International Tower Hill Mines Ltd. — Q1 2023 Form 10-Q
Business context and reporting period
Unaudited results cover the three months ended March 31, 2023, with comparison to March 31, 2022. The Company is an exploration and development-stage mineral company with a 100% interest in the Livengood Gold Project in Alaska. It has not commenced extraction or commercial production and has no revenue-generating operations.
The Livengood project had reported measured and indicated resources 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, as of December 31, 2022. These estimates remain subject to the technical and economic assumptions and cautionary language in the Company’s technical report.
Financial condition and key metrics
| Metric | Q1 2023 | Q1 2022 / prior period |
|---|---|---|
| Revenue | $nil | $nil |
| Net loss | $503,537 | $713,973 |
| Comprehensive loss | $502,922 | $581,485 |
| Operating expenses | $518,330 | $633,439 |
| Cash used in operating activities | $616,726 | $953,223 |
| Cash and cash equivalents | $4.23 million | $4.85 million at December 31, 2022 |
| Working capital | $4.23 million | $4.71 million at December 31, 2022 |
| Total assets | $59.78 million | $60.38 million at December 31, 2022 |
| Total liabilities | $173,032 | $288,385 at December 31, 2022 |
| Debt | The filing does not disclose debt; reported liabilities consist of accounts payable and accrued liabilities. |
Basic and diluted loss per share was reported as $0.00, with 195.3 million weighted-average shares outstanding. Capitalized acquisition costs for the Livengood project were unchanged at $55.38 million. No investing or financing cash flows occurred during Q1 2023. The Company’s reported margins are not meaningful because it has no revenue.
Material changes versus the prior comparable period
- Net loss improved by $210,436, or approximately 29%, primarily from lower operating expenses and a substantially smaller foreign-exchange loss.
- Operating expenses declined by $115,109, or approximately 18%. Mineral property exploration costs decreased to $145,895 from $203,093, primarily because the prior-year period included geological and geophysical work associated with the completed pre-feasibility study.
- Professional fees declined to $41,305 from $66,233, regulatory costs declined to $61,364 from $73,696, and investor-relations costs declined to $4,071 from $15,253.
- Interest income increased to $21,566 from $1,569 because short-term investment certificates were reinvested at higher rates.
- Foreign-exchange loss decreased to $6,773 from $94,755. Q1 2022 also included $12,652 of other income, which was absent in Q1 2023.
- Cash declined by $616,128 during the quarter, compared with a $530,888 decline in Q1 2022. Q1 2022 included $290,290 of proceeds from option exercises; Q1 2023 had no financing proceeds.
- Shares outstanding remained 195,313,184. Stock-based compensation declined to $20,268 from $29,224, and 710,000 options expired during Q1 2023.
Guidance, outlook, risks and unusual items
Management expects approximately $3.3 million of expenditures for 2023, including approximately $0.7 million for mineral property leases and mining claim government fees and $2.6 million for general corporate and administrative purposes. Management expects cash on hand to fund the 2023 work plan and currently anticipated general and administrative costs for at least the next 12 months.
The Board approved a 2023 work program focused on baseline environmental data collection, hydrology, waste-rock geochemical characterization, permitting support and community engagement. The Company is evaluating financing alternatives, including a potential strategic alliance, but provides no assurance that additional financing or an alliance will be completed on acceptable terms.
- The Company expects continuing operating losses and has no internally generated revenue.
- Significant additional financing will be required to advance the Livengood project and fund any future mine development. Financing availability and terms are uncertain.
- Delays in permits, unexpected project results, changes in gold prices, inflation, interest rates, foreign-exchange rates, market conditions and resource or metallurgical assumptions could materially affect the project and liquidity.
- Failure to make required mineral property payments or expenditures could result in the loss or forfeiture of property interests. Contractual mineral-property lease and government-fee payments total approximately $4.51 million through 2028 and beyond, excluding required work expenditures and potential production royalties.
- The Alaska Mental Health Trust mineral-rights lease extends through June 30, 2023, subject to extension conditions described in the filing.
- The Company believes it has been a passive foreign investment company for U.S. federal income tax purposes and expects that status to continue.
- Management stated that disclosure controls and procedures were effective as of March 31, 2023, with no material changes in internal control over financial reporting.
Important facts for investors to verify
- Confirm the current status and extension terms of the Alaska Mental Health Trust mineral-rights lease after June 30, 2023.
- Assess the timing, scope and cost of permitting, environmental baseline work and community engagement at Livengood.
- Review available financing alternatives and the expected timing of additional capital raises or any strategic alliance.
- Reconcile the projected 2023 cash expenditures of approximately $3.3 million with the $4.23 million of cash reported at March 31, 2023.
- Evaluate the assumptions, sensitivity to gold prices and preliminary nature of the project’s pre-feasibility study, including estimated capital cost of $1.93 billion and estimated all-in sustaining cost of $1,171 per ounce.
- Review mineral-resource and reserve estimates, title and lease rights, required payments, royalties and potential permitting or environmental contingencies.