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, 2005
Jurisdiction: British Columbia, Canada
Business Overview: The Company is an exploration-stage mineral resource company with no commercial production. Its primary asset is the Siwash Creek Property in British Columbia, where it explores for gold, silver, and copper. Other properties (Chinchaga, Torngat, Fort Vermillion) are inactive, and their deferred costs were written off in prior periods. The Company has no employees and relies on a related party for administrative services.

Key Financial Metrics (Canadian GAAP)

Note: Under US GAAP, the Net Loss for 2005 would be $(200,327) due to the immediate expensing of exploration costs.

Material Changes vs. Prior Period

• Liquidity Decline: Cash and cash equivalents decreased by $103,469 (93%) from $111,180 in 2004 to $7,711 in 2005, primarily due to operating expenses.
• Reduced Net Loss: The net loss improved to $(121,483) from $(244,330) in 2004. The 2004 loss included a $154,345 write-off of deferred exploration expenses for inactive properties, which did not recur in 2005.
• Exploration Activity: Exploration costs for the active Siwash Creek Property increased to $84,993 in 2005 (net of tax credits) compared to $25,970 in 2004, reflecting a diamond drill program.
• Related Party Debt: The Company recorded a $80,000 unsecured, non-interest-bearing loan from a director, which was not present in the prior year.
• Revenue: Interest income dropped to $132 from $4,519 due to lower cash balances and interest rates.

Outlook, Risks, and Management Commentary

Capital Requirements: Management states the Company has a working capital deficiency and insufficient funds to cover basic administrative costs beyond the immediate future. Continued operations and exploration depend entirely on raising additional capital, likely through equity issuance.

Financing Plans: The Company is conducting a private placement of 1,000,000 units at $0.20 per unit (totaling $200,000 Cdn) to fund 12 months of administrative expenses and further exploration.

Key Risks:

• Going Concern: The auditor's report notes that the Company's ability to continue as a going concern is dependent on obtaining additional financing and achieving profitable operations.
• Speculative Nature: Properties are in the exploration stage with no established reserves. There is no assurance of discovering commercial ore.
• Penny Stock Rules: The stock is subject to SEC penny stock rules, which may limit liquidity and marketability.
• PFIC Status: The Company is likely classified as a Passive Foreign Investment Company (PFIC) for US tax purposes, which may result in adverse tax consequences for US investors.
• Concentration of Ownership: The President and Director, Anton J. Drescher, beneficially owns approximately 68% of the outstanding shares.

Investor Verification Checklist

• Cash Runway: Verify the current cash balance (reported as $7,711 Cdn) against the $5,000/month management fee to confirm the immediate need for financing.
• Private Placement Status: Confirm whether the proposed $200,000 private placement has been completed or if the Company has secured alternative funding.
• Related Party Transactions: Review the terms of the $80,000 director loan and the $60,000 annual management fee paid to a company owned by the President.
• Exploration Results: Assess the geological significance of the Siwash Creek drill results (1.547 g/t gold over 9.6m) to determine if they justify further capital investment.
• US GAAP Reconciliation: Note that US GAAP losses are significantly higher than Canadian GAAP losses due to the expensing of exploration costs; verify which basis is used for financial analysis.