THM

Business Context and Reporting Period

Company: International Tower Hill Mines Ltd.
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal year ended May 31, 2006
Jurisdiction: British Columbia, Canada
Business Overview: The Company is a mineral exploration entity with no commercial production or known reserves. Its primary focus is the acquisition and exploration of mineral properties in Alaska. During the period, the Company significantly expanded its portfolio through the acquisition of seven properties from AngloGold Ashanti and entered into option agreements for two additional properties.

Key Financial Metrics

Note: All figures are in Canadian Dollars (Cdn$) unless otherwise noted. Financial statements are prepared under Canadian GAAP.

Liquidity Update (Post-Period): Following the fiscal year-end, the Company completed two private placements in August 2006, raising approximately Cdn$11.5 million. As of August 31, 2006, working capital was approximately US$10.3 million.

Material Changes vs. Prior Period

• Operational Losses: Net loss increased slightly by $5,745 compared to the prior year. This was primarily due to the recovery of exploration expense-permit fees and a gain on the sale of marketable securities in 2005, partially offset by a decrease in mineral property due diligence costs in 2006.
• Capital Structure: Significant equity financing occurred in August 2006 (post-fiscal year-end), increasing outstanding shares from ~10 million to ~30 million by December 2006.
• Asset Acquisition: The Company acquired a portfolio of seven mineral exploration projects in Alaska (Livengood, Coffee Dome, Chisna, Blackshell, Gilles, West Pogo, and Caribou) from AngloGold Ashanti in exchange for shares and cash. It also secured options on the LMS and Terra properties.
• Property Disposition: The Company disposed of its interest in the Siwash Creek property in British Columbia to Ravencrest Resources Inc. in exchange for a 5% net smelter return royalty.

Guidance, Outlook, and Risks

Outlook and Funding: Management believes it has sufficient financial resources (following the August 2006 financing) to fund planned exploration for 2006 and 2007 and cover overhead for the next twelve months. Future funding for additional activities may require further equity issuance or joint ventures.

Key Risks:

• Exploration Risk: The Company has no known reserves or commercial production. Most exploration projects do not result in commercially mineable deposits.
• Financing Risk: The Company has a history of losses and no operating revenue. Continued operations depend on raising additional capital, which may not be available on acceptable terms.
• Regulatory and Permitting: Operations in Alaska are subject to strict federal and state regulations. Delays in permitting could halt exploration.
• Market Volatility: The Company's securities are considered "Penny Stocks" (trading below US$5.00), which may limit liquidity and marketability.
• PFIC Status: The Company may be classified as a Passive Foreign Investment Company (PFIC) for U.S. tax purposes, which could result in adverse tax consequences for U.S. investors.

Investor Verification Checklist

• Capital Sufficiency: Verify the actual cash balance and burn rate post-August 2006 financing to ensure the "12-month runway" claim holds true.
• Exploration Results: Monitor the release of assay results from the Livengood and LMS drilling programs, which were pending as of the filing date.
• AngloGold Relationship: Review the terms of the joint venture and option agreements with AngloGold Ashanti, specifically the expenditure requirements to earn interests in the LMS and Terra properties.
• Share Dilution: Assess the impact of outstanding warrants (approx. 8.3 million warrants) and the new stock option plan on future share count.
• GAAP Differences: Note the significant difference between Canadian GAAP (capitalizing exploration costs) and U.S. GAAP (expensing them), which results in a larger reported deficit under U.S. standards.