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, 2008
Jurisdiction: British Columbia, Canada
Accounting Basis: Canadian GAAP (with U.S. GAAP reconciliations provided)
Business Overview: The Company is a mineral exploration entity focused on acquiring and exploring gold, silver, and copper properties in Alaska and Nevada, USA. It is in the exploration stage with no commercial production or operating revenue. The Company's primary focus during the period was the Livengood project in Alaska.

Key Financial Metrics

Note: Under U.S. GAAP, exploration costs are expensed immediately, resulting in a significantly higher reported loss of $(12,156,429) for 2008 compared to Canadian GAAP.

Material Changes vs. Prior Period

• Reduced Net Loss: The net loss decreased significantly from $8.67 million in 2007 to $2.42 million in 2008. This improvement was primarily due to the absence of a $1.47 million write-off of the Siwash, Caribou, and Blackshell properties that occurred in 2007.
• Increased Exploration Capitalization: Mineral property assets increased by approximately $9.76 million to $23.15 million, reflecting significant exploration expenditures on the Livengood, Terra, and LMS projects in Alaska.
• Cash Position: Cash and cash equivalents declined by $11.05 million to $10.86 million, driven by substantial exploration spending without new equity financings during the fiscal year (unlike 2007, which saw four financings).
• Interest Income: Interest income more than doubled to $603,094 due to higher average cash balances resulting from private placements completed in May 2007.
• Property Disposition: The Company sold its interest in the South Estelle property to Millrock Resources Inc. in April 2008, recognizing a gain of $89,246.

Guidance, Outlook, and Risks

Outlook and Guidance: The Company anticipates operating at a loss for the foreseeable future. Management estimates that exploration programs and general administrative costs for the balance of the fiscal year ending May 31, 2009, will total approximately $10.0 million. The Company believes its current cash reserves are sufficient to fund these activities for the next 12 months. Future funding for additional exploration or acquisitions will likely require equity financing.

Management Commentary: The primary focus remains on the Livengood project in Alaska, where a scoping or pre-feasibility study is the next goal. A two-phase drill program for 2009 is proposed, with an anticipated expenditure of $6.6 million. Other projects (Terra, LMS, North Bullfrog) are being held for potential joint venture partnerships.

Risks and Contingencies:

• Financing Risk: The Company has no revenue and relies on equity financing. Disruptions in credit markets (noted in 2008) could limit access to capital or increase costs.
• Exploration Risk: The Company has no known reserves. There is no assurance that exploration will result in commercially mineable deposits.
• Regulatory and Permitting: Operations are subject to U.S. federal and state regulations (Alaska/Nevada). Delays in permitting could halt operations.
• Commodity Prices: Profitability is highly dependent on gold and silver prices, which are volatile.
• PFIC Status: The Company believes it was a Passive Foreign Investment Company (PFIC) for the year ended May 31, 2008, which may have adverse U.S. tax consequences for U.S. investors.

Key Facts for Investor Verification

• Capital Adequacy: Verify if the $10.86 million cash balance (as of May 31, 2008) is sufficient to cover the projected $10.0 million expenditure for the remainder of FY2009, considering potential inflation or scope creep.
• Resource Estimates: Review the independent technical reports (Giroux Consultants) for the Livengood, Terra, LMS, and Mayflower properties. Note that these are "resources" under Canadian NI 43-101, not "reserves" under U.S. SEC Industry Guide 7, and have no demonstrated economic viability.
• Financing Needs: Assess the likelihood of raising additional capital given the 2008 credit market conditions and the Company's history of equity dilution.
• Joint Venture Progress: Monitor the status of seeking partners for the Terra, LMS, and North Bullfrog projects, as the Company intends to focus its own capital on Livengood.
• Accounting Differences: Understand the material difference between Canadian GAAP (capitalizing exploration costs) and U.S. GAAP (expensing them), which drastically alters the reported loss and asset base.