International Tower Hill Mines Ltd. 2021 Q2 Form 10-Q Summary
Business context and reporting period
International Tower Hill Mines Ltd. is a British Columbia, Canada-based mineral exploration company. It owns a 100% interest in the exploration-stage Livengood Gold Project in Alaska and has no revenue-generating operations. This unaudited Form 10-Q covers the three and six months ended June 30, 2021, with comparisons to the corresponding 2020 periods.
Financial condition and key metrics
| Metric | Three months ended June 30, 2021 | Six months ended June 30, 2021 |
|---|---|---|
| Revenue | None | None |
| Net loss | $2.18 million | $3.32 million |
| Comprehensive loss | $2.02 million | $3.01 million |
| Basic and diluted loss per share | $0.01 | $0.02 |
| Operating expenses | $2.03 million | $3.04 million |
| Cash used in operating activities | Not separately provided for the quarter | $2.74 million |
| Cash and cash equivalents | Not separately provided for the quarter | $10.62 million at June 30, 2021 |
- Total assets were $66.24 million at June 30, 2021, including $55.38 million of capitalized acquisition costs related to the mineral property.
- Total liabilities were $679,469; the filing reports no debt or borrowings.
- Working capital was $10.18 million, compared with $12.72 million at December 31, 2020.
- Cash declined by $2.43 million during the first six months, from $13.05 million at December 31, 2020 to $10.62 million at June 30, 2021. The decline primarily reflected operating expenditures, partially offset by a $304,294 favorable foreign-exchange effect.
- There were no financing or investing cash flows during the first six months of 2021.
- Six-month exploration and evaluation expenditures were $1.67 million, principally for geological and geophysical work, land maintenance, environmental activities and work on the updated pre-feasibility study.
Material changes versus the prior comparable period
- Three-month net loss increased 47% to $2.18 million from $1.49 million, while six-month net loss increased to $3.32 million from $1.42 million.
- Three-month operating expenses increased to $2.03 million from $1.28 million; six-month expenses increased to $3.04 million from $1.79 million.
- Mineral property expenditures increased to $1.13 million in the quarter from $537,000 and to $1.67 million for the six months from $652,000. The increases primarily reflected work on the updated PFS and higher baseline environmental and land-related legal costs.
- Foreign-exchange results shifted from a $316,091 gain in the first six months of 2020 to a $298,516 loss in the first six months of 2021.
- Interest income declined to $13,763 from $50,666 for the first six months, primarily because short-term investments were reinvested at lower rates.
- Share-based compensation increased to $475,080 from $348,252 for the first six months, reflecting additional deferred share units and stock options.
- Shares outstanding remained 194,908,184, with no share issuances during the first six months of 2021.
Guidance, outlook, commentary, risks and unusual items
- Management approved a 2021 budget of $5.6 million and a work program focused on completing an updated PFS, targeted for release in October 2021, as well as environmental baseline work and community engagement.
- Management expects the company to operate at a loss for the foreseeable future and believes existing cash is sufficient to complete the PFS, the anticipated 2021 work plan and currently anticipated general and administrative costs through at least the next 12 months.
- The company will require significant additional financing to continue operations, advance the Livengood project and potentially develop a mine. Management is evaluating equity financing and a potential strategic alliance, but no assurance is provided that financing or an alliance will be completed on acceptable terms.
- Failure to make required lease, royalty, government-fee or other property payments could result in the loss or forfeiture of mineral-property interests. Disclosed contractual payments total $3.31 million through 2026 and beyond, excluding required work expenditures and potential production royalties.
- The company cautions that mineral resources, particularly inferred resources, may not be economically or legally mineable or convertible into reserves. The project remains exploration-stage, and no production decision has been made.
- Key risks include gold-price volatility, financing and market conditions, permitting delays, environmental requirements, title and lease issues, geological and metallurgical uncertainty, cost overruns, currency movements and the continuing COVID-19 pandemic. Management stated that COVID-19 had not materially affected the company as of the filing date.
- The company expects to remain a passive foreign investment company for U.S. federal income-tax purposes, which may create adverse tax consequences for U.S. shareholders.
- Disclosure controls and procedures were deemed effective as of June 30, 2021, with no material changes in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Whether the updated Livengood PFS was completed and released as targeted in October 2021, and how its economics compare with prior studies.
- Cash-burn rates, remaining liquidity and the timing, structure and dilution associated with any future financing.
- Progress on permitting, environmental baseline studies, community engagement and required property payments.
- The quality, classification and economic assumptions underlying Livengood resource estimates, including the proportion of inferred resources.
- Gold-price, recovery, capital-cost and operating-cost assumptions used in the PFS and any subsequent economic assessment.
- Lease terms, royalty obligations, title status and the potential impact of missed payments or required work commitments.
- The tax implications of the company’s PFIC status for U.S. investors.