International Tower Hill Mines Ltd. — Q3 2022 Form 10-Q Summary
Business Context and Reporting Period
International Tower Hill Mines Ltd. is an exploration- and development-stage mineral company incorporated in British Columbia, Canada. It owns a 100% interest in the Livengood Gold Project in Alaska and had not begun mining or commercial production as of September 30, 2022. The filing covers the three and nine months ended September 30, 2022 and is presented in U.S. dollars on an unaudited basis.
The Livengood project had an estimated measured and indicated resource of 704.5 million tonnes at 0.60 grams per tonne, or 13.62 million ounces, and proven and probable reserves of 430.1 million tonnes at 0.65 grams per tonne, or 9.0 million ounces, based on a $1,680 per ounce gold price.
Financial Position and Key Metrics
| Metric | Q3 2022 / September 30, 2022 | Comparable Period / December 31, 2021 |
|---|---|---|
| Revenue | No revenue-generating operations | No revenue-generating operations |
| Net loss — three months | $295,260 | $1,648,913 loss in Q3 2021 |
| Net loss — nine months | $2,209,512 | $4,964,799 loss in the first nine months of 2021 |
| Comprehensive loss — nine months | $2,600,494 | $4,912,819 loss in the first nine months of 2021 |
| Operating expenses — nine months | $2,652,770 | $4,948,125 |
| Cash and cash equivalents | $5,472,704 | $7,780,671 at December 31, 2021 |
| Working capital | $5,460,100 | $7,342,470 at December 31, 2021 |
| Total assets | $61,022,246 | $63,304,940 at December 31, 2021 |
| Total liabilities | $179,557 | $579,881 at December 31, 2021 |
| Capitalized acquisition costs | $55,375,124 | $55,375,124 at December 31, 2021 |
The company disclosed no debt balances or interest-bearing borrowings. Margins and operating profitability are not meaningful because the company has no revenue and is incurring exploration, development and corporate costs.
Cash Flow, Liquidity and Capital Resources
- Cash used in operating activities was $2,208,877 for the first nine months of 2022, compared with $3,833,073 in the comparable 2021 period.
- Financing activities provided $290,290 from the exercise of 405,000 stock options. There were no investing cash flows.
- Cash declined by $2,307,967 during the first nine months, including a $389,380 unfavorable foreign-exchange effect.
- Management expects approximately $3.2 million of 2022 expenditures, including $0.6 million for mineral property leases and mining claim government fees and $2.6 million for general corporate and administrative costs.
- The company stated that existing cash was expected to fund the 2022 work plan and anticipated general and administrative costs through at least the next 12 months. It also stated that significant additional financing will be required to continue operations and advance or develop the Livengood project.
Material Changes Versus the Prior Comparable Period
- Q3 net loss improved to $295,260 from $1.65 million, primarily because mineral property expenditures fell to $95,511 from $1.38 million after completion of the prior-year pre-feasibility study and due to lower land maintenance and timing-related environmental and legal costs.
- Nine-month net loss improved by $2.76 million, or approximately 56%, to $2.21 million. The principal driver was a $2.18 million reduction in mineral property expenditures to $860,549.
- Nine-month other income was $443,258 versus other expense of $16,674 in 2021, primarily because of a $410,693 foreign-exchange gain compared with a $49,356 loss in the prior-year period.
- Cash declined approximately 30% from year-end 2021, while total liabilities declined by approximately $400,000. The company issued no shares in 2021 but received $290,290 from option exercises in 2022.
- Share-based compensation decreased to $427,834 from $505,101 for the first nine months, while 451,085 deferred share units and 240,000 stock options were granted during 2022.
Guidance, Outlook, Risks and Unusual Items
- The 2022 budget of $3.2 million focuses on baseline environmental data collection, hydrology, waste-rock geochemical characterization, permitting support and community engagement.
- The 2021 pre-feasibility study contemplated a 65,000-ton-per-day operation producing approximately 6.4 million ounces over 21 years. It estimated initial capital costs of $1.93 billion, all-in sustaining costs of $1,171 per ounce and a 5% net present value of $400 million at an $1,800 per ounce gold price. The study is preliminary and subject to refinement through a potential full feasibility study.
- The company has no operating revenue and expects to continue operating at a loss. Future financing may involve equity financing or a strategic alliance, but management provided no assurance that financing will be available on acceptable terms, or at all.
- Material risks include gold-price volatility, equity-market conditions, inflation and interest rates, permitting and environmental requirements, mineral-resource and metallurgical assumptions, property-title and lease issues, access to services and supplies, and the ability to retain qualified personnel.
- Contractual property-related payments totaled approximately $3.94 million through 2027 and beyond, including $2.74 million for mineral property leases and $1.20 million for mining claim government fees. Required work expenditures and potential production royalties are excluded.
- The Alaska Mental Health Trust mineral lease extends through June 30, 2023, subject to extension conditions including payment of an advance minimum royalty and diligent pursuit of development.
- The company reported no material adverse effects from COVID-19 as of the filing date, no material changes to previously disclosed risk factors, and effective disclosure controls and procedures.
- The company expects to remain a passive foreign investment company for U.S. federal income tax purposes, which may have significant tax consequences for U.S. shareholders.
Most Important Facts for Investors to Verify
- Whether the company can obtain the significant additional capital required to advance permitting, feasibility work and any future mine construction.
- The timing and terms of the required extension or renewal of the Alaska Mental Health Trust mineral lease beyond June 30, 2023.
- Progress on environmental baseline studies, permitting, community engagement and any future full feasibility study.
- The current cash-burn rate and whether the stated cash runway remains adequate as project expenditures develop.
- The assumptions underlying the Livengood resource and reserve estimates, including the $1,680 per ounce reserve price and the pre-feasibility study’s $1,800 per ounce valuation case.
- Potential dilution from outstanding options and deferred share units, as well as the company’s future reliance on equity financing.