---



|CONSOLIDATED FINANCIAL STATEMENTS             
|----------------------------------------------
|                                              
|                                              
|For the years ended December 31, 2014 and 2013

---



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---

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 balance sheets as at December 31, 2014 and December
31, 2013, and consolidated statements of operations and total comprehensive
income (loss), changes in equity, and 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, 2014 and December 31, 2013, 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, 2014, 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 11, 2015 expressed an unqualified opinion on the
Companys internal control over financial reporting.

|/s/Deloitte LLP      
|---------------------
|                     
|Chartered Accountants
|March 11, 2015       
|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 Vice Chair
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.

Management assessed the effectiveness of the Companys internal
control over financial reporting as of December 31, 2014, 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 concludes that, as of December 31, 2014, 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, 2014, 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,
2014 and 2013, as stated in their report which appears on the following page.

|/s/Kevin McArthur                      | /s/Mark Sadler                                  
|-------------------------------------- | ------------------------------------------------
|                                       |                                                 
|Kevin McArthur                         | Mark Sadler                                     
|                                       |                                                 
|Vice Chair and Chief Executive Officer | Vice President and Chief Financial
      Officer

Reno, Nevada

March 11, 2015

---

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,
2014, based on the criteria established in Internal ControlIntegrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission. 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,
2014, 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, 2014 of the Company and our report dated March
11, 2015 expressed an unmodified opinion on those financial statements.

|/s/Deloitte LLP      
|---------------------
|                     
|Chartered Accountants
|March 11, 2015       
|Vancouver, Canada    

---







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---

|CONSOLIDATED BALANCE SHEETS                      
|-------------------------------------------------
|(Expressed in Thousands of United States Dollars)

December 31,
    
    
    December 31,Notes
    
    
    2014
    
    
    2013ASSETSCurrentCash and cash
      equivalents
    
    6
    
    $
    80,356
    
    $
    8,838Trade and other receivables
    
    7
    
    
    7,707
    
    
    2,506Inventories
    
    8
    
    
    40,570
    
    
    22,965Other
    
    
    
    
    5,951
    
    
    1,502134,584
    
    
    35,811Non-currentMineral
      interests
    
    9
    
    
    828,742
    
    
    844,583Other
    
    
    
    
    12,302
    
    
    2,939841,044
    
    
    847,522Total Assets
    
    
    
    $
    975,628
    
    $
    883,333LIABILITIESCurrentAccounts payable
      and accrued liabilities
    
    10
    
    $
    40,246
    
    $
    54,678Debt
    
    11
    
    
    49,804
    
    
    49,479Income tax payable
    
    
    
    
    1,825
    
    
    80891,875
    
    
    104,965Non-currentReclamation provision
    
    12
    
    
    3,529
    
    
    3,021Other
    
    
    
    
    2,164
    
    
    1,193Total Liabilities
    
    
    
    
    97,568
    
    
    109,179SHAREHOLDERS EQUITYShare capital
    
    16e
    
    
    1,014,656
    
    
    996,076Reserves
    
    
    
    
    11,793
    
    
    14,304Deficit
    
    
    
    
    (148,389
    )
    
    (236,226
    )Total Shareholders Equity
    
    
    
    
    878,060
    
    
    774,154Total Liabilities and Shareholders Equity
    
    
    
    $
    975,628
    
    $
    883,333


Commitments, Contingencies and Events after the reporting
period (notes 22b, 25 and 26)

APPROVED BY THE DIRECTORS

|Dan Rovig | Kevin McArthur                      
|----------- | --------------------------------------
|Dan Rovig   | Kevin McArthur                        
|Board Chair | Vice Chair and Chief Executive Officer

See accompanying notes to the consolidated financial
statements.

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

---

|CONSOLIDATED STATEMENTS OF OPERATIONS                                                          
|-----------------------------------------------------------------------------------------------
|AND TOTAL COMPREHENSIVE INCOME (LOSS)                                                          
|(Expressed in Thousands of United States Dollars, Except
      Per Share and Share Information)

Years EndedDecember 31,Notes
    
    
    2014
    
    
    2013Revenues
    
    13, 20
    
    $
    350,265
    
    $
    -Operating costsProduction costs
    
    14
    
    
    127,323
    
    
    -Royalties
    
    
    
    
    20,830
    
    
    -Depreciation and depletion
    
    
    
    
    43,313
    
    
    -Total operating costs
    
    
    
    
    191,466
    
    
    -Mine operating
      earnings
    
    
    
    
    158,799
    
    
    -Other operating expensesEscobal project
    
    
    
    
    -
    
    
    36,404Exploration
    
    
    
    
    3,574
    
    
    5,268General and administrative
    
    15
    
    
    31,953
    
    
    19,509Total other operating expenses
    
    
    
    
    35,527
    
    
    61,181Earnings (loss) from operations
    
    
    
    
    123,272
    
    
    (61,181
    )Other expenseInterest expense
    
    
    
    
    5,640
    
    
    1,820Net foreign exchange loss
    
    
    
    
    906
    
    
    -Other expense
    
    
    
    
    1,036
    
    
    975Total other expense
    
    
    
    
    7,582
    
    
    2,795Earnings (loss) before income taxes
    
    
    
    
    115,690
    
    
    (63,976
    )Income tax expense
    
    17a
    
    
    24,900
    
    
    1,621Earnings (loss) and total comprehensive
      income    **(loss) attributable to
      common shareholders**
    
    
    
    $
    90,790
    
    $
    (65,597
    )Earnings (loss) per shareBasic
    
    18
    
    $
    0.62
    
    $
    (0.45
    )Diluted
    
    18
    
    $
    0.61
    
    $
    (0.45
    )Weighted average shares outstandingBasic
    
    18
    
    
    147,405,379
    
    
    145,842,795Diluted
    
    18
    
    
    147,992,271
    
    
    145,842,795


See accompanying notes to the consolidated financial
statements.

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

---

|CONSOLIDATED STATEMENTS OF CASH FLOWS            
|-------------------------------------------------
|(Expressed in Thousands of United States Dollars)

Years EndedDecember 31,Notes
    
    
    2014
    
    
    2013OPERATING ACTIVITIESNet
      earnings(loss) for the period
    
    
    
    $
    90,790
    
    $
    (65,597
    )Adjustments for:Interest
      expense
    
    
    
    
    5,677
    
    
    1,940Income tax expense
    
    17a
    
    
    24,900
    
    
    1,621Financing
      fees
    
    
    
    
    574
    
    
    854Items not involving cash:Depreciation and depletion
    
    
    
    
    44,113
    
    
    3,630Loss on disposition of plant and equipment
    
    
    
    
    397
    
    
    37Share-based
      payments
    
    16
    
    
    5,912
    
    
    5,684Unrealized foreign exchange loss
    
    
    
    
    690
    
    
    128Accretion
    
    
    
    
    177
    
    
    71Cash provided by(used in)
      operating activities   before changes in working capital
    
    
    
    
    173,230
    
    
    (51,632
    )Changes in working capital
    
    19
    
    
    (28,270
    )
    
    (6,866
    )Cash provided by(used in)
      operating activities
    
    
    
    
    144,960
    
    
    (58,498
    )Income taxes paid
    
    
    
    
    (25,638
    )
    
    (1,107
    )Net cash provided by(used in)
      operating activities
    
    
    
    
    119,322
    
    
    (59,605
    )INVESTING ACTIVITIESMineral interests additions
    
    
    
    
    (48,799
    )
    
    (144,811
    )Net cash used in investing
      activities
    
    
    
    
    (48,799
    )
    
    (144,811
    )FINANCING ACTIVITIESProceeds
      from issuance of common shares on exercise of share options
    
    16a
    
    
    10,673
    
    
    2,501Borrowings on credit facility
    
    11
    
    
    -
    
    
    50,000Dividends
      paid to shareholders
    
    18
    
    
    (2,953
    )
    
    -Loan origination fees
    
    
    
    
    (1,499
    )
    
    (2,105
    )Interest
      expense paid
    
    
    
    
    (4,436
    )
    
    (1,575
    )Payments on finance
      leases
    
    
    
    
    (100
    )
    
    -Net cash provided by financing activities
    
    
    
    
    1,685
    
    
    48,821Effect of exchange rates on cash and cash equivalents
    
    
    
    
    (690
    )
    
    (128
    )Increase(decrease) in cash
      and cash equivalents
    
    
    
    
    71,518
    
    
    (155,723
    )Cash and cash equivalents, beginning of year
    
    
    
    
    8,838
    
    
    164,561Cash and cash equivalents, end of year
    
    6
    
    $
    80,356
    
    $
    8,838


Supplemental cash flow information (note 19)

See accompanying notes to the consolidated financial
statements.

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

---

|CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY                                     
|---------------------------------------------------------------------------------
|(Expressed in Thousands of United States Dollars, Except
      Share Information)

Number of
    
    
    
    ShareNotes
    
    
    Shares
    
    
    
    Capital
    
    
    Reserves
    
    
    Deficit
    
    
    TotalAt January 1, 2014
    
    
    
    
    146,094,407
    
    
    $
    996,076
    
    $
    14,304
    
    $
    (236,226
    )
    $
    774,154Net earnings
    
    
    
    
    -
    
    
    
    
    
    
    
    
    
    90,790
    
    
    90,790Shares issued under the Share Plan
    
    16
    
    
    143,667
    
    
    
    2,960
    
    
    (2,186
    )
    
    -
    
    
    774Exercise of stock options
    
    16
    
    
    1,406,597
    
    
    
    15,620
    
    
    (4,947
    )
    
    -
    
    
    10,673Share-based payments
    
    16
    
    
    -
    
    
    
    -
    
    
    4,622
    
    
    -
    
    
    4,622Dividends paid to shareholders
    
    18
    
    
    -
    
    
    
    -
    
    
    -
    
    
    (2,953
    )
    
    (2,953
    )At December 31, 2014
    
    
    
    
    147,644,671
    
    
    $
    1,014,656
    
    $
    11,793
    
    $
    (148,389
    )
    $
    878,060


Number of
    
    
    
    ShareNotes
    
    
    Shares
    
    
    
    Capital
    
    
    Reserves
    
    
    Deficit
    
    
    TotalAt
      January 1, 2013
    
    
    
    
    145,565,204
    
    
    $
    988,081
    
    $
    13,845
    
    $
    (170,629
    )
    $
    831,297Net loss
    
    
    
    
    -
    
    
    
    -
    
    
    -
    
    
    (65,597
    )
    
    (65,597
    )Shares issued under the Share Plan
    
    16
    
    
    247,666
    
    
    
    4,280
    
    
    (3,684
    )
    
    -
    
    
    596Exercise of stock options
    
    16
    
    
    281,537
    
    
    
    3,715
    
    
    (1,214
    )
    
    -
    
    
    2,501Share-based payments
    
    16
    
    
    -
    
    
    
    -
    
    
    5,357
    
    
    -
    
    
    5,357At
      December 31, 2013
    
    
    
    
    146,094,407
    
    
    $
    996,076
    
    $
    14,304
    
    $
    (236,226
    )
    $
    774,154


See accompanying notes to the consolidated financial
statements.

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

---

|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                                     
|-----------------------------------------------------------------------------------
|(Expressed in Thousands of United States Dollars, Except
      as Otherwise Stated)
|Years Ended
      December 31, 2014 and 2013                                       

|1. | OPERATIONS
|-- | ----------

Tahoe Resources Inc. 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 Resources Inc. and its wholly owned
subsidiaries (together referred to as the Company). The Companys principal
business activities are the operation of mineral properties for the mining of
precious metals and the acquisition, exploration and development 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 11,
2015.

|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, 2014. 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) | Basis of measurement
| | -- | --------------------

The consolidated financial statements
have been prepared on a historical cost basis, except for certain financial
instruments, which are measured at fair value through profit or loss (FVTPL),
as explained in the accounting policies set out below. Additionally, these
consolidated financial statements have been prepared using the accrual basis of
accounting, except for cash flow information.

| | b) | Currency of presentation
| | -- | ------------------------

The consolidated financial statements
are presented in United States dollars (USD$), which is the functional and
presentation currency of the Company and all of its subsidiaries. Certain values
are presented in Canadian dollars and described as CAD$.

| | c) | Basis of consolidation
| | -- | ----------------------

The accounts of the subsidiaries
controlled by the Company are included in the consolidated financial statements
from the date that control commenced until the date that control ceases. Control
is achieved where the Company has the power to govern the financial and
operating policies of an entity so as to obtain benefits from its activities.

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

---

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

The subsidiaries of the Company and
their geographic locations are as follows:

| |                                         |               | Ownership  |                   
| | --------------------------------------- | ------------- | ---------- | ------------------
| | Name of Subsidiary                      | Location      | Percentage | Principal Activity
| | Tahoe Resources USA Inc.                | United States | 100%       | Services          
| | Tahoe Swiss AG                          | Switzerland   | 100%       | Services          
| | Escobal Resources Holding
      Limited | Barbados      | 100%       | Services          
| | Minera San Rafael, S.A.                 | Guatemala     | 100%       | Operations        

Intercompany balances, transactions,
income and expenses 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 (loss) attributable to
common shareholders and presented in the consolidated statements of operations
and total comprehensive income (loss). The unrealized portion of foreign
exchange gains and losses are disclosed separately in the consolidated
statements of cash flows.

| | e) | Cash and cash equivalents
| | -- | -------------------------

Cash and cash equivalents comprise
cash balances and deposits with maturities of 90 days or less.

| | f) | Inventories
| | -- | -----------

Finished goods (including
work-in-process) 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 is
stockpiled and subsequently processed into finished goods (metal concentrate).
The costs of finished goods represent the costs of work-in-process inventories
incurred prior to the sale of concentrate. Costs are included in inventory based
on current costs incurred to produce concentrate, including applicable
depreciation and depletion of mining interests, and removed at the cost per
tonne of concentrate produced.

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.

| | g) | Mineral interests, plant and
  equipment
| | -- | ----------------------------------------

Mineral interests, plant and equipment
are carried at cost, less accumulated depreciation and accumulated impairment
losses.

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

---

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

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.

In subsequent periods, plant and
equipment are stated at cost less accumulated depreciation and any impairment in
value.

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 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.

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

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

---

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

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 complete; is
| | - | -------------------------------------------------------------------------------
| |  | Operating results are being achieved
      consistently for a period of time;  
| |  | Indicators that these operating results will
      continue; and               
| |  | Other factors include one or more of the
      following:                      

| | o | Significant milestones for the development of
      the mineral interests have been achieved;                             
| | - | --------------------------------------------------------------------------------------------------------------------------
| | o | A significant portion of plant/mill 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 commissioning costs. 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.

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.

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

---

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

Units of production basis

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.

Upon declaration of commercial
production, the carrying amounts of mineral interests are depleted using the UOP
method over the estimated life of mine based on proven and probable reserves.
Estimation of proven and probable reserves is updated when relative information
is available. Changes to these estimates will be prospectively applied to
calculate depletion amounts for future periods. For operations that reach
commercial production prior to the determination of proven and probable
reserves, depletion is calculated based on the mineable portion of measured and
indicated resources until such time that proven and probable reserves are
established.

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 &
      software | 2 - 5 years 
| | Vehicles                            | 3 - 5 years 
| | Mining equipment                    | 2 - 14 years
| | Ancillary facilities                | 20 Years    
| | Mineral interests and plant         | UOP         

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.

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

---

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

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 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.

| | h) | 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 there is a high degree of confidence in the
projects viability and hence it is probable that future economic benefits will
flow to the Company.

Capitalized exploration and evaluation
costs are classified as mineral interests within mineral interests, plant and
equipment.

Corporate general and administrative
costs related to exploration and evaluation assets are expensed as incurred.

| | i) | 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 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.

| | j) | Financial instruments
| | -- | ---------------------

The Company has only one
classification of non-derivative financial assets comprising cash and cash
equivalents and trade and other receivables.

The Company initially recognizes trade
and other receivables and deposits on the date that they originated. Subsequent
to initial recognition trade and other receivables are measured at FVTPL.
Deposits are measured at historical cost.

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.

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

---

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

The Company has non-derivative
financial liabilities comprising accounts payable, accrued liabilities, current
debt, and SARs liabilities. Such 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 SARs liabilities are measured at FVTPL.

| | k) | 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.

| | l) | 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 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 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. Trade
receivables are therefore measured at FVTPL. Treatment and refining charges are
netted against revenues from metal concentrate sales.

Until a mine is operating at the level
intended by management revenues will be offset against mineral interests, plant
and equipment costs.

| | m) | 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, senior employees,
and consultants 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.

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

---

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

The amount payable in respect of share
appreciation rights (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 FVTPL.

| | n) | Income taxes
| | -- | ------------

Income tax on the earnings or loss for
the period 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.

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.

| | o) | Mine operating earnings
| | -- | -----------------------

Mine operating earnings represent the
difference between revenues and operating costs which include royalties and
depreciation and depletion.

| | p) | Earnings (loss) from
operations
| | -- | -------------------------------

Earnings (loss) from operations
represent the difference between mine operating earnings and other operating
expenses which include Escobal project expenses, other exploration expenses and
general and administrative expenses.

| | 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 which are adjusted for the dilutive impact of deferred share awards
issued and outstanding.

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.

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

---

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

| | r) | Cash provided by (used in) operating activities before
      changes in working capital
| | -- | ---------------------------------------------------------------------------------------

Cash provided by (used in) operating
activities before changes in working capital represents the cash flows generated
by operating activities after adjusting for interest expense, income tax expense
and financing fees as well as items not involving cash.

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

| | a) | Application of new and revised accounting standards
      effective January 1, 2014
| | -- | -----------------------------------------------------------------------------------

The following standards were applied
for periods beginning on or after January 1, 2014 and have no material effect on
our financial performance:

| | i. | IFRIC 21  Levies
| | -- | -----------------

IFRIC 21  Levies (IFRIC 21)
provides guidance on when to recognize a liability for a levy imposed by a
government, other than those levies within the scope of other standards. The
Company has applied IFRIC 21 on a retrospective basis in compliance with the
transitional requirements. No adjustments to the Companys consolidated
financial statements were made as a result of the implementation of IFRIC 21.

| | 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, 2014, and have not been applied in preparing these
consolidated financial statements. The Company is currently evaluating the
impact these standards are expected to have on its consolidated financial
statements. Details related to these standards and interpretations are discussed
below.

| | i. | IFRS 15  Revenue from Contracts with
    Customers
| | -- | ---------------------------------------------------

In May 2014, the IASB issued IFRS 15 
Revenue from Contracts with Customers (IFRS 15) which supersedes IAS 11
 Construction Contracts, IAS 18  Revenue, IFRIC 13  Customer
Loyalty Programmes, IFRIC 15  Agreements for the Construction of Real
Estate, IFRIC 18  Transfers of Assets from Customers, and SIC 31 
Revenue  Barter Transactions Involving Advertising Services. IFRS 15
establishes a single five-step model framework for determining the nature,
amount, timing and uncertainty of revenue and cash flows arising from a contract
with a customer. The standard is effective for annual periods beginning on or
after January 1, 2017, with early adoption permitted. The Company is currently
evaluating the impact the standard is expected to have on its consolidated
financial statements.

| | ii. | IFRS 9  Financial
Instruments
| | --- | ------------------------------

In July 2014, the IASB issued an
amendment to IFRS 9  Financial Instruments (IFRS 9) which supersedes
previous versions of IFRS 9. IFRS 9, among other things, requires an expected
credit loss model for impairment of financial instruments and introduces a new
hedge accounting model designed to align with entities risk management
activities. The standard is effective for annual periods beginning on or after
January 1, 2018, with early adoption permitted. The Company is currently
evaluating the impact the standard is expected to have on its consolidated
financial statements.

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

---

|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.

Information about critical judgments
and estimates in applying accounting policies that have the most significant
effect on the amounts recognized in the consolidated financial statements are as
follows:

| | 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 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s 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 subsidiary operates. If there is a change in
events or conditions which determined the primary economic environment, the
Company periodically reevaluates the functional currency for each of its
subsidiaries.

| | iii. | Economic recoverability and probability of future
      economic benefits of exploration, evaluation and development
    costs.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------

The Company has determined that
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.

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

---

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

Prior to the first quarter of 2013,
underground development expenditures associated with the Escobal mine were
expensed as incurred because the Company had not received the exploitation
permit necessary for commercial mining operations. Underground development
expenditures incurred subsequent to the receipt of the exploitation permit are
capitalized. The surface assets associated with the Escobal mine were
capitalized both during 2012 and 2013.

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

| | i. | Revenue recognition
| | -- | -------------------

As is customary in the industry,
revenue on provisionally priced sales is recognized based on relevant forward
market prices. At each reporting period, provisionally priced 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
recorded as an adjustment to sales revenue.

| | ii. | Estimated material in the mineral
  reserves
| | --- | --------------------------------------------

The carrying amounts of the Companys
depletable mineral interests are depleted upon commencement of commercial
production based on the UOP method over the estimated life of mine based on
proven and probable reserves. Changes to estimates of material and depletable
costs including changes resulting from revisions to the Companys mine plans can
result in a change to future depletion rates.

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. Assets
with similar useful lives are grouped and treated as a single asset for the
purposes of depreciation. Should the grouping of these like assets change,
depreciation charges may vary materially in the future.

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

---

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

| | 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 and
concentrate inventories. The estimates and assumptions include surveyed
quantities of stockpiled ore, in-process volumes, metal contents, 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.

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

---

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

| | viii. | 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.

| | ix. | 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,
2014 that are expected to have a material effect on the consolidated financial
statements of the Company.

|6. | CASH AND CASH
EQUIVALENTS
|-- | -------------------------

December 31,
    
    
    December 31,2014
    
    
    2013Cash
    $
    79,830
    
    $
    8,812Cash
      equivalents
    
    526
    
    
    26$
    80,356
    
    $
    8,838


|7. | TRADE AND OTHER
RECEIVABLES
|-- | ---------------------------

December 31,
    
    
    December 31,2014
    
    
    2013Trade receivables
    $
    6,569
    
    $
    2,421Other
    
    1,138
    
    
    85$
    7,707
    
    $
    2,506


|8. | INVENTORIES
|-- | -----------

| |                |   | December 31, |  |   | December 31, | 
| | -------------- | - | ------------ |  | - | ------------ | 
| |                |   | 2014         |  |   | 2013         | 
| | Supplies       | $ | 29,851       |  | $ | 14,575       | 
| | Stockpile      |   | 1,539        |  |   | 3,440        | 
| | Finished goods |   | 9,180        |  |   | 4,950        | 
| |                | $ | 40,570       |  | $ | 22,965       | 

The cost of inventories recognized as
an expense for the year ended December 31, 2014 was $170,636 (year ended
December 31, 2013 - $nil) and is included in total operating costs.

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

---

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

|9. | MINERAL INTERESTS
|-- | -----------------

Mineral
      InterestsNon-
    
    
    Plant &Depletable
    
    
    Depletable
    
    
    Equipment
    
    
    TotalCostBalance at January 1, 2014
    $
    -
    
    $
    566,766
    
    $
    298,897
    
    $
    865,663Additions
    
    14,269
    
    
    65
    
    
    19,270
    
    
    33,604Disposals
    
    -
    
    
    (127
    )
    
    (476
    )
    
    (603
    )Transfers(1)
    
    537,187
    
    
    (539,447
    )
    
    -
    
    
    (2,260
    )**Change in reclamation**
      provision
    
    331
    
    
    -
    
    
    -
    
    
    331Balance at December 31, 2014
    $
    551,787
    
    $
    27,257
    
    $
    317,691
    
    $
    896,735Accumulated Depreciation and DepletionBalance at January 1, 2014
    
    -
    
    
    -
    
    
    (21,080
    )
    
    (21,080
    )Additions
    
    (25,382
    )
    
    -
    
    
    (21,706
    )
    
    (47,088
    )Disposals
    
    -
    
    
    -
    
    
    175
    
    
    175Transfers
    
    (567
    )
    
    -
    
    
    567
    
    
    -Balance at December 31, 2014
    $
    (25,949
    )
    $
    -
    
    $
    (42,044
    )
    $
    (67,993
    )Carrying Amount at December 31, 2014
    $
    525,838
    
    $
    27,257
    
    $
    275,647
    
    $
    828,742


Mineral InterestsNon-
    
    
    Plant &Depletable
    
    
    Depletable
    
    
    Equipment
    
    
    TotalCostBalance at January 1, 2013
    $
    -
    
    $
    531,172
    
    $
    156,234
    
    $
    687,406Additions
    
    -
    
    
    36,334
    
    
    142,729
    
    
    179,063Disposals
    
    -
    
    
    -
    
    
    (66
    )
    
    (66
    )Change in reclamation provision
    
    -
    
    
    (740
    )
    
    -
    
    
    (740
    )Balance at December 31, 2013
    $
    -
    
    $
    566,766
    
    $
    298,897
    
    $
    865,663Accumulated Depreciation and DepletionBalance at January 1, 2013
    
    -
    
    
    -
    
    
    (8,080
    )
    
    (8,080
    )Additions
    
    -
    
    
    -
    
    
    (13,029
    )
    
    (13,029
    )Disposals
    
    -
    
    
    -
    
    
    29
    
    
    29Balance at December 31, 2013
    $
    -
    
    $
    -
    
    $
    (21,080
    )
    $
    (21,080
    )Carrying Amount at December 31, 2013
    $
    -
    
    $
    566,766
    
    $
    277,817
    
    $
    844,583


| | (1) | In early January 2014, the commissioning of the Escobal
      mine was completed as operating levels intended by management were
      determined to have been reached. Accordingly, mineral interests were
      transferred from non- depletable to depletable mineral interests.
      Depreciation and depletion of capitalized costs classified as depletable
      commenced effective January 1, 2014. In addition, proceeds from
      concentrate sales and costs incurred during production have been included
      in net earnings and total comprehensive income effective January 1, 2014.
      Final settlement adjustments of $2,260 relating to concentrate sold prior
      to the commissioning of the Escobal mine have been offset against
      depletable mineral interests for the year ended December 31,
  2014.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10. | ACCOUNTS PAYABLE AND ACCRUED
  LIABILITIES
|--- | ------------------------------------------

**December 31,**
    
    
    December 31,Notes
    
    
    2014
    
    
    2013Trade payables
    $
    
    
    
    11,609
    
    $
    23,104Royalties payable
    
    
    
    
    16,369
    
    
    1,750Accrued trade payables
    
    
    
    
    8,779
    
    
    26,063Accrued payroll and related benefits
    
    
    
    
    3,061
    
    
    2,255Share appreciation rights, current portion
    
    16c
    
    
    428
    
    
    1,506$
    
    
    
    40,246
    
    $
    54,678


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

---

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

|11. | DEBT
|--- | ----

| |                 |   | December 31, |   |   | December 31, |  
| | --------------- | - | ------------ | - | - | ------------ | -
| |                 |   | 2014         |   |   | 2013         |  
| | Credit facility | $ | 50,000       |   | $ | 50,000       |  
| | Commitment fee  |   | (2,175       | ) |   | (1,250       | )
| | Accretion       |   | 1,979        |   |   | 729          |  
| |                 | $ | 49,804       |   | $ | 49,479       |  

On December 20, 2013, the Company
reached an agreement with the lender to expand its credit facility by an
additional $25 million bearing interest at a rate per annum of the USD$ London
Interbank Offered Rate plus a margin of 7.25% . The $25 million was drawn on
January 2, 2014, and repaid upon maturity on September 3, 2014.

In July 2014, the Company amended the
credit facility agreement and extended the maturity date of the original $50
million to June 3, 2015. All other terms remain per the original agreement.

During the year ended December 31,
2014, the Company paid commitment fees of $925 related to the credit facility
(year ended December 31, 2013: $1,250). The commitment fees are being amortized
over the life of the facility, $1,250 of which was amortized during the year
ended December 31, 2014 (year ended December 31, 2013: $729). In addition to the
commitment fees, the Company has paid other fees related to the facility
totaling $574 for the year ended December 31, 2014 (year ended December 31,
2013: $854).

The facility is secured by
substantially all of the assets of the Company and its subsidiaries: Tahoe Swiss
AG, Escobal Resources Holding Limited and Minera San Rafael, S.A.

The facility contains covenants that,
among other things, restrict the ability of the Company and its subsidiaries to
incur additional debt, merge without consent, consolidate, transfer, lease or
otherwise dispose of all or substantially all of its assets. As at December 31,
2014, the Company was in compliance with the covenants.

|12. | RECLAMATION PROVISION
|--- | ---------------------

| |                                        |   | December 31, |  |   | December 31, |  
| | -------------------------------------- | - | ------------ |  | - | ------------ | -
| |                                        |   | 2014         |  |   | 2013         |  
| | Balance, beginning of the
      year   | $ | 3,021        |  | $ | 3,691        |  
| | Accretion expense                      |   | 177          |  |   | 70           |  
| | Revisions in estimates and obligations |   | 331          |  |   | (740         | )
| | Balance, end of the year               | $ | 3,529        |  | $ | 3,021        |  

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

---

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

The Companys environmental permit
requires 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 present value of the
future reclamation obligation arising from its activities to December 31, 2014
to be $3,529 (December 31, 2013: $3,021). The present value of the future
reclamation obligation assumes a discount rate of 5.77% (December 31, 2013:
5.69%), an inflation rate of 3.42% (December 31, 2013: 4.34%), an undiscounted
amount to settle the obligation of $10,240 (December 31, 2013: $8,457), and the
commencement of reclamation activities in 19 years. The present value of the
future obligation has increased by $331 during 2014 (December 31, 2013: ($740))
as a result of the impact of the change in estimate in mine life, estimated
reclamation costs, discount and inflation rates.

|13. | REVENUES
|--- | --------

Years EndedDecember 31,2014
    
    
    2013
    (1)Silver
    $
    310,036
    
    $
    -Gold
    
    10,437
    
    
    -Lead
    
    12,193
    
    
    -Zinc
    
    17,599
    
    
    -$
    350,265
    
    $
    -


(1)During the year ended
December 31, 2013, pre-commercial production revenues generated were capitalized
as part of the cost of placing the asset into service.

|14. | PRODUCTION COSTS
|--- | ----------------

Years EndedDecember 31,2014
    
    
    2013
    (1)Consumption of raw materials
      and consumables
    $
    72,886
    
    $
    -Employee compensation and benefits
    
    20,713
    
    
    -Contractors and outside
      services
    
    19,165
    
    
    -Other expenses
    
    16,679
    
    
    -Changes in inventory
    
    (2,120
    )
    
    -$
    127,323
    
    $
    -


(1)During the year ended
December 31, 2013, pre-commercial production costs incurred were capitalized as
part of the cost of placing the asset into service.

|15. | GENERAL AND ADMINISTRATIVE
  EXPENSES
|--- | -------------------------------------

Years EndedDecember 31,2014
    
    
    2013Salaries and benefits
    $
    11,246
    
    $
    8,303Share-based payments
    
    5,912
    
    
    5,683Consulting and professional
      fees
    
    3,296
    
    
    2,557Charitable contributions and donations
    
    3,987
    
    
    17Investor relations and
      communications
    
    1,657
    
    
    515Administrative and other
    
    5,855
    
    
    2,434$
    31,953
    
    $
    19,509


|16. | 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 Canadian dollars (CAD$) and include Share Plan
Options (Share Options), Deferred Share Awards (DSAs), Restricted Share
Awards (RSAs) and Share Appreciation Rights (SARs) (collectively referred to
as the Share Plan). At December 31, 2014, the Company has the following
share-based payment arrangements:

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

---

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

| | 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 service-related 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, 2014 and
December 31, 2013 are as follows:

| |                                      |   | Weighted average |  |  | Number of     |  
| | ------------------------------------ | - | ---------------- |  |  | ------------- | -
| |                                      |   | exercise price   |  |  | Share Options |  
| | Outstanding at January 1,
      2013 | $ | 9.61             |  |  | 2,534,793     |  
| | Granted                              |   | 16.51            |  |  | 612,000       |  
| | Exercised                            |   | 9.20             |  |  | (281,537      | )
| | Outstanding at December 31, 2013     |   | 11.13            |  |  | 2,865,256     |  
| | Granted                              |   | 23.92            |  |  | 105,000       |  
| | Exercised                            |   | 8.32             |  |  | (1,406,597    | )
| | Forfeited                            |   | 16.34            |  |  | (16,000       | )
| | Outstanding at December 31, 2014     | $ | 14.49            |  |  | 1,547,659     |  

The following table summarizes
information about share options outstanding and exercisable at December 31, 2014
(exercise range and prices in CAD$):

| |              |  |             |  |   | Weighted |  |  | Weighted     |  |  |             |  |   | Weighted |  |  | Weighted     | 
| | ------------ |  | ----------- |  | - | -------- |  |  | ------------ |  |  | ----------- |  | - | -------- |  |  | ------------ | 
| |              |  |             |  |   | average  |  |  | average      |  |  |             |  |   | average  |  |  | average      | 
| | Exercise     |  |             |  |   | exercise |  |  | remaining    |  |  |             |  |   | exercise |  |  | remaining    | 
| | price range  |  | Outstanding |  |   | price    |  |  | life (years) |  |  | Exercisable |  |   | price    |  |  | life (years) | 
| | $ 6.40-11.15 |  | 524,659     |  | $ | 7.53     |  |  | 0.54         |  |  | 524,659     |  | $ | 7.53     |  |  | 0.54         | 
| | $16.34-17.56 |  | 743,000     |  | $ | 16.70    |  |  | 2.61         |  |  | 373,000     |  | $ | 17.04    |  |  | 2.04         | 
| | $18.14-21.68 |  | 175,000     |  | $ | 20.28    |  |  | 2.37         |  |  | 102,000     |  | $ | 20.28    |  |  | 2.02         | 
| | $22.49-29.74 |  | 105,000     |  | $ | 23.92    |  |  | 4.43         |  |  | -           |  | $ | -        |  |  | -            | 
| |              |  | 1,547,659   |  | $ | 14.49    |  |  | 2.00         |  |  | 999,659     |  | $ | 12.38    |  |  | 1.25         | 

During the year ended December 31,
2014, 1,406,597 share options were exercised and the cash proceeds received were
$10,673 (year ended December 31, 2013: 281,537 share options exercised for cash
proceeds of $2,501).

During the year ended December 31,
2014, the Company recorded $1,805 of compensation expense relating to Share
Options in general and administrative expenses (year ended December 31, 2013:
$2,957).

| | 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.

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

---

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

| | 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, 2014 and December 31, 2013 is as follows:

| | Outstanding at January 1, 2013   |  | 370,000  |  
| | -------------------------------- |  | -------- | -
| | Granted                          |  | 24,000   |  
| | Shares issued                    |  | (212,666 | )
| | Outstanding at December 31, 2013 |  | 181,334  |  
| | Granted                          |  | 213,000  |  
| | Shares issued                    |  | (108,667 | )
| | Outstanding at December 31, 2014 |  | 285,667  |  

The 213,000 DSAs granted during the
year ended December 31, 2014 had a weighted average fair market value of
CAD$23.46. Of the 213,000 granted during the year, 210,000 vest according to the
general DSA vesting terms. The remaining 3,000 DSAs were granted under special
vesting terms whereby the first tranche is to vest eight months after grant date
and the second and third tranches vesting annually thereafter in order to match
the vesting schedule of the 210,000 DSAs granted earlier in the year (year ended
December 31, 2013: 15,000 of the 24,000 DSAs granted had the first tranche
vesting immediately on grant date with the second and third tranches vesting
annually thereafter).

During the year ended December 31,
2014, 108,667 DSAs vested and common shares of the Company were issued to the
recipients under the provisions of the Share Plan. As a result $2,186 was
transferred to share capital from share based payments reserve (year ended
December 31, 2013: 212,666 DSAs vested and $3,684 was transferred to share
capital).

During the year ended December 31,
2014, the Company recorded $2,817 of compensation expense relating to DSAs in
general and administrative expenses (year ended December 31, 2013: $2,400).

| | 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, 2014 and December 31, 2013.

There were 35,000 RSAs granted during
the year ended December 31, 2014 with a weighted average fair market value of
CAD$24.03 (year ended December 31, 2013: 35,000 RSAs were granted with a
weighted average fair market value of CAD$17.08) .

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

---

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

During the year ended December 31,
2014, 35,000 RSAs vested and common shares of the Company were issued to the
recipients under the provisions of the Share Plan resulting in an increase to
share capital of $774 (year ended December 31, 2013: 35,000 RSAs vested for an
increase to share capital of $596).

During the year ended December 31,
2014, the Company recorded $774 of compensation expense relating to the vesting
and issuance of RSAs in general and administrative expenses (year ended December
31, 2013: $596).

| | 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 at
December 31, 2014 and December 31, 2013 is as follows:

Number of SARsOutstanding at January 1,
      2013
    
    326,925Issued
    
    10,000Exercised
    
    (84,200
    )Cancelled
    
    (47,000
    )Outstanding at December 31,
      2013
    
    205,725Issued
    
    10,000Exercised
    
    (122,725
    )Cancelled
    
    (20,000
    )Outstanding at December
      31, 2014
    
    73,000Exercisable at December 31, 2013
    
    100,725Exercisable at December 31, 2014
    
    50,000


At December 31, 2014, vested SARs had
a weighted average intrinsic value of CAD$6.92 per share (December 31, 2013:
CAD$6.79) .

At December 31, 2014, the Company has
recognized other current and long-term liabilities for SARs of $428 and $21,
respectively (December 31, 2013: $1,506 and $80, respectively).

During the year ended December 31,
2014, the Company recorded $515 of compensation expense relating to SARs in
general and administrative expenses (year ended December 31, 2013: $(270)).

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

---

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

The following table summarizes
information about SARs outstanding and exercisable at December 31, 2014 (grant
price range in CAD$):

Exercised/Grant price range
    
    Issued
    
    
    Cancelled
    
    
    Outstanding
    
    
    Exercisable$6.40-12.87
    
    262,000
    
    
    (210,000
    )
    
    52,000
    
    
    50,000$13.35-16.57
    
    65,000
    
    
    (59,000
    )
    
    6,000
    
    
    -$18.00-20.55
    
    82,500
    
    
    (67,500
    )
    
    15,000
    
    
    -409,500
    
    
    (336,500
    )
    
    73,000
    
    
    50,000


| | d) | Inputs for measurement of fair values
| | -- | -------------------------------------

The grant date fair values of Share
      Options were measured based on the Black-Scholes Model. The fair value of SARs
      has been re-measured at December 31, 2014. 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 in
the measurement of the fair values (CAD$) at the grant dates of the Share
Options are as follows:

Years EndedDecember 31,2014
    
    
    2013Share price
    $
    24.11
    
    $
    16.62Exercise price
    $
    23.92
    
    $
    16.51Expected volatility
    
    52%
    
    
    49%Expected life (years)
    
    3.60
    
    
    3.60Expected dividend yield
    
    -
    
    
    -Risk-free interest rate
    
    1.42%
    
    
    1.21%Fair
      value
    $
    9.55
    
    $
    6.18


The weighted average inputs used in
the re-measurement of the fair value (CAD$) of the SARs are as follows:

| |                         |   | December 31, |  |   | December 31, | 
| | ----------------------- | - | ------------ |  | - | ------------ | 
| |                         |   | 2014         |  |   | 2013         | 
| | Share price             | $ | 16.15        |  | $ | 17.67        | 
| | Exercise price          | $ | 10.48        |  | $ | 11.28        | 
| | Expected volatility     |   | 53%          |  |   | 51%          | 
| | Expected life (years)   |   | 1.69         |  |   | 2.18         | 
| | Expected dividend yield |   | -            |  |   | -            | 
| | Risk-free interest rate |   | 1.23%        |  |   | 1.65%        | 
| | Fair value              | $ | 8.78         |  | $ | 9.10         | 

| | 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.    

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

---

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

At December 31, 2014, there were
147,664,671 common shares of the Company issued and outstanding (December 31,
2013: 146,094,407).

|17. | INCOME TAX EXPENSE
|--- | ------------------

| |                                                         |   | Years Ended  |  
| | ------------------------------------------------------- | - | ------------ | -
| |                                                         |   | December 31, |  
| |                                                         |   | 2014         |  
| | Current income tax expense                              |   |              |  
| | Current period                                          | $ | 26,650       |  
| |                                                         |   | 26,650       |  
| | Deferred tax benefit                                    |   |              |  
| | Origination and reversal of
      temporary differences |   | (1,750       | )
| |                                                         |   | (1,750       | )
| | Income tax expense                                      | $ | 24,900       |  

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

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

| |                                                          |   |              |   |   | Years Ended |  
| | -------------------------------------------------------- | - | ------------ | - | - | ----------- | -
| |                                                          |   | December 31, |  
| |                                                          |   | 2014         |   |   | 2013        |  
| | Earnings (loss) before income
      taxes                | $ | 115,690      |   | $ | (63,976     | )
| | Statutory tax rate                                       |   | 26.00%       |   |   | 25.75%      |  
| | Income tax expense (benefit)                             |   | 30,079       |   |   | (16,474     | )
| | Reconciling items:                                       |   |              |   |   |             |  
| | Difference
      between statutory and foreign tax rates |   | (15,345      | ) |   | 12,002      |  
| | (Deductible) non-deductible
      share-based payments   |   | (187         | ) |   | 994         |  
| | Non-deductible
      expenses                            |   | 6,365        |   |   | 2,391       |  
| | Change in unrecognized deferred
      tax assets         |   | 3,973        |   |   | 2,696       |  
| | Other                                                    |   | 15           |   |   | 12          |  
| | Income tax expense                                       | $ | 24,900       |   | $ | 1,621       |  

Effective January 1, 2014, the income
tax rate in Guatemala increased from 6% to 7% of taxable revenues for entities
in the optional simplified regime for income derived from lucrative activities.
The Company has elected to be taxed under this regime.

At December 31, 2014, the Companys
significant components of deferred income tax assets related to inventories and
trade accounts receivable and were $2,044 (December 31, 2013: $294). The Company
did not have any deferred income tax liabilities at December 31, 2014 and 2013.

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

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

As at December 31, 2014, the Company
had $68,126 of tax losses (December 31, 2013: $46,279) for which $nil (December
31, 2013: $nil) 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 2030.

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

---

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

Deductible temporary differences at
December 31, 2014 and 2013 are as follows:

December 31,
    
    
    December 31,2014
    
    
    2013Tax losses and tax credits
    $
    68,126
    
    $
    46,729Deductible temporary
      differencesCumulative eligible
      capital
    
    759
    
    
    816Financing costs
    
    2,275
    
    
    7,900Deductible temporary difference
    $
    71,160
    
    $
    55,445


|18. | EARNINGS (LOSS) PER
SHARE
|--- | -------------------------

Year ended December 31, 2014
    
    
    Year ended December 31, 2013Weighted
    
    
    
    
    
    
    
    
    WeightedEarnings
    
    
    average
    
    
    Earnings
    
    
    Loss
    
    
    average
    
    
    Lossfor the
    
    
    shares
    
    
    per
    
    
    for the
    
    
    shares
    
    
    peryear
    
    
    outstanding
    
    
    share
    
    
    year
    
    
    outstanding
    
    
    shareBasic EPS(1)
    $
    90,790
    
    
    147,405,379
    
    $
    0.62
    
    $
    (65,597
    )
    
    145,842,795
    
    $
    (0.45
    )Effect of dilutive securities:Share options
    
    -
    
    
    586,892
    
    
    (0.01
    )
    
    -
    
    
    -
    
    
    -Diluted EPS
    $
    90,790
    
    
    147,992,271
    
    $
    0.61
    
    $
    (65,597
    )
    
    145,842,795
    
    $
    (0.45
)


| | (1) | The weighted average shares outstanding used in the basic
      earnings per share calculation includes the dilutive impact of 285,667
      DSAs (year ended December 31, 2013: 181,334 DSAs).
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

At December 31, 2014, 1,547,659 Shares
Options and 285,667 Share Awards were outstanding of which 69,000 and nil,
respectively, were anti-dilutive (year ended December 31, 2013: nil and nil,
respectively) because the underlying exercise prices exceeded the average market
price for the year ended December 31, 2014 of CAD$23.24 (year ended December 31,
2013: CAD$16.94) .

During the year ended December 31,
2014, the Company declared and paid to its shareholders dividends of $0.02 per
common share for total dividends of $2,953 (year ended December 31, 2013: no
dividends declared or paid).

For the period January 1, 2015 to March
11, 2015, the Company declared and paid dividends of $0.02 per common share for
each of the months of January and February for total dividends paid of $5,906.
The Company declared and made payable dividends of $0.02 per common share for
the month of March for total dividends payable of $2,953.

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

---

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

|19. | SUPPLEMENTAL CASH FLOW
  INFORMATION
|--- | ------------------------------------

| |                                                                                |   | Years Ended  |  
| | ------------------------------------------------------------------------------ | - | ------------ | -
| |                                                                                |   | December 31, |  
| |                                                                                |   | 2014         |  
| | Trade and other receivables                                                    | $ | (5,201       | )
| | Inventories                                                                    |   | (16,329      | )
| | Other current assets                                                           |   | (2,693       | )
| | Other non-current assets                                                       |   | (9,363       | )
| | Accounts payable, accrued
      liabilities, and other non-current liabilities |   | 5,316        |  
| | Changes in working capital                                                     | $ | (28,270      | )
| |                                                                                |   |              |  
| | Supplemental information:                                                      |   |              |  
| | Interest received                                                              | $ | 37           |  

|20. | SEGMENTED INFORMATION
|--- | ---------------------

The Company conducts its business as a
single operating segment, the principal business activities being the operation
of mineral properties for the mining of precious metals and the acquisition,
exploration and development of mineral interests. All mineral interests, plant
and equipment are situated in Guatemala and all revenues are generated by the
Companys mine in Guatemala. Substantially all of the cash and cash equivalents
are denominated in United States dollars and are held in Canada. The corporate
office located in Reno, Nevada, USA, provides support to the mining and
exploration activities with respect to financial, human resources and technical
support.

The Company has contracts with a number
of customers for its concentrate sales. The Companys top three customers
account for 85% of revenues for the year ended December 31, 2014. The revenues
by customer for the year ended December 31, 2014 are 37%, 26%, and 22%. No other
customer accounted for more than 10% of sales during the respective periods. The
loss of these customers or curtailment of purchases by such customers could have
a material adverse effect on the Companys results of operations, financial
condition and cash flows.

|21. | FAIR VALUE OF FINANCIAL
  INSTRUMENTS
|--- | -------------------------------------

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.                                                                                                                                                                                        

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

---

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

At December 31, 2014, the levels in the
FV hierarchy into which the Companys financial assets are measured and
recognized on the balance sheet at fair value are categorized as follows:

December 31,
      2014
    
    
    December 31, 2013Level 1
    
    
    Level 2
    
    
    Level 1
    
    
    Level 2Cash
    $
    79,830
    
    $
    -
    
    $
    8,812
    
    $
    -Cash equivalents
    
    -
    
    
    526
    
    
    -
    
    
    26Trade and other receivables
    
    -
    
    
    7,707
    
    
    -
    
    
    2,506$
    79,830
    
    $
    8,233
    
    $
    8,812
    
    $
    2,532


There were no transfers between Level 1
and Level 2 during the year ended December 31, 2014. At December 31, 2014 and
2013, there were no financial assets measured and recognized at fair value that
would be categorized as Level 3 in the fair value hierarchy.

The Companys trade receivables are
classified as FVTPL.

At December 31, 2014 and 2013, there
were no financial liabilities measured and recognized at fair value that would
be categorized as Level 1, Level 2 or Level 3 in the fair value hierarchy.

|22. | FINANCIAL RISK MANAGEMENT
|--- | -------------------------

The Company has exposure to certain
risks resulting from its use of financial instruments. These risks include
credit risk, liquidity risk and market risk.

| | a) | Credit Risk
| | -- | -----------

Credit risk is the risk that the
counterparty to a financial instrument will cause a loss for the Company by
failing to meet its obligations. Credit risk for the Company is primarily
related to trade and other receivables and cash and cash equivalents.

The Company manages the credit risk
associated with trade and other receivables by selling to organizations with
strong credit ratings and 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.

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.

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

---

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

| | 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. At December
31, 2014, the Company deems this risk to be minimal.

The Companys financial liabilities at
December 31, 2014 include accounts payable and accrued liabilities, all of which
are due within a year. The other long-term liabilities consist of the SARs
long-term portion and severance provisions.

1 year
    
    
    2-5 years
    
    
    5+ years
    
    
    TotalAccounts payable and accrued
      liabilities
    $
    40,246
    
    $
    -
    
    $
    -
    
    $
    40,246Debt
    
    51,313
    
    
    -
    
    
    -
    
    
    51,313Income tax payable
    
    1,825
    
    
    -
    
    
    -
    
    
    1,825Lease and contractual agreements
    
    5,921
    
    
    1,796
    
    
    66
    
    
    7,783Commitments to purchase
      equipment, services, materials and supplies
    
    19,400
    
    
    -
    
    
    -
    
    
    19,400Other long-term liabilities
    
    -
    
    
    2,164
    
    
    -
    
    
    2,164Reclamation provision
    
    -
    
    
    -
    
    
    10,240
    
    
    10,240$
    118,705
    
    $
    3,960
    
    $
    10,306
    
    $
    132,971


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

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

| | i. | Foreign Exchange Risk
| | -- | ---------------------

The Company is exposed to currency
risk on cash and cash equivalents and accounts payable that are denominated in a
currency other than the USD$. To minimize risk, the Companys funds are kept in
highly liquid instruments such as commercial paper and time deposits. The
Company also contracts for goods and services mainly in USD$ currency. At
December 31, 2014, the Company held substantially all cash in USD$ to minimize
exchange rate risk. Cash and cash equivalents includes the following balances
held in foreign currencies:

| |                                         |   | December 31, |  |   | December 31, | 
| | --------------------------------------- | - | ------------ |  | - | ------------ | 
| |                                         |   | 2014         |  |   | 2013         | 
| | CAD$                                    | $ | 185          |  | $ | 1,050        | 
| | Guatemalan quetzal and other currencies |   | 1,188        |  |   | 643          | 
| |                                         | $ | 1,373        |  | $ | 1,693        | 

While most of the Companys goods and
services are contracted in USD$, there is a portion contracted in other
currencies (CAD$ and Guatemalan Quetzals). The appreciation of these currencies
against the USD$ can increase the costs the Company incurs while the
depreciation of these currencies against the USD$ can decrease the costs the
Company incurs. At December 31, 2014, the Company has determined this risk to be
low.

|
|
|

---

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

The Company recognized a foreign
exchange loss of $906 year ended December 31, 2014 (year ended December 31,
2013: $nil).

| | 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, 2014, the Companys
interest-bearing financial instruments are related to cash and cash equivalents,
the credit facility, and finance leases. At December 31, 2014, the credit
facility was subject to a floating interest rate (note 11). The weighted average
interest rate paid by the Company during the year ended December 31, 2014
related to the credit facility was 6.57% (year ended December 31, 2013: 6.27%) .
At December 31, 2014, the Company has determined the interest rate risk to be
low.

| | 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. At December 31, 2014, the Company has determined that risk to the
Company due to metals prices is at an acceptable level and have entered into no
hedging contracts.

The costs associated with operating
and construction activities of the Company are subject to price risk as it
relates to certain consumables including diesel fuel and power. The Company has
determined these risks to be negligible at December 31, 2014.

|23. | CAPITAL MANAGEMENT
|--- | ------------------

The Companys policy is to maintain a
strong capital base so as to maintain investor, creditor and market confidence
and to support future development of the business. The Company seeks to maintain
a balance between the higher returns that might be possible with higher levels
of borrowing and the advantages and security afforded by a sound capital
position. The capital structure of the Company consists of common equity,
comprising share capital and reserves net of accumulated deficit, and debt,
which includes the credit facility and finance leases.

| |                                 |   | December 31, |  |  | December 31, |  
| | ------------------------------- | - | ------------ |  |  | ------------ | -
| |                                 |   | Notes        |  |  | 2014         |  
| | Equity                          | $ |              |  |  | 878,060      |  
| | Debt                            |   | 11           |  |  | 49,804       |  
| |                                 |   |              |  |  | 927,864      |  
| | Less: cash and cash equivalents |   | 6            |  |  | (80,356      | )
| |                                 | $ |              |  |  | 847,508      |  

On June 4, 2013, the Company entered
into a $50 million secured credit facility (the facility) with an
international financial institution. On December 20, 2013, the Company reached
an agreement with the lender to expand the facility by an additional $25
million. The additional $25 million was drawn on January 2, 2014 and repaid on
September 3, 2014 (note 11). The intent of the facility is to provide working
capital for general corporate purposes.

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

---

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

The Companys overall capital
management strategy remains unchanged from the year ended December 31, 2013.

|24. | RELATED PARTIES
|--- | ---------------

| | a) | Related party transactions
| | -- | --------------------------

The Companys related parties include
its subsidiaries, Goldcorp Inc. as an approximate 39% equity shareholder in the
Companys publicly traded shares, key management personnel, and Directors.

Transactions with subsidiaries, key
management personnel, and Directors were conducted using normal commercial terms
and were considered to be at arms length and are included in these consolidated
financial statements.

| | b) | Key management personnel
  compensation
| | -- | ---------------------------------------

Key management includes those
personnel having the authority and responsibility for planning, directing, and
controlling the Company. In addition to their salaries, key management
personnel, including the Board of Directors, Officers, Vice Presidents and
senior management, receive bonuses and also participate in the Companys Share
Plan (note 16).

Key management personnel compensation
included in corporate and general administrative expenses is as follows:

| |                                       |   | Years Ended  | 
| | ------------------------------------- | - | ------------ | 
| |                                       |   | December 31, | 
| |                                       |   | 2014         | 
| | Short-term employee
      benefits(1) | $ | 6,275        | 
| | Share-based payments                  |   | 4,647        | 
| |                                       | $ | 10,922       | 

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

|25. | 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.

|26. | EVENTS AFTER THE REPORTING
PERIOD
|--- | ---------------------------------

| | a) | Business combination
agreement
| | -- | ------------------------------

On February 9, 2015, the Company
entered into the Arrangement Agreement with Rio Alto Mining Limited (Rio Alto)
for a business combination of the two companies pursuant to a plan of
arrangement (the Arrangement). Under the terms of the Arrangement, each issued
and outstanding common share of Rio Alto will be exchanged for 0.227 of a Tahoe
common share and CAD$0.001 in cash. Upon closing of the Arrangement, existing
Tahoe and Rio Alto shareholders will own approximately 65% and 35% of the
combined company, respectively. Prior to entering into the Arrangement Agreement
with Rio Alto, the Company obtained consent from its lender in accordance with
the loan covenants.

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

---

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

Based on the closing price of the
Shares on the TSX of CAD$17.64 on February 6, 2015, the offer implies
consideration of CAD$4.00 per Rio Alto share which represents a premium of 22.1%
to the closing price of Rio Alto shares of CAD$3.28 on the TSX on February 6,
2015 and a premium of 20.3% based on the volume weighted average prices of each
respective company on the TSX for the 20-day period ending on February 6, 2015.
The boards of directors of each of Tahoe and Rio Alto have determined that the
Arrangement is in the best interests of their respective shareholders based on a
number of factors, including fairness opinions received from their respective
financial advisors.

The completion of the Arrangement is
subject to the approval by at least 66.67% of the votes cast by shareholders of
Rio Alto at a special meeting. In accordance with the rules of the TSX, the
Company has obtained written consent from its shareholders with ownership,
control or direction over more than 50% of the outstanding Tahoe common shares
approving the issuance of Tahoe common shares as consideration under the
Arrangement.

In addition to Rio Alto shareholder
and court approvals, the Arrangement is subject to applicable regulatory
approvals and the satisfaction of certain other closing conditions customary in
transactions of this nature. The Arrangement is expected to close in April 2015.

The Arrangement includes customary
deal-protection provisions including non-solicitation provisions, a right to
match competing offers and a CAD$57.6 million termination fee payable to the
Company under certain circumstances.

For additional details, see the news
release dated February 9, 2015 available at www.sedar.com or on the
Companys website at www.tahoeresourcesinc.com.

| | b) | Guatemalan Royalty
| | -- | ------------------

On November 28, 2014, the Guatemalan
Congress passed legislation that would increase statutory royalties in the
mining law. The royalty increase is the only proposed change to the Guatemala
mining law and is part of an effort to raise revenue and balance the 2015
budget. President Otto Perez Molina signed and approved the legislation which
subsequently became law and is effective January 1, 2015.

The law requires that the Company pay
a nine percent royalty directly to the federal government and a one percent
royalty to the local municipalities for a total royalty payment of ten percent.
This represents an additional five percent royalty to the Companys current
combined statutory and voluntary regime of five percent. The law does not
contemplate existing agreements with local and regional municipalities and
replaces all current voluntary royalty agreements.

Industry groups and local governments
are currently challenging the new law in the Guatemalan Constitutional Court.
For financial reporting purposes, as of January 1, 2015, the Company commenced
accruing royalty payments at the ten percent legislated rate.

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

---