International Tower Hill Mines Ltd. — Q3 2021 Form 10-Q Summary
Business Context and Reporting Period
International Tower Hill Mines Ltd. is a mineral exploration and development company focused on its 100%-owned Livengood Gold Project in Alaska. The project remained at the exploration stage as of September 30, 2021. This unaudited Form 10-Q covers the three and nine months ended September 30, 2021, compared with the corresponding 2020 periods. The company had 194,908,184 common shares outstanding at September 30, 2021 and November 4, 2021.
Financial Condition and Key Metrics
| Metric | Q3 2021 | Q3 2020 | First 9 Months 2021 | First 9 Months 2020 |
|---|---|---|---|---|
| Revenue | No revenue | No revenue | No revenue | No revenue |
| Net loss | $1.65 million | $1.10 million | $4.96 million | $2.52 million |
| Loss per share | $0.01 | $0.01 | $0.03 | $0.01 |
| Operating cash used | Not separately provided | Not separately provided | $3.83 million | $1.74 million |
| Cash and cash equivalents | September 30, 2021: $9.27 million | December 31, 2020: $13.05 million | ||
| Working capital | September 30, 2021: $8.31 million | December 31, 2020: $12.72 million | ||
| Total assets | $64.81 million | December 31, 2020: $68.59 million | ||
| Total liabilities | $1.12 million | December 31, 2020: $0.49 million |
There was no debt reported. Capitalized mineral-property acquisition costs were $55.38 million and unchanged from December 31, 2020. The company’s principal assets were cash and the Livengood Gold Project. Operating expenses were $1.91 million in Q3 2021 and $4.95 million for the first nine months, including mineral-property exploration expenses of $1.38 million and $3.04 million, respectively.
Material Changes Versus Prior Comparable Period
- Q3 net loss increased 50% to $1.65 million from $1.10 million; nine-month net loss increased 97% to $4.96 million from $2.52 million.
- Q3 mineral-property expenditures increased $660,245 to $1.38 million. The increase primarily reflected Livengood pre-feasibility study work, land maintenance and the timing of Alaska claim rentals.
- Nine-month mineral-property expenditures increased $1.67 million to $3.04 million, primarily due to $1.25 million of additional pre-feasibility study work, higher land-maintenance costs and claim-rental timing.
- Cash declined $3.78 million during the first nine months, principally from operating expenditures. No financing cash flows occurred in 2021; by contrast, 2020 included approximately $9.16 million of gross proceeds from share issuances.
- Other income declined to a net expense of $16,674 for the first nine months from income of $457,559 in 2020, principally because the 2021 period included a $49,356 foreign-exchange loss versus a $389,633 gain in 2020 and lower interest income.
- Share-based compensation increased to $505,101 from $366,685, reflecting additional deferred share units and stock options.
- Accounts payable and accrued liabilities increased to $1.12 million from $0.49 million at year-end 2020, including higher project-cost accruals.
Outlook, Commentary, Risks and Unusual Items
Management stated that existing cash was expected to fund the anticipated 2021 work plan and general and administrative costs through at least the next 12 months. However, the company has no revenue-generating operations and will require significant additional financing to continue advancing Livengood and to fund any future mine development. Management is considering equity financing and a possible strategic alliance, but stated that additional financing may not be available on acceptable terms, or at all.
The 2021 work program was budgeted at $5.6 million, with the principal objective of completing an updated pre-feasibility study, advancing environmental baseline work and supporting community engagement. On November 4, 2021, after the quarter-end, the company announced PFS results describing a potential 65,000-ton-per-day operation producing 6.4 million ounces over 21 years. The PFS 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 a gold price of $1,800 per ounce. The company characterized the PFS as preliminary and subject to further refinement in a full feasibility study. The related NI 43-101 technical report was expected to be filed within 45 days.
- There is substantial uncertainty regarding project economics, resource estimates, metallurgy, gold prices, operating and capital costs, permitting and any eventual production decision.
- Failure to make required lease, royalty, government-fee or other property payments could result in loss or forfeiture of mineral-property interests. Disclosed scheduled payments totaled $3.55 million through 2026 and beyond, excluding required work expenditures and potential production royalties.
- Scheduled payments included $7,400 in 2021 and $632,692 in 2022. The Alaska Mental Health Trust lease extends through June 30, 2023, subject to extension conditions.
- The company cautioned that inferred resources and other non-reserve mineralization may not be economically or legally mineable and should not be treated as demonstrated reserves.
- COVID-19 had not materially adversely affected the company as of the filing date, but future effects remained uncertain.
- The company expects to remain loss-making for the foreseeable future and reported significant uncertainty regarding its ability to continue securing financing.
- The company disclosed that it has been a passive foreign investment company for U.S. federal income-tax purposes in recent years and expects to remain a PFIC.
Important Facts for Investors to Verify
- Review the final NI 43-101 technical report supporting the November 2021 PFS and reconcile its assumptions with the reported $1.93 billion capital requirement and $400 million NPV.
- Assess liquidity runway, expected cash-burn rates and the timing, size and terms of required future equity or strategic financing.
- Verify Livengood permitting status, environmental baseline work, lease-extension requirements and scheduled property payments.
- Evaluate the sensitivity of project economics to gold prices, recoveries, throughput, capital costs and operating costs.
- Distinguish Canadian mineral-resource disclosures, particularly inferred resources, from SEC-compliant proven and probable reserves.
- Consider dilution from the 2.95 million outstanding stock options and 2.15 million deferred share units, in addition to future financing.