International Tower Hill Mines Ltd. — Q1 2019 Form 10-Q Summary
Business context and reporting period
International Tower Hill Mines Ltd. is a British Columbia, Canada-based mineral exploration company. It controls a 100% interest in the exploration-stage Livengood Gold Project in Alaska. The filing covers the three months ended March 31, 2019, with unaudited interim financial statements prepared under U.S. GAAP.
The Company has no revenue-generating operations and is advancing metallurgical, engineering, and environmental baseline work under an approved 2019 budget of approximately $3.7 million.
Key financial metrics
| Metric | Q1 2019 | Q1 2018 or period-end comparison |
|---|---|---|
| Revenue | None | None |
| Net loss | $820,912 | $1,065,220 loss |
| Comprehensive loss | $614,887 | $1,043,443 loss |
| Basic and diluted loss per share | $0.00 loss | $0.01 loss |
| Cash used in operating activities | $962,760 | $1,058,423 |
| Cash and cash equivalents | $9,534,251 | $10,228,964 at December 31, 2018 |
| Working capital | $9,336,611 | $9,884,979 at December 31, 2018 |
| Total assets | $64,969,768 | $65,724,114 at December 31, 2018 |
| Total liabilities | $342,554 | $547,953 at December 31, 2018 |
| Capitalized acquisition costs | $55,273,432 | Unchanged from December 31, 2018 |
Operating expenses were $649,571, including $250,591 of mineral property exploration costs. No meaningful revenue or operating margin was reported because the Company remains in the exploration stage. The filing does not identify outstanding debt; reported liabilities consisted of accounts payable and accrued liabilities.
Financing activities provided $64,254 from the exercise of stock options for 121,174 common shares. Foreign exchange effects increased cash by $203,793. There were no investing cash flows.
Material changes versus the prior comparable period
- Net loss improved by $244,308, or approximately 23%, primarily because of lower wages and benefits, lower stock-based compensation, and reduced insurance and consulting costs.
- Mineral property exploration expenditures increased to $250,591 from $204,212, reflecting additional technical and environmental baseline work.
- Foreign exchange loss increased substantially to $203,538 from $27,447, partly offsetting the reduction in operating expenses.
- Cash used in operations declined to $962,760 from $1,058,423.
- Q1 2018 included $12.0 million of private-placement proceeds; Q1 2019 included only $64,254 from option exercises. Consequently, cash declined by $694,713 during Q1 2019 compared with a $10.9 million increase in Q1 2018.
- Shares outstanding increased to 187,111,857 from 186,990,683 at December 31, 2018.
Guidance, outlook, risks, and unusual items
- Management stated that existing cash was expected to fund the current 2019 work plan and anticipated general and administrative costs through fiscal 2020, but significant additional financing will be required to continue operations and advance development of the Livengood Project.
- Management was conducting metallurgical studies involving approximately 2,000 kilograms of samples to evaluate grind size and recovery parameters, with BBA Inc. supporting the program. Environmental baseline work for future permitting was also progressing.
- The Company expects to operate at a loss for the foreseeable future and is dependent on equity financing, a potential strategic alliance, or other financing sources. There is no assurance that financing will be available on acceptable terms.
- Scheduled mineral-property leases and mining-claim government fees total $3,278,274 through 2024 and beyond, including $500,214 due in 2019. Failure to meet required payments or work commitments could result in loss or forfeiture of property interests.
- Key risks include gold-price volatility, financing and capital-market conditions, permitting delays, environmental and regulatory requirements, title and surface-rights issues, resource-estimate uncertainty, metallurgy and recovery assumptions, and the possibility that the project will not become economically or legally mineable.
- The Company cautioned that its Canadian-compliant mineral resource disclosures, including inferred resources, may not be comparable with U.S. reserve disclosures and do not establish economic viability.
- The Company expects to be classified as a passive foreign investment company for U.S. federal income-tax purposes.
- There were no material changes to the risk factors reported in the 2018 Form 10-K, no legal proceedings requiring disclosure, and no off-balance-sheet arrangements.
Most important facts for investors to verify
- Whether the $9.5 million cash balance and stated funding outlook remain sufficient as exploration, engineering, permitting, and corporate costs continue.
- The timing, terms, and dilution impact of any future equity financing or strategic alliance.
- Results of the metallurgical and engineering programs and whether they improve projected recovery, costs, mine design, or project economics.
- Progress toward environmental permitting and the potential effect of delays or additional requirements.
- The economic viability and regulatory classification of Livengood’s mineral resources, particularly inferred resources that are not mineral reserves.
- Compliance with the project’s lease, royalty, government-fee, and work-expenditure commitments.
- Exposure to foreign exchange movements, gold prices, and the Company’s continuing operating losses.