International Tower Hill Mines Ltd. — Form 10-Q Summary
Business Context and Reporting Period
International Tower Hill Mines Ltd. is a British Columbia, Canada-based mineral exploration and development company. It controls a 100% interest in the exploration-stage Livengood Gold Project in Alaska. The filing covers the three and six months ended June 30, 2019, with unaudited interim financial statements prepared under U.S. GAAP. The company has no revenue-generating operations.
Financial Highlights
| Metric | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2019 |
|---|---|---|
| Revenue | None reported | None reported |
| Operating expenses | $1.30 million | $1.95 million |
| Net loss | $1.39 million | $2.21 million |
| Basic and diluted loss per share | $0.01 | $0.01 |
| Cash used in operating activities | Not separately provided | $2.32 million |
| Cash and cash equivalents at period-end | Not separately provided | $8.30 million |
- Total assets were $63.84 million at June 30, 2019, including $55.31 million of capitalized acquisition costs related primarily to the Livengood Gold Project.
- Working capital was $8.08 million, compared with $9.88 million at December 31, 2018.
- Total liabilities were $443,729; the filing indicates no debt or senior securities outstanding.
- Shareholders’ equity was $63.40 million at June 30, 2019. Shares outstanding increased to 187.57 million from 186.99 million at December 31, 2018.
- Exploration expenditures were $1.16 million for the six months, compared with $910,327 in the prior-year period.
- Capitalized acquisition costs increased by $31,819 during the six months for land acquisitions.
Material Changes Versus the Prior Comparable Period
- Six-month net loss increased to $2.21 million from $2.02 million, primarily reflecting higher mineral property expenditures and unfavorable foreign-exchange results.
- Second-quarter net loss increased to $1.39 million from $955,415.
- Six-month mineral property expenditures increased by $252,211, principally due to increased technical work.
- Foreign-exchange results shifted from a $212,279 gain in the prior-year six-month period to a $363,246 loss in 2019. For the quarter, the result changed from a $239,726 gain to a $159,708 loss.
- Cost reductions partially offset higher project spending. Six-month wages and benefits, excluding share-based compensation, declined by approximately $374,000, while insurance and travel costs also decreased.
- Cash declined by $1.93 million during the first half of 2019, compared with a $9.87 million increase in the prior-year period, when the company completed a $12.0 million private placement.
- Financing provided only $64,254 in the first half of 2019 from stock-option exercises, compared with $12.00 million in the prior-year period.
Guidance, Outlook, Commentary, and Risks
- The company was advancing its approved 2019 work plan with a budget of $3.7 million. Metallurgical studies, environmental baseline work, and engineering activities were underway at Livengood.
- Approximately 2,000 kilograms of samples were expected to be processed during 2019 to evaluate grind size and recovery parameters. BBA Inc. was retained to guide the metallurgical program.
- Management believed available funds were sufficient to complete the current test programs and engineering work, the anticipated 2019 work plan, and general and administrative costs through the 2020 fiscal year.
- The company expects to operate at a loss for the foreseeable future and will require significant additional financing to continue operations, advance the project, and potentially develop a mine.
- Management was evaluating financing alternatives, including a potential strategic alliance, but stated that additional financing may not be available on acceptable terms, if at all.
- Required property-related payments totaled $114,825 in 2019 and $2.94 million over the disclosed commitment period through 2024 and beyond. The commitments exclude required work expenditures and potential royalties other than annual minimum royalties.
- Failure to make required lease, royalty, government-fee, or work-expenditure payments could result in the loss or forfeiture of mineral property rights.
- Key risks include gold-price volatility, financing and equity-market conditions, permitting delays, environmental and regulatory requirements, uncertainty in mineral-resource estimates, metallurgy and recovery results, title and surface-rights issues, and the feasibility of ultimately developing the Livengood project.
- The company cautioned that inferred resources and preliminary economic assessments are highly uncertain and do not demonstrate economic viability or constitute SEC-compliant mineral reserves.
- The company reported no material changes to the risk factors previously disclosed in its 2018 Form 10-K, no legal proceedings, and no off-balance-sheet arrangements.
- Subsequent to quarter-end, the company granted 187,232 stock options and issued additional deferred share units to directors. These awards may increase future share dilution.
Most Important Facts for Investors to Verify
- Whether the $8.30 million cash balance and stated funding outlook remain sufficient as exploration, permitting, and engineering costs continue.
- The timing, terms, and availability of future equity financing or a strategic alliance.
- Results of the metallurgical testing and whether they improve projected recovery, operating costs, mine design, or production schedules.
- The status of permitting, environmental baseline work, land and lease obligations, and the company’s ability to retain its Livengood property interests.
- The distinction between Canadian mineral-resource disclosures and SEC-compliant mineral reserves; the filing does not establish that the project is economically mineable.
- Potential dilution from outstanding options, deferred share units, and future equity financings.
- Foreign-exchange exposure, given the material change from foreign-exchange gains in 2018 to losses in 2019.