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MANAGEMENTS DISCUSSION AND ANALYSIS

For the years ended December 31, 2014 and 2013

Dated March 11, 2015

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|                                                                                                      | Managements Discussion and Analysis
|----------------------------------------------------------------------------------------------------- | ------------------------------------
|For the Years Ended December 31, 2014 and 2013                                                       
|(tabular amounts expressed in thousands of
      United States dollars, except where otherwise noted)
|                                                                                                      |                                     

This Managements Discussion & Analysis (MD&A) of
Tahoe Resources Inc. (Tahoe) and its subsidiaries (together referred to as the
Company) has been prepared to enable a reader to assess material changes in
financial condition and results of operations as at and for the years ended
December 31, 2014 and 2013. The following discussion of performance, financial
condition and future prospects should be read in conjunction with the audited
consolidated financial statements for the years ended December 31, 2014 and 2013
(consolidated financial statements), prepared in accordance with International
Financial Reporting Standards as issued by the International Accounting
Standards Board (IFRS). The information provided herein supplements, but does
not form part of, the consolidated financial statements. This MD&A contains
forward looking information that is subject to risk factors set out the
cautionary note herein. This discussion covers the years ended December 31, 2014
and 2013 and the subsequent period up to the date of this MD&A. Dollar
amounts are stated in millions of United States dollars (USD$), the Companys
functional currency, unless otherwise indicated. Tabular amounts are presented
in thousands of USD$, except where otherwise noted. Information for this
MD&A is prepared as at March 11, 2015.

BUSINESS OVERVIEW

Tahoe is a Canadian public mineral exploration, development and
mine operating company whose common shares are listed on the Toronto Stock
Exchange (TSX) under the symbol THO and on the New York Stock Exchange
(NYSE) under the symbol TAHO. Tahoe is a reporting issuer in each of the
provinces and territories of Canada. Additional information relating to the
Company, including a copy of this MD&A, may be obtained or viewed from the
System for Electronic Document Analysis and Retrieval (SEDAR) at
www.sedar.com, on the Electronic Data Gathering, Analysis, and Retrieval
system (EDGAR) at www.sec.gov, and on the Companys website at
www.tahoeresourcesinc.com.

Tahoe was incorporated under the Business Corporations Act
(British Columbia) on November 10, 2009. The Companys principal business
activity is to profitably operate the Escobal mine, a mining operation located
in southeastern Guatemala. Additional business objectives are the acquisition,
exploration, development and operation of mineral properties for the mining of
precious metals in the Americas.

At present, the Companys only commercial operation is the
Escobal mine, which contains high-grade silver, gold, lead, and zinc
mineralization. Operating the Escobal mine as a profitable silver mine will
require that Tahoe consistently meet production targets and effectively manage
costs.

Mill commissioning commenced at the end of the third quarter of
2013 and the Company declared commercial production during the first quarter of
2014. As a result, there are no production results and limited earnings results
for the comparative year ended December 31, 2013. The Company has included
comparative financial figures where applicable.

2014 HIGHLIGHTS

|OPERATIONAL AND FINANCIAL
|-------------------------
|                         
|                        
|                         
|                        
|                         
|                        
|                         
|                        



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|                                                                                                      | Managements Discussion and Analysis
|----------------------------------------------------------------------------------------------------- | ------------------------------------
|For the Years Ended December 31, 2014 and 2013                                                       
|(tabular amounts expressed in thousands of
      United States dollars, except where otherwise noted)
|                                                                                                      |                                     

| | Earnings from operations(1)for the
      year were $123.3 million, compared to a net loss from operations of $61.2
      million for the prior year.                                                                                                                                                                                                                                                                                                                  
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Earnings and total comprehensive income for the year were
      $90.8 million resulting in basic and diluted earnings per share of $0.62
      and $0.61, respectively, compared to the prior year net loss of $65.6
      million resulting in a basic and diluted loss per share of $0.45 and
      $0.45, respectively.                                                                                                                                            
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Cash flow provided by operations before changes in
      working capital(1)was $173.2 million compared to prior year
      cash flow used in operating activities before changes in working capital
      of $51.6 million.                                                                                                                                                                                                                                           
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Cash costs net of by-product credits(2)were $6.37 per silver ounce produced.                                                                                                                                                                                                                                                                                                                                                                                          
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | All-in sustaining costs net of by-product
      credits(2)were $9.15 per silver ounce produced.                                                                                                                                                                                                                                                                                                                                                                       
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | The Company declared and paid dividends of $3.0
      million to shareholders.                                                                                                                                                                                                                                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | The Company announced the completion of new mineral
      resource and mineral reserve estimates prepared in accordance with
      National Instrument 43-101 (NI 43-101) and supported by an independent
      Feasibility Study of the Escobal mine (the Feasibility Study), released
      on November 5, 2014 and available at www.sedar.comor on the
      Companys website at www.tahoeresourcesinc.com. Highlights of the
      Feasibility Study include:

| | o | Proven and Probable mineral reserves of 31.4 million
      tonnes at an average silver grade of 347 grams per tonne (g/t) for 350.5
      million silver ounces contained in the mine plan;                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                 
| | o | Average annual production of 19.1 million
      silver ounces over the first 10 years of the mine life;                                                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                 
| | o | Measured and Indicated (M&I) mineral resources
      totaling 433.9 million silver ounces at an average grade of 346 g/t,
      reflecting an increase of 18% in M&I silver ounces as compared to the
      mineral resource estimate from the May 2012 Preliminary Economic
      Assessment.

|(1) | Refer to the Additional GAAP Measures section of
      this MD&A.  
|--- | ---------------------------------------------------------------------
|(2) | Refer to the Non-GAAP Financial Measuressection
      of this MD&A.

RECENT DEVELOPMENTS

Proposed business combination with Rio Alto

On February 9, 2015, the Company entered into an 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.

Based on the closing price of the Companys common 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.



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|                                                                                                      | Managements Discussion and Analysis
|----------------------------------------------------------------------------------------------------- | ------------------------------------
|For the Years Ended December 31, 2014 and 2013                                                       
|(tabular amounts expressed in thousands of
      United States dollars, except where otherwise noted)
|                                                                                                      |                                     

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, Tahoe has obtained written
approval from Tahoe shareholders with ownership, control or direction over more
than 50% of the outstanding shares for the issuance of 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.

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.



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|                                                                                                      | Managements Discussion and Analysis
|----------------------------------------------------------------------------------------------------- | ------------------------------------
|For the Years Ended December 31, 2014 and 2013                                                       
|(tabular amounts expressed in thousands of
      United States dollars, except where otherwise noted)
|                                                                                                      |                                     

SELECTED ANNUAL FINANCIAL INFORMATION

|                                                                            |   | December 31, |  |   | December 31, |   |   | December 31, |  
|--------------------------------------------------------------------------- | - | ------------ |  | - | ------------ | - | - | ------------ | -
|                                                                            |   | 2014         |  |   | 2013         |   |   | 2012         |  
|Metal Sold                                                                  |   |              |  |   |              |   |   |              |  
|Silver (ozs)                                                                |   | 18,160,421   |  |   | -            |   |   | -            |  
|Gold (ozs)                                                                  |   | 8,361        |  |   | -            |   |   | -            |  
|Lead (t)                                                                    |   | 9,131        |  |   | -            |   |   | -            |  
|Zinc (t)                                                                    |   | 10,652       |  |   | -            |   |   | -            |  
|Realized Price                                                              |   |              |  |   |              |   |   |              |  
|Silver (per oz)                                                             | $ | 18.13        |  | $ | -            |   | $ | -            |  
|Gold (per oz)                                                               | $ | 1,258        |  | $ | -            |   | $ | -            |  
|Lead (per t)                                                                | $ | 2,053        |  | $ | -            |   | $ | -            |  
|Zinc (per t)                                                                | $ | 2,220        |  | $ | -            |   | $ | -            |  
|LBMA/LME
      Price(1)                                                     |   |              |  |   |              |   |   |              |  
|Silver (per oz)                                                             | $ | 19.08        |  | $ | -            |   | $ | -            |  
|Gold (per oz)                                                               | $ | 1,266        |  | $ | -            |   | $ | -            |  
|Lead (per t)                                                                | $ | 2,096        |  | $ | -            |   | $ | -            |  
|Zinc (per t)                                                                | $ | 2,164        |  | $ | -            |   | $ | -            |  
|Revenues                                                                    | $ | 350,265      |  | $ | -            |   | $ | -            |  
|Earnings (loss) from
      operations(2)                                    | $ | 123,272      |  | $ | (61,181      | ) | $ | (100,579     | )
|Earnings (loss) attributable to common
      shareholders                   | $ | 90,790       |  | $ | (65,597      | ) | $ | (93,453      | )
|Earnings (loss) per common
      share                                      |   |              |  |   |              |   |   |              |  
|Basic                                                                       | $ | 0.62         |  | $ | (0.45        | ) | $ | (0.65        | )
|Diluted                                                                     | $ | 0.61         |  | $ | (0.45        | ) | $ | (0.65        | )
|Dividends paid                                                              | $ | 2,953        |  | $ | -            |   | $ | -            |  
|Cash flow provided by
      (used in) operating activities                  | $ | 119,322      |  | $ | (59,605      | ) | $ | (87,773      | )
|Cash and cash equivalents                                                   | $ | 80,356       |  | $ | 8,838        |   | $ | 164,561      |  
|Total assets                                                                | $ | 975,628      |  | $ | 883,333      |   | $ | 852,943      |  
|Total long-term liabilities                                                 | $ | 5,693        |  | $ | 4,214        |   | $ | 4,721        |  
|Costs per silver ounce
      produced                                       |   |              |  |   |              |   |   |              |  
|Total cash costs
      net of by-product credits(2)                         | $ | 6.37         |  | $ | -            |   | $ | -            |  
|All-in
      sustaining costs per silver ounce net of by-product credits(2) | $ | 9.15         |  | $ | -            |   | $ | -            |  

|(1) | London Bullion Market Association (LBMA)/London Metal
      Exchange (LME) average closing prices for 2014.
|--- | -----------------------------------------------------------------------------------------------------------
|(2) | Refer to Non-GAAP Financial Measuresand
      Additional GAAP Measures sections of this
  MD&A.        

|REVIEW OF
      ANNUAL FINANCIAL RESULTS
|----------------------------------------

Earnings for the Company increased to $90.8 million compared to
a loss of $65.6 million for 2013 as a result of the following factors:

Revenues

Commercial operations commenced in the first quarter of 2014 at
which time the Company recorded its first revenues. During 2014, the Company
sold in concentrate 18.2 million silver ounces, 8,361 gold ounces at realized
prices of $18.13 and $1,258 per ounce, respectively, and 9,131 tonnes of lead
and 10,652 tonnes of zinc at realized prices of $2,053 and $2,220 per tonne,
respectively. These concentrate sales generated a total of $350.3 million in
revenues, net of treatment and refining charges for 2014. During 2013,
pre-commercial production revenues generated were capitalized as part of the
cost of placing the asset into service.

The Companys revenue and trade receivables include
provisionally priced metal concentrate sales which are marked to market at the
end of each reporting period based on the forward price for the quotational period stipulated in the contract (or an
approximation thereof). Provisionally priced metal at December 31, 2014 includes
2.5 million silver ounces and 1,089 gold ounces at $15.63 and $1,186 per ounce,
respectively and 1,259 and 2,240 tonnes of lead and zinc at $1,878 and $2,171
per tonne, respectively.



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|                                                                                                      | Managements Discussion and Analysis
|----------------------------------------------------------------------------------------------------- | ------------------------------------
|For the Years Ended December 31, 2014 and 2013                                                       
|(tabular amounts expressed in thousands of
      United States dollars, except where otherwise noted)
|                                                                                                      |                                     

Operating costs

Production costs

Production costs, which comprise the
full cost of operations less royalties and depreciation and depletion, form a
component of total operating costs and were $127.3 million for 2014. During
2013, pre-commercial production costs incurred were capitalized as part of the
cost of placing the asset into service.

During 2014, the Company recognized
$0.8 million for obsolete supplies inventory which is included in production
costs and is related to reagents and filter cloths used during the ramp up
period of the Escobal mine which have been replaced by other consumables as a
result of optimizing the production process.

Royalties

During 2014, royalty expense to
Guatemalan government agencies was $20.8 million compared to $nil in 2013, due
to the commencement of commercial production in the first quarter of 2014.
During 2013, royalties incurred on pre-commercial production revenues were
capitalized as part of the cost of placing the asset into service.

Depreciation and depletion

During 2014, depreciation and depletion
was $43.3 million compared to $nil in 2013, due to the commencement of
commercial production in the first quarter of 2014. During 2013, pre-commercial
production depreciation and depletion was capitalized as part of the cost of
placing the asset into service.

Other operating expenses

Exploration expenses

Exploration expenses were $3.6 million
for 2014 compared to $5.3 million in 2013 as a result of fewer metres (m)
being drilled during the current year. Twenty-eight surface holes and four
underground holes totaling 16,624m were drilled during 2014 compared to 54
surface holes totaling 29,532m during 2013.

General and administrative
expenses

General and administrative expenses
were $32.0 million for 2014 compared to $19.5 million for 2013. This $12.5
million increase over prior year relates in part to an increase of $4.0 million
in charitable contributions and donations, $2.3 million of which was donated to
the Guatemalan Governments Zero Hunger Pact program. Salaries and benefits
increased by $2.9 million due to increased staffing at the corporate level
resulting from the commencement of commercial operations. Investor relations and
communications increased by $1.1 million as a result of additional public
relations campaigns combined with an increase in public awareness programs to
coincide with the first year of commercial operations. Professional and
consulting fees increased by $0.7 million, of which $0.2 million relates to
increased audit fees as a result of the Companys first year of commercial operations and certain Sarbanes-Oxley compliance expenses. The
remaining $0.5 million increase is a result of higher general consulting fees.
Share-based compensation increased by $0.2 million. The remainder is a $3.6
million increase in administrative and other expenses as a result of increases
in Guatemala City overhead, corporate social responsibility programs and other
general and administrative expenses.



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|                                                                                                      | Managements Discussion and Analysis
|----------------------------------------------------------------------------------------------------- | ------------------------------------
|For the Years Ended December 31, 2014 and 2013                                                       
|(tabular amounts expressed in thousands of
      United States dollars, except where otherwise noted)
|                                                                                                      |                                     

Other expense

Interest Expense

Interest expense for 2014 was $5.6
million compared to $1.8 million in 2013. The increase over the prior year is
due to the original $50 million credit facility being outstanding for the entire
2014 year combined with the additional $25 million credit facility expansion
that was drawn and repaid during 2014.

Net foreign exchange loss

A foreign exchange loss of $0.9 million
was recognized during 2014 compared to $nil during 2013. The variation in
foreign exchange compared to prior periods is the result of fluctuations in the
CAD$ and Guatemalan Quetzal exchange rates.

Total Assets

Total assets increased by $92.3 million during 2014 primarily
due to increases in cash and cash equivalents of $71.5 million relating to the
collection of revenues, trade and other receivables of $5.2 million, inventories
of $17.6 million, other current and long-term assets of $13.8 million, offset by
a decrease related to mineral interests of $15.8 million.

Total long-term liabilities

Total long-term liabilities increased by $1.5 million as a
result of a $0.5 million increase in the reclamation provision due to the annual
revaluation of estimated closure costs and a $1.0 million increase in other
non-current liabilities.



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|                                                                                                      | Managements Discussion and Analysis
|----------------------------------------------------------------------------------------------------- | ------------------------------------
|For the Years Ended December 31, 2014 and 2013                                                       
|(tabular amounts expressed in thousands of
      United States dollars, except where otherwise noted)
|                                                                                                      |                                     

SELECTED QUARTERLY RESULTS

Selected consolidated financial information from continuing
operations for the most recent eight quarters is as follows:

|                                                                                                       |   | Q4      |  |   | Q3      |  |   | Q2      |  |   | Q1      |  |   | Q4      |   |   | Q3      |   |   | Q2      |   |   | Q1      |  
|------------------------------------------------------------------------------------------------------ | - | ------- |  | - | ------- |  | - | ------- |  | - | ------- |  | - | ------- | - | - | ------- | - | - | ------- | - | - | ------- | -
|                                                                                                       |   | 2014    |  |   | 2014    |  |   | 2014    |  |   | 2014    |  |   | 2013    |   |   | 2013    |   |   | 2013    |   |   | 2013    |  
|Metal Sold                                                                                             |   |         |  |   |         |  |   |         |  |   |         |  |   |         |   |   |         |   |   |         |   |   |         |  
|Silver (000s ozs)                                                                                     |   | 4,073   |  |   | 5,102   |  |   | 4,805   |  |   | 4,180   |  |   | -       |   |   | -       |   |   | -       |   |   | -       |  
|Gold (ozs)                                                                                             |   | 1,567   |  |   | 2,240   |  |   | 2,142   |  |   | 2,412   |  |   | -       |   |   | -       |   |   | -       |   |   | -       |  
|Lead (t)                                                                                               |   | 1,818   |  |   | 2,257   |  |   | 2,670   |  |   | 2,386   |  |   | -       |   |   | -       |   |   | -       |   |   | -       |  
|Zinc (t)                                                                                               |   | 3,068   |  |   | 2,265   |  |   | 3,066   |  |   | 2,253   |  |   | -       |   |   | -       |   |   | -       |   |   | -       |  
|Realized Price                                                                                         |   |         |  |   |         |  |   |         |  |   |         |  |   |         |   |   |         |   |   |         |   |   |         |  
|Silver (per oz)                                                                                        | $ | 14.99   |  | $ | 16.87   |  | $ | 20.82   |  | $ | 20.20   |  | $ | -       |   | $ | -       |   | $ | -       |   | $ | -       |  
|Gold (per oz)                                                                                          | $ | 1,198   |  | $ | 1,158   |  | $ | 1,383   |  | $ | 1,349   |  | $ | -       |   | $ | -       |   | $ | -       |   | $ | -       |  
|Lead (per t)                                                                                           | $ | 1,754   |  | $ | 2,140   |  | $ | 2,200   |  | $ | 1,990   |  | $ | -       |   | $ | -       |   | $ | -       |   | $ | -       |  
|Zinc (per t)                                                                                           | $ | 2,112   |  | $ | 2,532   |  | $ | 2,245   |  | $ | 1,973   |  | $ | -       |   | $ | -       |   | $ | -       |   | $ | -       |  
|LBMA/LME
      Price(1)                                                                                |   |         |  |   |         |  |   |         |  |   |         |  |   |         |   |   |         |   |   |         |   |   |         |  
|Silver (per oz)                                                                                        | $ | 16.50   |  | $ | 19.74   |  | $ | 19.62   |  | $ | 20.48   |  | $ | -       |   | $ | -       |   | $ | -       |   | $ | -       |  
|Gold (per oz)                                                                                          | $ | 1,201   |  | $ | 1,283   |  | $ | 1,288   |  | $ | 1,292   |  | $ | -       |   | $ | -       |   | $ | -       |   | $ | -       |  
|Lead (per t)                                                                                           | $ | 2,000   |  | $ | 2,183   |  | $ | 2,095   |  | $ | 2,106   |  | $ | -       |   | $ | -       |   | $ | -       |   | $ | -       |  
|Zinc (per t)                                                                                           | $ | 2,235   |  | $ | 2,311   |  | $ | 2,073   |  | $ | 2,029   |  | $ | -       |   | $ | -       |   | $ | -       |   | $ | -       |  
|Revenues                                                                                               | $ | 65,396  |  | $ | 90,279  |  | $ | 104,717 |  | $ | 89,873  |  | $ | -       |   | $ | -       |   | $ | -       |   | $ | -       |  
|Earnings (loss) from
      operations                                                                  | $ | 15,829  |  | $ | 28,754  |  | $ | 45,198  |  | $ | 33,491  |  | $ | (7,271  | ) | $ | (14,196 | ) | $ | (14,750 | ) | $ | (24,964 | )
|Earnings (loss) attributable to
      common shareholders                                              | $ | 9,836   |  | $ | 20,036  |  | $ | 36,107  |  | $ | 24,811  |  | $ | (9,571  | ) | $ | (15,537 | ) | $ | (15,614 | ) | $ | (24,875 | )
|Earnings (loss) per
      Common Share                                                                 |   |         |  |   |         |  |   |         |  |   |         |  |   |         |   |   |         |   |   |         |   |   |         |  
|Basic                                                                                                  | $ | 0.07    |  | $ | 0.13    |  | $ | 0.25    |  | $ | 0.17    |  | $ | (0.07   | ) | $ | (0.11   | ) | $ | (0.11   | ) | $ | (0.17   | )
|Diluted                                                                                                | $ | 0.07    |  | $ | 0.13    |  | $ | 0.24    |  | $ | 0.17    |  | $ | (0.07   | ) | $ | (0.11   | ) | $ | (0.11   | ) | $ | (0.17   | )
|Dividends paid                                                                                         | $ | 2,953   |  | $ | -       |  | $ | -       |  | $ | -       |  | $ | -       |   | $ | -       |   | $ | -       |   | $ | -       |  
|Cash flow provided
      by (used in) operating activities                                             | $ | 17,773  |  | $ | 62,321  |  | $ | 17,679  |  | $ | 21,549  |  | $ | (12,062 | ) | $ | (3,521  | ) | $ | (15,451 | ) | $ | (28,571 | )
|Cash and cash equivalents                                                                              | $ | 80,356  |  | $ | 78,897  |  | $ | 51,506  |  | $ | 39,867  |  | $ | 8,838   |   | $ | 39,173  |   | $ | 99,235  |   | $ | 107,151 |  
|Total assets                                                                                           | $ | 975,628 |  | $ | 963,267 |  | $ | 963,089 |  | $ | 930,309 |  | $ | 883,333 |   | $ | 874,323 |   | $ | 868,121 |   | $ | 828,015 |  
|Total long-term liabilities                                                                            | $ | 5,693   |  | $ | 5,099   |  | $ | 4,915   |  | $ | 4,701   |  | $ | 4,214   |   | $ | 4,887   |   | $ | 4,966   |   | $ | 4,924   |  
|Costs per silver ounce
      produced                                                                  |   |         |  |   |         |  |   |         |  |   |         |  |   |         |   |   |         |   |   |         |   |   |         |  
|Total cash costs net
      of 
             by-product credits(2)                                      | $ | 6.26    |  | $ | 7.02    |  | $ | 5.65    |  | $ | 9.14    |  | $ | -       |   | $ | -       |   | $ | -       |   | $ | -       |  
|All-in
      sustaining costs
             per silver ounce net of by- 
            product credits(2) | $ | 9.09    |  | $ | 9.62    |  | $ | 8.04    |  | $ | 10.25   |  | $ | -       |   | $ | -       |   | $ | -       |   | $ | -       |  

|(1) | London Bullion Market Association (LBMA)/London Metal
      Exchange (LME) average closing prices for each quarter
presented.
|--- | -----------------------------------------------------------------------------------------------------------------------------
|(2) | Refer to the Non-GAAP Financial Measures and the
      Additional GAAP Measures sections of this
  MD&A.                 



---

|                                                                                                      | Managements Discussion and Analysis
|----------------------------------------------------------------------------------------------------- | ------------------------------------
|For the Years Ended December 31, 2014 and 2013                                                       
|(tabular amounts expressed in thousands of
      United States dollars, except where otherwise noted)
|                                                                                                      |                                     

|REVIEW OF
      QUARTERLY FINANCIAL RESULTS
|-------------------------------------------

Since the completion of the Companys Initial Public Offering
and acquisition of the Escobal project in June 2010, the Company built the
Escobal mine and commenced commercial production in the first quarter of 2014.
Variances in results by quarter reflect overall corporate activity and factors
that do not necessarily recur each quarter, including operating results, timing
of concentrate sales, fluctuations in the amount of finished goods, construction
costs, stock based compensation, interest income on fluctuating cash balances,
foreign exchange gains (losses) and exploration drill programs.

Q4 2014 vs. Q4 2013

Earnings for the Company increased to $9.8 million for Q4 2014
compared to a loss of $9.6 million for Q4 2013 as a result of the following
factors:

Revenues

Commercial operations commenced in the first quarter of 2014 at
which time the Company recorded its first revenues. During Q4 2014, the Company
sold in concentrate 4.1 million silver ounces, 1,567 gold ounces at realized
prices of $14.99 and $1,198 per ounce, respectively, and 1,818 tonnes of lead
and 3,068 tonnes of zinc at realized prices of $1,754 and $2,112 per tonne,
respectively. These concentrate sales generated a total of $65.4 million in
revenues, net of treatment and refining charges for Q4 2014. During Q4 2013,
pre-commercial production revenues generated were capitalized as part of the
cost of placing the asset into service.

Operating costs

Production costs

Production costs, which comprise the
full cost of operations less royalties and depreciation and depletion, form a
component of total operating costs and were $29.5 million for Q4 2014. During Q4
2013, pre-commercial production costs incurred were capitalized as part of the
cost of placing the asset into service.

Royalties

During Q4 2014 royalty expense to
Guatemalan government agencies were $4.0 million compared to $nil in Q4 2013,
due to the commencement of commercial production in the first quarter of 2014.
During Q4 2013, royalties incurred on pre-commercial production revenues were
capitalized as part of the cost of placing the asset into service.

Depreciation and depletion

During Q4 2014, depreciation and
depletion was $9.6 million compared to $nil in Q4 2013, due to the commencement
of commercial production in the first quarter of 2014. During Q4 2013,
pre-commercial production depreciation and depletion was capitalized as part of
the cost of placing the asset into service.



---

|                                                                                                      | Managements Discussion and Analysis
|----------------------------------------------------------------------------------------------------- | ------------------------------------
|For the Years Ended December 31, 2014 and 2013                                                       
|(tabular amounts expressed in thousands of
      United States dollars, except where otherwise noted)
|                                                                                                      |                                     

Other operating expenses

Exploration expenses

Exploration expenses were $0.6 million
for Q4 2014 compared to $1.4 million in Q4 2013 as a result of fewer metres
being drilled during the current quarter. Five surface holes totaling 2,683m
were drilled during Q4 2014 compared to nineteen surface holes totaling 8,965m
during Q4 2013.

General and administrative
expenses

General and administrative expenses
were $5.9 million for Q4 2014 compared to $3.5 million for Q4 2013. This $2.4
million increase relates primarily to an increase in salaries and benefits of
$0.7 million due to increased staffing at the corporate level. Investor
relations and communications increased by $0.6 million as a result of additional
public relations campaigns combined with an increase in public awareness
programs. Professional and consulting fees increased by $0.1 million and
charitable contributions and donations increased by $0.1 million. Share-based
payments were consistent at $0.9 million when compared to Q4 2013. The remainder
is a $0.9 million increase as a result of additional Guatemala City overhead,
corporate social responsibility programs, and other general and administrative
expenses.

Other expense

Interest Expense

Interest expense for Q4 2014 was $0.9
million compared to $0.6 million in Q4 2013. The increase over prior year period
is due to the capitalization of interest related to the construction of the
Escobal mine during 2013.

Net foreign exchange loss

A foreign exchange loss of $0.3 million
was recognized during Q4 2014 compared to $0.1 million during Q4 2013. The
variation in foreign exchange compared to the prior year period is the result of
fluctuations in the CAD$ and Guatemalan Quetzal exchange rates.

Q4 2014 vs. Q3 2014

Earnings for the Company decreased to $9.8 million for Q4 2014
compared to $20.0 million for Q3 2014 as a result of the following factors:

Revenues

Commercial operations commenced in the first quarter of 2014 at
which time the Company recorded its first revenues. During Q4 2014, the Company
sold in concentrate 4.1 million silver ounces and 1,567 gold ounces at realized
prices of $14.99 and $1,198 per ounce, respectively, and 1,818 tonnes of lead
and 3,068 tonnes of zinc at realized prices of $1,754 and $2,112 per tonne,
respectively. During Q3 2014, the Company sold 5.1 million silver ounces, 2,240
gold ounces at realized prices of $16.87 and $1,158 per ounce, respectively, and
2,257 tonnes of lead and 2,265 tonnes of zinc at realized prices of $2,140 and
$2,532 per tonne, respectively. These metal sales generated a total of $65.4
million in revenues, net of treatment and refining charges for Q4 2014 compared
to $90.3 million in Q3 2014. The lower revenues realized during Q4 2014 are a
result of decreased quantities of metals sold combined with decreased metals
prices during the quarter and the timing differences related to the settlement
adjustments incurred on prior period shipments.



---

|                                                                                                      | Managements Discussion and Analysis
|----------------------------------------------------------------------------------------------------- | ------------------------------------
|For the Years Ended December 31, 2014 and 2013                                                       
|(tabular amounts expressed in thousands of
      United States dollars, except where otherwise noted)
|                                                                                                      |                                     

Operating costs

Production costs

Production costs, which comprise the
full cost of operations less royalties and depreciation and depletion, form a
component of total operating costs and were $29.5 million for Q4 2014 compared
to $34.9 million in Q3 2014. This $5.4 million decrease is primarily due to
lower diesel prices, fewer tonnes milled and improved operating efficiencies.

During Q3 2014, the Company recognized
$0.8 million for obsolete supplies inventory which is included in production
costs and is related to reagents and filter cloths used during the ramp up
period of the Escobal mine which have been replaced by other consumables as a
result of optimizing the production process. There were no impairment charges
recognized in Q4 2014.

Royalties

During Q4 2014 royalty expense to
Guatemalan government agencies were $4.0 million compared to $6.4 million in Q3
2014 due to lower market prices combined with decreased quantities of metal
sales.

Depreciation and depletion

During Q4 2014, depreciation and
depletion was $9.6 million compared to $12.2 in Q3 2014 primarily due to
approximately 22,000 fewer tonnes milled.

Other operating expenses

Exploration expenses

Exploration expenses were $0.6 million
for Q4 2014 compared to $0.5 million in Q3 2014 as a result of additional metres
being drilled during Q4 2014. Five surface holes totaling 2,683m were drilled
during Q4 2014 compared to five surface holes totaling 2,222m during Q3
2014.

General and administrative
expenses

General and administrative expenses
were $5.9 million for Q4 2014 compared to $7.7 million for Q3 2014. This $1.8
million decrease relates primarily to cost management efforts including a $0.8
million decrease in salaries and benefits due to the reduction of short-term
employee benefits, a decrease of $0.9 million in charitable contributions and
donations and a decrease in professional and consulting fees of $0.1 million.
These decreases were offset by an increase in investor relations and
communications of $0.2 million. Share-based compensation was consistent at $0.9
million compared to Q3 2014. The remainder is $0.2 million of cost reductions in
Guatemala City overhead, corporate social responsibility programs, other general
and administrative expenses.

Other expense

Interest Expense

Interest expense for Q4 2014 decreased
to $0.9 million compared to $1.4 million in Q3 2014 as a result of the repayment
of $25 million in credit facility prior to Q4 2014.



---

|                                                                                                      | Managements Discussion and Analysis
|----------------------------------------------------------------------------------------------------- | ------------------------------------
|For the Years Ended December 31, 2014 and 2013                                                       
|(tabular amounts expressed in thousands of
      United States dollars, except where otherwise noted)
|                                                                                                      |                                     

Net foreign exchange loss

A foreign exchange loss of $0.3 million
was recognized during Q4 2014 compared to $0.6 million during Q3 2014. The
variation in foreign exchange compared to the prior year period is the result of
fluctuations in the CAD$ and Guatemalan Quetzal exchange rates.

2014 OPERATIONAL OVERVIEW

|                                                                 |   | Three Months Ended |  |   | Year Ended        | 
|---------------------------------------------------------------- | - | ------------------ |  | - | ----------------- | 
|                                                                 |   | December 31, 2014  |  |   | December 31, 2014 | 
|                                                                 |   |                    |  |   |                   | 
|Tonnes Milled                                                    |   | 319,632            |  |   | 1,245,730         | 
|Average Tonnes Milled(tpd)                                       |   | 3,474              |  |   | 3,413             | 
|Average Metal Grades                                             |   |                    |  |   |                   | 
|Silver
      (g/t)                                               |   | 585                |  |   | 585               | 
|Gold (g/t)                                                       |   | 0.42               |  |   | 0.42              | 
|Lead                                                             |   | 0.84%              |  |   | 0.93%             | 
|Zinc                                                             |   | 1.52%              |  |   | 1.43%             | 
|Average Metal Recovery(1)                                        |   |                    |  |   |                   | 
|Silver                                                           |   | 87.0%              |  |   | 86.7%             | 
|Gold                                                             |   | 62.8%              |  |   | 64.0%             | 
|Lead                                                             |   | 89.0%              |  |   | 89.0%             | 
|Zinc                                                             |   | 77.7%              |  |   | 75.2%             | 
|Recovered
      Metal(2)                                         |   |                    |  |   |                   | 
|Silver
      Ounces                                              |   | 5,227,504          |  |   | 20,301,675        | 
|Gold Ounces                                                      |   | 2,694              |  |   | 10,893            | 
|Lead Tonnes                                                      |   | 2,389              |  |   | 10,359            | 
|Zinc Tonnes                                                      |   | 3,773              |  |   | 13,394            | 
|Payable Metal(3)                                                 |   |                    |  |   |                   | 
|Silver Ounces                                                    |   | 4,940,363          |  |   | 19,250,104        | 
|Gold Ounces                                                      |   | 2,399              |  |   | 9,882             | 
|Lead Tonnes                                                      |   | 2,246              |  |   | 9,761             | 
|Zinc Tonnes                                                      |   | 3,168              |  |   | 11,239            | 
|Costs Per Ounce Silver
      Produced(4)                         |   |                    |  |   |                   | 
|Total cash
      costs per ounce before by-product credits       | $ | 8.47               |  | $ | 8.97              | 
|Total cash costs per ounce net of by-product credits             | $ | 6.26               |  | $ | 6.37              | 
|Total
      production costs per ounce net of by-product credits | $ | 8.10               |  | $ | 8.50              | 
|All-in sustaining costs per ounce net of by-product credits      | $ | 9.09               |  | $ | 9.15              | 
|Capital Expenditures(5)                                          | $ | 15,183             |  | $ | 41,235            | 

|(1) | Percent silver and gold recovered into lead and zinc
      concentrates; percent lead recovered into lead concentrate; percent zinc
      recovered into zinc concentrate.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Silver and gold contained in lead and zinc concentrates;
      lead contained in lead concentrate; zinc contained in zinc
    concentrate.                                
|(3) | Payable metal calculated using average NSR payable
      values.                                                                                                          
|(4) | Non-GAAP financial measures are described in the
      Non-GAAP Financial Measures section of this MD&A.                                                                
|(5) | Capital expenditures include project and sustaining
      capital.                                                                                                        



---

|                                                                                                      | Managements Discussion and Analysis
|----------------------------------------------------------------------------------------------------- | ------------------------------------
|For the Years Ended December 31, 2014 and 2013                                                       
|(tabular amounts expressed in thousands of
      United States dollars, except where otherwise noted)
|                                                                                                      |                                     

|MINE
      OPERATIONS
|---------------------

The Escobal mine continued to meet the expectations of
management in the fourth quarter of 2014. Highlights for the three months and
year ended December 31, 2014 include:

| | Average mill throughput of 3,474 tpd, with an average
      silver head grade of 585 g/t for the three months ended December 31, 2014.
      Average mill throughput of 3,413 tpd with an average silver head grade of
      585 g/t for the year ended December 31, 2014.                                                                                   
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                              
| | Produced metal concentrates containing 5.2 million ounces
      of silver, 2,694 ounces of gold, 2,389 tonnes of lead and 3,773 tonnes of
      zinc for the three months ended December 31, 2014 and 20.3 million ounces
      of silver, 10,893 ounces of gold, 10,359 tonnes of lead and 13,394 tonnes
      of zinc for the year ended December 31, 2014.
|  |                                                                                                                                                                                                                                                                                                                                                              
| | Average silver recovery to concentrates of
      87.0% for the three months ended December 31, 2014 and 86.7% for the year
      ended December 31, 2014.                                                                                                                                                                                                    
|  |                                                                                                                                                                                                                                                                                                                                                              
| | Produced 5,956 tonnes of lead concentrates containing an
      average silver grade of 25,943 g/t for the three months ended December 31,
      2014 and 23,744 tonnes of lead concentrates containing an average silver
      grade of 25,477 g/t for the year ended December 31, 2014.                                                                     

Since the commencement of commercial production in the first
quarter of 2014, the operation has continued to perform as intended and is now
operating at design capacity.

The Company produced 5.2 million ounces of silver contained in
lead and zinc concentrates in the fourth quarter of 2014 and 20.3 million ounces
of silver for the year. Lead and zinc concentrate production during the quarter
totaled 5,956 dry metric tonnes (dmt) and 7,357 dmt, respectively. For the
year ended December 31, 2014, production was 23,744 dmt and 25,576 dmt of lead
and zinc concentrates, respectively.

During the fourth quarter of 2014, 4,726 dmt of lead
concentrate and 6,436 dmt of zinc concentrate containing approximately 4.1
million payable ounces of silver were shipped and sold to third party smelters.
For the year, 22,123 dmt of lead concentrate and 23,361 dmt of zinc concentrate
containing approximately 18.2 million payable ounces of silver were shipped and
sold to third party smelters.

Fourth quarter concentrate sales generated $65.4 million in
revenues at operating costs of $43.1 million resulting in mine operating
earnings of $22.3 million. Concentrate sales for the year generated $350.3
million in revenues at operating costs of $191.5 million resulting in mine
operating earnings of $158.8 million.

Total cash costs per ounce of silver produced, net of
by-product credits, for the fourth quarter of 2014 was $6.26 and $6.37 for the
year, which is higher than the guidance range provided in the news release dated
November 12, 2013 of $5.65 to $6.25 per ounce. This and other non-GAAP costs per
ounce calculations are described in the Non-GAAP Financial Measures
section of this MD&A.

Underground Development and Production

Underground development continues to advance in support of the
life-of-mine production schedule. Sublevel and stope development on the second
mining front continues to advance on the 1190m, 1215m and 1240m elevation
sublevels. The east ramp is underway to provide access to the East Zone, which
hosts approximately 40% of the Escobal mine resource.

During the fourth quarter, the Escobal mine delivered 325,000
tonnes of ore to the stockpile, mined from stopes on multiple production
sublevels including production from secondary transverse longhole stopes on the
1265m sublevel. Mine production for 2014 totaled 1.24 million tonnes of ore.



---

|                                                                                                      | Managements Discussion and Analysis
|----------------------------------------------------------------------------------------------------- | ------------------------------------
|For the Years Ended December 31, 2014 and 2013                                                       
|(tabular amounts expressed in thousands of
      United States dollars, except where otherwise noted)
|                                                                                                      |                                     

Mill Performance

Mill operations averaged 3,474 tpd for the three months ended
December 31, 2014 including 14 days where the average throughput rate exceeded
4,000 tpd. For the year ending December 31, 2014, mill throughput averaged 3,413
tpd including scheduled mill maintenance down time. Optimization of
metallurgical performance continues.

The mill processed a total of 319,632 tonnes during the quarter
with an average silver recovery of 87.0% in concentrates and produced 5,956
tonnes of lead concentrate and 7,357 tonnes of zinc concentrate containing 5.2
million ounces of silver. For the year ending December 31, 2014, the mill
processed a total of 1,245,729 tonnes with an average silver recovery of 86.7%
in concentrates and produced 23,744 tonnes of lead concentrate and 25,576 tonnes
of zinc concentrate containing 20.3 million ounces of silver.

Capital Projects

Structural steel erection, equipment installation, and
mechanical and electrical construction for the paste backfill plant was near
completion at the end of the fourth quarter. Completion of construction and
pre-commissioning activities is scheduled in the first half of 2015. We expect
the paste backfill plant to be fully operational ahead of the ramp-up to the
4500 tpd mill throughput in the second half of 2015.

The fourth tailing filter press was received in Guatemala in
December and delivered to the Escobal site in January 2015. The filter press is
slated for commissioning in the second half of 2015.

Engineering and procurement of the second primary ventilation
fan was initiated during the quarter. Pad and foundation construction is slated
to begin in the first quarter of 2015 with fan installation anticipated mid-year
2015.

|EXPLORATION
|-----------

All identified mineral resources for the Escobal project are
located on the Escobal Exploitation concession, which along with three other
exploration concessions comprise the project area. The 2014 drilling program
continued to explore extensions of the deposit where it was open laterally and
to depth and to improve confidence in the mineral resource through in-fill
drilling. A total of between one and three drills concentrated on exploration
drilling at the Escobal project throughout the year.

The Escobal project mineral resource occurs in a mineralized
zone that is referred to as the Escobal vein. Exploration to date has defined
the Escobal vein through drill core analyses from drilling campaigns carried out
between 2007 and 2014. As at December 31, 2014, a total of 477 exploration holes
(199,150 metres) have targeted the Escobal vein system. In addition, 21 drill
holes totaling approximately 4,942 metres were completed for the purpose of
collecting metallurgical test samples. All drilling in the Escobal vein has
utilized diamond drill core methods, with the majority of mineralized intercepts
drilled using NQ or larger size drill core. Project core recovery averages
greater than 96%.

During Q4 2014, a total of five holes for a total of 2,683
metres were drilled at the Escobal project. Exploration drilling throughout 2014
tested dip extensions in the East, Central, and West Margarito zones, and
explored mineralized zone projections in the extreme west extension area. The
drill campaign succeeded in defining the known limits of the Escobal vein with
mineralization in the project area now recognized over a 3,000 metre strike
length and 2,000 metre vertical range.

Exploration also tested secondary veins surrounding Escobal.
Drilling continued on the Beto vein zone approximately 800 metres southwest of
the main Escobal vein and in the Gaby zone a secondary vein located approximately six kilometres west of Escobal. Drilling
in both areas is expected to continue in 2015.



---

|                                                                                                      | Managements Discussion and Analysis
|----------------------------------------------------------------------------------------------------- | ------------------------------------
|For the Years Ended December 31, 2014 and 2013                                                       
|(tabular amounts expressed in thousands of
      United States dollars, except where otherwise noted)
|                                                                                                      |                                     

In addition to the Escobal vein, twelve veins have been
discovered on the Companys concessions. These prospective areas continue to be
evaluated; however, a number of these veins occur on concessions that have not
yet been granted or are in areas that are not currently open to exploration.
There is no assurance that concessions will be granted which would allow the
Company to extend exploration activities. Given the proposed moratorium and
unwillingness of MEM to issue new licenses at this time, regional exploration
efforts outside of the Companys two approved licenses have been temporarily
suspended.

Exploration will continue to define vein extensions through
wide step-out drilling. Priority will be placed on testing deep and lateral
extension targets at Escobal as well as other district and regional targets. In
2015, the drilling of the Escobal vein and district drilling is expected to
continue using one core drill. Exploration expenditures for the year ended
December 31, 2014 totaled $3.6 million.

|LEGAL,
      GOVERNMENT ACTIVITIES AND COMMUNITY RELATIONS
|----------------------------------------------------------

Appeal before the Constitutional Court

On July 23, 2013, the Court of Appeals in Guatemala (the
Court) held that the Ministry of Energy and Mines (MEM) should have conducted
a hearing of a written opposition to the Escobal mine exploitation license
during the permitting application process. The Court did not rule on the
substance or validity of the license; it merely stated that MEM was obligated to
hold an administrative hearing addressing the substance of the opposition under
the 1997 Mining Law. The Court did not invalidate or comment on the Escobal mine
exploitation license in its decision. MEM issued a press release on July 24,
2013 stating that the ruling had no impact on the status of the Escobal mine
exploitation license. MEM and the Company have appealed the Courts decision to
the Constitutional Court. If the Constitutional Court upholds the Courts
decision, MEM will likely be compelled to hear the opposition which it already
stated it believes to be without merit. A public hearing of the appeal was held
in November 2013. The Constitutional Court is expected to issue a ruling in the
case sometime in the near future.

Power line

Organized resistance previously impeded the Companys attempts
to install a power line along an approved right of way. The Company installed
contractor supplied diesel-fired generator power which is sufficient to operate
the project up to 4500 tpd. The Company continues to assess alternative power
strategies to reduce power costs.

Garcia, et al. v. Tahoe Resources Inc.

On June 18, 2014, an action was commenced against the Company
in the Supreme Court of British Columbia. Filed by seven Guatemalan plaintiffs,
the lawsuit alleges that Tahoe is directly or vicariously liable for battery
and/or negligence regarding an incident that occurred at the Escobal mine on
April 27, 2013. The plaintiffs seek compensatory and punitive damages. Tahoe
believes the claim has no merit.

Community activity and donations

In April 2014, one of the Companys wholly-owned subsidiaries,
Minera San Rafael, S.A. (MSR) signed a cooperation agreement to support the
Guatemalan Governments Zero Hunger Pact program (Pacto Hambre Cero). The $2.4
million donation, given through Guatemalas Ministry of Social Development, is
being used for family nutrition and household management training initiatives.
Of the total, $1.8 million was paid during 2014 with the remaining $0.6 million included
in current liabilities as at December 31, 2014 as it is anticipated to be paid
during 2015.



---

|                                                                                                      | Managements Discussion and Analysis
|----------------------------------------------------------------------------------------------------- | ------------------------------------
|For the Years Ended December 31, 2014 and 2013                                                       
|(tabular amounts expressed in thousands of
      United States dollars, except where otherwise noted)
|                                                                                                      |                                     

|CREDIT
      FACILITY
|---------------------

On January 2, 2014, the Company expanded its existing $50
million credit facility (the facility) and drew an additional $25 million to
ensure adequate working capital through continued ramp-up of the Escobal mine
and to provide working capital for general corporate purposes. The $25 million
bore interest at a rate per annum of the USD$ London Interbank Offered Rate
(LIBOR) plus 7.25% .

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

On September 3, 2014, the Company repaid the $25 million
expanded portion of the facility with funds generated from mining operations.
The original $50 million is anticipated to be repaid as scheduled from current
cash balances and operating cash flows.

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

Additionally, the facility contains covenants that, among other
things, restrict the ability of the Company and its subsidiaries to incur
additional debt, merge, consolidate, transfer, lease or otherwise dispose of all
or substantially all its of its assets to any other entity.

|2015 OPERATIONS
      OUTLOOK
|-----------------------------

The Company provided guidance regarding expected 2015
production and unit costs in the news release dated January 20, 2015 available
at www.sedar.com or on the Companys website at
www.tahoeresourcesinc.com.

2015 Guidance(1)(2)(3)(6)

| | 18 to 21 million ounces of silver contained in
      concentrates
|- | -----------------------------------------------------------------
| | Cash costs per ounce (1)(5)                                      

| | Total cash costs per ounce before by-product credits         | $ | 9.75  |   |  | to |  | $ | 11.25 |  
| | ------------------------------------------------------------ | - | ----- | - |  | -- |  | - | ----- | -
| | By-product per ounce credit for gold, lead and
      zinc(4) |   | (3.40 | ) |  | to |  |   | (3.00 | )
| | Total cash costs per ounce
      net of by-product credits   | $ | 6.35  |   |  | to |  | $ | 8.25  |  
| |                                                              |   |       |   |  |    |  |   |       |  
| | All-in sustaining costs per ounce                            | $ | 9.75  |   |  | to |  | $ | 11.50 |  

| | (1) | See Cautionary Statement on Forward-Looking
      Information and Non-GAAP Financial Measures in this
      MD&A.      
| | --- | ---------------------------------------------------------------------------------------------------------------------------
| | (2) | Assumes the following metals prices: $1,300/oz gold;
      $1,984/tonne lead; $2,315/tonne zinc.                           
| | (3) | Assumes payable by-product metal production: 11,300 ozs
      gold; 9,452 tonnes lead; 14,453 tonnes zinc.                 
| | (4) | By-product credits per ounce of silver: gold $0.75; lead
      $0.95; zinc $1.70; total $3.40.                             
| | (5) | All per ounce costs are based on silver ounces contained
      in concentrates unless otherwise noted.                     
| | (6) | 2015 Guidance figures presented are for the Escobal mine
      and do not include the impact of the Rio Alto
  Arrangement.



---

|                                                                                                      | Managements Discussion and Analysis
|----------------------------------------------------------------------------------------------------- | ------------------------------------
|For the Years Ended December 31, 2014 and 2013                                                       
|(tabular amounts expressed in thousands of
      United States dollars, except where otherwise noted)
|                                                                                                      |                                     

RISK FACTORS

Tahoes ability to generate revenues and achieve a return on
shareholders investment must be considered in light of the early production
stage of the Escobal mine and the sustainability of operations. The Company is
subject to many risks, including dependence on one project and operating in a
country that at times has experienced political and social unrest and
anti-mining resistance, among other destabilizing factors. This document should
be read in conjunction with the 2014 Annual Information Form (2014 AIF) which
includes a more comprehensive risk factor discussion under the heading
Description of Our Business  Risk Factors. The 2014 AIF is available at
www.sedar.comor on the Companys website at
www.tahoeresourcesinc.com.

|DEPENDENCE ON
      THE ESCOBAL MINE
|------------------------------------

Until the Company acquires additional property interests, any
adverse development affecting the Escobal mine, including potential court
rulings, could have a material adverse effect upon the Company, including the
production of mineral resources, profitability, financial performance and
results of operations.

|OPERATIONS IN
      GUATEMALA
|-----------------------------

The Escobal mine is located in Guatemala. Guatemala has a
history of political unrest. Guatemala suffered a civil armed conflict for 36
years, which was finally resolved through a peace agreement in 1996. The last
political crisis in Guatemala occurred in 1983 and a constitutional government
was restored in 1985. A resurgence of political unrest or a political crisis in
Guatemala could adversely affect the Companys business and results of
operations.

The Companys business may be exposed to a number of risks and
uncertainties, including terrorism and hostage taking, military repression,
expropriation or nationalization without adequate compensation, illegal mining,
labour unrest, high rates of inflation, changes to royalty and tax regimes,
extreme fluctuations in currency exchange rates, volatile local, political and
economic developments, government corruption, difficulty understanding and
complying with an unpredictable regulatory and legal framework respecting the
ownership and maintenance of mineral properties, renegotiation or nullification
of existing concessions, licenses, permits and contracts, surface rights, mining
permits, mines and mining operations, and difficulty obtaining key equipment and
components for equipment. The status of Guatemala as a developing country may
make it more difficult for the Company to obtain any required financing for its
projects.

|ANTI-MINING
      RESISTANCE
|----------------------------

Some communities and non-governmental organizations (NGOs)
have been vocal and active with respect to mining and exploration activities in
Guatemala. These communities and NGOs have taken such actions as road closures,
power line opposition, work stoppages, and law suits for damages. These actions
relate not only to current activities but often in respect to decades old mining
activities by prior owners of mining properties. Such actions by communities and
NGOs may have a material adverse effect on our operations at the Escobal mine,
on exploration activities in the region and on its financial position, cash flow
and results of operations.



---

|                                                                                                      | Managements Discussion and Analysis
|----------------------------------------------------------------------------------------------------- | ------------------------------------
|For the Years Ended December 31, 2014 and 2013                                                       
|(tabular amounts expressed in thousands of
      United States dollars, except where otherwise noted)
|                                                                                                      |                                     

|SUSTAINED
      PRODUCTION
|--------------------------

The Company has based its financial projections on the results
of a feasibility study of mineral reserves that demonstrate economic and
technical viability of the Escobal deposit. Failure to maintain production or
the ability to market its metal concentrates would have a material adverse
impact on the Companys ability to generate revenue and cash flow to fund
operations. Failure to achieve the anticipated production levels would have a
material adverse impact on the Companys cash flow and future profitability.

|NON-GAAP
      FINANCIAL MEASURES
|---------------------------------

The Company has included certain non-GAAP financial measures
throughout this document which include total cash costs, total production costs
and all-in sustaining costs per silver ounce (all-in sustaining costs). These
measures are not defined under IFRS and should not be considered in isolation.
The Companys primary business is silver production in concentrates with other
metals (gold, lead and zinc), produced simultaneously in the mining process, the
value of which represents a small percentage of the Companys revenue and is
therefore considered by-product. The Company believes these measures will
provide investors and analysts with useful information about the Companys
underlying cash costs of operations, the impact of by-product credits on the
Companys cost structure and its ability to generate cash flow, as well as
providing a meaningful comparison to other mining companies. Accordingly, these
measures are intended to provide additional information and should not be
substituted for GAAP measures.

Total cash costs and total production costs

The Company reports total cash costs and total production costs
on a silver ounces produced basis. The Company follows the recommendation of the
cost standard as endorsed by the Silver Institute (the Institute). The
Institute is a nonprofit international association with membership from across
the silver industry. The Institute serves as the industrys voice in increasing
public understanding of the many uses and values of silver. This remains the
generally accepted standard for reporting cash costs of production by precious
metal mining companies. Total cash costs and total production costs are divided
by the number of silver ounces contained in concentrate to calculate per ounce
figures. When deriving the production costs associated with an ounce of silver,
the Company deducts by-product credits from gold, lead and zinc sales which are
incidental to producing silver.

All-in sustaining costs

The Company has also adopted the reporting of all-in sustaining
costs as a non-GAAP measure of a silver mining companys operating performance
and the ability to generate cash flow from operations. This measure has no
standardized meaning and the Company has utilized an adapted version of the
guidance released by the World Gold Council, the market development organization
for the gold industry. The World Gold Council is not a regulatory industry
organization and does not have the authority to develop accounting standards or
disclosure requirements.

All-in sustaining costs include total cash costs incurred at
the Companys mining operation, sustaining capital expenditures, corporate
administrative expense, exploration and evaluations costs, and reclamation and
closure accretion. The Company believes that this non-GAAP measure represents
the total costs of producing silver from its operation, and provides additional
information of the Companys operational performance and ability to generate
cash flows to support future capital investments and to sustain future
production.



---

|                                                                                                      | Managements Discussion and Analysis
|----------------------------------------------------------------------------------------------------- | ------------------------------------
|For the Years Ended December 31, 2014 and 2013                                                       
|(tabular amounts expressed in thousands of
      United States dollars, except where otherwise noted)
|                                                                                                      |                                     

These non-GAAP financial measures may be calculated differently
by other companies depending on the underlying accounting principles and
policies applied.

The following tables provide reconciliations of total
production costs, total cash costs and all-in sustaining costs to the
consolidated financial statements for the three months and year ended December
31, 2014.

Total cash costs and total production costs per ounce of
produced silver, net of by-product credits are as follows:

|                                                                 |   | Three Months Ended |   |   | Year Ended        |  
|---------------------------------------------------------------- | - | ------------------ | - | - | ----------------- | -
|Total cash costs and total production costs                      |   | December 31, 2014  |   |   | December 31, 2014 |  
|Production costs                                                 | $ | 29,537             |   | $ | 127,323           |  
|Add/(subtract)                                                   |   |                    |   |   |                   |  
|Change in product inventory                                      |   | 3,526              |   |   | 2,120             |  
|Royalties                                                        |   | 3,997              |   |   | 20,830            |  
|Treatment and refining
      charges                             |   | 7,208              |   |   | 31,896            |  
|Total cash costs before by-product
      credits(1)              | $ | 44,268             |   | $ | 182,169           |  
|Less gold credit                                                 |   | (1,878             | ) |   | (10,518           | )
|Less lead
      credit                                           |   | (3,188             | ) |   | (18,747           | )
|Less zinc credit                                                 |   | (6,481             | ) |   | (23,652           | )
|Total cash costs net of by-product credits                       | $ | 32,721             |   | $ | 129,252           |  
|Add/(subtract)                                                   |   |                    |   |   |                   |  
|Depreciation and depletion                                       |   | 9,600              |   |   | 43,313            |  
|Total production costs net of
      by-product credits           | $ | 42,321             |   | $ | 172,565           |  
|                                                                 |   |                    |   |   |                   |  
|Silver ounces produced in
      concentrate (000s)              |   | 5,228              |   |   | 20,302            |  
|                                                                 |   |                    |   |   |                   |  
|Total cash costs per ounce
      before by-product credits       | $ | 8.47               |   | $ | 8.97              |  
|Total cash costs per ounce net of
      by-product credits       | $ | 6.26               |   | $ | 6.37              |  
|Total production costs per ounce net of by-product
      credits | $ | 8.10               |   | $ | 8.50              |  

(1) Gold, lead and zinc by-product credits are
calculated as follows:

Three Months Ended
    
    
    Year EndedDecember 31, 2014
    
    
    December 31, 2014Unit
    
    
    Total
    
    
    Credit per
    
    
    
    
    
    Unit
    
    
    Total
    
    
    Credit perQuantity
    
    
    Price
    
    
    Credit
    
    
    ounce
    
    
    Quantity
    
    
    Price
    
    
    Credit
    
    
    ounceGold Ounces
    
    1,567
    
    $
    1,198
    
    $
    1,878
    
    $
    0.36
    
    
    8,361
    
    $
    1,258
    
    $
    10,518
    
    $
    0.52Lead Tonnes
    
    1,818
    
    $
    1,754
    
    $
    3,188
    
    $
    0.61
    
    
    9,131
    
    $
    2,053
    
    $
    18,747
    
    $
    0.92Zinc Tonnes
    
    3,068
    
    $
    2,112
    
    $
    6,481
    
    $
    1.24
    
    
    10,652
    
    $
    2,220
    
    $
    23,652
    
    $
    1.16




---

|                                                                                                      | Managements Discussion and Analysis
|----------------------------------------------------------------------------------------------------- | ------------------------------------
|For the Years Ended December 31, 2014 and 2013                                                       
|(tabular amounts expressed in thousands of
      United States dollars, except where otherwise noted)
|                                                                                                      |                                     

Total all-in sustaining costs per ounce of produced silver, net
of by-product credits is as follows:

|                                                                           |   | Three Months Ended |  |   | Year Ended        | 
|-------------------------------------------------------------------------- | - | ------------------ |  | - | ----------------- | 
|All-in sustaining costs                                                    |   | December 31, 2014  |  |   | December 31, 2014 | 
|Total cash costs net of
      by-product credits                           | $ | 32,721             |  | $ | 129,252           | 
|Sustaining
      capital(1)                                                |   | 8,308              |  |   | 20,790            | 
|Exploration                                                                |   | 574                |  |   | 3,574             | 
|Reclamation
      cost accretion                                           |   | 44                 |  |   | 177               | 
|General and
      administrative expenses                                  |   | 5,859              |  |   | 31,953            | 
|All-in sustaining costs                                                    | $ | 47,506             |  | $ | 185,746           | 
|                                                                           |   |                    |  |   |                   | 
|Silver ounces produced in concentrate (000s)                              |   | 5,228              |  |   | 20,302            | 
|                                                                           |   |                    |  |   |                   | 
|All-in sustaining costs per ounce produced net of
      by-product credits | $ | 9.09               |  | $ | 9.15              | 

(1) Sustaining capital includes underground
development and surface sustaining capital expenditures.

|ADDITIONAL GAAP
      MEASURES
|------------------------------

The Company has disclosed additional GAAP measures which
include mine operating earnings, earnings (loss) from operations and cash
generated by operating activities before changes in working capital. Management
believes that, in addition to conventional measures prepared in accordance with
GAAP, certain investors use this information to evaluate the Companys
performance. These measures are intended to provide additional information and
should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with GAAP.

Mine operating earnings

Mine operating earnings represent the difference between
revenues and operating costs which include royalties and depreciation and
depletion. Management believes that this presentation provides useful
information to investors to evaluate the Companys mine operating performance
and to assess the Companys ability to generate operating cash flow.

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. Management believes that this presentation provides
useful information to investors to evaluate the Companys overall mine operating
performance when taking into account certain costs not directly associated with
production.

Cash flow provided by (used in) operating activities before
changes in working capital

Cash flow 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. Management believes that
this presentation provides useful information to investors to evaluate the
Companys ability to generate cash flows from its mining operation.



---

|                                                                                                      | Managements Discussion and Analysis
|----------------------------------------------------------------------------------------------------- | ------------------------------------
|For the Years Ended December 31, 2014 and 2013                                                       
|(tabular amounts expressed in thousands of
      United States dollars, except where otherwise noted)
|                                                                                                      |                                     

The additional GAAP measures described above do not have a
standardized meaning prescribed by IFRS. As such, there are likely to be
differences in the method of computation when compared to similar measures
presented by other reporting issuers.

|CASH FLOW
|---------

Cash provided by operating activities before changes in working
capital was $27.5 million and $173.2 million for the three months and year ended
December 31, 2014 compared to net cash used in operating activities before
changes in working capital of $5.9 million and $51.6 million for the three
months and year ended December 31, 2013. Net cash provided by operating
activities totaled $17.8 million and $119.3 million for the three months and
year ended December 31, 2014, compared to outflows of $12.1 million and $59.6
million during the three months and year ended December 31, 2013. The increase
in cash from operations was due to the commencement of commercial operations
during the first quarter of 2014 and the collection of sales proceeds.

Investing activities consisted of additions to property, plant,
and equipment of $12.7 million and $48.8 million during the three months and
year ended December 31, 2014 compared to net additions during the three months
and year ended December 31, 2013 of $18.2 million and $144.8 million. The change
from 2013 levels is a result of completion of construction and commencement of
commercial operations.

Financing activities resulted in a cash outflow of $3.6 million
and an inflow of $1.7 million for the three months and year ended December 31,
2014 compared to cash inflows for the three months and year ended December 31,
2013 of $0.2 million and $48.8 million. Cash used in financing activities in the
year ended December 31, 2014 consisted primarily of interest and fees related to
the extension of the credit facility. Financing activities in 2013 consisted
primarily of the initial proceeds of the facility.

|LIQUIDITY AND
      CAPITAL RESOURCES
|-------------------------------------

The Companys cash and cash equivalents balance at December 31,
2014 was $80.4 million compared to $8.8 million at December 31, 2013.

The Company had working capital of $42.7 million and
non-current liabilities of $5.7 million at December 31, 2014. This compares to a
working capital deficit of $69.2 million at December 31, 2013 and non-current
liabilities of $4.2 million. This change in the working capital position was due
to commencement of commercial operations and the sale of concentrate production,
collection of concentrate sales accounts receivable and buildup of product
inventories. As the mine focused on ramping up to steady state operations, a
significant amount of the operating cash flow was used to pay down construction
related liabilities, build concentrate inventories, and materials and supplies
inventories.

It is the opinion of management, based on the Companys current
liquidity position, continued steady state operations and sale of concentrate
production, that the Companys liquid assets will be sufficient to discharge
liabilities, and to continue funding the Escobal mine. The Company may consider
alternative financing arrangements to meet its strategic needs. Refer to the
Credit Facility section of this MD&A for further information.

The Companys capital consists of the following:

|                                |   | December 31, |   |   | December 31, |   |   | January 1, |  
|------------------------------- | - | ------------ | - | - | ------------ | - | - | ---------- | -
|                                |   | 2014         |   |   | 2013         |   |   | 2013       |  
|Equity                          | $ | 878,060      |   | $ | 774,154      |   | $ | 831,297    |  
|Debt                            |   | 49,804       |   |   | 49,479       |   |   | -          |  
|                                |   | 927,864      |   |   | 823,633      |   |   | 831,297    |  
|Less: cash and cash equivalents |   | (80,356      | ) |   | (8,838       | ) |   | (164,561   | )
|                                | $ | 847,508      |   | $ | 814,795      |   | $ | 666,736    |  



---

|                                                                                                      | Managements Discussion and Analysis
|----------------------------------------------------------------------------------------------------- | ------------------------------------
|For the Years Ended December 31, 2014 and 2013                                                       
|(tabular amounts expressed in thousands of
      United States dollars, except where otherwise noted)
|                                                                                                      |                                     

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.

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.

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

Dividends declared and paid during the year ended December 31,
2014 totaled $3.0 million (no dividends were declared or paid during the year
ended December 31, 2013).

|COMMITMENTS AND
      CONTINGENCIES
|-----------------------------------

A summary of non-discounted liabilities and future operating
commitments are as follows:

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


|OFF-BALANCE
      SHEET ARRANGEMENTS
|------------------------------------

The Company currently has no off-balance sheet arrangements.

|USE OF
      FINANCIAL INSTRUMENTS
|----------------------------------

The principal financial instruments currently affecting the
Companys financial condition are debt and leases. The Companys exposure to
credit risk on its Canadian currency and United States currency deposits is
limited by maintaining such cash and term deposits with major Canadian banks and
banks in the United States that have strong credit ratings. A minimal amount of
cash is held by banks in Switzerland and Guatemala to fund the immediate needs
of subsidiaries in those locations. To minimize risk, the Companys funds are
kept in highly liquid instruments and on deposit with stable institutions and
are redeemable on demand.

|ASSET
      VALUATION
|---------------------

There have been no events or changes in circumstances that
would indicate an impairment of the Escobal mine as at December 31, 2014.



---

|                                                                                                      | Managements Discussion and Analysis
|----------------------------------------------------------------------------------------------------- | ------------------------------------
|For the Years Ended December 31, 2014 and 2013                                                       
|(tabular amounts expressed in thousands of
      United States dollars, except where otherwise noted)
|                                                                                                      |                                     

|RELATED
      PARTIES
|---------------------

Related party transactions

The Companys related parties include its subsidiaries,
Goldcorp Inc. (Goldcorp) as an approximate 39% equity shareholder in the
Companys publicly traded shares, key management personnel, and Directors.
During the year ended December 31, 2014 and 2013, no transactions occurred with
Goldcorp. Transactions with subsidiaries, key management personnel, and
Directors were conducted using normal commercial terms and were considered to be
at arms length.

Key management personnel compensation

Key management are 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.

Key management personnel compensation included in 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.
|--- | ---------------------------------------------------------------------------------------------------------------------

|RECLAMATION AND
      CLOSURE
|-----------------------------

The Company has an obligation to reclaim its properties. The
Company recognizes the present value of liabilities for reclamation and closure
costs in the period in which they are incurred. A corresponding increase in the
carrying amount of the related assets is recorded and amortized over the life of
the asset. As at December 31, 2014, the Company has estimated the present value
of the future reclamation obligation arising from its activities to be $3.5
million (December 31, 2013: $3.0 million). The present value calculation 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
$10.2 million (December 31, 2013: $8.5 million), and the commencement of
reclamation activities in 19 years.

|OUTSTANDING
      SHARE DATA
|----------------------------

As at March 11, 2015, the Company had 147,734,775 issued and
outstanding common shares, 1,531,222 issued and outstanding options and 212,000
issued and outstanding DSAs.

|DIVIDENDS
|---------

The Company declared and paid dividends of $3.0 million to
shareholders on record as of December 12, 2014. No dividends were declared or
paid during the year ended December 31, 2013.



---

|                                                                                                      | Managements Discussion and Analysis
|----------------------------------------------------------------------------------------------------- | ------------------------------------
|For the Years Ended December 31, 2014 and 2013                                                       
|(tabular amounts expressed in thousands of
      United States dollars, except where otherwise noted)
|                                                                                                      |                                     

|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.

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.

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
six months or less. The other long-term liabilities consist of the SARs
long-term portion and severance provisions.

Market Risk

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

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

| |                        |   | December 31, |  |   | December 31, |  |   | January 1, | 
| | ---------------------- | - | ------------ |  | - | ------------ |  | - | ---------- | 
| |                        |   | 2014         |  |   | 2013         |  |   | 2013       | 
| | Cash                   | $ | 79,830       |  | $ | 8,812        |  | $ | 146,586    | 
| | Cash
      equivalents |   | 526          |  |   | 26           |  |   | 17,975     | 
| |                        | $ | 80,356       |  | $ | 8,838        |  | $ | 164,561    | 



---

|                                                                                                      | Managements Discussion and Analysis
|----------------------------------------------------------------------------------------------------- | ------------------------------------
|For the Years Ended December 31, 2014 and 2013                                                       
|(tabular amounts expressed in thousands of
      United States dollars, except where otherwise noted)
|                                                                                                      |                                     

Cash and cash equivalents includes the
following balances held in foreign currencies:

| |                                         |   | December 31, |  |   | December 31, |  |   | January 1, | 
| | --------------------------------------- | - | ------------ |  | - | ------------ |  | - | ---------- | 
| |                                         |   | 2014         |  |   | 2013         |  |   | 2013       | 
| | CAD$                                    | $ | 185          |  | $ | 1,050        |  | $ | 458        | 
| | Guatemalan quetzal and other currencies |   | 1,188        |  |   | 643          |  |   | 585        | 
| |                                         | $ | 1,373        |  | $ | 1,693        |  | $ | 1,043      | 

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 a 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.

The Company recognized foreign exchange
losses of $0.3 million and $0.9 million for the three months and year ended
December 31, 2014, compared to gains of $0.1 million and $nil during the three
months and year ended December 31, 2013.

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. 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.

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.

|CRITICAL
      ACCOUNTING JUDGMENTS AND ESTIMATES
|-------------------------------------------------

Critical accounting estimates used in the preparation of the
consolidated financial statements include the Companys review of asset carrying
values, the determination of impairment charges of long-lived assets,
determination of mineral resources and valuation of share-based payments and the
determination of amounts accrued for reclamation obligations. The estimates of
non-cash compensation expenses involve considerable judgment and are, or could
be, affected by significant factors that are out of the Companys control.
Actual results could differ from those 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 in future periods affected.



---

|                                                                                                      | Managements Discussion and Analysis
|----------------------------------------------------------------------------------------------------- | ------------------------------------
|For the Years Ended December 31, 2014 and 2013                                                       
|(tabular amounts expressed in thousands of
      United States dollars, except where otherwise noted)
|                                                                                                      |                                     

Judgments

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 revenues 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.

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 re-evaluates periodically the functional currency for each of its
subsidiaries.

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.

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.

Estimates

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.

Estimated material in the mineral
reserves

The carrying amounts of the Companys
depletable mineral interests are depletable upon commencement of commercial
production based on the units of production method over the estimated life of
mine based on proven and probable mineral 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.



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|                                                                                                      | Managements Discussion and Analysis
|----------------------------------------------------------------------------------------------------- | ------------------------------------
|For the Years Ended December 31, 2014 and 2013                                                       
|(tabular amounts expressed in thousands of
      United States dollars, except where otherwise noted)
|                                                                                                      |                                     

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.

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.

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 cash generating units (CGU). 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).

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.

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.

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.



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|                                                                                                      | Managements Discussion and Analysis
|----------------------------------------------------------------------------------------------------- | ------------------------------------
|For the Years Ended December 31, 2014 and 2013                                                       
|(tabular amounts expressed in thousands of
      United States dollars, except where otherwise noted)
|                                                                                                      |                                     

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 rate 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.

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 will have a material effect on the consolidated financial statements
of the Company.

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

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:

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.

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.

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.



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|                                                                                                      | Managements Discussion and Analysis
|----------------------------------------------------------------------------------------------------- | ------------------------------------
|For the Years Ended December 31, 2014 and 2013                                                       
|(tabular amounts expressed in thousands of
      United States dollars, except where otherwise noted)
|                                                                                                      |                                     

The Company is currently evaluating the impact the standard is
expected to have on its consolidated financial statements.

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.

DISCLOSURE CONTROLS AND PROCEDURES
AND INTERNAL CONTROLS OVER FINANCIAL REPORTING

|DISCLOSURE
      CONTROLS AND PROCEDURES
|----------------------------------------

The Companys management, including the Chief Executive Officer
(CEO) and the Vice-President and Chief Financial Officer (CFO), is
responsible for the design of disclosure controls and procedures and internal
controls over financial reporting (ICFR). Having assessed the effectiveness of
the Companys disclosure controls and procedures, the CEO and CFO believe that
the disclosure controls and procedures are effective at a reasonable assurance
level as of the end of the period covered by this report.

|INTERNAL
      CONTROLS OVER FINANCIAL REPORTING
|------------------------------------------------

The Companys management is responsible for establishing and
maintaining an adequate system of internal controls, including ICFR. To design
and evaluate its ICFR, the Company used the Internal Control  Integrated
Framework (2013) published by the Committee of Sponsoring Organizations of
the Treadway Commission (the 2013 COSO Framework).

The Companys ICFR include policies and procedures that: (1)
pertain to the maintenance of records and accurately and fairly reflect, in
reasonable detail, the transactions related to acquisition, maintenance and
disposition of its assets; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in
accordance with IFRS, and receipts are recorded and expenditures are incurred
only in accordance with authorization of its management and directors; and (3)
provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of assets that could have a
material effect on its financial statements. Management has concluded that the
Companys ICFR were effective as of December 31, 2014 and provide reasonable
assurance that financial information is recorded, processed, summarized and
reported in a timely manner.

The Company has designed its internal risk management and
control systems to provide reasonable (but not absolute) assurance to ensure
compliance with regulatory matters and to safeguard reliability of the financial
reporting and its disclosures.

The Company adopted the 2013 COSO Framework to design and
evaluate its ICFR during the year ended December 31, 2014. During the year ended
December 31, 2014, there were no changes in the Companys ICFR that have
materially affected or are reasonably likely to materially affect the Companys
ICFR.



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|                                                                                                      | Managements Discussion and Analysis
|----------------------------------------------------------------------------------------------------- | ------------------------------------
|For the Years Ended December 31, 2014 and 2013                                                       
|(tabular amounts expressed in thousands of
      United States dollars, except where otherwise noted)
|                                                                                                      |                                     

|CAUTIONARY NOTE
      REGARDING INTERNAL CONTROLS
|-------------------------------------------------

The Companys management, including the CEO and the CFO,
believe that any disclosure controls and procedures or internal controls and
procedures, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met. Further, the design of a control system must reflect the fact that
there are resource constraints, and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in all control
systems, they cannot provide absolute assurance that all control issues and
instances of fraud, if any, within the Company have been prevented or detected.
These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, or by unauthorized
override of the control. The design of any system of control is based in part
upon certain assumptions about the likelihood of future events, and there can be
no assurance that any design will succeed in achieving its stated goals under
all potential future conditions. Accordingly, because of the inherent
limitations in a cost effective control system, misstatements due to error or
fraud may occur and may not be detected.

|TECHNICAL
      INFORMATION
|---------------------------

Charles Muerhoff, Vice President Technical Services and
Qualified Person as defined in National Instrument 43-101 has reviewed and
approved the scientific and technical information contained in this MD&A.
The Feasibility Study is entitled Escobal Mine Guatemala NI 43-101 Feasibility
Study and is dated November 5, 2014.

|CAUTIONARY
      STATEMENT ON FORWARD-LOOKING INFORMATION
|---------------------------------------------------------

This MD&A contains forward-looking information within the
meaning of applicable Canadian securities legislation, and forward-looking
statements within the meaning of the United States Private Securities
Litigation Reform Act of 1995 (collectively referred to as forward-looking
information). Forward-looking information in this MD&A may include, but is
not limited to: statements related to the Companys liquidity position and
sufficiency of cash from operations to fund repayment of outstanding debt;
expected working capital requirements, the sufficiency of capital resources and
the possibility of considering alternative financing arrangements to meet
strategic needs; the 2015 operations outlook and production guidance, including
estimated unit costs per ounce of silver; the availability and sufficiency of
power for operations; the assessment of future reclamation obligations;
exploration and review of prospective mineral acquisitions; statements relating
to changes in Guatemalan mining laws and regulations and the timing and results
of court proceedings; the timing for the construction and pre-commissioning and
eventual commissioning of the paste backfill plant; the timing and cost for the
addition of the fourth tailing filter press; and the timing and cost for the
addition of the second primary ventilation fan.

Forward-looking information is based on the reasonable
assumptions, estimates, analysis and opinions of management made in light of its
experience and its perception of trends, current conditions and expected
developments, as well as other factors that management believes to be relevant
and reasonable in the circumstances at the date that such statements are made,
but which may prove to be incorrect. Management believes that the assumptions
and expectations reflected in such forward-looking information are reasonable.
Assumptions have been made regarding, among other things: the Companys ability
to carry on exploration and development activities; the timely receipt of
required approvals; the price of silver and other metals; the Companys ability
to operate in a safe, efficient and effective manner; and the Companys ability
to obtain financing as and when required and on reasonable terms. Readers are
cautioned that the foregoing list is not exhaustive of all factors and
assumptions which may have been used.



---

|                                                                                                      | Managements Discussion and Analysis
|----------------------------------------------------------------------------------------------------- | ------------------------------------
|For the Years Ended December 31, 2014 and 2013                                                       
|(tabular amounts expressed in thousands of
      United States dollars, except where otherwise noted)
|                                                                                                      |                                     

Forward-looking information is subject to known and unknown
risks, uncertainties and other factors that may cause actual results to be
materially different from those expressed or implied by such forward-looking
information, including risks associated with the Companys dependence on the
Escobal mine and its limited operating history, risks associated with the
fluctuation of the price of silver and other metals, the risk of unrest and
political instability in Guatemala, risks associated with the availability of
additional funding as and when required, exploration and development risks,
permitting and licensing risks, uncertainty in the estimation of mineral
resources, geologic, hydrological, and geotechnical risks, infrastructure risks,
inflation risks, governmental regulation risks, environmental risks and hazards,
insurance and uninsured risks, land title risks, risks associated with
competition, risks associated with currency fluctuations, labour and employment
risks, risks associated with dependence on key management personnel and
executives, the timing and possible outcome of pending litigation, other
unanticipated litigation risks, the risk that dividends might not continue to be
declared, risks associated with the repatriation of earnings, risks of negative
operating cash flow, risks associated with the interests of certain directors in
other mining projects, risks associated with dilution, risks associated with
stock exchange prices and risks associated with effecting service of process and
enforcing judgments. See the Companys 2014 Annual Information Form available on
www.sedar.com under the heading Description of Our Business  Risk
Factors.

The Companys forward-looking statements are based on the
reasonable beliefs, expectations and opinions of management on the date of this
MD&A. Although management has attempted to identify important factors that
could cause actual results to differ materially from those contained in
forward-looking information, there may be other factors that cause results not
to be as anticipated, estimated or intended. There is no assurance that such
information will prove to be accurate, as actual results and future events could
differ materially from those anticipated in such information. Accordingly,
readers should not place undue reliance on forward-looking information. The
Company does not undertake to update any forward-looking information, except as,
and to the extent required by, applicable securities laws.

|NOTICE TO
      READERS IN THE UNITED STATES
|--------------------------------------------

Canadian standards, including those under National Instrument
43-101 Standards of Disclosure for Mineral Projects, differ significantly
from the requirements of the Securities and Exchange Commission of the United
States (SEC), and mineral resource and mineral reserve information contained
or incorporated by reference in the MD&A may not be comparable to similar
information disclosed by U.S. companies. Under U.S. standards, mineralization
may not be classified as a reserve unless the determination has been made that
the mineralization could be economically and legally produced or extracted at
the time the reserve determination is made. The SECs disclosure standards
normally do not permit the inclusion in documents filed with the SEC of
information concerning measured mineral resources, indicated mineral
resources or inferred mineral resources or other descriptions of the amount
of mineralization in mineral deposits that do not constitute reserves by U.S.
standards. U.S. investors should also understand that inferred mineral
resources have a great amount of uncertainty as to their existence and as to
their economic and legal feasibility. It cannot be assumed that all or any part
of an inferred mineral resource will ever be upgraded to a higher category.
Under Canadian rules, estimated inferred mineral resources may not form the
basis of feasibility or pre-feasibility studies except in rare cases. Investors
are cautioned not to assume that all or any part of an inferred mineral
resource exists or is economically or legally mineable. Disclosure of
contained ounces in a mineral resource estimate is permitted disclosure under
Canadian regulations; however, the SEC normally only permits issuers to report
mineralization that does not constitute reserves by SEC standards as in place
tonnage and grade without reference to unit measures. The requirements for
identification of reserves are also not the same as those of the SEC, and
reserves reported by the Company may not qualify as reserves under SEC
standards. Accordingly, information concerning mineral deposits set forth herein
may not be comparable with information made public by companies that report in
accordance with U.S. standards.



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