Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 001-33638
INTERNATIONAL TOWER HILL MINES LTD.
(Exact Name of Registrant as Specified in its Charter)
British Columbia, Canada
98-0668474
(State or other jurisdiction of incorporation or organization)
(I.R.S. EmployerIdentification No.)
2710 - 200 Granville StreetVancouver, British Columbia, Canada
(Address of Principal Executive Offices)
V6C 1S4
(Zip code)
Registrant’s telephone number, including area code: (604) 683-6332
Securities registered pursuant to Section 12(b) of the Act:
Title of each class:
Trading Symbol:
Name of each exchange on which registered:
Common Shares, no par value
THM
NYSE American
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
Non-accelerated filer
☒
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of July 28, 2023, the registrant had 195,885,531 common shares outstanding.
Page
Part I
FINANCIAL INFORMATION
Item 1
Financial Statements
5
Item 2
Management’s Discussion and Analysis of Financial Condition and Results of Operations
17
Item 3
Quantitative and Qualitative Disclosures About Market Risk
21
Item 4
Controls and Procedures
22
Part II
OTHER INFORMATION
Legal Proceedings
23
Item 1A
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
Defaults Upon Senior Securities
Mine Safety Disclosures
Item 5
Other Information
Item 6
Exhibits
24
SIGNATURES
25
2
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements or information within the meaning of the United States Private Securities Litigation Reform Act of 1995 concerning anticipated results and developments in the operations of International Tower Hill Mines Ltd. (“we”, “us”, “our,” “ITH” or the “Company”) in future periods, planned exploration activities, the adequacy of the Company’s financial resources and other events or conditions that may occur in the future. Forward-looking statements are frequently, but not always, identified by words such as “expects,” “anticipates,” “believes,” “intends,” “estimates,” “potential,” “possible” and similar expressions, or statements that events, conditions or results “will,” “may,” “could” or “should” (or the negative and grammatical variations of any of these terms) occur or be achieved. These forward-looking statements may include, but are not limited to, statements concerning:
Such forward-looking statements reflect the Company’s current views with respect to future events and are subject to certain known and unknown risks, uncertainties and assumptions. Many factors could cause actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others:
3
Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein. This list is not exhaustive of the factors that may affect any of the Company’s forward-looking statements. Forward-looking statements are statements about the future and are inherently uncertain, and actual achievements of the Company or other future events or conditions may differ materially from those reflected in the forward-looking statements due to a variety of risks, uncertainties and other factors, including without limitation those discussed in Part I, Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended December 31, 2022, which are incorporated herein by reference, as well as other factors described elsewhere in the Company’s other reports filed with the U.S. Securities and Exchange Commission (the “SEC”).
The Company’s forward-looking statements contained in this Quarterly Report on Form 10-Q are based on the beliefs, expectations and opinions of management as of the date of this report. The Company does not assume any obligation to update forward-looking statements if circumstances or management’s beliefs, expectations or opinions should change, except as required by law. For the reasons set forth above, investors should not attribute undue certainty to or place undue reliance on forward-looking statements.
4
PART 1
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS
As at June 30, 2023 and December 31, 2022
(Expressed in US Dollars - Unaudited)
June 30,
December 31,
Note
2023
2022
ASSETS
Current
Cash and cash equivalents
1
$
2,990,012
4,847,429
Prepaid expenses and other
297,923
152,572
Total current assets
3,287,935
5,000,001
Property and equipment
7,465
Capitalized acquisition costs
55,375,124
Total assets
58,670,524
60,382,590
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable
24,295
53,539
Accrued liabilities
142,521
234,846
Total liabilities
166,816
288,385
Shareholders’ equity
Share capital, no par value; unlimited number of authorized shares; 195,313,184 and 195,885,531 shares issued and outstanding at December 31, 2022 and June 30, 2023, respectively
6
288,866,139
288,484,901
Contributed surplus
36,215,746
36,275,917
Accumulated other comprehensive income
1,560,066
1,500,196
Deficit
(268,138,243)
(266,166,809)
Total shareholders’ equity
58,503,708
60,094,205
Total liabilities and shareholders’ equity
General Information and Nature of Operations (Note 1)
Commitments (Note 8)
Subsequent event (Note 10)
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the Three and Six Months Ended June 30, 2023 and 2022
Three Months Ended
Six Months Ended
June 30, 2023
June 30, 2022
Operating expenses
Consulting fees
318,614
374,100
376,249
432,765
Insurance
52,993
58,486
102,567
100,936
Investor relations
30,740
34,320
34,811
49,573
Mineral property exploration
641,748
561,945
787,643
765,038
Office
5,979
6,092
8,887
10,436
Other
2,801
3,193
7,023
7,802
Professional fees
86,576
43,260
127,881
109,493
Regulatory
24,812
24,989
86,176
98,685
Rent
33,796
33,802
67,592
67,605
Travel
11,963
6,413
13,874
8,157
Wages and benefits
248,767
255,384
364,416
384,933
Total operating expenses
(1,458,789)
(1,401,984)
(1,977,119)
(2,035,423)
Other income (expenses)
Gain/(Loss) on foreign exchange
(53,843)
190,165
(60,616)
95,410
Interest income
34,255
1,540
55,821
3,109
Other income
10,480
10,000
22,652
Total other income (expenses)
(9,108)
201,705
5,685
121,171
Net loss for the period
(1,467,897)
(1,200,279)
(1,971,434)
(1,914,252)
Other comprehensive income (loss)
Exchange difference on translating foreign operations
59,255
(196,458)
59,870
(63,970)
Total other comprehensive income (loss) for the period
Comprehensive loss for the period
(1,408,642)
(1,396,737)
(1,911,564)
(1,978,222)
Basic and diluted loss per share
(0.01)
Weighted average number of shares outstanding – basic and diluted
195,369,790
195,313,184
195,341,643
195,129,206
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Six-Month Period Ended June 30, 2023
Accumulated
other
Number of
Contributed
comprehensive
shares
Share capital
surplus
income
Total
Balance, December 31, 2022
Stock-based compensation-options
—
63,514
Stock-based compensation-DSUs
257,553
Share issuance
572,347
381,238
(381,238)
Net loss
Balance, June 30, 2023
195,885,531
Three-Month Period Ended June 30, 2023
Balance, March 31, 2023
36,296,185
1,500,811
(266,670,346)
59,611,551
43,246
Six-Month Period Ended June 30, 2022
Balance, December 31, 2021
194,908,184
288,032,132
35,989,922
1,828,121
(263,125,116)
62,725,059
93,342
313,023
Exercise of options
405,000
290,290
Reallocation from contributed surplus
162,479
(162,479)
Balance, June 30, 2022
36,233,808
1,764,151
(265,039,368)
61,443,492
Three-Month Period Ended June 30, 2022
Balance, March 31, 2022
35,856,667
1,960,609
(263,839,089)
62,463,088
64,118
7
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2023 and 2022
Operating Activities
Loss for the period
Add items not affecting cash:
Changes in non-cash items:
Accounts receivable
(28,526)
5,969
(114,470)
(119,872)
Accounts payable and accrued liabilities
(123,515)
(420,875)
Cash and cash equivalents used in operating activities
(1,916,878)
(2,042,665)
Financing Activities
Issuance of shares
Cash and cash equivalents provided by financing activities
Effect of foreign exchange on cash
59,461
(63,708)
Change in cash and cash equivalents
(1,857,417)
(1,816,083)
Cash and cash equivalents, beginning of the period
7,780,671
Cash and cash equivalents, end of the period
5,964,588
Non-cash transactions:
8
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Six Months Ended June 30, 2023 and 2022
(Expressed in US dollars – Unaudited)
1. GENERAL INFORMATION AND NATURE OF OPERATIONS
International Tower Hill Mines Ltd. (“ITH” or the “Company”) is incorporated under the laws of British Columbia, Canada. The Company’s head office address is 2710 - 200 Granville Street, Vancouver, British Columbia, Canada.
International Tower Hill Mines Ltd. consists of ITH and its wholly-owned subsidiaries Tower Hill Mines, Inc. (“TH Alaska”) (an Alaska corporation), Tower Hill Mines (US) LLC (“TH US”) (a Colorado limited liability company), and Livengood Placers, Inc. (“LPI”) (a Nevada corporation). The Company is in the business of acquiring, exploring and evaluating mineral properties, and either joint venturing or developing these properties further or disposing of them when the evaluation is completed. At June 30, 2023, the Company has a 100% interest in its Livengood Gold Project, an exploration-stage project in Alaska, U.S.A (the “Livengood Gold Project”).
These unaudited condensed consolidated interim financial statements have been prepared on a going-concern basis, which presumes the realization of assets and discharge of liabilities in the normal course of business for the foreseeable future.
As at June 30, 2023, the Company had cash and cash equivalents of $2,990,012 compared to $4,847,429 at December 31, 2022. The Company has no revenue generating operations from which it can internally generate funds.
The Company will require significant additional financing to continue its operations (including general and administrative expenses) in connection with advancing activities at the Livengood Gold Project and the development of any mine that may be built at the Livengood Gold Project. There is no assurance that the Company will make a decision to build a mine at the Livengood Gold Project and, if so, that it will be able to obtain the additional financing required on acceptable terms, if at all. In addition, any significant delays in the issuance of required permits for the ongoing work at the Livengood Gold Project, or unexpected results in connection with the ongoing work, could result in the Company being required to raise additional funds to advance permitting efforts. The Company’s review of its financing options includes considering a future strategic alliance to assist in further development, permitting and future construction costs, although there can be no assurance that any such strategic alliance will, in fact, be pursued or realized.
Despite the Company’s success to date in raising significant equity financing to fund its operations, there is significant uncertainty that the Company will be able to secure any additional financing in the current or future equity markets. The amount of funds to be raised and the terms of any proposed equity financing that may be undertaken will be negotiated by management as opportunities to raise funds arise. Specific plans related to the use of proceeds will be devised once financing has been completed and management knows what funds will be available for these purposes. As at August 5, 2023, management believes that the Company has sufficient financial resources to maintain its operations for the next twelve months.
2. BASIS OF PRESENTATION
These unaudited condensed consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X under the Securities Exchange Act of 1934, as amended. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for annual financial statements. These unaudited condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2022 as filed in our Annual Report on Form 10-K. In the opinion of the Company’s management, these financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary to present fairly the Company’s financial position at June 30, 2023 and the results of its operations for the six months then ended. Operating results for the six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.
The preparation of financial statements in conformity with U.S. GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the period. These judgments, estimates and assumptions are continuously evaluated and are based on management’s experience and knowledge of the relevant facts and
9
circumstances. While management believes the estimates to be reasonable, actual results could differ from those estimates and could impact future results of operations and cash flows.
On August 5, 2023, the Board of Directors of the Company (the “Board”) approved these condensed consolidated interim financial statements.
All currency amounts are stated in U.S. dollars unless noted otherwise. References to C$ refer to Canadian currency.
Basis of consolidation
These condensed consolidated interim financial statements include the accounts of ITH and its wholly-owned subsidiaries TH Alaska, TH US, and LPI. All intercompany transactions and balances have been eliminated.
3. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of cash and cash equivalents, accounts receivable and accounts payable and accrued liabilities approximate their fair values due to the short-term nature of these financial instruments.
Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the significance of the inputs used in making the measurement. The three levels of the fair value hierarchy are as follows:
There were no financial instruments measured at fair value.
4. MINERAL PROPERTY
The Company had the following activity related to its Livengood Gold Project:
Amount
Acquisition costs
The following table presents costs incurred for exploration and evaluation activities for the six months ended June 30, 2023 and 2022:
Exploration costs:
Aircraft
13,200
9,000
Environmental
99,819
73,710
Equipment rental
34,676
23,493
Field costs
60,787
62,394
Geological/geophysical
64,626
Land maintenance and tenure
536,097
445,090
Legal
35,323
82,917
Transportation and travel
7,741
3,808
Total expenditures for the period
10
Livengood Gold Project Property
The Livengood property is located in the Tintina gold belt approximately 70 miles (113 kilometers) northwest of Fairbanks, Alaska. The property consists of land leased from the Alaska Mental Health Trust, a number of smaller private mineral leases, Alaska state mining claims purchased or located by the Company and patented ground held by the Company.
Details of the leases are as follows:
11
Title to mineral properties
The acquisition of title to mineral properties is a detailed and time-consuming process. The Company has taken steps to verify title to all mineral properties in which it has an interest. Although the Company has taken every reasonable precaution to ensure that legal title to its properties is properly recorded in the name of the Company, there can be no assurance that such title will ultimately be secured.
5. ACCRUED LIABILITIES
The following table presents the Company's accrued liabilities balances at June 30, 2023 and December 31, 2022.
December 31, 2022
120,097
104,198
Accrued salaries and benefits
22,424
130,648
Total accrued liabilities
Accrued liabilities at June 30, 2023 include accruals for general corporate costs and project costs of $83,507 and $36,590, respectively. Accrued liabilities at December 31, 2022 include accruals for general corporate costs and project costs of $46,974 and $57,224, respectively.
6. SHARE CAPITAL
Authorized
The Company’s authorized share capital consists of an unlimited number of common shares without par value. At December 31, 2022 and June 30, 2023, there were 195,313,184 and 195,885,531 shares issued and outstanding, respectively.
Share issuances
At the Company's 2023 Annual General Meeting of Shareholders held on May 23, 2023, Mr. Stephen Lang did not stand for re-election as director. On June 22, 2023, in accordance with the approved Deferred Share Unit Plan, the Company issued 572,347 common shares to Mr. Lang and transferred related contributed surplus of $381,238 to share capital.
During the six months ended June 30, 2022, the Company issued an aggregate of 405,000 common shares pursuant to the exercise of stock options for total proceeds of $290,290 and transferred related contributed surplus of $162,479 to share capital.
12
Stock options
The Company adopted an incentive stock option plan in 2006, as amended September 19, 2012, and reapproved by the Company’s shareholders on May 28, 2015, May 30, 2018, and May 25, 2021 (the “Stock Option Plan”). The essential elements of the Stock Option Plan provide that the aggregate number of common shares of the Company that may be issued pursuant to options granted under the Stock Option Plan and any other share-based compensation arrangements may not exceed 10% of the number of issued shares of the Company at the time of the granting of options. Options granted under the Stock Option Plan will have a maximum term of ten years. The exercise price of options granted under the Stock Option Plan shall be fixed in compliance with the applicable provisions of the Toronto Stock Exchange (“TSX”) Company Manual in force at the time of grant and, in any event, shall not be less than the closing price of the Company’s common shares on the TSX on the trading day immediately preceding the day on which the option is granted, or such other price as may be agreed to by the Company and accepted by the TSX. Options granted under the Stock Option Plan vest immediately, unless otherwise determined by the Board at the date of grant.
A summary of the options granted under the Stock Option Plan as of June 30, 2023 and December 31, 2022 is presented below:
Year Ended
Weighted
Average
Aggregate
Exercise Price
Intrinsic Value
Options
(C$)
Balance, beginning of the period
2,287,049
0.95
2,947,049
0.97
Granted
240,000
0.63
0.92
Exercised
(405,000)
0.90
Expired
(740,000)
0.91
(495,000)
1.08
Balance, end of the period
1,787,049
Nil
10,400
The weighted average remaining life of options outstanding at June 30, 2023 was 3.0 years.
Stock options outstanding as at June 30, 2023 and December 31, 2022 are as follows:
Exercise
Expiry Date
Price (C$)
Exercisable
March 16, 2023
1.00
580,000
0.50
130,000
June 9, 2023
30,000
March 21, 2024
0.61
374,817
February 1, 2025
1.35
250,000
August 8, 2025
0.85
187,232
May 27, 2026
255,000
May 25, 2027
1.31
160,000
May 24, 2028
80,000
May 23, 2029
1,547,049
2,047,049
13
A summary of the non-vested options as of June 30, 2023 and changes during the six months ended June 30, 2023 is as follows:
Weighted average
grant-date fair value
Non-vested options:
options
Outstanding at December 31, 2022
0.73
0.42
Vested
(240,000)
0.67
Outstanding at June 30, 2023
0.48
At June 30, 2023, there was unrecognized compensation expense of C$83,927 related to non-vested options outstanding. The cost is expected to be recognized over a weighted-average remaining period of approximately 1.3 years.
Deferred Share Unit Incentive Plan
On April 4, 2017, the Company adopted a Deferred Share Unit Plan (the “DSU Plan”). The DSU Plan was approved by the Company’s shareholders on May 24, 2017 and reapproved by the Company’s shareholders on May 27, 2020 and May 25, 2021. The maximum aggregate number of common shares that may be issued under the DSU Plan and the Stock Option Plan is 10% of the number of issued and outstanding common shares (on a non-diluted basis).
During the six months ended June 30, 2023, in accordance with the DSU Plan, the Company granted each of the members of the Company’s Board of Directors (other than those directors nominated for election by Paulson & Co. Inc.) 131,746 deferred share units (“DSUs”) for a total of 526,984 DSUs with a grant date fair value (defined as the weighted average of the prices at which the common shares traded on the exchange with the most volume for the five days immediately preceding the grant) of C$0.63 per DSU, representing C$83,000 per director or C$332,000 in the aggregate.
Subject to adjustment in accordance with their terms, each DSU entitles the holders to receive one common share of the Company without the payment of any consideration. The DSUs vested immediately upon being granted, but the common shares underlying the DSUs are not deliverable to the grantee until the grantee is no longer serving on the Company’s Board of Directors.
DSUs outstanding as at June 30, 2023 and December 31, 2022 are as follows:
Weighted Average
Average Exercise
Units
2,602,361
0.89
2,151,276
0.88
Issued
526,984
451,085
Delivered
(572,347)
0.87
2,556,998
0.84
Share-based payments
During the six months ended June 30, 2023, there were 240,000 stock options granted under the Stock Option Plan and 526,984 DSUs granted under the DSU Plan. Share-based payment compensation for the six months ended June 30, 2023 totaled $321,067 ($63,514 related to stock options and $257,553 related to DSUs). Of the total expense for the period ended June 30, 2023, $261,523 was included in consulting fees ($3,970 related to stock options and $257,553 related to DSUs), $3,970 was included in investor relations, and $55,574 was included in wages and benefits in the statement of operations and comprehensive loss.
14
During the six months ended June 30, 2022, there were 240,000 stock options granted under the Stock Option Plan and 451,085 DSUs granted under the DSU Plan. Share-based payment compensation for the six months ended June 30, 2022 totaled $406,365 ($93,342 related to stock options and $313,023 related to DSUs). Of the total expense for the period ended June 30, 2022, $319,420 was included in consulting fees ($6,397 related to stock options and $313,023 related to DUSs), $5,796 was included in investor relations, and $81,149 was included in wages and benefits in the statement of operations and comprehensive loss.
7. SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates in a single reportable segment, being the exploration and development of mineral properties. The following tables present selected financial information by geographic location:
Canada
United States
Current assets
2,828,286
459,649
2,835,751
55,834,773
4,582,892
417,109
4,590,357
55,792,233
Net loss for the period – Canada
(532,343)
(369,075)
Net loss for the period – United States
(935,554)
(831,204)
(718,901)
(696,721)
(1,252,533)
(1,217,531)
15
8. COMMITMENTS
The following table discloses the Company’s contractual obligations as of June 30, 2023, including anticipated mineral property payments. Under the terms of the Company’s mineral property purchase agreements, mineral leases and unpatented mineral claims, the Company is required to make certain scheduled acquisition payments, incur certain levels of expenditures, make lease or advance royalty payments, make payments to government authorities and incur assessment work expenditures (as summarized in the table below) in order to maintain and preserve the Company’s interests in the related mineral properties. If the Company is unable or unwilling to make any such payments or incur any such expenditure, it is likely that the Company would lose or forfeit its rights to acquire or hold the related mineral properties. The following table assumes that the Company retains the rights to all of its current mineral properties, but does not exercise any lease purchase or royalty buyout options:
Payments Due by Year
2024
2025
2026
2027
2028 and beyond
Mineral Property Leases(1)
541,324
547,091
552,930
558,842
564,828
2,765,015
Mining Claim Government Fees
206,215
1,237,290
747,539
753,306
759,145
765,057
771,043
4,002,305
9. DIRECTOR CHANGE
On June 22, 2023, the Company announced the appointment of Dr. Edel Tully to the Company’s board of directors, effective June 18, 2023, expanding the board from six to seven members.
10. SUBSEQUENT EVENT
In accordance with the DSU Plan, the Company granted a director 145,614 DSUs with a grant date fair value of C$0.57 per DSU, or an aggregate of C$83,000. The DSUs vested immediately upon being granted but the common shares underlying the DSUs are not deliverable to the grantee until the grantee is no longer serving on the Company’s board of directors.
16
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2022. All currency amounts are stated in U.S. dollars unless noted otherwise. References to C$ refer to Canadian currency.
Current Business Activities
General
International Tower Hill Mines Ltd. (“ITH” or the “Company”) consists of ITH and its wholly-owned subsidiaries Tower Hill Mines, Inc. (“TH Alaska”) (an Alaska corporation), Tower Hill Mines (US) LLC (“TH US”) (a Colorado limited liability company), and Livengood Placers, Inc. (“LPI”) (a Nevada corporation). The Company is engaged in the acquisition and development of mineral properties. The Company currently has a 100% interest in a development stage project in Alaska referred to as the “Livengood Gold Project” or the “Project”. The Company has not yet begun extraction of mineralization from the deposit or reached commercial production. As of December 31, 2022, the Project has a measured and indicated mineral resource of 704.5 million tonnes at an average grade of 0.60 g/tonne (13.62 million ounces). As reported in the Technical Report Summary (“TRS”), filed as Exhibit 96.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, a portion of the mineral resources at the Project have been converted into proven and probable reserves of 430.1 million tonnes at an average grade of 0.65 g/tonne (9.0 million ounces) based on a gold price of $1,680 per ounce. See Part I, Item 2. Properties of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, including the cautionary language therein, for more information regarding mineral reserves and resources at the Livengood Gold Project.
Recent Developments
Livengood Gold Project Pre-Feasibility Study
On November 4, 2021, the Company announced the results of the Pre-Feasibility Study (“PFS”) for the Livengood Gold Project which are summarized in the TRS. The TRS details a project that would process 65,000 tons per day and produce 6.4 million ounces of gold over 21 years from a gold resource estimated at 13.6 million ounces at 0.60 g/tonne. The study utilized a third-party review by Whittle Consulting and BBA Inc. to integrate new interpretations based on an expanded geological database, improved geological modelling, new resource estimation methodology, an optimized mine plan and production schedule, additional detailed metallurgical work at various gold grades and grind sizes, changes in the target grind for the mill, new engineering estimates, and updated cost inputs, all of which significantly de-risk the Project. The TRS has estimated the capital costs of the Project at $1.93 billion, the total cost per ton milled at $13.12, the all-in sustaining costs at $1,171 per ounce, and net present value (5)% at $1,800/oz of $400 million.
The Project configuration evaluated in the TRS is a conventional, owner-operated surface mine that would utilize large-scale mining equipment in a blast/load/haul operation. Mill feed would be processed in a comminution circuit consisting of primary and secondary crushing, wet grinding in a single semi-autogenous mill and single ball mill followed by a gravity gold circuit and a conventional carbon in leach circuit.
The TRS was prepared by independent third-party consultants. The Company cautions that the PFS, which is summarized in the TRS, is preliminary in nature, and is based on technical and economic assumptions which are expected to be further refined and evaluated in a full feasibility study which may be completed in the future. The TRS is based on a mineral resource estimate effective as of August 20, 2021. The Company has determined that the mineral resource estimate of August 20, 2021 remains current as of December 31, 2022, and has no reason to believe that the mineral resource estimate is no longer current as of June 30, 2023.
On March 8, 2023, the Company announced that the Board approved the 2023 work program which will advance the baseline environmental data collection in critical areas of hydrology and waste rock geochemical characterization needed to support future permitting, as well as advance community engagement.
Results of Operations
Summary of Quarterly Results
Description
March 31, 2023
September 30, 2022
Net income (loss)
(503,537)
(832,181)
(295,260)
Basic and diluted net gain (loss) per common share
(0.00)
March 31, 2022
December 31, 2021
September 30, 2021
(713,973)
(1,015,489)
(1,648,913)
Three Months Ended June 30, 2023 compared to Three Months Ended June 30, 2022
The Company had a net loss of $1,467,897 for the three months ended June 30, 2023, compared to a net loss of $1,200,279 for the three months ended June 30, 2022.
Mineral property expenditures were $641,748 for the three months ended June 30, 2023, compared to $561,945 for the three months ended June 30, 2022. The increase of $79,803 was primarily due to payment of an advance minimum royalty equal to 125% of the amount paid in year 19 on the Alaska Mental Health Trust lease for an increase of $91,167, partially offset by timing variances for environmental activities for an increase of $13,674, project-related expenses for a decrease of $6,701, and legal services for a decrease of $18,337.
Professional fees were $86,576 for the three months ended June 30, 2023 compared to $43,260 for the three months ended June 30, 2022. The increase of $43,316 was primarily due to timing variances for legal services for an increase of $31,491, Sarbanes-Oxley Act review services for an increase of $7,511, XBRL services for an increase of $3,350, and audit services for an increase of $1,052.
Travel costs were $11,963 for the three months ended June 30, 2023 compared to $6,413 for the three months ended June 30, 2022. The increase of $5,550 was primarily due to travel expenses incurred in connection with the 2023 annual shareholders’ meeting, which was held in Vancouver.
Excluding share-based costs of $2,703 and $3,993 for the three months ended June 30, 2023 and June 30, 2022, respectively, investor relations costs were $28,037 for the three months ended June 30, 2023 compared to $30,327 for the three months ended June 30, 2022. The decrease of $2,290 was primarily due to reduced utilization of investor relations services.
Excluding share-based costs of $260,256 and $317,245 for the three months ended June 30, 2023 and June 30, 2022, respectively, consulting fees were $58,358 for the three months ended June 30, 2023 compared to $56,855 for the three months ended June 30, 2022. The increase of $1,503 was primarily due to the timing of services utilized.
Excluding share-based payments, all other operating expense categories reflected only moderate changes period over period.
Share-based payment charges
Share-based payment charges for the three-month periods ended June 30, 2023 and 2022 were allocated as follows:
Expense category:
Consulting
260,256
317,245
2,703
3,993
37,840
55,903
300,799
377,141
Share-based payment charges were $300,799 during the three months ended June 30, 2023 compared to $377,141 during the three months ended June 30, 2022. The decrease of $76,342 was mainly the result of the DSUs issued on May 23, 2023 being expensed at $257,553 compared to the DSUs issued on May 24, 2022 being expensed at $313,023 for a decrease of $55,470 and stock options for
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common shares of the Company issued to its employees and consultants on May 25, 2021 being fully vested during the three months ended June 30, 2023 for a decrease of $20,872.
Other Items
Other items amounted to total other expense of $9,108 during the three-month period ended June 30, 2023, compared to total other income of $201,705 during the three-month period ended June 30, 2022. As a result of the impact of exchange rates on certain of the Company’s U.S. dollar cash balances, the Company had a foreign exchange loss of $53,843 during the three-month period ended June 30, 2023, compared to a gain of $190,165 during the three-month period ended June 30, 2022. The average exchange rate during the three-month period ended June 30, 2023 was C$1 to $0.7447, compared to C$1 to $0.7834 during the three-month period ended June 30, 2022. Interest income was $34,255 for the three-month period ended June 30, 2023, compared to $1,540 for the three-month period ended June 30, 2022. The increase of $32,715 was primarily due to short-term investment certificates being re-invested upon maturity at a higher interest rate. Other income was $10,480 for the three-month period ended June 30, 2023, compared to $10,000 for the three-month period ended June 30, 2022.
Six Months Ended June 30, 2023 compared to Six Months Ended June 30, 2022
The Company had a net loss of $1,971,434 for the six months ended June 30, 2023, compared to a net loss of $1,914,252 for the six months ended June 30, 2022.
Mineral property expenditures were $787,643 for the six months ended June 30, 2023, compared to $765,038 for the six months ended June 30, 2022. The increase of $22,605 was primarily due to payment of an advance minimum royalty equal to 125% of the amount paid in year 19 on the Alaska Mental Health Trust lease for an increase of $91,167 and timing variances for environmental activities for an increase of $43,818, legal services for a decrease of $47,594, and project-related expenses for a decrease of $64,786.
Professional fees were $127,881 for the six months ended June 30, 2023 compared to $109,493 for the six months ended June 30, 2022. The increase of $18,388 was primarily due to timing variances for legal services for an increase of $18,998, audit services for an increase of $6,357, accounting services for a decrease of $254, XBRL services for a decrease of $1,290, and Sarbanes-Oxley Act review services for a decrease of $5,423.
Travel costs were $13,874 for the six months ended June 30, 2023 compared to $8,157 for the six months ended June 30, 2022. The increase of $5,717 was primarily due to travel expenses incurred in connection with the 2023 annual shareholders’ meeting, which was held in Vancouver.
Office costs were $8,887 for the six months ended June 30, 2023 compared to $10,436 for the six months ended June 30, 2022. The decrease of $1,549 was primarily due to timing of replacement office hardware.
Regulatory costs were $86,176 for the six months ended June 30, 2023 compared to $98,685 for the six months ended June 30, 2022. The decrease of $12,509 was primarily due to decreased EDGAR/SEDAR filing expenses of $6,136, reduced Toronto Stock Exchange (“TSX”) listing fees of $5,481, and timing variances for other services for a decrease of $3,489, partially offset by increased NYSE American listing fees of $2,597.
Excluding share-based costs of $3,970 and $5,796 for the six months ended June 30, 2023 and June 30, 2022, respectively, investor relations costs were $30,841 for the six months ended June 30, 2023 compared to $43,777 for the six months ended June 30, 2022. The decrease of $12,936 was primarily due to reduced utilization of investor relations services.
Excluding share-based costs of $261,523 and $319,420 for the six months ended June 30, 2023 and June 30, 2022, respectively, consulting fees were $114,726 for the six months ended June 30, 2023 compared to $113,345 for the six months ended June 30, 2022. The decrease of $1,381 was primarily due to the foreign exchange rate.
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Share-based payment charges for the six-month periods ended June 30, 2023 and 2022 were allocated as follows:
261,523
319,420
3,970
5,796
55,574
81,149
321,067
406,365
Share-based payment charges were $321,067 during the six months ended June 30, 2023 compared to $406,365 during the six months ended June 30, 2022. The decrease of $85,298 was mainly the result of the DSUs issued on May 23, 2023 being expensed at $257,553 compared to the DSUs issued on May 24, 2022 being expensed at $313,023 for a decrease of $55,470 and stock options for common shares of the Company issued to its employees and consultants on May 25, 2021 being fully vested during the three months ended June 30, 2023 for a decrease of $29,828.
Other items amounted to total other income of $5,685 during the six-month period ended June 30, 2023, compared to total other income of $121,171 during the six-month period ended June 30, 2022. As a result of the impact of exchange rates on certain of the Company’s U.S. dollar cash balances, the Company had a foreign exchange loss of $60,616 during the six-month period ended June 30, 2023, compared to a gain of $95,410 during the six-month period ended June 30, 2022. The average exchange rate during the six-month period ended June 30, 2023 was C$1 to $0.7421, compared to C$1 to $0.7866 during the six-month period ended June 30, 2022. Interest income was $55,821 for the six-month period ended June 30, 2023, compared to $3,109 for the six-month period ended June 30, 2022. The increase of $52,712 was primarily due to short-term investment certificates being re-invested upon maturity at a higher interest rate. Other income was $10,480 for the six-month period ended June 30, 2023, compared to $22,652 for the six-month period ended June 30, 2022.
Liquidity and Capital Resources
The Company has no revenue generating operations from which it can internally generate funds. To date, the Company has predominantly financed its ongoing operations through the sale of its equity securities by way of public offerings and private placements and the subsequent exercise of share purchase and broker warrants and options issued in connection with such private placements.
As at June 30, 2023, the Company had cash and cash equivalents of $2,990,012 compared to $4,847,429 at December 31, 2022. The decrease of approximately $1.9 million resulted mainly from expenditures on operating activities of $2.0 million partially offset by a positive foreign currency transaction impact of $0.1 million.
The Company had no cash flows from financing activities during the six-month period ended June 30, 2023.
Financing activities during the six-month period ended June 30, 2022 included the exercise of stock options. Proceeds of $290,290 were received on the issuance of 405,000 common shares.
The Company had no cash flows from investing activities during the six-month periods ended June 30, 2023 and 2022.
As at June 30, 2023, the Company had working capital of $3,121,119 compared to working capital of $4,711,616 at December 31, 2022. The Company expects that it will operate at a loss for the foreseeable future, but believes the current cash and cash equivalents will be sufficient to cover the anticipated 2023 work plan at the Livengood Gold Project and satisfy its currently anticipated general and administrative costs through at least the next 12 months.
The Company will require significant additional financing to continue its operations (including general and administrative expenses) in connection with advancing activities at the Livengood Gold Project and the development of any mine that may be built at the Livengood Gold Project, and there is no assurance that the Company will be able to obtain the additional financing required on acceptable terms, if at all. In addition, any significant delays in the issuance of required permits for the ongoing work at the Livengood Gold Project, or unexpected results in connection with the ongoing work, could result in the Company being required to raise additional funds to advance permitting efforts. The Company’s review of its financing options includes considering a future strategic alliance to assist in further
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development, permitting and future construction costs, although there can be no assurance that any such strategic alliance will, in fact, be pursued or realized.
Despite the Company’s success to date in raising significant equity financing to fund its operations, there is significant uncertainty that the Company will be able to secure any additional financing in the current or future equity markets. See “Risk Factors – We will require additional financing to fund exploration and, if warranted, development and production. Failure to obtain additional financing could have a material adverse effect on our financial condition and results of operation and could cast uncertainty on our ability to continue as a going concern” included in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
Other than cash held by its subsidiaries for their immediate operating needs in the United States, all of the Company’s cash reserves are on deposit with a major Canadian chartered bank. The Company does not believe that the credit, liquidity or market risks with respect thereto have increased as a result of current market conditions.
Our anticipated expenditures for the year ending December 31, 2023 are approximately $3.3 million, which are expected to be funded from cash on hand. These expenditures include $0.7 million for mineral property leases and mining claim government fees and $2.6 million for general corporate and administrative purposes. Expenditures for mineral property leases and mining claims government fees are anticipated to be approximately $0.7 million in 2024 and $0.8 million in 2025.
Environmental Regulations
The operations of the Company may in the future be affected from time to time in varying degrees by changes in environmental regulations, including those for future removal and site restoration costs. Both the likelihood of new regulations and their overall effect upon the Company vary greatly and are not predictable. The Company’s policy is to meet or, if possible, surpass standards set by relevant legislation by application of technically proven and economically feasible measures.
Certain U.S. Federal Income Tax Considerations for U.S. Holders
The Company believes that it has been a “passive foreign investment company” (“PFIC”) for U.S. federal income tax purposes in recent years and expects to continue to be a PFIC in the future. Current and prospective U.S. shareholders should consult their tax advisors as to the tax consequences of PFIC classification and the U.S. federal tax treatment of PFICs. Additional information on this matter is included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, under “Part II. Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Certain U.S. Federal Income Tax Considerations for U.S. Holders.”
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As of June 30, 2023, an evaluation was carried out under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act). Based on the evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that, as of June 30, 2023, the Company’s disclosure controls and procedures were effective in ensuring that information required to be disclosed in reports filed or submitted to the Securities and Exchange Commission under the Exchange Act: (i) is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and (ii) is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, in a manner that allows for timely decisions regarding required disclosures.
The effectiveness of our or any system of disclosure controls and procedures, however well designed and operated, can provide only reasonable assurance that the objectives of the system will be met and is subject to certain limitations, including the exercise of judgement in designing, implementing and evaluating controls and procedures and the assumptions used in identifying the likelihood of future events.
Changes in Internal Control over Financial Reporting
There were no changes in internal control over financial reporting during the quarter ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors previously disclosed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 under the heading “Risk Factors.”
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. MINE SAFETY DISCLOSURES
Pursuant to Section 1503(a) of the Dodd-Frank Act, issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose specified information about mine health and safety in their periodic reports. These reporting requirements are based on the safety and health requirements applicable to mines under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”) which is administered by the U.S. Department of Labor’s Mine Safety and Health Administration (“MSHA”). During the six-month period ended June 30, 2023, the Company and its subsidiaries were not subject to regulation by MSHA under the Mine Act and thus no disclosure is required under Section 1503(a) of the Dodd-Frank Act.
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS
Exhibit Number
31.1*
Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1+
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2+
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*
Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Condensed Consolidated Interim Balance Sheets at June 30, 2023 and December 31, 2022, (ii) the Condensed Consolidated Interim Statements of Operations and Comprehensive Loss for the Three and Six Months ended June 30, 2023 and 2022, (iii) the Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity for the Three and Six Months Ended June 30, 2023 and 2022, (iv) the Condensed Consolidated Interim Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022, and (v) the Notes to the Condensed Consolidated Interim Financial Statements.
104*
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
* Filed herewith.
+ Furnished herewith.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
International Tower Hill Mines Ltd.
By:
/s/ Karl L. Hanneman
Karl L. Hanneman
Chief Executive Officer
(Principal Executive Officer)
Date: August 7, 2023
/s/ David Cross
David Cross
Chief Financial Officer
(Principal Financial and Accounting Officer)