International Tower Hill Mines Ltd. — Form 10-Q Summary
Business Context and Reporting Period
Quarterly report for the three and six months ended June 30, 2022, filed August 5, 2022. International Tower Hill Mines Ltd. is an exploration-stage mining company with a 100% interest in the Livengood Gold Project in Alaska. The Company has not commenced mineral extraction or commercial production and has no revenue-generating operations.
The Livengood project is supported by a reported measured and indicated resource 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. These estimates remain subject to the technical and economic assumptions and cautionary language in the Company’s technical report.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2022 | Comparable Period |
|---|---|---|---|
| Revenue | None | None | None |
| Net loss | $1.20 million | $1.91 million | $2.18 million and $3.32 million, respectively |
| Comprehensive loss | $1.40 million | $1.98 million | $2.02 million and $3.01 million, respectively |
| Loss per share | $0.01 | $0.01 | $0.01 and $0.02, respectively |
| Operating cash flow | Not separately provided | $(2.04) million | $(2.74) million |
| Cash and cash equivalents | $5.96 million at June 30, 2022 | $7.78 million at December 31, 2021 | |
| Working capital | $6.06 million at June 30, 2022 | $7.34 million at December 31, 2021 |
- Six-month operating expenses were $2.04 million, including $0.77 million of mineral property exploration costs and $0.41 million of share-based compensation.
- Other income was $0.12 million for the six months, including a $0.10 million foreign-exchange gain, $3,109 of interest income and $22,652 of other income.
- Total assets were $61.60 million, including $55.38 million of capitalized acquisition costs related to the Livengood project.
- Total liabilities were $158,239. The filing reports no debt or borrowings.
- Cash declined by $1.82 million during the six months. Financing provided $290,290 from the exercise of stock options; there were no investing cash flows.
- The Company had 195.31 million common shares outstanding at June 30, 2022 and July 29, 2022. During the six months, 405,000 shares were issued upon option exercises.
Material Changes Versus Prior Comparable Period
- Six-month net loss improved by $1.40 million, or approximately 42%, primarily because mineral property expenditures declined by $0.90 million following completion of the updated pre-feasibility study.
- Quarterly net loss improved by $0.98 million, or approximately 45%, as mineral property expenditures decreased by $0.56 million.
- Foreign-exchange results changed from losses of $157,829 for the quarter and $298,516 year to date in 2021 to gains of $190,165 and $95,410, respectively, in 2022.
- Share-based compensation declined to $406,365 for the six months from $475,080 in the prior-year period, primarily reflecting lower values assigned to deferred share units and option vesting patterns.
- Cash decreased from $7.78 million at December 31, 2021 to $5.96 million at June 30, 2022, while current liabilities declined from $579,881 to $158,239.
- The Company’s 2022 exploration and development spending was focused on baseline environmental work, hydrology, waste-rock geochemical characterization, permitting support and community engagement rather than the prior period’s pre-feasibility-study work.
Guidance, Outlook, Risks and Unusual Items
- Management approved an approximately $3.2 million 2022 work program, comprising approximately $0.6 million for mineral property leases and mining claim government fees and $2.6 million for corporate and administrative expenses.
- Management believes existing cash is sufficient to fund the anticipated 2022 work plan and currently anticipated general and administrative costs through at least the next 12 months. However, the Company expects to continue operating at a loss and requires significant additional financing for ongoing operations, permitting and any future mine development.
- Management is considering financing alternatives, including a potential strategic alliance, but provides no assurance that additional financing or an alliance will be available on acceptable terms.
- The Livengood pre-feasibility study describes a potential 65,000-ton-per-day operation producing approximately 6.4 million ounces over 21 years. Reported estimates include $1.93 billion of capital costs, $1,171 per ounce of all-in sustaining costs and a $400 million after-tax net present value at an $1,800-per-ounce gold price. The study is preliminary and would require further refinement through a future feasibility study.
- Key risks include gold-price volatility, financing availability, permitting delays, environmental and reclamation requirements, title and lease rights, resource and reserve uncertainty, metallurgy and recovery assumptions, inflation, currency movements, market conditions and the potential effects of COVID-19. The Company stated that COVID-19 had not materially affected it as of the filing date.
- Contractual property-related payments total approximately $3.97 million over the disclosed schedule, including $205,720 in 2022 and $741,297 in 2023. The amounts exclude required work expenditures and potential production royalties.
- The Company expects to remain a passive foreign investment company for U.S. federal income tax purposes.
- Disclosure controls were evaluated as effective as of June 30, 2022, and no material changes in internal control over financial reporting were reported. No material changes to previously disclosed risk factors were identified.
Important Facts for Investors to Verify
- Whether the Company can obtain the significant additional capital required beyond the currently funded 2022 work program and on what dilution or other terms.
- Whether the Livengood pre-feasibility study’s capital cost, operating cost, production, gold-price and recovery assumptions remain supportable in a future feasibility study.
- The status and timing of permitting, environmental baseline studies, community engagement and the Alaska Mental Health Trust lease, which currently extends through June 30, 2023 subject to extension conditions.
- The accuracy and continuing economic viability of the reported mineral resource and reserve estimates, including their sensitivity to gold prices and operating assumptions.
- The Company’s cash runway, quarterly spending rate and potential need for equity financing or a strategic partner.
- The effect of deferred share units, stock options and other equity awards on future dilution and share-based compensation.
- Potential property-related payments, minimum royalties, production royalties, required work expenditures and any title or lease disputes.