International Tower Hill Mines Ltd. — Q1 2022 Form 10-Q Summary
Business Context and Reporting Period
International Tower Hill Mines Ltd. is an exploration- and development-stage mining company focused on its 100%-owned Livengood Gold Project in Alaska. The company has not begun mineral extraction or commercial production and has no revenue-generating operations. This unaudited Form 10-Q covers the three months ended March 31, 2022, with comparative information for the three months ended March 31, 2021. Financial statements are presented in U.S. dollars unless otherwise noted.
The Livengood project had estimated measured and indicated resources of 704.5 million tonnes at 0.60 g/tonne, or 13.62 million ounces, and proven and probable reserves of 430.1 million tonnes at 0.65 g/tonne, or 9.0 million ounces, based on a $1,680-per-ounce gold price.
Financial Condition and Key Metrics
| Metric | Q1 2022 | Q1 2021 or period-end comparison |
|---|---|---|
| Revenue | None | None |
| Operating expenses | $633,439 | $1,007,106 |
| Net loss | $713,973 | $1,137,872 |
| Comprehensive loss | $581,485 | $994,480 |
| Loss per share, basic and diluted | $0.00 | $0.01 |
| Cash used in operating activities | $953,223 | $1,194,577 |
| Cash and cash equivalents at period-end | $7,249,783 | $11,998,038 at March 31, 2021 |
| Working capital | $7,080,499 | $7,342,470 at December 31, 2021 |
| Total assets | $62,796,993 | $63,304,940 at December 31, 2021 |
| Total liabilities | $333,905 | $579,881 at December 31, 2021 |
| Debt | The filing does not report debt | The filing does not report debt |
Mineral property exploration expenditures were $203,093, compared with $539,754 in Q1 2021. Other expenses were $80,534, including a $94,755 foreign-exchange loss, partly offset by $1,569 of interest income and $12,652 of other income. The company reported no cash flows from investing activities.
Financing activities provided $290,290 from the exercise of options for 405,000 common shares. Shares outstanding increased to 195,313,184 at March 31, 2022, from 194,908,184 at December 31, 2021.
Material Changes Versus the Prior Comparable Period
- Net loss decreased by $423,899, or approximately 37%, primarily because mineral property expenditures declined by $336,661 following completion of the prior-year pre-feasibility study work.
- Operating expenses declined by $373,667, or approximately 37%.
- Cash used in operations improved by $241,354, although the company remained cash-flow negative.
- Foreign-exchange loss decreased by $45,932, while interest income decreased by $8,352 because short-term investments were reinvested at lower rates.
- Professional fees increased by $19,592, partly due to legal review of the Livengood technical report and other filing-related services.
- Share-based compensation increased to $29,224 from $18,971.
- Cash declined by $530,888 from December 31, 2021, while total liabilities declined by $245,976.
Guidance, Outlook, Risks and Unusual Items
Management approved a 2022 budget of $3.2 million. The work program is intended to advance baseline environmental data collection, including hydrology and waste-rock geochemical characterization, and to advance community engagement in support of future permitting.
The company believes its cash and cash equivalents will fund the anticipated 2022 work plan and general and administrative costs for at least the next 12 months. However, management expects continued losses and states that significant additional financing will be required to continue operations, advance the Livengood project and fund any future mine development. Potential financing may include equity issuance or a strategic alliance, but no assurance is provided that financing will be available on acceptable terms.
- The company is dependent on the price of gold, equity-market conditions and its ability to raise capital.
- Permitting delays, unexpected technical or environmental results, cost inflation and required project expenditures could increase funding needs.
- Failure to make scheduled lease, royalty, government-fee or other property payments could result in loss of mineral-property rights.
- Contractual obligations disclosed in the filing total $4.25 million through 2027 and beyond, excluding required work expenditures and potential production royalties.
- The company’s principal Alaska Mental Health Trust mineral lease runs through June 30, 2023, subject to extension conditions.
- Mineral-resource and reserve estimates, project economics, recovery assumptions and the possibility of future mine construction remain subject to technical, permitting, financing and commodity-price risks.
- The company states that COVID-19 had not materially adversely affected its business as of the filing date, but future effects remain uncertain.
- The company expects to remain a passive foreign investment company for U.S. federal income-tax purposes, which may affect U.S. shareholders.
The Livengood pre-feasibility study described a 65,000-ton-per-day project with estimated 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. Management cautions that the study is preliminary and subject to further refinement through a potential full feasibility study.
Investor Verification Checklist
- Verify the company’s ability to raise the substantial capital needed beyond the currently funded 2022 work program.
- Review the Livengood technical report, including the preliminary nature of the pre-feasibility study, reserve assumptions, capital costs and operating-cost estimates.
- Monitor permitting progress, environmental baseline work, community engagement and the June 30, 2023 lease-extension requirements.
- Assess exposure to gold-price changes, foreign-exchange movements, inflation, supply costs and equity-market conditions.
- Reconcile the disclosed $4.25 million of contractual property obligations with excluded work expenditures and potential royalties.
- Consider dilution from future equity financings, option exercises and other share-based instruments.
- Review PFIC tax implications for U.S. investors and the risk factors incorporated from the company’s 2021 Form 10-K.