And he's confident the company's management team can get permits for the new mine.

"We have a lot of experience in Central America," he says.

Even after buying the property from GoldCorp, and even after paying for feasibility studies and permitting, Tahoe Resources stands to have more than $60 million available to pre-order equipment for the mine.

Full construction, however, will require another round of financing.

And in the meantime, McArthur expects the company to widen its scope of exploration to include other prospects in politically safe regions of the Americas.

The Tahoe Resources leadership team

* A. Dan Rovig, director and chairman of the board: Former chairman, president and chief executive officer of Glamis Gold Ltd. Currently a director of Goldcorp Inc.

* Kevin McArthur, president, chief executive officer and director: President and CEO of Glamis until its acquisition by GoldCorp in 2006.

* Ron Clayton, vice president and chief operating officer: Former senior vice president for operations at Hecla Mining Co.

* Jaime Mondragon, chief financial officer: Former director of finance at Minefinders Corp. and former financial executive for Glamis and Hecla.

* Brian Brodsky, vice president exploration: Former exploration manager for Goldcorp and Glamis.


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