Business Context and Reporting Period
International Tower Hill Mines Ltd. filed an unaudited Form 10-Q for the quarter and nine months ended September 30, 2023. The Company is a development-stage mineral exploration company with a 100% interest in the Livengood Gold Project in Alaska. It has not commenced mining or commercial production and has no revenue-generating operations.
The Livengood Project is the Company’s only property. Management’s 2023 work program focuses on baseline environmental data collection, hydrology, waste-rock geochemical characterization, permitting support, and community engagement.
Financial Performance and Position
| Metric | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2023 | Comparable Prior Period |
|---|---|---|---|
| Revenue | None reported | None reported | None reported |
| Operating expenses | $780,958 | $2,758,077 | $617,347 and $2,652,770, respectively |
| Net loss | $710,351 | $2,681,785 | $295,260 and $2,209,512, respectively |
| Comprehensive loss | $760,835 | $2,672,399 | $622,272 and $2,600,494, respectively |
| Loss per share | $0.00 | $0.01 | $0.00 and $0.01, respectively |
- Interest income was $23,916 for the quarter and $79,737 for the nine months, versus $1,512 and $4,621, respectively, in the prior-year periods.
- Foreign exchange income was $46,691 for the quarter, while the nine-month period included a foreign exchange loss of $13,925. Prior-year results included gains of $315,283 and $410,693, respectively.
- Cash and cash equivalents were $2.35 million at September 30, 2023, compared with $4.85 million at December 31, 2022.
- Working capital was $2.39 million at September 30, 2023, compared with $4.71 million at year-end 2022.
- Total assets were $57.94 million, including $55.38 million of capitalized acquisition costs for the Livengood Project. Total liabilities were $164,651. The filing does not disclose outstanding debt.
- Shareholders’ equity was $57.77 million, and 195,885,531 common shares were outstanding at September 30, 2023.
- Cash used in operating activities was $2.45 million for the nine months, compared with $2.21 million in the prior-year period. Financing activities used $50,661, primarily for share issuance costs.
- Exploration expenditures were $893,122 for the nine months, compared with $860,549 in the prior-year period.
- The filing does not present operating margins because the Company has no revenue.
Material Changes Versus the Prior Comparable Period
- Third-quarter net loss increased to $710,351 from $295,260, primarily reflecting higher operating expenses and substantially lower foreign exchange gains, partially offset by higher interest income.
- Nine-month net loss increased to $2.68 million from $2.21 million. Operating expenses rose by approximately $105,000, while other income declined by approximately $367,000 because the prior-year period benefited from a large foreign exchange gain.
- Professional fees increased to $232,077 from $181,729 for the nine-month period, and travel expenses increased to $41,490 from $24,227.
- Share-based compensation decreased to $401,360 from $427,834 for the nine-month period, although third-quarter share-based compensation increased to $80,293 from $21,469 due mainly to newly granted deferred share units.
- Cash declined by approximately $2.49 million during the first nine months, primarily because of operating expenditures. The Company issued 572,347 shares in connection with deferred share units but received no financing proceeds from that issuance.
- Capitalized acquisition costs were unchanged at $55.38 million. No new acquisition costs were capitalized during the nine months.
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 expenses.
- Management stated that existing cash was expected to fund the anticipated 2023 work program and general and administrative costs through at least the next 12 months; however, the financial statements contain a substantial doubt regarding the Company’s ability to continue as a going concern.
- The Company expects to seek significant additional financing on or before December 2023. Management is also evaluating a potential strategic alliance to support project development, permitting, and future construction costs. There is no assurance that financing or an alliance will be obtained on acceptable terms, or at all.
- If sufficient financing is unavailable, the Company may reduce discretionary project activities to preserve working capital for non-discretionary expenditures beyond 2024.
- The Project’s previously reported technical study estimated approximately $1.93 billion of initial capital costs, $1,171 per ounce of all-in sustaining costs, and a 5% net present value of approximately $400 million at a gold price of $1,800 per ounce. Management cautions that the study is preliminary and subject to further refinement.
- The Company’s only project is described as technically feasible but marginally viable. Development depends on financing, gold prices, permitting, resource and reserve estimates, and successful cost optimization.
- Commitments disclosed through 2028 and beyond total approximately $4.00 million, excluding required work expenditures and potential production royalties. The Company may lose or forfeit property interests if required payments or expenditures are not made.
- Other risks include permitting delays, environmental requirements, title and lease risks, metallurgy and recovery uncertainty, inflation, interest rates, currency movements, and the possibility that the Project will never generate revenue.
- The Company believes it has been a passive foreign investment company for U.S. federal income tax purposes in recent years and expects to remain one; U.S. shareholders should consult tax advisers.
- Management concluded that disclosure controls and procedures were effective as of September 30, 2023, with no material changes in internal control over financial reporting during the quarter.
Important Facts for Investors to Verify
- Whether the Company completed a financing by or after December 2023 and on what terms.
- Current cash levels, quarterly cash burn, and the estimated date on which additional capital will be required.
- Progress on permitting, environmental baseline studies, community engagement, and the 2023–2024 Livengood work programs.
- Whether project optimization or a future feasibility study improves the Project’s marginal economic profile and financing prospects.
- Current gold-price assumptions, capital costs, operating costs, recovery assumptions, and the status of mineral resources and reserves.
- Compliance with mineral lease payments, government fees, required work expenditures, and other commitments needed to preserve property rights.
- Potential dilution from future equity offerings, deferred share units, stock options, and other share-based compensation.