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, 2007
Business Overview: The Company is a mineral exploration company focused on acquiring and exploring natural resource properties in Alaska and Nevada. It holds no known reserves and has no commercial production. Operations are funded primarily through equity financing.

Key Financial Metrics (Fiscal Year Ended May 31, 2007)

Note: Financial data is presented in Canadian Dollars (CAD). Under US GAAP, exploration costs are expensed immediately, resulting in a significantly higher reported loss compared to Canadian GAAP, which allows capitalization of these costs.

Material Changes vs. Prior Period

• Significant Increase in Loss: The net loss increased from $127,228 in 2006 to $8,666,021 in 2007. This was driven by a massive increase in exploration and general/administrative expenses following the acquisition of Alaskan properties from AngloGold Ashanti.
• Capitalization of Assets: Mineral property assets increased from $1.03 million to $13.39 million due to the capitalization of exploration expenditures under Canadian GAAP.
• Liquidity Surge: Cash and cash equivalents increased from $6,695 to $21.9 million, resulting from two private placements in August 2006 (netting ~$11.4 million) and two in May 2007 (netting ~$17.5 million).
• Property Write-downs: The Company wrote down the Siwash property ($1.03 million) and terminated rights to the Blackshell and Caribou properties ($443,184) due to disposal agreements and disappointing exploration results.

Outlook, Risks, and Management Commentary

• Capital Resources: Management believes current funds (~$17.7 million working capital as of Aug 31, 2007) are sufficient to cover exploration and G&A costs for the balance of 2007 and all of 2008. However, future expansion or additional acquisitions will likely require further equity financing.
• Exploration Plans:
  • Livengood (Alaska): Planning a resource definition drilling program in 2008 (approx. 50,000 meters) with a budget of $7 million.
  • Chisna (Alaska): Anticipated 2008 budget of $1 million for initial drilling.
  • Terra (Alaska): Company exercised option to earn 60% interest; awaiting AngloGold's response regarding a back-in right.
  • Nevada Projects: Phase II drilling planned for North Bullfrog in early 2008.
• Key Risks:
  • Speculative Nature: No known reserves; no revenue from operations; history of losses.
  • Financing: Dependence on equity markets to fund operations; risk of dilution.
  • Exploration Risk: High probability that exploration will not result in commercially mineable deposits.
  • Regulatory/Permitting: Subject to US federal and state regulations in Alaska and Nevada; permitting delays possible.
  • PFIC Status: The Company may be classified as a Passive Foreign Investment Company (PFIC) for US tax purposes, which could have adverse tax consequences for US investors.

Investor Verification Checklist

• Capitalization vs. Expense: Verify the impact of Canadian GAAP capitalization of exploration costs versus US GAAP expensing on the reported net loss and asset base.
• AngloGold Joint Venture Terms: Review the specific earn-in requirements and back-in rights for the Terra and LMS properties, and confirm AngloGold's election status regarding the Terra back-in right.
• Private Placement Dilution: Assess the dilution impact of outstanding warrants (approx. 13.5 million warrants outstanding) and stock options (approx. 3.7 million options outstanding).
• Property Tenure: Confirm the status of leases and claims for key properties (Livengood, Coffee Dome, North Bullfrog) and any pending permitting requirements.
• Cash Burn Rate: Monitor the rate of cash consumption against the stated $11.5 million budget for 2007-2008 to determine if additional financing will be required sooner than anticipated.