Business Context and Reporting Period
International Tower Hill Mines Ltd. is a British Columbia, Canada-based mineral exploration company with a 100% interest in the exploration-stage Livengood Gold Project in Alaska. The unaudited Form 10-Q covers the three months ended March 31, 2021, with comparisons to March 31, 2020. The company has no revenue-generating operations.
Financial Metrics
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | None | None |
| Operating expenses | $1.01 million | $0.51 million |
| Net income (loss) | $(1.14) million | $0.07 million |
| Comprehensive income (loss) | $(0.99) million | $(0.49) million |
| Basic and diluted loss per share | $(0.01) | Approximately $0.00 |
| Cash used in operating activities | $(1.19) million | $0.07 million provided |
| Cash and cash equivalents | $12.00 million | $6.47 million |
| Working capital | $11.74 million | $12.72 million at December 31, 2020 |
At March 31, 2021, total assets were $67.55 million, including $55.38 million of capitalized mineral property acquisition costs. Total liabilities were $0.42 million. No debt is reported in the filing. The company had 194.9 million common shares outstanding, unchanged during the quarter.
Margins are not meaningful because the company has no revenue and is still in the exploration stage. No investing or financing cash flows were reported in either comparable quarter.
Material Changes Versus the Prior Comparable Period
- Net results shifted from $65,085 of income in Q1 2020 to a $1.14 million loss in Q1 2021.
- Mineral property exploration expenditures increased to $539,754 from $115,420, primarily due to work supporting the updated pre-feasibility study.
- Geological and geophysical costs increased substantially, to $372,724 from $6,286.
- Regulatory costs increased to $100,023 from $61,173, principally due to higher exchange-listing and annual filing fees.
- Foreign exchange results changed from a $541,186 gain to a $140,687 loss, while interest income declined to $9,921 from $37,325.
- Cash declined by approximately $1.05 million from December 31, 2020, primarily because of operating expenditures, partly offset by favorable foreign currency effects.
Guidance, Outlook, Risks and Unusual Items
Management approved a 2021 budget of $5.6 million and a work program focused on completing an updated Livengood Gold Project pre-feasibility study, planned for release in October 2021. The program also includes environmental baseline work and community engagement.
Management believes existing cash is sufficient to complete the anticipated 2021 work plan and general and administrative costs through at least the next 12 months. However, the company expects to operate at a loss and states that significant additional financing will be required to continue operations, advance the project, and potentially develop a mine. Potential financing sources include equity financing and a strategic alliance, neither of which is assured.
Contractual mineral property lease and mining claim government fee payments total $3.70 million through 2026 and beyond, excluding required work expenditures and potential royalties. Failure to make required payments or expenditures could result in loss of property rights.
Key risks include gold-price volatility, financing availability, permitting and environmental requirements, title and lease interests, resource-estimate uncertainty, metallurgy and recoveries, project costs and schedule, COVID-19-related effects, and the possibility that the Livengood project will not support an economically viable mine. The filing states that COVID-19 had not materially affected the company as of the report date. The company also expects to remain a passive foreign investment company for U.S. tax purposes.
The quarter included $18,971 of stock-based compensation and a $140,687 foreign exchange loss. No material changes to previously disclosed risk factors were reported.
Investor Verification Checklist
- Verify completion, timing, assumptions and economics of the updated Livengood pre-feasibility study expected in October 2021.
- Assess cash-burn trends against the $5.6 million 2021 budget and the stated need for future financing.
- Review mineral resource and reserve disclosures carefully, particularly the limitations applicable to inferred resources and Canadian reporting standards.
- Confirm required lease, royalty, government-fee and work-expenditure commitments, including the potential consequences of nonpayment.
- Monitor permitting, environmental baseline work, community engagement and any changes to project configuration or development costs.
- Evaluate foreign exchange exposure, gold-price sensitivity and the tax implications of continued PFIC classification for U.S. investors.