---



CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2016 and 2015

---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Tahoe Resources
Inc.

We have audited the accompanying consolidated financial
statements of Tahoe Resources Inc. and subsidiaries (the Company), which
comprise the consolidated statements of financial position as at December 31,
2016 and December 31, 2015, and the consolidated statements of operations and
total comprehensive income (loss), consolidated statements of changes in equity,
and consolidated statements of cash flows for the years then ended, and a
summary of significant accounting policies and other explanatory
information.

Management's Responsibility for the Consolidated Financial
Statements

Management is responsible for the preparation and fair
presentation of these consolidated financial statements in accordance with
International Financial Reporting Standards as issued by the International
Accounting Standards Board, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or
error.

Auditor's Responsibility

Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We conducted our audits
in accordance with Canadian generally accepted auditing standards and the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we comply with ethical requirements and plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditor's judgment, including
the assessment of the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity's
preparation and fair presentation of the consolidated financial statements in
order to design audit procedures that are appropriate in the circumstances. An
audit also includes evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our
audits is sufficient and appropriate to provide a basis for our audit
opinion.

Opinion

In our opinion, the consolidated financial statements present
fairly, in all material respects, the financial position of Tahoe Resources Inc.
and subsidiaries as at December 31, 2016 and December 31, 2015, and their
financial performance and their cash flows for the years then ended in
accordance with International Financial Reporting Standards as issued by the
International Accounting Standards Board.

Other Matter

We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the Companys
internal control over financial reporting as of December 31, 2016, based on the
criteria established in Internal Control  Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission and our
report dated March 9, 2017 expressed an unqualified opinion on the Companys
internal control over financial reporting.

/s/ Deloitte LLP

Chartered Professional Accountants March 9, 2017
Vancouver, Canada

---

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING

Management of Tahoe Resources Inc. (the Company) is
responsible for establishing and maintaining adequate internal control over
financial reporting. Internal control over financial reporting is a process
designed by, or caused to be designed under the supervision of, the President
and Chief Executive Officer and the Vice President and Chief Financial Officer
and effected by the Board of Directors, management and other personnel to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of consolidated financial statements for external purposes
in accordance with International Financial Reporting Standards as issued by the
International Accounting Standards Board. It includes those policies and
procedures that:

| | I.   | pertain to the maintenance of records that accurately and
      fairly reflect, in reasonable detail, the transactions and dispositions of
      assets of the Company;                                                                                                                                                                                                                                                                    
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | II.  | provide reasonable assurance that transactions are
      recorded as necessary to permit preparation of consolidated financial
      statements in accordance with International Financial Reporting Standards
      as issued by the International Accounting Standards Board, and that the
      Companys receipts and expenditures are made only in accordance with
      authorizations of management and the Companys directors; and
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | III. | provide reasonable assurance regarding prevention or
      timely detection of unauthorized acquisition, use, or disposition of the
      Companys assets that could have a material effect on the Companys
      consolidated financial statements.                                                                                                                                                                                     

Due to its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements on a timely basis.
Also, projections of any evaluation of the effectiveness of internal control
over financial reporting to future periods are subject to the risk that the
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

In accordance with the National Instrument 52-109 and Rule
13a-15, as interpreted by the U.S. Securities and Exchange Commission, the
design of internal control over financial reporting excludes the controls,
policies and procedures of Lake Shore Gold Corp (Lake Shore Gold) on the basis
that Lake Shore Gold was acquired on April 1, 2016 and therefore not more than
365 days before the end of the relevant year ended December 31, 2016. Lake Shore
Golds financial statements constitute $813.5 million and $948.9 million of net
and total assets, respectively, and $137.1 million of revenue and $23.3 million
of loss of the consolidated financial statement amounts as of and for the year
ended December 31, 2016.

As at December 31, 2016, the Companys design of internal
control over financial reporting included the controls, policies and procedures
of Rio Alto Mining Ltd. (Rio Alto), acquired on April 1, 2015.

Other than the exclusion of Lake Shore Gold described above,
management assessed the effectiveness of the Companys internal control over
financial reporting as of December 31, 2016, based on the criteria set forth in
Internal Control  Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on this assessment,
management has concluded that, as of December 31, 2016, the Companys internal
control over financial reporting was effective.

The effectiveness of the Companys internal control over
financial reporting, as of December 31, 2016, has been audited by Deloitte LLP,
Independent Registered Public Accounting Firm, who also audited the Companys
consolidated financial statements as of and for the years ended December 31,
2016 and 2015, as stated in their report which appears on the following page.

|/s/Ron Clayton                        | /s/Elizabeth McGregor                     
|------------------------------------- | ------------------------------------------
|                                      |                                           
|Ron Clayton                           | Elizabeth McGregor                        
|                                      |                                           
|President and Chief Executive Officer | Vice President and Chief Financial Officer
|                                      |                                           
|Reno, Nevada                          |                                           
|March 9, 2017                         |                                           

---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Tahoe Resources
Inc.

We have audited the internal control over financial reporting
of Tahoe Resources Inc. and subsidiaries (the Company) as of December 31,
2016, based on the criteria established in Internal ControlIntegrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission.

As described in the Managements Report on Internal Control
Over Financial Reporting, management excluded from its assessment the internal
control over financial reporting of Lake Shore Gold Corp. (Lake Shore Gold),
which was acquired on April 1, 2016, and whose financial statements constitute
$813.5 million and $948.9 million of net and total assets, respectively, and
$137.1 million of revenue and $23.3 million of loss of the consolidated
financial statement amounts as of and for the year ended December 31, 2016.
Accordingly, our audit did not include the internal control over financial
reporting of Lake Shore Gold.

The Company's management is responsible for maintaining
effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting, included in the
accompanying Managements Report on Internal Control over Financial Reporting.
Our responsibility is to express an opinion on the Company's internal control
over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in
all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a
process designed by, or under the supervision of, the company's principal
executive and principal financial officers, or persons performing similar
functions, and effected by the company's board of directors, management, and
other personnel to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with International Financial Reporting Standards as
issued by the International Accounting Standards Board. A company's internal
control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with International
Financial Reporting Standards as issued by the International Accounting
Standards Board, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over
financial reporting, including the possibility of collusion or improper
management override of controls, material misstatements due to error or fraud
may not be prevented or detected on a timely basis. Also, projections of any
evaluation of the effectiveness of the internal control over financial reporting
to future periods are subject to the risk that the controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31,
2016 based on the criteria established in Internal Control  Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission.

We have also audited, in accordance with Canadian generally
accepted auditing standards and the standards of the Public Company Accounting
Oversight Board (United States), the consolidated financial statements as of and
for the year ended December 31, 2016 of the Company and our report dated March
9, 2017 expressed an unmodified/unqualified opinion on those financial
statements.

/s/ Deloitte LLP

Chartered Professional Accountants March 9,
2017Vancouver, Canada

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CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Expressed in thousands of United States dollars)

|                                               |  |       |  |   | December 31, |   |   | December 31, |  
|---------------------------------------------- |  | ----- |  | - | ------------ | - | - | ------------ | -
|                                               |  | Notes |  |   | 2016         |   |   | 2015         |  
|ASSETS                                         |  |       |  |   |              |   |   |              |  
|Current                                        |  |       |  |   |              |   |   |              |  
|Cash and cash
      equivalents                |  | 7     |  | $ | 163,368      |   | $ | 108,667      |  
|Trade and other receivables                    |  | 8     |  |   | 64,646       |   |   | 43,234       |  
|Inventories                                    |  | 9     |  |   | 126,618      |   |   | 70,080       |  
|Other                                          |  |       |  |   | 4,810        |   |   | 6,220        |  
|                                               |  |       |  |   | 359,442      |   |   | 228,201      |  
|Non-current                                    |  |       |  |   |              |   |   |              |  
|Mineral
      interests, plant and equipment   |  | 10    |  |   | 2,556,953    |   |   | 1,674,512    |  
|Sales tax and other receivables                |  |       |  |   | 36,107       |   |   | 37,404       |  
|Restricted cash                                |  |       |  |   | 4,672        |   |   | 2,500        |  
|Deferred tax asset                             |  | 19b   |  |   | 1,994        |   |   | 2,376        |  
|Goodwill                                       |  | 10a   |  |   | 112,085      |   |   | 57,468       |  
|                                               |  |       |  |   | 2,711,811    |   |   | 1,774,260    |  
|Total Assets                                   |  |       |  | $ | 3,071,253    |   | $ | 2,002,461    |  
|LIABILITIES                                    |  |       |  |   |              |   |   |              |  
|Current                                        |  |       |  |   |              |   |   |              |  
|Accounts payable and accrued
      liabilities |  | 11    |  | $ | 129,170      |   | $ | 99,748       |  
|Debt                                           |  | 12a   |  |   | -            |   |   | 35,000       |  
|Lease obligations                              |  | 13    |  |   | 8,696        |   |   | 6,151        |  
|Income tax
      payable                       |  |       |  |   | 10,733       |   |   | 9,981        |  
|Other                                          |  |       |  |   | 1,837        |   |   | -            |  
|                                               |  |       |  |   | 150,436      |   |   | 150,880      |  
|Non-current                                    |  |       |  |   |              |   |   |              |  
|Lease
      obligations                        |  | 13    |  |   | 7,250        |   |   | 7,711        |  
|Debt                                           |  | 12b   |  |   | 35,000       |   |   | -            |  
|Reclamation
      provision                    |  | 14    |  |   | 64,219       |   |   | 39,524       |  
|Deferred tax liability                         |  | 19b   |  |   | 236,175      |   |   | 134,641      |  
|Other                                          |  |       |  |   | 6,019        |   |   | 5,674        |  
|Total Liabilities                              |  |       |  |   | 499,099      |   |   | 338,430      |  
|SHAREHOLDERS EQUITY                           |  |       |  |   |              |   |   |              |  
|Share capital                                  |  | 18e   |  |   | 2,775,068    |   |   | 1,914,676    |  
|Share-based
      payment reserve              |  | 18    |  |   | 18,629       |   |   | 19,372       |  
|Deficit                                        |  |       |  |   | (221,543     | ) |   | (270,017     | )
|Total Shareholders Equity                     |  |       |  |   | 2,572,154    |   |   | 1,664,031    |  
|Total Liabilities and Shareholders Equity     |  |       |  | $ | 3,071,253    |   | $ | 2,002,461    |  

Commitments and Contingencies (notes 24b and 26)

APPROVED BY THE DIRECTORS

|Ron Clayton     | Dan Rovig         
|----------------- | --------------------
|Ron Clayton       | Dan Rovig           
|PRESIDENT AND CEO | INDEPENDENT DIRECTOR

See accompanying notes to the consolidated financial
statements.

|Consolidated Financial Statements | 1
|--------------------------------- | -

---

CONSOLIDATED STATEMENTSOF OPERATIONS AND TOTAL
COMPREHENSIVE INCOME (LOSS) (Expressed in thousands of United States
dollars, except per share and share information)

|                                                            |  |       |  |   |             |   |   | Years Ended  |  
|----------------------------------------------------------- |  | ----- |  | - | ----------- | - | - | ------------ | -
|                                                            |  |       |  |   |             |   |   | December 31, |  
|                                                            |  | Notes |  |   | 2016        |   |   | 2015         |  
|Revenues                                                    |  | 15,22 |  | $ | 784,503     |   | $ | 519,721      |  
|Operating costs                                             |  |       |  |   |             |   |   |              |  
|Production costs                                            |  | 16,22 |  |   | 332,721     |   |   | 241,661      |  
|Royalties                                                   |  | 22    |  |   | 22,913      |   |   | 13,240       |  
|Depreciation and depletion                                  |  | 22    |  |   | 124,744     |   |   | 78,649       |  
|Total operating costs                                       |  |       |  |   | 480,378     |   |   | 333,550      |  
|Mine operating
      earnings                               |  |       |  |   | 304,125     |   |   | 186,171      |  
|                                                            |  |       |  |   |             |   |   |              |  
|Other operating expenses                                    |  |       |  |   |             |   |   |              |  
|Impairment                                                  |  | 10b   |  |   | -           |   |   | 220,000      |  
|Exploration                                                 |  |       |  |   | 14,350      |   |   | 6,472        |  
|General and administrative                                  |  | 17    |  |   | 47,507      |   |   | 39,251       |  
|Total other operating expenses                              |  |       |  |   | 61,857      |   |   | 265,723      |  
|Earnings (loss) from operations                             |  |       |  |   | 242,268     |   |   | (79,552      | )
|                                                            |  |       |  |   |             |   |   |              |  
|Other (income) expense                                      |  |       |  |   |             |   |   |              |  
|Interest income                                             |  |       |  |   | (150        | ) |   | (1,924       | )
|Interest expense                                            |  |       |  |   | 3,644       |   |   | 3,610        |  
|Loss on
      debenture conversion                          |  | 6     |  |   | 32,304      |   |   | -            |  
|Foreign exchange loss                                       |  |       |  |   | 435         |   |   | 4,530        |  
|Other (income) expense                                      |  |       |  |   | (2,697      | ) |   | 2,464        |  
|Total other (income) expense                                |  |       |  |   | 33,536      |   |   | 8,680        |  
|                                                            |  |       |  |   |             |   |   |              |  
|Earnings (loss) before income taxes                         |  |       |  |   | 208,732     |   |   | (88,232      | )
|Current income tax expense                                  |  | 19    |  |   | 70,654      |   |   | 47,486       |  
|Deferred income tax expense (benefit)                       |  | 19    |  |   | 20,202      |   |   | (63,807      | )
|Earnings (loss) and total comprehensive income
      (loss) |  |       |  | $ | 117,876     |   | $ | (71,911      | )
|                                                            |  |       |  |   |             |   |   |              |  
|Earnings (loss) per
      share                             |  |       |  |   |             |   |   |              |  
|Basic                                                       |  | 20    |  | $ | 0.41        |   | $ | (0.35        | )
|Diluted                                                     |  | 20    |  | $ | 0.41        |   | $ | (0.35        | )
|                                                            |  |       |  |   |             |   |   |              |  
|Weighted average
      shares outstanding                   |  |       |  |   |             |   |   |              |  
|Basic                                                       |  | 20    |  |   | 289,726,501 |   |   | 207,810,941  |  
|Diluted                                                     |  | 20    |  |   | 289,988,046 |   |   | 207,810,941  |  

See accompanying notes to the consolidated financial
statements.

|2 | Tahoe Resources Inc.
|- | --------------------

---

CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in
thousands of United States dollars)

|                                                                                 |  |       |  |   |          |   |   | Years Ended  |  
|-------------------------------------------------------------------------------- |  | ----- |  | - | -------- | - | - | ------------ | -
|                                                                                 |  |       |  |   |          |   |   | December 31, |  
|                                                                                 |  | Notes |  |   | 2016     |   |   | 2015         |  
|OPERATING ACTIVITIES                                                             |  |       |  |   |          |   |   |              |  
|Earnings
      (loss) for the year                                               |  |       |  | $ | 117,876  |   | $ | (71,911      | )
|Adjustments for:                                                                 |  |       |  |   |          |   |   |              |  
|Interest
      expense                                                           |  |       |  |   | 3,644    |   |   | 4,119        |  
|Payment
      on extinguishment of currency swap                                 |  |       |  |   | (1,939   | ) |   | -            |  
|Income tax
      expense (recovery)                                              |  | 19    |  |   | 90,856   |   |   | (16,321      | )
|Items not involving cash:                                                        |  |       |  |   |          |   |   |              |  
|Depreciation and depletion                                                       |  |       |  |   | 128,072  |   |   | 81,908       |  
|Loss
      (gain) on disposition of plant and equipment                          |  |       |  |   | 451      |   |   | (1           | )
|(Gain) loss
      on currency swap                                               |  |       |  |   | (803     | ) |   | 1,210        |  
|Share-based payments                                                             |  | 18    |  |   | 7,224    |   |   | 6,017        |  
|Shares
      issued as transaction costs                                         |  |       |  |   | 5,332    |   |   | -            |  
|Unrealized foreign exchange loss                                                 |  |       |  |   | 539      |   |   | 308          |  
|Impairment                                                                       |  | 10b   |  |   | -        |   |   | 220,000      |  
|Loss on debenture conversion                                                     |  | 6     |  |   | 32,304   |   |   | -            |  
|Accretion                                                                        |  | 14    |  |   | 2,370    |   |   | 1,003        |  
|Cash provided by operating
      activities    before changes in working capital |  |       |  |   | 385,926  |   |   | 226,332      |  
|Changes in working capital                                                       |  | 21    |  |   | (67,556  | ) |   | (12,301      | )
|Cash provided by operating
      activities                                      |  |       |  |   | 318,370  |   |   | 214,031      |  
|Income taxes paid                                                                |  |       |  |   | (68,916  | ) |   | (47,287      | )
|Net cash provided by operating activities                                        |  |       |  |   | 249,454  |   |   | 166,744      |  
|                                                                                 |  |       |  |   |          |   |   |              |  
|INVESTING ACTIVITIES                                                             |  |       |  |   |          |   |   |              |  
|Mineral
      interests additions                                                |  |       |  |   | (190,885 | ) |   | (121,953     | )
|Cash acquired through
      acquisition                                          |  | 6     |  |   | 70,187   |   |   | 61,713       |  
|Net
      cash used in investing activities                                      |  |       |  |   | (120,698 | ) |   | (60,240      | )
|                                                                                 |  |       |  |   |          |   |   |              |  
|FINANCING ACTIVITIES                                                             |  |       |  |   |          |   |   |              |  
|Proceeds
      from issuance of common shares on exercise of share options       |  |       |  |   | 19,790   |   |   | 27,662       |  
|Repayments
      of loan facility                                                |  | 12d   |  |   | -        |   |   | (50,000      | )
|Dividends paid to shareholders                                                   |  | 20    |  |   | (67,044  | ) |   | (49,717      | )
|Loan
      origination fees and other                                            |  |       |  |   | (403     | ) |   | (756         | )
|Interest paid                                                                    |  |       |  |   | (2,989   | ) |   | (4,197       | )
|Payments on finance leases                                                       |  |       |  |   | (22,266  | ) |   | (4,823       | )
|Net cash used in financing activities                                            |  |       |  |   | (72,912  | ) |   | (81,831      | )
|                                                                                 |  |       |  |   |          |   |   |              |  
|Effect of exchange rates on cash and cash equivalents                            |  |       |  |   | (1,143   | ) |   | 3,638        |  
|Increase in cash and cash equivalents                                            |  |       |  |   | 54,701   |   |   | 28,311       |  
|Cash and cash equivalents, beginning of year                                     |  |       |  |   | 108,667  |   |   | 80,356       |  
|Cash and cash equivalents, end of year                                           |  | 7     |  | $ | 163,368  |   | $ | 108,667      |  

Supplemental cash flow information (note 21)

See accompanying notes to the consolidated financial
statements.

|Consolidated Financial Statements | 3
|--------------------------------- | -

---

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

|                                                                                                                          |  |       |  |  | 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 comprehensive
      income                                                                                   |  |       |  |  | -           |  |   | -         |  |   | -        |   |   | 117,876  |   |   | 117,876   |  
|Shares issued under the
      Share Plan                                                                                  |  | 18    |  |  | 244,000     |  |   | 3,729     |  |   | (2,942   | ) |   | -        |   |   | 787       |  
|Shares issued as transaction costs                                                                                        |  | 6     |  |  | 455,019     |  |   | 5,332     |  |   | -        |   |   | -        |   |   | 5,332     |  
|Shares issued on
      acquisition of Lake Shore Gold                                                                     |  | 6     |  |  | 69,239,629  |  |   | 676,670   |  |   | 8,436    |   |   | -        |   |   | 685,106   |  
|Shares issued on conversion
      of    Performance Share Units
      (PSUs)    on acquisition of Lake Shore
      Gold |  | 6     |  |  | 211,442     |  |   | 2,131     |  |   | -        |   |   | -        |   |   | 2,131     |  
|Shares issued on
      conversion and    redemption of
      convertible debentures                                       |  | 6     |  |  | 10,733,675  |  |   | 137,997   |  |   | -        |   |   | -        |   |   | 137,997   |  
|Shares issued on exercise of stock
      options                                                                          |  | 18    |  |  | 2,819,838   |  |   | 32,175    |  |   | (12,385  | ) |   | -        |   |   | 19,790    |  
|Share-based payments                                                                                                      |  | 18    |  |  | -           |  |   | -         |  |   | 6,148    |   |   | -        |   |   | 6,148     |  
|Dividends paid to shareholders                                                                                            |  | 20    |  |  | 256,747     |  |   | 2,358     |  |   | -        |   |   | (69,402  | ) |   | (67,044   | )
|At December 31, 2016                                                                                                      |  |       |  |  | 311,362,031 |  | $ | 2,775,068 |  | $ | 18,629   |   | $ | (221,543 | ) | $ | 2,572,154 |  

|                                                 |  |       |  |  | 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 loss                  |  |       |  |  | -           |  |   | -         |  |   | -        |   |   | (71,911  | ) |   | (71,911   | )
|Shares issued under the Share
      Plan         |  | 18    |  |  | 193,167     |  |   | 3,666     |  |   | (2,938   | ) |   | -        |   |   | 728       |  
|Shares issued on acquisition of Rio Alto         |  | 6     |  |  | 75,991,381  |  |   | 856,198   |  |   | 11,536   |   |   | -        |   |   | 867,734   |  
|Shares issued on exercise of
      stock options |  | 18    |  |  | 1,561,218   |  |   | 17,466    |  |   | (6,385   | ) |   | -        |   |   | 11,081    |  
|Shares issued on exercise of warrants            |  | 6     |  |  | 2,011,244   |  |   | 22,690    |  |   | -        |   |   | -        |   |   | 22,690    |  
|Share-based payments                             |  | 18    |  |  | -           |  |   | -         |  |   | 5,366    |   |   | -        |   |   | 5,366     |  
|Dividends paid to shareholders                   |  | 20    |  |  | -           |  |   | -         |  |   | -        |   |   | (49,717  | ) |   | (49,717   | )
|At December 31, 2015                             |  |       |  |  | 227,401,681 |  | $ | 1,914,676 |  | $ | 19,372   |   | $ | (270,017 | ) | $ | 1,664,031 |  

See accompanying notes to the consolidated financial
statements.

|4 | Tahoe Resources Inc.
|- | --------------------

---

|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                                     
|-----------------------------------------------------------------------------------
|(Expressed in thousands of United States dollars, except
      as otherwise stated)
|Years ended December 31, 2016 and 2015                                             
|                                                                                   

|1. | OPERATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | Tahoe Resources Inc. (Tahoe) was incorporated under the
      Business Corporations Act (British Columbia) on November 10, 2009. These
      audited annual consolidated financial statements (consolidated financial
      statements) include the accounts of Tahoe and its subsidiaries (together
      referred to as the Company). The Companys principal business activities
      are the operation of mineral properties for the mining of precious metals
      and the exploration, development and acquisition of mineral interests in
      the Americas.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | 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 Companys Board of Directors authorized issuance of
      these consolidated financial statements on March 9, 2017.                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|2. | BASIS OF PREPARATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | The consolidated financial statements have been prepared
      in accordance with International Financial Reporting Standards as issued
      by the International Accounting Standards Board (IFRS) effective as of
      December 31, 2016. IFRS includes IFRSs, International Accounting Standards
      (IASs), and interpretations issued by the IFRS Interpretations Committee
      (IFRICs) and the former Standing Interpretations Committee
    (SICs).                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|3. | SIGNIFICANT ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

|Consolidated Financial Statements | 5
|--------------------------------- | -

---

|NOTES TO THE
      CONSOLIDATED 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
December 31, 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        
| |                                |           |            | La Arena Phase II    
| |                                |           |            | Sulfide Project      
| | 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 year ended December 31,
2016, the Company divested of its ownership interest in Northern Superior
Resources which was acquired on April 1, 2016 as part of the Lake Shore Gold
acquisition and previously accounted for using the equity method. A gain of
$1,059 was recognized in the consolidated statements of operations and total
comprehensive income (loss).

Intercompany assets, liabilities,
equity, income, expenses and cash flows arising from intercompany transactions
are eliminated in full on consolidation.

| | d) | Foreign currency translation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | Transactions in currencies other than the functional
      currency are recorded at the rates of exchange prevailing on the dates of
      the transactions. At the end of each reporting period, monetary assets and
      liabilities that are denominated in foreign currencies are translated at
      the rates prevailing at that date. Non-monetary items that are measured in
      terms of historical cost in foreign currencies are not re-translated.
      Total foreign exchange gains and losses are recognized in earnings. The
      unrealized portion of foreign exchange gains and losses are disclosed
      separately in the consolidated statements of cash flows.                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | e) | Business Combinations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | A business combination is defined as an acquisition of
      assets and liabilities that constitute a business. A business is an
      integrated set of activities and assets that consist of inputs, including
      non- current assets, and processes, including operational processes that,
      when applied to those inputs, have the ability to create outputs that
      provide a return to the Company and its shareholders. A business also
      includes those assets and liabilities that do not necessarily have all the
      inputs and processes required to produce outputs, but can be integrated
      with the inputs and processes of the Company to create outputs. When
      acquiring a set of activities or assets in the exploration and development
      stage, which may not have outputs, the Company considers other factors to
      determine whether the set of activities or assets is a business.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | Business combinations are accounted for using the
      acquisition method whereby identifiable assets acquired and liabilities
      assumed, including contingent liabilities, are recorded at their fair
      values at acquisition date. The acquisition date is the date at which the
      Company obtains control over the acquiree, which is generally the date
      that consideration is transferred and the Company acquires the assets and
      assumes the liabilities of the acquiree. The Company considers all
      relevant facts and circumstances in determining the acquisition
    date.                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | The consideration transferred in a business combination
      is measured at fair value, which is calculated as the sum of the fair
      values of the assets at the acquisition date transferred by the Company,
      the liabilities, including contingent consideration, incurred and payable
      by the Company to former owners of the acquiree and the equity interests
      issued by the Company. The measurement date for equity interests issued by the Company is
the acquisition date. Acquisition-related costs are expensed as incurred.                                                                                                                                                                                                                                                                                                                                                                               

|6 | Tahoe Resources Inc.
|- | --------------------

---

|NOTES TO THE
      CONSOLIDATED FINANCIAL STATEMENTS(expressed in 000s of USD, except
      as otherwise stated)
|-----------------------------------------------------------------------------------------------------------------

If the initial accounting for a
  business combination is incomplete by the end of the reporting period in which
  the combination occurs, the Company reports in its consolidated financial
  statements provisional amounts for the items for which the accounting is
  incomplete. During the measurement period, the Company will retrospectively
  adjust the provisional amounts recognized at the acquisition date to reflect new
  information obtained about facts and circumstances that existed as of the
  acquisition date and, if known, would have affected the measurement of the
  amounts recognized as of that date. During the measurement period, the Company
  will also recognize additional assets or liabilities if new information is
  obtained about facts and circumstances that existed as of the acquisition date
  and, if known, would have resulted in the recognition of those assets and
  liabilities as of that date. The measurement period ends as soon as the Company
  receives the information it was seeking about facts and circumstances that
  existed as of the acquisition date or learns that more information is not
obtainable and shall not exceed one year from the acquisition date.

Non-controlling interests (NCI) are
the equity in a subsidiary not attributable, directly or indirectly, to a
parent. NCI are recorded at their proportionate share of the fair value of
identifiable net assets acquired on initial recognition. Goodwill is recognized
as the sum of the total consideration (acquisition date fair value) transferred
by the Company, including contingent consideration and the NCI in the acquiree,
less the fair value of net assets acquired.

Goodwill

Goodwill typically arises on the
Companys acquisitions 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.

Goodwill is not amortized. The Company
performs an impairment test for goodwill annually and when events or changes in
circumstances indicate that the related carrying amount may not be recoverable.
If the carrying amount of a mine site or project, which is the cash-generating
unit, to which goodwill has been allocated exceeds the recoverable amount, an
impairment loss is recognized for the amount in excess. The impairment loss is
allocated first to reduce the carrying amount of goodwill allocated to the mine
site to nil and then to the other assets of the mine site based on the relative
carrying amounts of those assets. Impairment losses recognized for goodwill are
not reversed in subsequent periods.

Upon disposal or abandonment of a mine
site or project to which goodwill has been attributed, the carrying amount of
goodwill allocated to that mine site is derecognized and included in the
calculation of the gain or loss on disposal or abandonment.

| | f) | Cash and cash equivalents and restricted
    cash                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | Cash and cash equivalents comprise cash balances and
      deposits with maturities of 90 days or less. Restricted cash comprises
      cash balances which are restricted from being immediately exchanged or
      used to settle a transaction and can be classified as either a current or
      non-current asset depending on the terms of the restriction(s).                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | g) | Inventories                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | Finished goods, work-in-process, heap leach ore and
      stockpiled ore are measured at the lower of average cost or net realizable
      value. Net realizable value is calculated as the estimated price at the
      time of sale based on prevailing metal prices less estimated future costs
      to convert the inventories into saleable form and estimated costs to
      sell.                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | Ore extracted from the mine may be stockpiled and
      subsequently processed into finished goods (gold and by-products in doré
      or silver and by-products in concentrate form). The costs of finished
      goods represent the costs of work-in process inventories incurred prior to
      the sale of doré or concentrate. Costs are included in inventory based on
      current costs incurred to produce doré and concentrate, including
      applicable depreciation and depletion of mining interests, and removed
      at the cost per ounce of doré produced (gold) or cost per tonne of
concentrate produced (silver and by-products).

|Consolidated Financial Statements | 7
|--------------------------------- | -

---

|NOTES TO THE
      CONSOLIDATED FINANCIAL STATEMENTS(expressed in 000s of USD, except
      as otherwise stated)
|-----------------------------------------------------------------------------------------------------------------

The recovery of gold and by-products
  from certain oxide ore is achieved through a heap leaching process at the La
  Arena and Shahuindo mines. Costs are included in heap leach ore inventory based
  on current mining and leaching costs, including applicable depreciation and
  depletion of mining interests, and removed from heap leach ore inventory as
  ounces of gold are recovered at the average cost per recoverable ounce of gold
  on the leach pads. Estimates of recoverable gold on the leach pads are
  calculated based on the quantities of ore placed on the leach pads (measured
  tonnes added to the leach pads), the estimated grade of ore placed on the leach
pads, and an estimated recovery percentage.

Supplies are measured at average cost.
In the event that the net realizable value of the finished product is lower than
the expected cost of the finished product, the supplies used in the finished
product are written down to net realizable value. Replacement costs of supplies
are generally used as the best estimate of net realizable value.

| | h) | Mineral interests, plant and equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | Mineral interests, plant and equipment are carried at
      cost, less accumulated depreciation and accumulated impairment
    losses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | On initial acquisition, mineral interests, plant and
      equipment are valued at cost, being the purchase price and the directly
      attributable costs of acquisition or construction required to bring the
      asset to the location and condition necessary for the asset to be capable
      of operating in the manner intended by management. Land is stated at cost
      less any impairment in value and is not depreciated, and is included in
      non-depletable mineral interests. When provisions for closure and
      decommissioning are recognized, the corresponding cost is capitalized as
      part of the cost of the related assets, representing part of the cost of
      acquiring the future economic benefits of the operation. The capitalized
      cost of closure and decommissioning activities is recognized in mineral
      interests, plant and equipment and depreciated accordingly.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | Each asset or components estimated useful life has due
      regard to both its own physical life limitations and the present
      assessment of economic viability of the mineral interests benefitting from
      its use, and to possible future variations in those assessments. Estimates
      of remaining useful lives and residual values are reviewed on a periodic
      basis. Changes in estimates are accounted for prospectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | Borrowing costs directly relating to the financing of a
      qualifying project are added to the capitalized cost of those projects
      until such time as the assets are substantially ready for their intended
      use or sale which, in the case of mineral interests, is when commercial
      production is achieved.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | Expenditure on major maintenance or repairs includes the
      cost of the replacement of parts of assets and overhaul costs. Where an
      asset or part of an asset is replaced and it is probable that future
      economic benefits associated with the item will be available to the
      Company, the expenditure is capitalized and the carrying amount of the
      item replaced derecognized. Similarly, overhaul costs associated with
      major maintenance are capitalized and depreciated over their useful lives
      where it is probable that future economic benefits will be available and
      any remaining carrying amounts of the cost of previous overhauls are
      derecognized. All other costs are expensed as incurred.                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | Operational mineral interests and mine
      development                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | When it has been determined that a mineral interest can
      be economically developed, the costs incurred to develop such interest are
      capitalized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | Major development expenditures on producing mineral
      interests incurred to increase production or extend the life of the mine
      are capitalized while ongoing mining expenditures on producing mineral
      interests are charged against earnings as
incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

|8 | Tahoe Resources Inc.
|- | --------------------

---

|NOTES TO THE
      CONSOLIDATED FINANCIAL STATEMENTS(expressed in 000s of USD, except
      as otherwise stated)
|-----------------------------------------------------------------------------------------------------------------

Costs associated with commissioning
activities are capitalized until the date the Company is ready to commence
commercial production.

A mine is ready to commence commercial
production when it is capable of operating at levels intended by management. The
main criteria management uses to assess operating levels are:

| |  | Operational commissioning of major mine and
      plant components is complete;
| | - | -------------------------------------------------------------------------------
| |  | Operating results are being achieved
      consistently for a period of time;  
| |  | Indicators that these operating results will
      continue; and               
| |  | Other factors which can include:                                               

| | o | Significant milestones for the development of
      the mineral interests have been achieved;                             
| | - | --------------------------------------------------------------------------------------------------------------------------
| | o | A significant portion of plant/mill/pad
      capacity has been achieved;                                                 
| | o | A significant portion of available funding is
      directed towards operating activities rather than capital projects; or
| | o | A pre-determined, reasonable period of time has
      passed.                                                             

Management may use additional criteria
to determine mine-specific operating levels for commercial production.

Any revenues earned during this period
are recorded as a reduction in construction capital. These costs are amortized
using the units-of-production method (UOP) over the life of the mine,
commencing on the date of commercial production.

Costs related to the acquisition of
land and mineral rights are capitalized as incurred.

Assets under construction are
capitalized as construction-in-progress. The cost of construction-in-progress
comprises its purchase price and any costs directly attributable to bringing it
into working condition for its intended use. Construction-in-progress is not
depreciated. Once the asset is complete and available for use it is transferred
to mineral interests, plant and equipment and depreciation commences.

Deferred Stripping

In open pit mining operations, it is
necessary to remove mine waste materials or overburden to gain access to mineral
ore deposits. Stripping costs incurred during the development phase of the mine
(prior to commercial production) are capitalized and deferred as part of the
cost of building, developing and constructing the mine (included in mineral
interests) if the costs relate to anticipated future benefits and meet the
definition of an asset. Once commercial production begins, the capitalized
stripping costs are amortized using the units of production (UOP) method over
the estimated life of the component to which they pertain.

During the production phase, to the
extent the benefit from the stripping activity is realized in the form of
inventory produced, the stripping costs are considered variable production costs
and are included in the costs of the inventory during the period in which they
are incurred. If the benefit from the stripping activity during the production
phase provides access to deeper levels of material that will be mined in future
periods, the stripping costs, including directly attributable overhead costs,
are capitalized as part of mineral interests and amortized using the UOP method
over the estimated life of the component to which they pertain. Stripping costs
during the production phase are recognized as an asset if all the following
criteria are met:

| |  | It is possible that the future benefit, i.e. improved
      access to the ore body, associated with the stripping activity will flow
      to the entity;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Company can identify the component of the ore body
      for which access has been improved; and                                                     
| |  | The stripping activity costs associated with the
      component can be measured reliably.                                                               

Stripping activity occurs on
separately identifiable components of the open pit and the amount capitalized is
calculated by multiplying the tonnes removed for stripping purposes from each
identifiable component during the period by the mining cost per tonne. If the
stripping costs cannot be attributed to a separately identifiable component,
they are allocated to inventory and mineral interests based on the actual waste-to-ore ratio
(strip ratio) of material extracted compared to the estimated strip ratio.

|Consolidated Financial Statements | 9
|--------------------------------- | -

---

|NOTES TO THE
      CONSOLIDATED FINANCIAL STATEMENTS(expressed in 000s of USD, except
      as otherwise stated)
|-----------------------------------------------------------------------------------------------------------------

Depreciation of mineral interests,
plant and equipment

The carrying amounts of mineral
interests, plant and equipment are depreciated to their estimated residual value
over the estimated useful lives of the specific assets concerned, or the
estimated life of the associated mine, if shorter. Estimates of residual values
and useful lives are reviewed on a periodic basis and any change in estimate is
taken into account in the determination of remaining depreciation charges, and
adjusted if appropriate, at each reporting period. Changes to the estimated
residual values or useful lives are accounted for prospectively. Depreciation
commences on the date when the asset is available for use as intended by
management.

Units of production basis (UOP)

For mineral interests and certain
mining equipment, the economic benefits from the asset are consumed in a pattern
which is linked to the production level. Except as noted below, such assets are
depreciated on a UOP basis. In applying the UOP method, depreciation is normally
calculated using the quantity of material extracted from the mine in the period
as a percentage of the total quantity of material to be extracted in current and
future periods based on life-of-mine reserves and, if appropriate, a portion of
the resources where it is considered highly probable that those mineral
resources will be economically extracted.

Upon declaration of commercial
production, the carrying amounts of mineral interests are depleted using the 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.
Economic extraction is considered highly probable for those mineral resources
where sufficient drill data exists, geologic interpretation has been undertaken
and management has included the mineral resources in the life of mine plan. The
life of mine plan represents managements best estimate of the future economic
benefits expected to be obtained from the mineral properties and therefore the
production levels contained in these plans may include mineral resources in each
of the measured, indicated and/or inferred mineral resources category. The
percentage of measured, indicated and/or inferred mineral resources to be
included in the estimated recoverable ounces of a mining property and depleted
using the unit-of-production method is determined on a site by site basis using
the most current life of mine plan for each site and includes considerations of
the following factors:

| |  | The Companys history of converting mineral resources to
      mineral reserves at its operations has ranged from 40% to 80%; the Company
      recognizes past performance may not be indicative of future mineral
      resource to mineral reserve conversion rates;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The type of deposit(s) at each mine site; and                                                                                                                                                                                                                          
| |  | The geological characteristics of the ore body and its
      impact to the costs related to the access of the resources.                                                                                                                                               

At sites where there is a lower
confidence of mineral resources or where production calculated in the life of
mine models does not exceed the mineral reserves, no mineral resources are
included in the estimated recoverable ounces for those sites.

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 year ended December 31, 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) (year ended
December 31, 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).

|10 | Tahoe Resources Inc.
|-- | --------------------

---

|NOTES TO THE
      CONSOLIDATED FINANCIAL STATEMENTS(expressed in 000s of USD, except
      as otherwise stated)
|-----------------------------------------------------------------------------------------------------------------

Straight line basis

For all other assets depreciation is
recognized in earnings or loss on a straight line basis over the estimated
useful lives of each part of an item (component), since this most closely
reflects the expected pattern of consumption of economic benefits embodied in
the asset. The estimated useful lives for assets and components that are
depreciated on a straight line basis range from 2 to 20 years.

| | Depreciated Items                     |  | Useful Life       | 
| | ------------------------------------- |  | ----------------- | 
| | Computer equipment and
      software |  | 2 - 5
      years | 
| | Vehicles                              |  | 3 - 5 years       | 
| | Mining equipment                      |  | 2 - 14 years      | 
| | Ancillary facilities(1)               |  | 20 Years          | 
| | Mineral interests and plant           |  | UOP               | 

| | (1) | The lessor of 20 years or life of mine
  (LOM).
| | --- | -------------------------------------------------

Impairment and Disposal

At the end of each reporting period
the Company reviews whether there is any indication that the assets are
impaired. If any such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment, if any. The
recoverable amount is the higher of the assets fair value less costs to sell
and its value in use. Fair value is determined as the amount that would be
obtained from the sale of the asset in an arms length transaction between
knowledgeable and willing parties. In assessing value in use, the estimated
future cash flows are discounted to their present value using a discount rate
that reflects current market assessments of the time value of money and the
risks specific to the asset. If the recoverable amount of an asset is estimated
to be less than its carrying amount, the carrying amount of the asset is reduced
to its recoverable amount and the impairment loss is recognized in the earnings
or loss for the period. For an asset that does not generate largely independent
cash inflows, the recoverable amount is determined for the cash generating unit
(CGU) to which the asset belongs.

Where an impairment loss subsequently
reverses, the carrying amount of the asset (or CGU) is increased to the revised
estimate of its recoverable amount, but to an amount that does not exceed the
carrying amount that would have been determined had no impairment loss been
recognized for the asset (or CGU) in prior years. A reversal of an impairment
loss is recognized immediately in earnings or loss.

Where an item of mineral interests,
plant and equipment is disposed of, it is derecognized and the difference
between its carrying value and net sales proceeds is disclosed as earnings or
loss on disposal in the consolidated statements of operations and total
comprehensive income (loss). Any items of mineral interests, plant or equipment
that cease to have future economic benefits are derecognized with any gain or
loss included in the financial year in which the item is derecognized.

| | i) | Exploration and evaluation assets                                                                                                                                                                                                                                                                                                                                                                                              
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | The cost of exploration and evaluation assets acquired
      through a business combination or an asset acquisition are capitalized, as
      are expenditures incurred for the acquisition of land and surface rights.
      All other exploration and evaluation expenditures are expensed as
      incurred, including those incurred before the Company has obtained the
      legal rights to explore an area of interest.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | Capitalization of evaluation expenditures commences when
      the technical feasibility and commercial viability of a project has been
      reached and hence it is probable that future economic benefits will flow
      to the Company.                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | Capitalized exploration and evaluation costs are
      classified as non-depletable mineral interests within mineral interests,
      plant and equipment.                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | Corporate general and administrative costs related to
      exploration and evaluation assets are expensed as
  incurred.                                                                                                                                                                                                                                                                                                      

|Consolidated Financial Statements | 11
|--------------------------------- | --

---

|NOTES TO THE
      CONSOLIDATED FINANCIAL STATEMENTS(expressed in 000s of USD, except
      as otherwise stated)
|-----------------------------------------------------------------------------------------------------------------

| | j) | Leases
| | -- | ------

In addition to contracts which take
the legal form of a lease, other significant contracts are assessed to determine
whether, in substance, they are or contain a lease, if the contractual
arrangement contains the use of a specific asset and the right to use that
asset. Where the Company receives substantially all the risks and rewards of
ownership of the asset, these assets are capitalized at the lower of the fair
value of the lease asset or the estimated present value of the minimum lease
payments. The corresponding lease obligation is included within lease
obligations and accretion expense is recognized over the term of the lease.

The Company will engage in sale and
leaseback transactions as part of its financing strategy if and when it is
deemed appropriate. Where a sale and leaseback transaction results in a finance
lease, any excess of sales proceeds over the carrying amount is deferred and
amortized over the lease term. Where a sale and leaseback transaction results in
an operating lease, and it is clear that the transaction is established at fair
value, any profit or loss is recognized immediately. If the sales price is below
fair value, the shortfall is recognized in income immediately, except that, if
the loss is compensated for by future lease payments at below market prices, it
is deferred and amortized in proportion to the lease payments over the period
for which the asset is expected to be used. If the sale price is above fair
value, the excess over fair value is deferred and amortized over the period the
asset is expected to be used.

Operating leases are not capitalized
and payments are included in the consolidated statements of operations and total
comprehensive income (loss) on a straight-line basis over the term of the lease.

| | k) | Provision for site reclamation and closure
      costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | The Company recognizes a liability for site closure and
      reclamation costs in the period in which it is incurred for disturbance to
      date, if a reasonable estimate of costs can be made. The Company records
      the net present value of estimated future cash flows associated with site
      closure and reclamation as a liability when the liability is incurred and
      increases the carrying value of the related assets for that amount.
      Subsequently, these capitalized costs are amortized over the life of the
      related assets. At the end of each reporting period, the estimated net
      present value of reclamation and closure cost obligations is assessed to
      reflect the passage of time (accretion expense) and changes in the
      estimated future cash flows underlying any initial estimates.                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | l) | Financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | 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.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | The Company ceases to recognize financial assets when the
      contractual rights to the cash flows from the assets expire, or it
      transfers the rights to receive the contractual cash flows on the
      financial assets in a transaction in which substantially all the risks and
      rewards of ownership of the financial assets are transferred. Any interest
      in transferred financial assets that is created or retained by the Company
      is recognized as a separate asset.                                                                                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | Financial liabilities are recognized initially at fair
      value net of any directly attributable transaction costs. Subsequent to
      initial recognition, current debt is measured at amortized cost using the
      effective interest method and the currency swap are measured at
    FVTPL.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | 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 earnings. Transaction costs are expensed as
incurred.                                                                                                                                                                                                                                                                                                                           

|12 | Tahoe Resources Inc.
|-- | --------------------

---

|NOTES TO THE
      CONSOLIDATED FINANCIAL STATEMENTS(expressed in 000s of USD, except
      as otherwise stated)
|-----------------------------------------------------------------------------------------------------------------

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
(loss) 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 earnings. The Company has classified its
investments in certain public companies as AFS.

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 (loss) 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 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
(loss).

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.

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 earnings in the period,
including cumulative gains or losses previously recognized in other
comprehensive income (loss). Reversals of impairment in respect of equity
instruments classified as available for sale are not recognized in earnings but
included in other comprehensive income (loss).

|Consolidated Financial Statements | 13
|--------------------------------- | --

---

|NOTES TO THE
      CONSOLIDATED FINANCIAL STATEMENTS(expressed in 000s of USD, except
      as otherwise stated)
|-----------------------------------------------------------------------------------------------------------------

| | m) | Share capital                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | Common shares are classified as equity. Incremental costs
      directly attributable to the issue of common shares are recognized as a
      deduction from equity, net of any tax effects.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | The Company offers a dividend reinvestment plan for its
      common shareholders. Participation is optional and under the terms of the
      plan, cash dividends on common shares are used to purchase additional
      common shares. The common shares are issued from the Companys treasury at
      a 3% discount to the average market price. The Company maintains the right
      to reduce or eliminate the discount at any time.                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | n) | Revenue recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | Revenue is recognized when the significant risks and
      rewards of ownership have passed to the buyer; it is probable that
      economic benefits associated with the transaction will flow to the
      Company; the sale price can be measured reliably; the Company has no
      significant continuing involvement; and the costs incurred or to be
      incurred in respect of the transaction can be measured reliably. In
      circumstances where title is retained to protect the financial security
      interests of the Company, revenue is recognized when the significant risks
      and rewards of ownership have passed to the buyer.                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | Revenues and trade receivables on concentrate sales are
      subject to adjustment upon final settlement of metal prices, weights, and
      assays as of a date that is typically a few months after the shipment
      date. The Company records adjustments to concentrate revenues and trade
      receivables monthly based on quoted forward prices for the expected
      settlement period. Adjustments for weights and assays are recorded when
      results are determinable or on final settlement. A portion of trade
      receivables are therefore measured at FVTPL and changes in value are
      recorded in revenues. Treatment and refining charges are netted against
      revenues from metal concentrate sales.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | Revenues and trade receivables on doré sales are recorded
      at the time the refined metal is transferred to the customers
    account.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | Until a mine is operating at the level intended by
      management, revenues will be offset against mineral interests, plant and
      equipment costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | o) | Share-based payments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | Share-based compensation arrangements in which the
      Company receives goods or services as consideration for its own equity
      instruments are accounted for as equity-settled share-based payment
      transactions. If the fair value of the goods or services received cannot
      be estimated reliably, the share-based payment transaction is measured at
      the fair value of the equity instruments granted at the date the Company
      receives the goods or the services.                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | The fair value of share-based compensation on the grant
      date to key management personnel and employees is recognized as an
      expense, with a corresponding increase in equity, over the period that the
      optionee becomes unconditionally entitled to the options. The amount
      recognized as an expense is adjusted to reflect the actual number of share
      options for which the related service and vesting conditions are
    met.                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | The amount payable in respect of SARs, which are settled
      in cash, is recognized as an expense with a corresponding increase in
      liabilities over the period that the rights are exercisable. The liability
      is measured at each reporting date using the Black-Scholes option pricing
      model and is recorded at fair value.                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | p) | Income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | Income tax on the earnings or loss for the years
      presented comprises current and deferred tax. Income tax is recognized in
      earnings or loss in the statements of operations except to the extent that
      it relates to items recognized directly in equity, in which case it is
      recognized in equity.                                                                                                                                                                                                                                                                                                                                                                                                               

|14 | Tahoe Resources Inc.
|-- | --------------------

---

|NOTES TO THE
      CONSOLIDATED FINANCIAL STATEMENTS(expressed in 000s of USD, except
      as otherwise stated)
|-----------------------------------------------------------------------------------------------------------------

Current tax expense is the expected
tax payable on the taxable income for the period, using tax rates substantively
enacted at period end, adjusted for amendments to tax payable with regards to
previous years.

Deferred tax is provided using the
balance sheet liability method, providing for temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for taxation purposes. Deferred tax is not recognized for
temporary differences which arise on the initial recognition of assets or
liabilities in a transaction that is not a business combination and that affects
neither accounting, nor taxable earnings or loss. The amount of deferred tax
provided is based on the expected manner of realization or settlement of the
carrying amount of assets and liabilities, using tax rates enacted or
substantively enacted at the balance sheet reporting date.

A deferred tax asset is recognized
only to the extent that it is probable that future taxable earnings will be
available against which the asset can be utilized. Deferred tax assets are
reviewed at each reporting date and are reduced to the extent it is no longer
probable that the related tax benefit will be realized.

| | q) | Earnings (loss) per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | The Company presents basic and diluted earnings (loss)
      per share (EPS) data for its common shares. Basic EPS is calculated by
      dividing earnings (loss) attributable to common shareholders of the
      Company by the weighted average number of common shares outstanding during
      the year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | Diluted EPS is determined by adjusting the earnings
      (loss) attributable to common shareholders and the weighted average number
      of common shares outstanding for the effects of all dilutive potential
      common shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | r) | Other comprehensive income (loss)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | 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.                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | s) | Employee benefits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | The Company has defined contribution pension plans which
      cover certain of the Companys employees. Under the provisions of the
      plans, the Company contributes a fixed percentage of the employees
      salaries to the pension plans. The employees are able to direct the
      contributions into a variety of investment funds offered by the plans.
      Pension costs associated with the Companys required contributions under
      the plans 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. The Company has no further legal or constructive
      obligation once the contributions have been paid.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | t) | Investments in associates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | 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 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 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.                                                                               

|Consolidated Financial Statements | 15
|--------------------------------- | --

---

|NOTES TO THE
      CONSOLIDATED FINANCIAL STATEMENTS(expressed in 000s of USD, except
      as otherwise stated)
|-----------------------------------------------------------------------------------------------------------------

|4. | CHANGES IN ACCOUNTING POLICIES AND
  STANDARDS
|-- | ----------------------------------------------

| | a) | Application of new or amended accounting standards
      effective January 1, 2016
| | -- | ----------------------------------------------------------------------------------

| | i. | New or amended standards adopted in the Companys
      consolidated 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 consolidated 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 19  Employee Benefits;                                                 
| |  | 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 year
ended December 31, 2016, and have not been applied in preparing these
consolidated financial statements.

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

| | i. | New or amended standards effective January 1,
      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.                                         

IFRS 15 - Revenue from Contracts with
Customers (IFRS 15) and IFRS 16  Leases (IFRS 16) are expected to have an
impact on the Companys consolidated financial statements upon adoption.

IFRS 15 was issued by the IASB on May
28, 2014, and will replace IAS 18, Revenue, IAS 11, Construction Contracts, and
related interpretations on revenue. IFRS 15 sets out the requirements for
recognizing revenue that apply to all contracts with customers, except for
contracts that are within the scope of the Standards on leases, insurance
contracts and financial instruments. IFRS 15 uses a control based approach to
recognize revenue which is a change from the risk and reward approach under the
current standard. Companies can elect to use either a full or modified
retrospective approach when adopting this standard. IFRS 15 is effective for
annual reporting periods beginning on or after January 1, 2018. The Company is
currently evaluating the impact of IFRS 15 on its consolidated financial
statements

IFRS 16 was issued by the IASB on
January 13, 2016, and will replace IAS 17, Leases. The new Standard will bring
most leases on-balance sheet for lessees under a single model, eliminating the
distinction between operating and finance leases. Lessor accounting however,
remains largely unchanged and the distinction between operating and
finance leases is retained. IFRS 16 is effective for annual reporting periods
beginning on or after January 1, 2019. Earlier application is permitted if IFRS
15, Revenue from Contracts with Customers, has been applied. The Company is
currently evaluating the impact of IFRS 16 on its consolidated financial
statements.

|16 | Tahoe Resources Inc.
|-- | --------------------

---

|NOTES TO THE
      CONSOLIDATED FINANCIAL STATEMENTS(expressed in 000s of USD, except
      as otherwise stated)
|-----------------------------------------------------------------------------------------------------------------

|5. | CRITICAL JUDGMENTS AND ESTIMATES IN APPLYING
      ACCOUNTING POLICIES
|-- | ----------------------------------------------------------------------

The preparation of consolidated
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.

| | a) | Judgments
| | -- | ---------

| | i.   | Commercial Production                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |      | In order to declare commercial production, a mine must be
      able to operate at levels intended by management. Prior to commercial
      production costs incurred are capitalized as part of the cost of placing
      the asset into service and proceeds from the sale of concentrates and doré
      are offset against the costs capitalized. Subsequent to the declaration of
      commercial production depletion of the costs incurred begins. Management
      considers several criteria in determining when a mine is operating at
      levels intended, and is therefore in commercial production.                                     
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ii.  | Functional Currency                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |      | The functional currency for each of the Company and its
      subsidiaries is the currency of the primary economic environment in which
      the entity operates. The Company has determined that for each subsidiary
      the functional currency is the United States dollar. When determining the
      functional currency certain judgments may be involved to assess the
      primary economic environment in which the entity operates. If there is a
      change in events or conditions which determined the primary economic
      environment, the Company reevaluates the functional currency for each of
      the subsidiary impacted.
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | iii. | Economic recoverability and probability of future
      economic benefits of exploration, evaluation and development
    costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |      | The Company makes determinations whether development and
      related costs incurred which have been capitalized are economically
      recoverable. Management uses several criteria in its assessments of
      economic recoverability and probability of future economic benefits
      including geological and metallurgical information, economic assessments
      and existing permits for the life of mine plan. The estimates contained
      within these criteria could change over time which could affect the
      economic recoverability of capitalized costs.                                                                       

| | b) | Estimates
| | -- | ---------

| | i.  | Revenue recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     | As is customary in the industry, revenue on provisionally
      priced concentrate sales is recognized based on relevant forward market
      prices. At each reporting period, provisionally priced concentrate sales
      are marked to market based on the estimated forward price for the
      quotational period stipulated in the contract. The adjustment to
      provisionally priced metal sold is included in concentrate
  revenue.                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ii. | 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 articulates 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.

|Consolidated Financial Statements | 17
|--------------------------------- | --

---

|NOTES TO THE
      CONSOLIDATED FINANCIAL STATEMENTS(expressed in 000s of USD, except
      as otherwise stated)
|-----------------------------------------------------------------------------------------------------------------

Where commercial production has
  commenced but proven and probable reserves have yet to be established, the
  carrying amounts of the Companys depletable mineral interests are depleted
based on the mineable portion of measured and indicated resources.

| | iii. | Determination of Useful Lives                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |      | Plant and equipment other than mineral interests are
      depreciated using the straight-line method based on the specific assets
      useful life. Should the actual useful life of the plant or equipment vary
      from the initial estimation, future depreciation charges may change.
      Should the componentization of these like assets change, depreciation
      charges may vary materially in the future.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | iv.  | Impairment charges                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |      | At the end of each reporting period, the Company assesses
      whether any indication of impairment exists. Where an indicator of
      impairment exists, an impairment analysis is performed. The impairment
      analysis requires the use of estimates and assumptions including amongst
      others, long-term commodity prices, discount rates, length of mine life,
      future production levels, future operating costs, future capital
      expenditures and tax positions taken. The estimates and assumptions are
      subject to risk and uncertainty; hence, there is the possibility that
      changes in circumstances will alter these projections, which may impact
      the recoverable amount of the individual assets or CGUs. In such
      circumstances, some or all of the carrying value of the assets or CGUs may
      be further impaired or the impairment charge reduced with the impact
      recorded in the consolidated statements of operations and comprehensive
      income (loss).                                                                                                                 
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | v.   | Reclamation provision and site closure
  costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |      | The Companys accounting policy for the recognition of
      accrued site closure costs requires significant estimates and assumptions
      such as the requirements of the relevant environmental, legal and
      regulatory framework, the magnitude of possible disturbance and the
      timing, extent and costs of required closure and rehabilitation activity.
      Changes to these estimates and assumptions may result in future actual
      expenditures differing from the amounts currently provided for. The
      decommissioning liability is periodically reviewed and updated
      prospectively based on the available facts and circumstances.                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | vi.  | Income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |      | The Company is periodically required to estimate the tax
      basis of assets and liabilities. Where applicable tax laws and regulations
      are either unclear or subject to varying interpretations, it is possible
      that changes in these estimates could occur that materially affect the
      amounts of deferred income tax assets and liabilities recorded in the
      financial statements. Changes in deferred tax assets and liabilities
      generally have a direct impact on earnings in the period of changes. Each
      period, the Company evaluates the likelihood of whether some portion or
      all of each deferred tax asset will not be realized. This evaluation is
      based on historic and future expected levels of taxable income, the
      pattern and timing of reversals of taxable temporary timing differences
      that give rise to deferred tax liabilities, and tax planning initiatives.
      Levels of future taxable income are affected by, among other things, the
      market price for saleable metals, production costs, interest rates and
      foreign currency exchange rates.
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | vii. | Valuation of inventory                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |      | All inventory is valued at the lower of average cost or
      net realizable value. Management is required to make various estimates and
      assumptions to determine the value of stockpiled ore, concentrate
      inventories, ore stacked on leach pads and ore in process. The estimates
      and assumptions include surveyed quantities of stockpiled ore, in-process
      volumes, contained metal content, recoverable metal content, costs to
      recover saleable metals, payable metal values once processed and the corresponding metals prices.
Changes in these estimates can result in changes to the carrying amounts of
inventories and mine operating costs of future periods.                                                                                                                                                                                                                                                                                                                                                                                                                                            

|18 | Tahoe Resources Inc.
|-- | --------------------

---

|NOTES TO THE
      CONSOLIDATED FINANCIAL STATEMENTS(expressed in 000s of USD, except
      as otherwise stated)
|-----------------------------------------------------------------------------------------------------------------

| | viii. | Deferred stripping costs                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |       | Stripping costs incurred during the production phase of a
      mineral property that relate to reserves and resources that will be mined
      in a future period are capitalized. The Company makes estimates of the
      stripping activity over the life of the component of reserves and
      resources which will be made accessible. Changes in estimated strip ratios
      can result in a change to the future capitalization of stripping costs
      incurred.
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ix.   | Share-based compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |       | The Company makes certain estimates and assumptions when
      calculating the fair values of share-based compensation granted. The
      significant estimations and assumptions include expected volatility,
      expected life, expected dividend yield and expected risk-free rate of
      return. Changes in these assumptions may result in a material change to
      the expense recorded for the issuance of share-based
  compensation.                         
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | x.    | Business combinations                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |       | The information necessary to measure the fair values as
      at the acquisition date of assets acquired and liabilities assumed
      requires management to make certain judgments and estimates about future
      events, including but not limited to:                                                                                                                                                                                                                 

| |  | Estimates of mineral reserves, mineral
      resources and exploration potential acquired;
| | - | ------------------------------------------------------------------------------------------
| |  | Future operating costs and capital
      expenditures;                                    
| |  | Discount rates to determine fair value of
      assets acquired; and                      
| |  | Future metal prices and long-term foreign
      exchange rates.                           

Changes to the preliminary
measurements of assets and liabilities acquired may be retrospectively adjusted
when new information is obtained until the final measurements are determined
within one year of the acquisition date.

| | xi. | Contingencies                                                                                                                                                                                                                                                                 
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                               
| |     | Due to the size, complexity and nature of the Companys
      operations, various legal and tax matters arise in the ordinary course of
      business. The Company accrues for such items when a liability is both
      probable and the amount can be reasonably estimated.
| |     |                                                                                                                                                                                                                                                                               
| |     | There are no matters at December 31, 2016 that are
      expected to have a material effect on the consolidated financial
      statements of the Company.                                                                                                                    

|6. | BUSINESS COMBINATION
|-- | --------------------

| | a) | 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).

|Consolidated Financial Statements | 19
|--------------------------------- | --

---

|NOTES TO THE
      CONSOLIDATED FINANCIAL STATEMENTS(expressed in 000s of USD, except
      as otherwise stated)
|-----------------------------------------------------------------------------------------------------------------

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.

Total consideration paid was based on
the April 1, 2016 opening price of Tahoe Shares on the Toronto Stock Exchange
(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 were
      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)                       | $ | 0.01-9.65     | 
| | 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. The allocation of the
purchase price has been finalized. Management determined the fair values of
identifiable assets and liabilities, measured the associated deferred income tax
assets and liabilities, and determined the value of goodwill.

The final allocation of the purchase
price is as follows:

| | 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              |   | 615,939  |  
| | Goodwill(1)                                              |   | 54,617   |  
| |                                                          |   |          |  
| | Accounts payable, accrued
      liabilities and other(2) |   | (45,246  | )
| | Lease obligation                                         |   | (16,589  | )
| | Reclamation provision                                    |   | (3,721   | )
| | Convertible debentures                                   |   | (105,693 | )
| | Deferred tax liability                                   |   | (81,715  | )
| | Total net assets acquired                                | $ | 685,106  |  

| | (1) | Goodwill of $54,617 was recognized due to the deferred
      tax liability generated on 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 year ended
      December 31, 2016.                                                                                                                                                         
| | (3) | As a result of the finalization of the purchase price
      allocation, the fair value attributed to goodwill and the reclamation
      provision decreased by $75,291 and $1,880, respectively, while mineral
      interest and exploration potential and the deferred income tax liabilities
      increased by $102,895 and $29,484, respectively, since June 30, 2016.
      These adjustments did not have a material impact on the Companys earnings
      for the year.

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).

|20 | Tahoe Resources Inc.
|-- | --------------------

---

|NOTES TO THE
      CONSOLIDATED FINANCIAL STATEMENTS(expressed in 000s of USD, except
      as otherwise stated)
|-----------------------------------------------------------------------------------------------------------------

The revenues and loss of Lake Shore
Gold included in these consolidated financial statements are $137,120 and
$23,329, respectively for the period since acquisition. The loss includes 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 year
ended December 31, 2016 are $11,134. Included in these transaction costs are
455,019 common shares of the Company issued with a value of $5,332.

Had the acquisition occurred on
January 1, 2016, the total pro-forma consolidated revenues and earnings of the
Company for the year ended December 31, 2016 would have been $831,909 and
$92,346, respectively.

The acquisition supports the Companys
growth strategy by adding high-quality 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. The Company 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 on the TSX 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 year ended December 31, 2016, the Company recognized
      a non-cash loss of $32,304 reflecting the appreciation of Tahoes share
      price between the closing price on April 1, 2016 and completion of the
      redemption on May 16, 2016.

| | b) | Acquisition of 100% interest in Rio
  Alto
| | -- | ------------------------------------------

On April 1, 2015, the Company
completed the Plan of Arrangement (the Arrangement) with Rio Alto which was
accounted for as a business combination. Pursuant to the Arrangement and
effective upon closing, Rio Alto became a wholly-owned subsidiary of Tahoe, and
all of the issued and outstanding common shares of Rio Alto (each a Rio Alto
Share) were transferred to Tahoe in consideration for the issuance by Tahoe of
0.227 of a common share of Tahoe (each whole common share a Tahoe Share) and
the payment of CAD$0.001 in cash for each Rio Alto Share.

In connection with the closing of the
Arrangement, Tahoe issued an aggregate of 75,991,381 Tahoe Shares to the former
shareholders of Rio Alto. On closing of the Arrangement, Tahoe had 223,726,156
common shares issued and outstanding, with former Rio Alto shareholders holding
approximately 34% on an undiluted basis. Tahoe had authorized the issuance of up
to an additional 3,374,449 Tahoe Shares issuable upon the exercise of the stock
options (the Options) held by the former option holders of Rio Alto and an
additional 2,011,244 Tahoe Shares issuable upon the exercise of Rio Alto
warrants. Subsequent to the closing of the Arrangement and prior to the expiration date of April 12, 2015, all outstanding warrants
were exercised and 2,011,244 Tahoe Shares were issued for total proceeds of
CAD$21,210.

|Consolidated Financial Statements | 21
|--------------------------------- | --

---

|NOTES TO THE
      CONSOLIDATED FINANCIAL STATEMENTS(expressed in 000s of USD, except
      as otherwise stated)
|-----------------------------------------------------------------------------------------------------------------

Total consideration paid was based on
  the April 1, 2015 price of Tahoe Shares on the TSX of CAD$14.21 and a CAD to USD
foreign exchange rate of 0.7929 and was comprised of the following:

| |                     |  | Number of     |  |  | Number of Shares |  |   |            | 
| | ------------------- |  | ------------- |  |  | ---------------- |  | - | ---------- | 
| |                     |  | Shares Issued |  |  | Issuable         |  |   | Fair Value | 
| | Tahoe Shares        |  | 75,991,381    |  |  | -                |  | $ | 856,198    | 
| | Options(1)          |  | -             |  |  | 3,374,449        |  |   | 11,536     | 
| | Cash                |  | -             |  |  | -                |  |   | 272        | 
| | Total consideration |  | 75,991,381    |  |  | 3,374,449        |  | $ | 868,006    | 

| | (1) | The fair values of the Options were determined using the
      Black-Scholes option pricing model. The inputs and input ranges, where
      applicable, used in the measurement of the fair value (CAD) of the Options
      were as follows:
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Share price             | $ | 14.21           | 
| | ----------------------- | - | --------------- | 
| | Exercise price          | $ | 6.13  23.13    | 
| | Expected volatility     |   | 42.36%  54.99% | 
| | Expected life (years)   |   | 0.08  4.55     | 
| | Expected dividend yield |   | 1.69%           | 
| | Risk-free interest rate |   | 0.49%  0.57%   | 
| | Fair value (CAD)        | $ | 0.49  7.98     | 

This acquisition was accounted for as
a business combination with Tahoe as the acquirer. The allocation of the
purchase price was finalized in 2015. Management determined the fair values of
identifiable assets and liabilities assumed, measured the associated deferred
income tax assets and liabilities, and determined the value of goodwill.

The final allocation of the purchase
price was as follows:

| | Cash and cash equivalents                                               | $ | 61,713    |  
| | ----------------------------------------------------------------------- | - | --------- | -
| | Other current and non-current assets                                    |   | 75,774    |  
| | Mineral interests(2)                                                    |   | 1,011,269 |  
| | Goodwill(1)(2)                                                          |   | 57,468    |  
| |                                                                         |   |           |  
| | Current liabilities                                                     |   | (94,592   | )
| | Warrant liability(3)                                                    |   | (5,837    | )
| | Reclamation and closure cost obligations                                |   | (20,099   | )
| | Other non-current liabilities
      and deferred gain on sale leaseback |   | (19,573   | )
| | Deferred income tax liabilities(2)                                      |   | (198,117  | )
| |                                                                         | $ | 868,006   |  

| | (1) | Goodwill of $57,468 was recognized as a result of the
      deferred tax liability recognized on the excess of the fair value of the
      acquired assets over their corresponding tax bases. The total amount of
      goodwill that is expected to be deductible for tax purposes is
  $nil.                                                                                                                                                                                                                                                                                             
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | As a result of the finalization of the purchase price
      allocation, the fair value attributed to other current and non-current
      assets, mineral interests and reclamation and closure cost obligations
      decreased by $2,680, $8,737 and $1,746, respectively, while goodwill,
      deferred income tax liabilities and other non-current liabilities and
      deferred gain on sale leaseback increased by $12,356, $2,392 and $293,
      respectively, since June 30, 2015. These adjustments did not have a
      material impact on the Companys net loss for the year.
| | (3) | The fair value of the warrant liability was determined
      using the Black-Scholes option pricing model. The inputs and input ranges,
      where applicable, used in the measurement of the fair value (CAD) of the
      warrant liability were as follows:                                                                                                                                                                                                                                                                                                                             

| | Share price             | $ | 14.21  | 
| | ----------------------- | - | ------ | 
| | Exercise price          | $ | 10.55  | 
| | Expected volatility     |   | 46.60% | 
| | Expected life (years)   |   | 0.03   | 
| | Expected dividend yield |   | 1.69%  | 
| | Risk-free interest rate |   | 0.49%  | 
| | Fair value (CAD)        | $ | 3.66   | 

The principal mining properties
acquired were the 100% owned La Arena gold mine and the 100% owned Shahuindo
mine (a gold project at the time of acquisition).

|22 | Tahoe Resources Inc.
|-- | --------------------

---

|NOTES TO THE
      CONSOLIDATED FINANCIAL STATEMENTS(expressed in 000s of USD, except
      as otherwise stated)
|-----------------------------------------------------------------------------------------------------------------

The revenues and net loss of Rio Alto
since April 1, 2015, the acquisition date, included in the comparative 2015
consolidated financial statements were $195,805 and ($144,733), respectively.
Total transaction costs incurred relating to the acquisition and included in
general and administrative expenses for the year ended December 31, 2015 are
$7,239.

Had the acquisition occurred on
January 1, 2015, the total pro-forma consolidated revenues and net loss of the
Company for the year ended December 31, 2015 would have been $263,567 and
($157,544), respectively.

The acquisition supported the
Companys growth strategy by adding high-quality assets which have increased the
sustainable production level, contributed to cash flow and diversified the
Companys operations.

|7. | CASH AND CASH
EQUIVALENTS
|-- | -------------------------

| |                        |   | December 31, |  |   | December 31, | 
| | ---------------------- | - | ------------ |  | - | ------------ | 
| |                        |   | 2016         |  |   | 2015         | 
| | Cash                   | $ | 162,841      |  | $ | 108,140      | 
| | Cash
      equivalents |   | 527          |  |   | 527          | 
| |                        | $ | 163,368      |  | $ | 108,667      | 

|8. | TRADE AND OTHER
RECEIVABLES
|-- | ---------------------------

| |                      |   | December 31, |  |   | December 31, | 
| | -------------------- | - | ------------ |  | - | ------------ | 
| |                      |   | 2016         |  |   | 2015         | 
| | Trade receivables    | $ | 18,997       |  | $ | 17,239       | 
| | Sales tax receivable |   | 42,844       |  |   | 23,935       | 
| | Other                |   | 2,805        |  |   | 2,060        | 
| |                      | $ | 64,646       |  | $ | 43,234       | 

|9. | INVENTORIES
|-- | -----------

| |                 |   | December 31, |  |   | December 31, | 
| | --------------- | - | ------------ |  | - | ------------ | 
| |                 |   | 2016         |  |   | 2015         | 
| | Supplies        | $ | 56,612       |  | $ | 41,658       | 
| | Stockpile       |   | 16,940       |  |   | 2,230        | 
| | Work in process |   | 27,649       |  |   | 17,228       | 
| | Finished goods  |   | 25,417       |  |   | 8,964        | 
| |                 | $ | 126,618      |  | $ | 70,080       | 

The cost of inventories recognized as
an expense for the year ended December 31, 2016 was $457,465 (year ended
December 31, 2015: $320,310) and is included in total operating costs.

|Consolidated Financial Statements | 23
|--------------------------------- | --

---

|NOTES TO THE
      CONSOLIDATED FINANCIAL STATEMENTS(expressed in 000s of USD, except
      as otherwise stated)
|-----------------------------------------------------------------------------------------------------------------

|10. | MINERAL INTERESTS
|--- | -----------------

| |                                           |   | Mineral
      Interests |   |   |            |   |   |           |  
| | ----------------------------------------- | - | ----------------------- | - | - | ---------- | - | - | --------- | -
| |                                           |   |                         |   |   | Non-       |   |   | Plant &   |  
| |                                           |   | Depletable              |   |   | Depletable |   |   | Equipment |  
| | Cost                                      |   |                         |   |   |            |   |   |           |  
| | Balance at January 1, 2016(6)             | $ | 714,011                 |   | $ | 737,108    |   | $ | 595,377   |  
| | Acquired
      mineral interests(1)(2)    |   | 278,489                 |   |   | 337,450    |   |   | 174,747   |  
| | Additions                                 |   | 69,178                  |   |   | 7,128      |   |   | 134,802   |  
| | Disposals                                 |   | -                       |   |   | -          |   |   | (5,413    | )
| | Transfers(3)                              |   | 444,042                 |   |   | (444,042   | ) |   | -         |  
| | **Change in reclamation**
      provision |   | 18,603                  |   |   | -          |   |   | -         |  
| | Balance at December 31, 2016              | $ | 1,524,323               |   | $ | 637,644    |   | $ | 899,513   |  
| | Accumulated depreciation and depletion    |   |                         |   |   |            |   |   |           |  
| | Balance at January 1, 2016(6)             | $ | (169,160                | ) | $ | (121,000   | ) | $ | (81,824   | )
| | Additions                                 |   | (75,088                 | ) |   | -          |   |   | (61,933   | )
| | Disposals                                 |   | -                       |   |   | -          |   |   | 4,478     |  
| | Transfers(3)                              |   | (121,000                | ) |   | 121,000    |   |   | -         |  
| | Balance at December 31, 2016              | $ | (365,248                | ) | $ | -          |   | $ | (139,279  | )
| | Carrying amount at December 31, 2016      | $ | 1,159,075               |   | $ | 637,644    |   | $ | 760,234   |  

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

| | (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.                                                                                                                                                                                                             
| | (3) | Upon declaration of commercial production on May 1, 2016,
      the carrying value of mineral interests and the impairment associated with
      the Shahuindo mine included in non-depletable mineral interests was
      transferred to depletable mineral interests. All pre-operating revenues
      from production at Shahuindo have been credited against construction
      capital through April 30, 2016.
| | (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 Phase II
      Sulfide Project (the La Arena Sulfides), the Shahuindo project and other
      exploration potential.                                                                                                                                                                
| | (6) | 2015 closing carrying amounts and opening 2016 balances
      reflect the reclassification of the 2015 impairment from cost to
      accumulated depreciation.                                                                                                                                                                                                                                                     

|24 | Tahoe Resources Inc.
|-- | --------------------

---

|NOTES TO THE
      CONSOLIDATED FINANCIAL STATEMENTS(expressed in 000s of USD, except
      as otherwise stated)
|-----------------------------------------------------------------------------------------------------------------

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

| |                  |   | Mineral
      Interests |  |   |              |   |   |           |  |   |              | 
| | ---------------- | - | ----------------------- |  | - | ------------ | - | - | --------- |  | - | ------------ | 
| |                  |   |                         |  |   | Non-         |   |   | Plant &   |  |   | December 31, | 
| |                  |   | Depletable              |  |   | Depletable(2 | ) |   | Equipment |  |   | 2016         | 
| | Escobal          | $ | 495,833                 |  | $ | 27,264       |   | $ | 262,791   |  | $ | 785,888      | 
| | La Arena         |   | 36,246                  |  |   | 214,234      |   |   | 201,071   |  |   | 451,551      | 
| | Shahuindo        |   | 318,964                 |  |   | 53,000       |   |   | 110,721   |  |   | 482,685      | 
| | Timmins mines(1) |   | 308,032                 |  |   | 343,146      |   |   | 185,651   |  |   | 836,829      | 
| |                  | $ | 1,159,075               |  | $ | 637,644      |   | $ | 760,234   |  | $ | 2,556,953    | 

| | (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.                                                                                                 

As at December 31, 2016, the Company
has $4,206 (December 31, 2015: $nil) in capitalized stripping costs relating to
production phase stripping.

| | a) | Goodwill
| | -- | --------

Goodwill typically arises on the
Companys business combinations due to: i) the ability of the Company to capture
certain synergies through management of the acquired operation within the
Company; and ii) the requirement to record a deferred tax liability for the
difference between the assigned fair values and the tax bases of assets acquired
and liabilities assumed.

The carrying amount of goodwill has
been allocated to the following cash generating units (CGUs) and is included
in the respective operating segment assets:

| |                   |   |            |   |   | Timmins     |   |   |         | 
| | ----------------- | - | ---------- | - | - | ----------- | - | - | ------- | 
| |                   |   | La Arena   |   |   | Exploration |   |   |         | 
| |                   |   | Sulfides(1 | ) |   | Potential(2 | ) |   | Total   | 
| | January 1, 2015   | $ | -          |   | $ | -           |   | $ | -       | 
| | Additions         |   | 57,468     |   |   | -           |   |   | 57,468  | 
| | December 31, 2015 | $ | 57,468     |   | $ | -           |   | $ | 57,468  | 
| | Additions         |   | -          |   |   | 54,617      |   |   | 54,617  | 
| | December 31, 2016 | $ | 57,468     |   | $ | 54,617      |   | $ | 112,085 | 

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

| | b) | Impairment
| | -- | ----------

The Company assesses indicators of
impairment or reversal of impairment on a quarterly and annual (at October 1)
basis for all CGUs and tests those CGUs for which indicators exist. Goodwill is
tested at least annually or when there are indicators of impairment. The purpose
of the impairment testing is to determine if the recoverable amount (fair value
less costs of disposal (FVLCD)) of a CGU is greater than its carrying
value.

The Company identified six CGUs for
which indicators of impairment were assessed: Escobal, La Arena oxides, La Arena
Sulfides, Shahuindo, Timmins mines and the Timmins Exploration Potential.
Discounted cash flow models were prepared, where applicable, using long-term
prices for gold of $1,250/oz, silver of $17.50/oz and copper of $3.00/lb (2015:
$1,200/oz, silver price - $18.75/oz and copper price $3.00/lb), discount rates
between 6.5% and 8.75% (2015: 7.00%) depending on the development stage of the
operation or project and currently enacted tax rates. In-situ values were used
for the impairment testing of exploration potential. Based on the results, for
the year ended December 31, 2016, management concluded that there was no
impairment or reversal of prior impairment for any of the CGUs (2015: $99.0
million and $121.0 million pre-tax impairment on La Arena and Shahuindo,
respectively).

|Consolidated Financial Statements | 25
|--------------------------------- | --

---

|NOTES TO THE
      CONSOLIDATED FINANCIAL STATEMENTS(expressed in 000s of USD, except
      as otherwise stated)
|-----------------------------------------------------------------------------------------------------------------

|11. | ACCOUNTS PAYABLE AND ACCRUED
  LIABILITIES
|--- | ------------------------------------------

| |                                      |   | December 31, |  |   | December 31, | 
| | ------------------------------------ | - | ------------ |  | - | ------------ | 
| |                                      |   | 2016         |  |   | 2015         | 
| | Trade payables                       | $ | 70,315       |  | $ | 45,079       | 
| | Accrued trade and other payables     |   | 22,976       |  |   | 20,047       | 
| | Royalties                            |   | 15,044       |  |   | 16,802       | 
| | Accrued payroll and related benefits |   | 20,835       |  |   | 17,820       | 
| |                                      | $ | 129,170      |  | $ | 99,748       | 

|12. | DEBT
|--- | ----

| |                                      |   | 2016    |   |   | 2015    |  
| | ------------------------------------ | - | ------- | - | - | ------- | -
| | Beginning balance at
      January 1 | $ | 35,000  |   | $ | 49,804  |  
| | Borrowings/additions (b)             |   | 35,000  |   |   | 35,000  |  
| | Repayments (a)(d)                    |   | (35,000 | ) |   | (50,000 | )
| | Commitment fees and other            |   | -       |   |   | 196     |  
| | Ending balance at December 31        | $ | 35,000  |   | $ | 35,000  |  

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

| | a) | Loan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    | As part of the acquisition of Rio Alto on April 1, 2015,
      the Company acquired debt in the form of a $35 million 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. The LIBOR rate was reset on January 11, 2017.
      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
      $886 for the year ended December 31, 2016 (year ended December 31, 2015:
      $331). The term for the Revolving Facility is three years. Proceeds from
      the Facility may be used for general corporate
purposes.                                                                                                                               

|26 | Tahoe Resources Inc.
|-- | --------------------

---

|NOTES TO THE
      CONSOLIDATED FINANCIAL STATEMENTS(expressed in 000s of USD, except
      as otherwise stated)
|-----------------------------------------------------------------------------------------------------------------

As at December 31, 2016, the Company
had not drawn on the Revolving Facility. The Company is currently in compliance
with all covenants associated with the Revolving Facility.

| | d) | Loan facility
| | -- | -------------

During 2015, the Company had
outstanding a loan facility (the Loan Facility) in the amount of $50 million
which had a maturity date of June 3, 2015. Upon maturity on June 3, 2015, the
Company repaid the Loan Facility and accrued interest.

|13. | LEASE OBLIGATIONS
|--- | -----------------

| |                                      |   | 2016    |   |   | 2015   |  
| | ------------------------------------ | - | ------- | - | - | ------ | -
| | Beginning balance at
      January 1 | $ | 13,862  |   | $ | -      |  
| | Additions(1)                         |   | 24,531  |   |   | 20,016 |  
| | Payments(2)                          |   | (22,468 | ) |   | (5,729 | )
| | Accrued interest                     |   | 559     |   |   | 159    |  
| | Foreign exchange gain                |   | (538    | ) |   | (584   | )
| | Ending balance at December 31        | $ | 15,946  |   | $ | 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. 2015 additions include
      $19,340 related to a sale-leaseback transaction (the La Ramada
      sale-leaseback) and $676 in other finance leases.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | Payments include $10,420 for the retirement of the La
      Ramada sale-leaseback.                                                                                                                                                                                                                                                                 

| |                     |   | December 31, |  |   | December 31, | 
| | ------------------- | - | ------------ |  | - | ------------ | 
| |                     |   | 2016         |  |   | 2015         | 
| | Current portion     | $ | 8,696        |  | $ | 6,151        | 
| | Non-current portion |   | 7,250        |  |   | 7,711        | 
| |                     | $ | 15,946       |  | $ | 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 bore interest at 3.7% and was 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 for CAD$1,314.

|14. | RECLAMATION PROVISION
|--- | ---------------------

| |                                        |   | 2016   |  |   | 2015   | 
| | -------------------------------------- | - | ------ |  | - | ------ | 
| | Beginning balance at
      January 1   | $ | 39,524 |  | $ | 3,529  | 
| | Additions to reclamation provision(1)  |   | 3,722  |  |   | 28,975 | 
| | Accretion expense                      |   | 2,370  |  |   | 1,003  | 
| | Revisions in estimates and obligations |   | 18,603 |  |   | 6,017  | 
| | Ending balance at December 31          | $ | 64,219 |  | $ | 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.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Consolidated Financial Statements | 27
|--------------------------------- | --

---

|NOTES TO THE
      CONSOLIDATED FINANCIAL STATEMENTS(expressed in 000s of USD, except
      as otherwise stated)
|-----------------------------------------------------------------------------------------------------------------

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 December 31, 2016 to be $99,273 (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 $18,603 during the year ended December 31,
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.

| | a) | Escobal                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    | The present value of the future reclamation obligation
      assumes a discount rate of 6.12% (December 31, 2015: 6.60%), an inflation
      rate of 4.25% (December 31, 2015: 2.39%), an undiscounted amount to settle
      the obligation of $10,960 (December 31, 2015: $8,269), and the
      commencement of reclamation activities in approximately 17
years.                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | b) | La Arena                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    | The present value of the future reclamation obligation
      assumes a discount rate of 4.18% (December 31, 2015: 4.69%), an inflation
      rate of 3.22% (December 31, 2015: 2.72%), an undiscounted amount to settle
      the obligation of $45,885 (December 31, 2015: $43,198), and the
      commencement of post-closure reclamation activities in approximately 5
      years.                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    | At December 31, 2016, the Company had a letter of credit
      (LOC) outstanding in the amount of $12,336 as partial guarantee of the
      La Arena closure obligations as required by the Ministry of Energy and
      Mines (MEM). The LOC was valid for one year with a renewal date of
      January 8, 2017. On January 13, 2017 the Company posted a renewed LOC
      under the same terms and totaling $12,531.                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | c) | Shahuindo                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    | The present value of the future reclamation obligation
      assumes a discount rate of 4.51% (December 31, 2015: 5.08%), an inflation
      rate of 3.22% (December 31, 2015: 2.72%), an undiscounted amount to settle
      the obligation of $32,124 (December 31, 2015: $17,934), and the
      commencement of post-closure reclamation activities in approximately 9
      years.                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    | At December 31, 2016, the Company had a LOC outstanding
      in the amount of $2,448 as partial guarantee of the Shahuindo closure
      obligations as required by MEM. The LOC was valid for one year with a
      renewal date of January 8, 2017. On January 13, 2017 the Company posted a
      renewed LOC under the same terms and totaling $4,964.                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | d) | Timmins mines                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    | Fair value measurement of the future reclamation
      obligation on acquisition assumed a discount rate of 6.00%. The present
      value of the future reclamation obligation assumes a discount rate of
      4.85% (December 31, 2015: nil), an inflation rate of 1.29% (December 31,
      2015: nil), an undiscounted amount to settle the obligation of $10,304
      (December 31, 2015: $nil), and the commencement of post-closure
      reclamation activities in approximately 10 years.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    | At December 31, 2016, the Company had a bond outstanding
      in the amount of $5,670 as partial guarantee of the Timmins mines closure
      obligations as required by the Ministry of Northern Development and
      Mines.                                                                                                                                                                                                                                                                     

|28 | Tahoe Resources Inc.
|-- | --------------------

---

|NOTES TO THE
      CONSOLIDATED FINANCIAL STATEMENTS(expressed in 000s of USD, except
      as otherwise stated)
|-----------------------------------------------------------------------------------------------------------------

|15. | REVENUES
|--- | --------

| |        |   |         |  |   | Years Ended  | 
| | ------ | - | ------- |  | - | ------------ | 
| |        |   |         |  |   | December 31, | 
| |        |   | 2016    |  |   | 2015         | 
| | Silver | $ | 316,793 |  | $ | 285,971      | 
| | Gold   |   | 437,464 |  |   | 206,576      | 
| | Lead   |   | 9,738   |  |   | 10,407       | 
| | Zinc   |   | 20,508  |  |   | 16,767       | 
| |        | $ | 784,503 |  | $ | 519,721      | 

| | a) | Concentrate revenues
| | -- | --------------------

The Company has contracts with a
number of customers for its concentrate sales. For the year ended December 31,
2016, the Companys top four concentrate customers account for 99% concentrate
revenues (year ended December 31, 2015: top four customers accounted for 97% of
concentrate revenues).

The concentrate revenues by customer
for the years ended December 31, 2016 and 2015 are as follows:

| |                            |  |      |  |  | Years Ended  | 
| | -------------------------- |  | ---- |  |  | ------------ | 
| |                            |  |      |  |  | December 31, | 
| |                            |  | 2016 |  |  | 2015         | 
| | Customer 1                 |  | 34%  |  |  | 40%          | 
| | Customer 2                 |  | 24%  |  |  | 23%          | 
| | Customer 3                 |  | 23%  |  |  | 18%          | 
| | Customer 4                 |  | 18%  |  |  | 16%          | 
| | Other customers            |  | 1%   |  |  | 3%           | 
| | Total concentrate revenues |  | 100% |  |  | 100%         | 

| | b) | Doré revenues
| | -- | -------------

The Company has contracts with
customers for its doré sales. The Companys top two doré customers account for
92% of doré revenues for the year ended December 31, 2016 (year ended December
31, 2015: one customer accounted for 100% of doré revenues). For the year ended
December 31, 2016, doré sales comprised 98% of total gold sales (year ended
December 31, 2015: 95%). The doré revenues by customer for the years ended
December 31, 2016 and 2015 are as follows:

| |                     |  |      |  |  | Years Ended  | 
| | ------------------- |  | ---- |  |  | ------------ | 
| |                     |  |      |  |  | December 31, | 
| |                     |  | 2016 |  |  | 2015         | 
| | Customer 1          |  | 60%  |  |  | 100%         | 
| | Customer 2          |  | 32%  |  |  | -            | 
| | Other customers     |  | 8%   |  |  | -            | 
| | Total doré revenues |  | 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
|--- | ----------------

| |                                        |   |         |   |   | Years Ended  | 
| | -------------------------------------- | - | ------- | - | - | ------------ | 
| |                                        |   |         |   |   | December 31, | 
| |                                        |   | 2016    |   |   | 2015         | 
| | Raw materials and consumables          | $ | 163,304 |   | $ | 110,855      | 
| | Salaries and benefits                  |   | 85,349  |   |   | 50,453       | 
| | Contractors and outside
      services |   | 100,557 |   |   | 54,314       | 
| | Other expenses                         |   | 1,717   |   |   | 11,075       | 
| | Changes in inventory                   |   | (18,206 | ) |   | 14,964       | 
| |                                        | $ | 332,721 |   | $ | 241,661      | 

|Consolidated Financial Statements | 29
|--------------------------------- | --

---

|NOTES TO THE
      CONSOLIDATED FINANCIAL STATEMENTS(expressed in 000s of USD, except
      as otherwise stated)
|-----------------------------------------------------------------------------------------------------------------

|17. | GENERAL AND ADMINISTRATIVE
  EXPENSES
|--- | -------------------------------------

| |                                        |  |       |  |       |            |  |   | Years Ended  | 
| | -------------------------------------- |  | ----- |  | ----- | ---------- |  | - | ------------ | 
| |                                        |  |       |  |       |            |  |   | December 31, | 
| |                                        |  | Notes |  |       | 2016       |  |   | 2015         | 
| | Salaries and benefits                  |  |       |  | **$** | **12,934** |  | $ | 14,383       | 
| | Share-based payments                   |  | 18    |  |       | 7,224      |  |   | 6,017        | 
| | Consulting and professional
      fees |  |       |  |       | 8,340      |  |   | 3,299        | 
| | Transaction costs                      |  | 6     |  |       | 11,134     |  |   | 7,239        | 
| | Administrative and other               |  |       |  |       | 7,875      |  |   | 8,313        | 
| |                                        |  |       |  | **$** | **47,507** |  | $ | 39,251       | 

|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 December 31, 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 December 31, 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(1)                           |   | 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(2)                           |   | 9.29             |  |  | 2,972,876     |  
| | Exercised                            |   | 9.13             |  |  | (2,819,838    | )
| | Forfeited                            |   | 13.82            |  |  | (335,000      | )
| | Expired                              |   | 16.57            |  |  | (674,750      | )
| | Outstanding at December 31, 2016     | $ | 14.55            |  |  | 3,211,745     |  

| | (1) | Includes the replacement options granted on April 1, 2015
      as a result of the acquisition of Rio Alto.                  
| | --- | -----------------------------------------------------------------------------------------------------------------------------
| | (2) | Includes the replacement options granted on April 1, 2016
      as a result of the acquisition of Lake Shore Gold (note
  6).

|30 | Tahoe Resources Inc.
|-- | --------------------

---

|NOTES TO THE
      CONSOLIDATED FINANCIAL STATEMENTS(expressed in 000s of USD, except
      as otherwise stated)
|-----------------------------------------------------------------------------------------------------------------

The following table summarizes
information about Share Options outstanding and exercisable at December 31, 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     |  |  | 1.78         |  |  | 249,494     |  | $ | 7.81     |  |  | 1.78         | 
| | $ 12.20-12.57  |  | 991,000     |  | $ | 12.38    |  |  | 4.19         |  |  | -           |  | $ | -        |  |  | -            | 
| | $ 12.58-15.44  |  | 332,423     |  | $ | 12.92    |  |  | 1.80         |  |  | 260,423     |  | $ | 12.79    |  |  | 1.10         | 
| | $ 15.45-16.06  |  | 808,000     |  | $ | 15.68    |  |  | 3.32         |  |  | 237,000     |  | $ | 15.68    |  |  | 3.27         | 
| | $ 16.07-23.68  |  | 830,828     |  | $ | 18.69    |  |  | 1.40         |  |  | 742,828     |  | $ | 18.41    |  |  | 1.13         | 
| |                |  | 3,211,745   |  | $ | 14.55    |  |  | 2.82         |  |  | 1,489,745   |  | $ | 15.22    |  |  | 1.57         | 

During the year ended December 31,
2016, 2,819,838 Share Options were exercised and the cash proceeds received were
$19,790, (year ended December 31, 2015: 1,561,218 Share Options exercised for
cash proceeds of $11,081).

During the year ended December 31,
2016, the Company recorded $3,120 of compensation expense relating to Share
Options in general and administrative expenses (year ended December 31, 2015:
$2,331).

| | 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
December 31, 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                          |  | (184,000 | )
| | Cancelled/forfeited                    |  | (45,000  | )
| | Outstanding at December 31, 2016       |  | 463,000  |  

There were 342,000 DSAs granted during
the year ended December 31, 2016 with a weighted average fair market value of
CAD$13.43 (year ended December 31, 2015: 219,000 DSAs granted with a weighted
average fair market value of CAD$15.68) .

During the year ended December 31,
2016, 184,000 DSAs vested and common shares of the Company were issued to the
recipients under the provisions of the Share Plan. As a result $2,942 was
transferred to share capital from share based payments reserve (year ended
December 31, 2015: 140,667 DSAs vested and $2,938 was transferred to share
capital).

During the year ended December 31,
2016, the Company recorded $2,909 of compensation expense relating to DSAs in
general and administrative expenses (year ended December 31, 2015: $3,078).

|Consolidated Financial Statements | 31
|--------------------------------- | --

---

|NOTES TO THE
      CONSOLIDATED FINANCIAL STATEMENTS(expressed in 000s of USD, except
      as otherwise stated)
|-----------------------------------------------------------------------------------------------------------------

| | ii. | RSAs
| | --- | ----

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

The Company granted 60,000 RSAs during
the year ended December 31, 2016 for total compensation expense of $787 (year
ended December 31, 2015: 52,500 RSAs granted for total compensation expense of
$728) 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 December 31, 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 December 31, 2016     |  | 154,000        |  
| |                                      |  |                |  
| | Exercisable at December 31, 2015     |  | 2,000          |  
| | Exercisable at December 31, 2016     |  | 12,000         |  

December 31, 2016, vested SARs had a
weighted average intrinsic value of CAD$(4.08) per share (December 31, 2015:
CAD$(5.36) per share) and the Company has recognized other current and
non-current liabilities for SARs of $165 and $101, respectively (December 31,
2015: $32 and $9, respectively).

During the year ended December 31,
2016, the Company recorded $408 of compensation expense relating to SARs in
general and administrative expenses (year ended December 31, 2015: $(120)).

The following table summarizes
information about SARs outstanding and exercisable at December 31, 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      | 

| | 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.

|32 | Tahoe Resources Inc.
|-- | --------------------

---

|NOTES TO THE
      CONSOLIDATED FINANCIAL STATEMENTS(expressed in 000s of USD, except
      as otherwise stated)
|-----------------------------------------------------------------------------------------------------------------

| | i. | Share Options                                                                                                                                                                                                                                                                                                       
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                     
| |    | There were 2,972,876 Share Options granted during the
      year ended December 31, 2016 including 1,621,877 replacement options
      related to the Lake Shore Gold acquisition (year ended December 31, 2015:
      4,561,579 including 3,374,449 replacement options related to the Rio Alto
      acquisition).
| |    |                                                                                                                                                                                                                                                                                                                     
| |    | The weighted average inputs used and grant date fair
      values (CAD) of Share Options granted during the years ended December 31,
      2016 and 2015 are as follows:                                                                                                                                            

| |                          |   | Years Ended
      December 31, | 
| | ------------------------ | - | ------------------------------ | 
| |                          |   | 2016                           | 
| | Share price              | $ | 13.21                          | 
| | Exercise price           | $ | 9.51                           | 
| | Expected volatility(1)   |   | 51%                            | 
| | Expected life (years)    |   | 3.00                           | 
| | Expected dividend yield  |   | 2.42%                          | 
| | Risk-free interest rate  |   | 0.57%                          | 
| | Pre-vest forfeiture rate |   | 4.12%                          | 
| | Fair
      value         | $ | 5.76                           | 

| | (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 135,000 SARs granted during the year ended
      December 31, 2016 (year ended December 31, 2015: 30,000).                                                                                                                                
| |     |                                                                                                                                                                                                                                                      
| |     | The fair value of SARs (CAD) has been re-measured at
      December 31, 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 years ended December 31, 2016 and
      2015 are as follows:                                                                                      

| |                         |   | Years Ended
      December 31, | 
| | ----------------------- | - | ------------------------------ | 
| |                         |   | 2016                           | 
| | Share price             | $ | 12.64                          | 
| | Exercise price          | $ | 12.38                          | 
| | Expected volatility     |   | 52%                            | 
| | Expected life (years)   |   | 5.00                           | 
| | Risk-free interest rate |   | 0.61%                          | 
| | Fair
      value        | $ | 5.74                           | 

The weighted average inputs used and
re-measurement date fair values (CAD) of SARs as at December 31, 2016 and 2015
are as follows:

| |                         |   | December 31, |  |   | December 31, | 
| | ----------------------- | - | ------------ |  | - | ------------ | 
| |                         |   | 2016         |  |   | 2015         | 
| | Share price             | $ | 12.65        |  | $ | 11.97        | 
| | Exercise price          | $ | 14.05        |  | $ | 18.34        | 
| | Expected volatility     |   | 50%          |  |   | 51%          | 
| | Expected life (years)   |   | 3.80         |  |   | 3.41         | 
| | Risk-free interest rate |   | 1.02%        |  |   | 0.62%        | 
| | Fair
      value        | $ | 4.60         |  | $ | 3.09         | 

|Consolidated Financial Statements | 33
|--------------------------------- | --

---

|NOTES TO THE
      CONSOLIDATED 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.                                                                          
| |  | Common shareholders are entitled to elect to
      reinvest their dividend payments through the Companys dividend
      reinvestment program.

At December 31, 2016, there were
311,362,031 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
|--- | ------------------

| |                                                         |   |        |  |   | Years Ended  |  
| | ------------------------------------------------------- | - | ------ |  | - | ------------ | -
| |                                                         |   |        |  |   | December 31, |  
| |                                                         |   | 2016   |  |   | 2015         |  
| | Current income tax expense                              |   |        |  |   |              |  
| | Current period                                          | $ | 69,832 |  | $ | 47,486       |  
| | Prior period                                            |   | 822    |  |   | -            |  
| |                                                         |   | 70,654 |  |   | 47,486       |  
| | Deferred tax expense
      (benefit)                    |   |        |  |   |              |  
| | Origination and
      reversal of temporary differences |   | 20,202 |  |   | (63,807      | )
| | Income tax expense (benefit)                            | $ | 90,856 |  | $ | (16,321      | )

| | a) | Income tax reconciliation
| | -- | -------------------------

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

| |                                                                                |   |         |   |   | Years Ended  |  
| | ------------------------------------------------------------------------------ | - | ------- | - | - | ------------ | -
| |                                                                                |   |         |   |   | December 31, |  
| |                                                                                |   | 2016    |   |   | 2015         |  
| | Earnings (loss) before income
      taxes                                      | $ | 208,732 |   | $ | (88,232      | )
| | Statutory tax rate                                                             |   | 26.00%  |   |   | 26.00%       |  
| | Income tax expense (benefit)                                                   |   | 54,270  |   |   | (22,940      | )
| | Reconciling items:                                                             |   |         |   |   |              |  
| | Difference
      between statutory and foreign tax rates                       |   | 9,127   |   |   | (22,428      | )
| | Non-deductible share-based
      payments                                      |   | 2,741   |   |   | 1,509        |  
| | Impact of
      foreign exchange on deferred income tax assets and liabilities |   | (3,080  | ) |   | 10,699       |  
| | Non-deductible expenses                                                        |   | 22,363  |   |   | 2,457        |  
| | Change in
      unrecognized deferred tax assets                               |   | (2,758  | ) |   | 13,824       |  
| | Other                                                                          |   | 8,193   |   |   | 558          |  
| | Income tax expense (benefit)                                                   | $ | 90,856  |   | $ | (16,321      | )

|34 | Tahoe Resources Inc.
|-- | --------------------

---

|NOTES TO THE
      CONSOLIDATED FINANCIAL STATEMENTS(expressed in 000s of USD, except
      as otherwise stated)
|-----------------------------------------------------------------------------------------------------------------

| | b) | Deferred tax assets and
  liabilities
| | -- | -------------------------------------

At December 31, 2016 and 2015, the
Companys significant components of deferred income tax assets and deferred tax
liabilities were as follows:

| |                                                |   | December 31, |   |   | December 31, |  
| | ---------------------------------------------- | - | ------------ | - | - | ------------ | -
| |                                                |   | 2016         |   |   | 2015         |  
| | Deferred income tax assets                     |   |              |   |   |              |  
| | Unused non-capital
      losses                | $ | 39,704       |   | $ | 17,916       |  
| | Reclamation and
      closure cost obligations |   | 13,019       |   |   | 5,736        |  
| | Inventories and receivables                    |   | 476          |   |   | 2,376        |  
| |                                                | $ | 53,199       |   | $ | 26,028       |  
| | Deferred income tax liabilities                |   |              |   |   |              |  
| | Mining interests                               |   | (310,028     | ) |   | (157,096     | )
| | Other                                          |   | 22,648       |   |   | (1,197       | )
| |                                                |   | (287,380     | ) |   | (158,293     | )
| |                                                |   |              |   |   |              |  
| | Net deferred income tax liabilities            | $ | (234,181     | ) | $ | (132,265     | )

The Company believes that it is
probable that the results of future operations will generate sufficient revenue
to realize the deferred income tax assets.

The Companys deferred tax liability
of $236,175 at December 31, 2016 is primarily the result of the acquisition of
Lake Shore Gold during 2016 and the acquisition of Rio Alto during 2015
(December 31, 2015: $134,641 is primarily the result of the acquisition of Rio
Alto). At December 31, 2016 and 2015, $1,994 and $2,376 of deferred tax assets
relating to inventories and receivables are not netted against the deferred tax
liability.

| |                                                            |   | December 31, |  |   | December 31, | 
| | ---------------------------------------------------------- | - | ------------ |  | - | ------------ | 
| |                                                            |   | 2016         |  |   | 2015         | 
| | Net deferred income tax
      liabilities                  | $ | 234,181      |  | $ | 132,265      | 
| | Deferred tax assets related to inventories and receivables |   | 1,994        |  |   | 2,376        | 
| | Deferred income tax liabilities                            | $ | 236,175      |  | $ | 134,641      | 

| | c) | Tax losses and tax credits
| | -- | --------------------------

As at December 31, 2016, the Company
had $270,730 of tax losses (December 31, 2015: $215,598) for which $147,891
(December 31, 2015: $65,149) have been recognized as deferred tax assets. The
Company recognizes the benefit of tax losses only to the extent of anticipated
future taxable income in relevant jurisdictions. The gross amount of tax losses
carried forward will begin to expire in 2017.

Deductible temporary differences for
which no deferred tax assets have been recognized at December 31, 2016 and 2015
are as follows:

| |                                                |   | December 31, |  |   | December 31, | 
| | ---------------------------------------------- | - | ------------ |  | - | ------------ | 
| |                                                |   | 2016         |  |   | 2015         | 
| | Tax losses and tax credits                     | $ | 140,695      |  | $ | 150,449      | 
| |                                                |   |              |  |   |              | 
| | Deductible temporary
      differences         |   |              |  |   |              | 
| | Cumulative
      eligible capital              |   | 611          |  |   | 657          | 
| | Financing costs                                |   | 1,937        |  |   | 3,461        | 
| | Unrealized capital
      losses                |   | 325          |  |   | 4,315        | 
| | Mining interests                               |   | 64           |  |   | 229          | 
| | Reclamation and closure cost
      obligations |   | 26,345       |  |   | 17,908       | 
| | Deductible temporary difference                | $ | 169,977      |  | $ | 177,019      | 

|Consolidated Financial Statements | 35
|--------------------------------- | --

---

|NOTES TO THE
      CONSOLIDATED FINANCIAL STATEMENTS(expressed in 000s of USD, except
      as otherwise stated)
|-----------------------------------------------------------------------------------------------------------------

|20. | EARNINGS (LOSS) PER
SHARE
|--- | -------------------------

| |               |   | Year Ended        |  |  | Year Ended        | 
| | ------------- | - | ----------------- |  |  | ----------------- | 
| |               |   | December 31, 2016 |  |  | December 31, 2015 | 
| |               |   |                   |  |  | Weighted          | 
| |               |   |                   |  |  | average           | 
| |               |   |                   |  |  | shares            | 
| |               |   | Earnings          |  |  | outstanding       | 
| | Basic EPS(1)  | $ | 117,876           |  |  | 289,726,501       | 
| | Dilutive      |   |                   |  |  |                   | 
| | securities:   |   |                   |  |  |                   | 
| | Share options |   | -                 |  |  | 261,545           | 
| | Diluted EPS   | $ | 117,876           |  |  | 289,988,046       | 

| | (1) | The weighted average shares outstanding used in the basic
      earnings per share calculation includes the dilutive impact of 463,000
      DSAs (year ended December 31, 2015: 350,000 DSAs).
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

At December 31, 2016, 3,211,745 Shares
Options and 463,000 DSAs were outstanding of which 1,638,828 and nil,
respectively for the year ended December 31, 2016 were anti-dilutive (year ended
December 31, 2015: 4,068,457 Share Options and 350,000 DSAs outstanding, of
which 4,068,457 and nil, respectively were anti-dilutive) because the underlying
exercise prices exceeded the average market price for the year ended December
31, 2016 of CAD$15.46 (year ended December 31, 2015: CAD$14.01) .

During the year ended December 31,
2016, the Company declared and paid to its shareholders dividends of $0.02 per
common share per month, for total dividends of $69,402 (year ended December 31,
2015: $49,717), including $2,358 which were paid as share-based dividends.

Subsequent to December 31, 2016, the
Company declared and paid dividends of $0.02 per common share for each of the
months of January and February 2017 for total dividends paid of $12,435,
including $2,538 of share-based dividends. On March 9, 2017, the Company
declared and made payable dividends of $0.02 per common share for the month of
March 2017.

As a result of shareholder enrolment in
the Dividend Reinvestment Plan during the year ended December 31, 2016
(effective October 2016), $2,358 was reinvested for a total issuance of 256,747
common shares of the Company. For the subsequent months of January and February
2017, $2,538 was reinvested for a total issuance of 290,846 common share of the
Company.

|21. | SUPPLEMENTAL CASH FLOW
  INFORMATION
|--- | ------------------------------------

| |                                                                                   |   |         |   |   | Years Ended  |  
| | --------------------------------------------------------------------------------- | - | ------- | - | - | ------------ | -
| |                                                                                   |   |         |   |   | December 31, |  
| |                                                                                   |   | 2016    |   |   | 2015         |  
| | Trade and other receivables                                                       | $ | (16,482 | ) | $ | (17,989      | )
| | Inventories                                                                       |   | (38,024 | ) |   | 7,674        |  
| | Other current assets                                                              |   | 1,474   |   |   | 2,794        |  
| | Other non-current assets                                                          |   | 2,619   |   |   | (14,548      | )
| | Accounts payable and accrued liabilities, and other
      non-current liabilities |   | (17,143 | ) |   | 9,768        |  
| | Changes in working capital                                                        | $ | (67,556 | ) | $ | (12,301      | )

|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.

|36 | Tahoe Resources Inc.
|-- | --------------------

---

|NOTES TO THE
      CONSOLIDATED FINANCIAL STATEMENTS(expressed in 000s of USD, except
      as otherwise stated)
|-----------------------------------------------------------------------------------------------------------------

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 year ended December 31, 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.

Significant information relating to the
Companys operating segments as at and for the year ended December 31, 2016 is
summarized as follows:

| |                                                 |   |         |   |   | **December
      31, 2016**(1)(2) |  |   |           | 
| | ----------------------------------------------- | - | ------- | - | - | --------------------------------- |  | - | --------- | 
| |                                                 |   |         |   |   |                                   |  |   |           | 
| |                                                 |   | Escobal |   |   | La Arena                          |  |   | Shahuindo | 
| | Mineral interests and
      plant and equipment | $ | 785,888 |   | $ | 451,551                           |  | $ | 482,685   | 
| | Goodwill                                        |   | -       |   |   | 57,468                            |  |   | -         | 
| | Total
      assets(4)                           |   | 963,824 |   |   | 611,344                           |  |   | 547,153   | 
| | Total liabilities(4)                            | $ | (27,225 | ) | $ | 71,490                            |  | $ | 319,432   | 

| |                            |   |         |  |   | **Year Ended
      December 31, 2016**(1)(2) |  |   |           | 
| | -------------------------- | - | ------- |  | - | -------------------------------------------- |  | - | --------- | 
| |                            |   |         |  |   |                                              |  |   |           | 
| |                            |   | Escobal |  |   | La Arena                                     |  |   | Shahuindo | 
| | Revenues                   | $ | 355,812 |  | $ | 244,397                                      |  | $ | 47,174    | 
| | Production costs           |   | 128,552 |  |   | 115,229                                      |  |   | 25,118    | 
| | Royalties                  |   | 18,741  |  |   | -                                            |  |   | -         | 
| | Depreciation and depletion |   | 53,204  |  |   | 27,779                                       |  |   | 10,016    | 
| | Mine operating earnings    |   | 155,315 |  |   | 101,389                                      |  |   | 12,040    | 
| | Capital expenditures(3)    | $ | 30,077  |  | $ | 35,366                                       |  | $ | 63,893    | 

| | (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 $13,676.              
| | (4) | Balances presented are before intercompany transaction
      eliminations not included in segmented
disclosure.                                                                                            

|Consolidated Financial Statements | 37
|--------------------------------- | --

---

|NOTES TO THE
      CONSOLIDATED 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 year ended December
31, 2015 is summarized as follows:

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

| |                            |   |         |  |   | Year Ended
      December 31, 2015(1)(2)(3) |  |   |           | 
| | -------------------------- | - | ------- |  | - | ------------------------------------------- |  | - | --------- | 
| |                            |   |         |  |   |                                             |  |   |           | 
| |                            |   | Escobal |  |   | La Arena                                    |  |   | Shahuindo | 
| | Revenues                   | $ | 323,916 |  | $ | 195,805                                     |  | $ | -         | 
| | Production costs           |   | 130,110 |  |   | 111,551                                     |  |   | -         | 
| | Royalties                  |   | 13,240  |  |   | -                                           |  |   | -         | 
| | Depreciation and depletion |   | 47,594  |  |   | 31,055                                      |  |   | -         | 
| | Mine operating earnings    |   | 132,972 |  |   | 53,199                                      |  |   | -         | 
| | Capital expenditures       | $ | 34,728  |  | $ | 32,997                                      |  | $ | 72,037    | 

| | (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, other financial assets, accounts payable and accrued liabilities,
debt and lease obligations, and are categorized as follows:

| |  | Cash and cash equivalents, restricted cash,
      trade and other receivables, and other financial assets are classified as
      loans and receivables and are measured at amortized cost;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Trade and other receivables, which are subject
      to provisional pricing adjustments, investments 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.

|38 | Tahoe Resources Inc.
|-- | --------------------

---

|NOTES TO THE
      CONSOLIDATED FINANCIAL STATEMENTS(expressed in 000s of USD, except
      as otherwise stated)
|-----------------------------------------------------------------------------------------------------------------

At December 31, 2016 and 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:

| |                                        |   | December 31,
      2016 |  |   | December 31, 2015 | 
| | -------------------------------------- | - | ----------------------- |  | - | ----------------- | 
| |                                        |   | Level 1                 |  |   | Level 2           | 
| | Investments(1)                         | $ | 39                      |  | $ | -                 | 
| | Provisionally priced trade receivables |   | -                       |  |   | 18,997            | 
| | Currency swap(2)                       |   | -                       |  |   | -                 | 
| |                                        | $ | 39                      |  | $ | 18,997            | 

| | (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.

The carrying value of cash and cash
equivalents, restricted cash, accounts payable and accrued liabilities, debt and
lease obligations approximate their fair value given the short term to maturity.

There were no transfers between Level 1
and Level 2 during the year ended December 31, 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, sales tax receivable and cash and cash
      equivalents.                                                                                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | The Company manages the credit risk associated with trade
      and other receivables by selling to organizations with strong credit
      ratings and/or by requiring substantial provisional pricing at the date of
      shipping its products. The history of defaults by these organizations to
      other entities has been negligible and the Company considers its risk in
      trade receivables to be negligible as well.                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | Receivables other than trade receivables are primarily
      sales tax receivables from the governments of Guatemala, Peru and Canada.
      The Company has a history of consistent collection of the sale tax
      receivable and therefore considers its risk to be negligible.                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | The Company manages the credit risk associated with cash
      and cash equivalents by investing these funds with highly rated financial
      institutions, and as such, the Company deems the credit risk on cash and
      cash equivalents to be low.                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | b) | Liquidity Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | Liquidity risk is the risk that the Company will
      encounter difficulty in meeting the obligations associated with its
      financial liabilities that are settled by delivering cash or another
      financial asset. The Companys approach to managing liquidity is to
      ensure, to the extent possible, that it will always have sufficient
      liquidity to meet its liabilities when due, under both normal and stressed
      conditions, without incurring unacceptable losses or risking damage to the
      Companys reputation. To further mitigate this risk, the Company has the
      Revolving Facility in place in the amount of $150 million (note
    12c).

|Consolidated Financial Statements | 39
|--------------------------------- | --

---

|NOTES TO THE
      CONSOLIDATED FINANCIAL STATEMENTS(expressed in 000s of USD, except
      as otherwise stated)
|-----------------------------------------------------------------------------------------------------------------

The Companys significant undiscounted
commitments at December 31, 2016 are as follows:

| |                                                |   |         |  |   |           |  |   |          |  |   | December 31, |  |   | December 31, | 
| | ---------------------------------------------- | - | ------- |  | - | --------- |  | - | -------- |  | - | ------------ |  | - | ------------ | 
| |                                                |   |         |  |   |           |  |   |          |  |   | 2016         |  |   | 2015         | 
| |                                                |   | 1 year  |  |   | 2-5 years |  |   | 5+ years |  |   | Total        |  |   | Total        | 
| | Accounts payable and accrued
      liabilities | $ | 129,170 |  | $ | -         |  | $ | -        |  | $ | 129,170      |  | $ | 99,748       | 
| | Debt                                           |   | -       |  |   | 35,000    |  |   | -        |  |   | 35,000       |  |   | 35,000       | 
| | Income tax payable                             |   | 10,733  |  |   | -         |  |   | -        |  |   | 10,733       |  |   | 9,981        | 
| | Lease and contractual agreements               |   | 8,696   |  |   | 7,250     |  |   | -        |  |   | 15,946       |  |   | 9,477        | 
| | Commitments(1)                                 |   | 116,684 |  |   | 6,797     |  |   | -        |  |   | 123,481      |  |   | 85,230       | 
| | Other non-current liabilities                  |   | -       |  |   | 24,917    |  |   | -        |  |   | 24,917       |  |   | 5,674        | 
| | Reclamation provision                          |   | -       |  |   | 1,039     |  |   | 98,234   |  |   | 99,273       |  |   | 69,401       | 
| |                                                | $ | 265,283 |  | $ | 75,003    |  | $ | 98,234   |  | $ | 438,520      |  | $ | 314,511      | 

| | (1) | Commitments to purchase equipment, services, materials
      and supplies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | During the year ended December 31, 2016, the Company
      generated cash flows from operating activities, one of the Companys main
      sources of liquidity, of $249,454 (year ended December 31, 2015:
      $166,744). The Company also realized increased liquidity from the
      acquisition of Lake Shore Gold which added $70,187 in cash and cash
      equivalents. At December 31, 2016, the Companys held cash and cash
      equivalents of $163,368 and had working capital of $209,006 (December 31,
      2015: $108,667 and $77,321 in cash and cash equivalents and working
      capital, respectively). The Company defines working capital as current
      assets less current liabilities.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | The Company determined that the working capital, combined
      with future cash flows from operations and the available Revolving
      Facility are sufficient to support the Companys commitments and deems
      liquidity risk to be minimal.                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

| | c) | Market Risk
| | -- | -----------

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

| | i. | Foreign Exchange Risk                                                                                                                                                                                                                                                      
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                            
| |    | The Company is exposed to foreign exchange or currency
      risk on balances that are denominated in a currency other than the USD.
      These include cash and cash equivalents, sales tax receivable, accounts
      payable and accrued liabilities and taxes payable.
| |    |                                                                                                                                                                                                                                                                            
| |    | To minimize currency risk, substantially all of the
      Companys cash is denominated in USD and is kept in highly liquid
      instruments such as commercial paper and time deposits.                                                                                  
| |    |                                                                                                                                                                                                                                                                            
| |    | Cash and cash equivalents held in foreign currencies,
      denominated in USD, are as follows:                                                                                                                                                                            

| |                    |   | December 31, |  |   | December 31, | 
| | ------------------ | - | ------------ |  | - | ------------ | 
| |                    |   | 2016         |  |   | 2015         | 
| | Guatemalan quetzal | $ | 564          |  | $ | 777          | 
| | Peruvian sol       |   | 3,579        |  |   | 2,185        | 
| | Canadian dollar    |   | 20,386       |  |   | 2,650        | 
| | Other              |   | 82           |  |   | 87           | 
| |                    | $ | 24,611       |  | $ | 5,699        | 

Exchange rate fluctuations may also
affect the costs that the Company incurs in its operations. While most of the
Companys goods and services are contracted in USD, there is a portion
contracted in other currencies (CAD, Guatemalan quetzals and Peruvian soles).
The appreciation of these currencies against the USD can increase the production
costs the Company incurs while the depreciation of these currencies against the
USD can decrease the production costs the Company incurs.

|40 | Tahoe Resources Inc.
|-- | --------------------

---

|NOTES TO THE
      CONSOLIDATED FINANCIAL STATEMENTS(expressed in 000s of USD, except
      as otherwise stated)
|-----------------------------------------------------------------------------------------------------------------

In addition, the Company is exposed to
currency risk through non-monetary assets and liabilities of subsidiaries whose
taxable profit or tax loss are denominated in foreign currencies. Changes in
exchange rates give rise to temporary differences resulting in a deferred tax
liability or asset with the resulting deferred tax charged or credited to income
tax expense. At December 31, 2016, the Company had $236,175 of deferred income
tax liabilities, which arose primarily from the acquisitions of Rio Alto in 2015
and Lake Shore Gold in 2016. Based on the Companys foreign exchange exposure on
deferred tax liabilities at December 31, 2016, a 10% appreciation or
depreciation in foreign exchange rates against the USD would have resulted in an
approximate $17,101 increase or decrease in the Companys earnings.

The Company recognized a foreign
exchange loss of $435 year ended December 31, 2016 (year ended December 31,
2015: $4,530). Based on the Companys net exposure at December 31, 2016, a 10%
appreciation or depreciation in foreign exchange rates against the USD would
have resulted in an approximate $3,781 increase or decrease in the Companys
earnings.

At December 31, 2016, the Company has
determined the exposure to currency risk to be at an acceptable level.

| | ii.  | Interest Rate Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |      | Interest rate risk is the risk that the Companys future
      cash flows and fair values will fluctuate as a result of changes in market
      interest rates. At December 31, 2016, the Companys interest- bearing
      financial instruments are related to cash and cash equivalents, the
      Facility, the Revolving Facility and finance leases. The weighted average
      interest rate paid by the Company during the year ended December 31, 2016
      related to debt facilities was 2.95% (year ended December 31, 2015:
      6.29%). No amounts were drawn on the Revolving Facility and therefore only
      standby fees were applicable for the year ended December 31, 2016 (note
      12c).
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |      | At December 31, 2016, the Company has determined the
      interest rate risk to be low and that a 10% increase or decrease in market
      interest rates would result in a nominal increase or decrease to the
      Companys earnings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | iii. | Price Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |      | Price risk is the risk that the fair value of the
      Companys financial instruments will fluctuate due to changes in market
      prices.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |      | The Company has determined that price risk due to
      fluctuations in metals prices is at an acceptable level and has not
      entered into any hedging contracts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |      | The costs associated with production, development,
      construction and exploration activities of the Company are also subject to
      price risk as it relates to certain consumables including diesel fuel and
      power. The Company deems its exposure to price risk related to fuel prices
      to be at an acceptable level has not entered into any hedging
      contracts.                                                                                                                                                                                                                                                                                                                           
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |      | At December 31, 2016, the Company has determined exposure
      to price risk to be at an acceptable level.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

|25. | CAPITAL MANAGEMENT
|--- | ------------------

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

|Consolidated Financial Statements | 41
|--------------------------------- | --

---

|NOTES TO THE
      CONSOLIDATED FINANCIAL STATEMENTS(expressed in 000s of USD, except
      as otherwise stated)
|-----------------------------------------------------------------------------------------------------------------

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.

| |                           |  |       |  |       | December 31,  |   |   | December 31, |  
| | ------------------------- |  | ----- |  | ----- | ------------- | - | - | ------------ | -
| |                           |  | Notes |  |       | 2016          |   |   | 2015         |  
| | Shareholders equity      |  |       |  | **$** | **2,572,154** |   | $ | 1,664,031    |  
| | Debt                      |  | 12    |  |       | 35,000        |   |   | 35,000       |  
| | Lease obligations         |  | 13    |  |       | 15,946        |   |   | 13,862       |  
| |                           |  |       |  |       | 2,623,100     |   |   | 1,712,893    |  
| | Cash and cash equivalents |  | 7     |  |       | (163,368      | ) |   | (108,667     | )
| | Restricted cash           |  |       |  |       | (4,672        | ) |   | (2,500       | )
| |                           |  |       |  | **$** | **2,455,060** |   | $ | 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.
|    |                                                                                                                                                                                                                                                                                                                                                                                                    
|27. | RELATED PARTIES                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                    
|    | a)                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                    
|    | b)                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                    

| |                                       |   | Years Ended  | 
| | ------------------------------------- | - | ------------ | 
| |                                       |   | December 31, | 
| |                                       |   | 2016         | 
| | Short-term employee
      benefits(1) | $ | 8,870        | 
| | Share-based payments                  |   | 5,948        | 
| |                                       | $ | 14,818       | 

| | (1) | Short-term employee benefits include salaries, bonuses
      and other annual employee benefits paid during the
year.
| | --- | ---------------------------------------------------------------------------------------------------------------------

|42 | Tahoe Resources Inc.
|-- | --------------------

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