THM 10-Q
International Tower Hill Mines Ltd (THM)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from to
Commission file number: |
(Exact Name of Registrant as Specified in its Charter)
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(State or other jurisdiction of incorporation or | (I.R.S. Employer |
| (Zip code) |
Registrant’s telephone number, including area code: ( | |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: |
| Trading Symbol: |
| Name of each exchange on which registered: |
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.
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 | ☐ |
☒ | 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
As of April 27, 2023, the registrant had
Table of Contents
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17 | |
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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:
| ● | the Company’s future cash requirements, the Company’s ability to meet its financial obligations as they come due, and the Company’s ability to raise the necessary funds to continue operations on acceptable terms, if at all; |
| ● | the Company’s ability to carry forward and incorporate into future engineering studies of the Livengood Gold Project updated mine design, production schedule and recovery concepts identified during the optimization process; |
| ● | the Company’s potential to carry out an engineering phase that will evaluate and optimize the Livengood Gold Project’s configuration and capital and operating expenses, including determining the optimum scale for the Livengood Gold Project; |
| ● | the Company’s strategies and objectives, both generally and specifically in respect of the Livengood Gold Project; |
| ● | the Company’s belief that there are no known environmental issues that are anticipated to materially impact the Company’s ability to conduct mining operations at the Livengood Gold Project; |
| ● | the potential for the expansion of the estimated mineral resources at the Livengood Gold Project; |
| ● | the potential for a production decision concerning, and any production at, the Livengood Gold Project; |
| ● | the sequence of decisions regarding the timing and costs of development programs with respect to, and the issuance of the necessary permits and authorizations required for, the Livengood Gold Project; |
| ● | the Company’s estimates of the quality and quantity of the mineral resources at the Livengood Gold Project; |
| ● | the timing and cost of any future exploration programs at the Livengood Gold Project, and the timing of the receipt of results therefrom; |
| ● | the expected levels of overhead expenses at the Livengood Gold Project; and |
| ● | future general business and economic conditions, including changes in the price of gold and the overall sentiment of the markets for public equity. |
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:
| ● | the demand for, and level and volatility of the price of gold; |
| ● | conditions in the financial markets generally, the overall sentiment of the markets for public equity, interest rates, currency rates, and the rate of inflation; |
| ● | general business and economic conditions; |
| ● | government regulation and proposed legislation (and changes thereto or interpretations thereof); |
| ● | defects in title to claims or the ability to obtain surface rights, either of which could affect the Company’s property rights and claims; |
| ● | the Company’s ability to secure the necessary services and supplies on favorable terms in connection with its programs at the Livengood Gold Project and other activities; |
| ● | the Company’s ability to attract and retain key staff, particularly in connection with the permitting and development of any mine at the Livengood Gold Project; |
| ● | the accuracy of the Company’s resource estimates (including with respect to size and grade) and the geological, operational and price assumptions on which these are based; |
| ● | the timing of the Company’s ability to commence and complete planned work programs at the Livengood Gold Project; |
3
| ● | the timing of the receipt of and the terms of the consents, permits and authorizations necessary to carry out exploration and development programs at the Livengood Gold Project and the Company’s ability to comply with such terms on a safe and cost-effective basis; |
| ● | the ongoing relations of the Company with the lessors of its property interests and applicable regulatory agencies; |
| ● | the metallurgy and recovery characteristics of samples from certain of the Company’s mineral properties and whether such characteristics are reflective of the deposit as a whole; and |
| ● | the continued development of and potential construction of any mine at the Livengood Gold Project property not requiring consents, approvals, authorizations or permits that are materially different from those identified by the Company. |
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
INTERNATIONAL TOWER HILL MINES LTD.
CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS
As at March 31, 2023 and December 31, 2022
(Expressed in US Dollars - Unaudited)
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Note | 2023 | 2022 | ||||||
ASSETS |
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Current |
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Cash and cash equivalents | 1 |
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Prepaid expenses and other | | | ||||||
Total current assets | | | ||||||
Property and equipment | | | ||||||
Capitalized acquisition costs |
| 4 | | | ||||
Total assets |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current liabilities |
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Accounts payable |
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Accrued liabilities |
| 5 | | | ||||
Total liabilities | | | ||||||
Shareholders’ equity | ||||||||
Share capital, |
| 6 | | | ||||
Contributed surplus | 6 | | | |||||
Accumulated other comprehensive income | | | ||||||
Deficit | ( | ( | ||||||
Total shareholders’ equity | | | ||||||
Total liabilities and shareholders’ equity |
| $ | | $ | | |||
General Information and Nature of Operations (Note 1)
Commitments (Note 8)
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
5
INTERNATIONAL TOWER HILL MINES LTD.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the Three Months Ended March 31, 2023 and 2022
(Expressed in US Dollars - Unaudited)
Three Months Ended | ||||||||
| Note |
| March 31, 2023 |
| March 31, 2022 | |||
Operating expenses |
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Consulting fees |
| 6 | $ | | $ | | ||
Insurance |
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Investor relations |
| 6 |
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Mineral property exploration |
| 4 |
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Office |
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Other |
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Professional fees |
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Regulatory |
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Rent |
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Travel |
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Wages and benefits |
| 6 |
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Total operating expenses |
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Other income (expenses) |
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Loss on foreign exchange |
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Interest income |
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Other income |
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Total other income (expenses) |
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Net loss for the period |
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Other comprehensive income |
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Exchange difference on translating foreign operations |
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Total other comprehensive income for the period |
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Comprehensive loss for the period |
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Basic and diluted loss per share |
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Weighted average number of shares outstanding – basic and diluted |
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The accompanying notes are an integral part of these condensed consolidated interim financial statements.
6
INTERNATIONAL TOWER HILL MINES LTD.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
For the Three Months Ended March 31, 2023 and 2022
(Expressed in US Dollars - Unaudited)
Three-Month Period Ended March 31, 2022 | |||||||||||||||||
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other | |||||||||||||||||
Number of | Contributed | comprehensive | |||||||||||||||
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| Deficit |
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Balance, December 31, 2021 |
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Stock-based compensation-options |
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Exchange difference on translating foreign operations |
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Exercise of options |
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Reallocation from contributed surplus |
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Net loss |
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Balance, March 31, 2022 |
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Three-Month Period Ended March 31, 2023 | |||||||||||||||||
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other | |||||||||||||||||
Number of | Contributed | comprehensive | |||||||||||||||
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| Deficit |
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Balance, December 31, 2022 |
| | $ | | $ | | $ | | $ | ( | $ | | |||||
Stock-based compensation-options | | | | | | | |||||||||||
Exchange difference on translating foreign operations |
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Net loss | | | | | ( | ( | |||||||||||
Balance, March 31, 2023 |
| | $ | | $ | | $ | | $ | ( | $ | | |||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
7
INTERNATIONAL TOWER HILL MINES LTD.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2023 and 2022
(Expressed in US Dollars - Unaudited)
| Three Months Ended | |||||
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| March 31, 2023 |
| March 31, 2022 | ||
Operating Activities |
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Loss for the period | $ | ( | $ | ( | ||
Add items not affecting cash: |
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Stock-based compensation-options |
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Changes in non-cash items: |
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Accounts receivable |
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Prepaid expenses and other |
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Accounts payable and accrued liabilities |
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Cash and cash equivalents used in operating activities |
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Financing Activities |
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Issuance of shares | | | ||||
Cash and cash equivalents provided by financing activities |
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Effect of foreign exchange on cash |
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Change in cash and cash equivalents |
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Cash and cash equivalents, beginning of the period |
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Cash and cash equivalents, end of the period | $ | | $ | | ||
Non-cash transactions:
| ● | Reallocation from contributed surplus from exercise of stock options $nil (March 31, 2022 - $ |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
8
INTERNATIONAL TOWER HILL MINES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three Months Ended March 31, 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 March 31, 2023, the Company has a
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 March 31, 2023, the Company had cash and cash equivalents of $
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 May 4, 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 March 31, 2023 and the results of its operations for the three months then ended. Operating results for the three months ended March 31, 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
INTERNATIONAL TOWER HILL MINES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three Months Ended March 31, 2023 and 2022
(Expressed in US dollars – Unaudited)
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 May 4, 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:
| ● | Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities; |
| ● | Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and |
| ● | Level 3 – Inputs that are not based on observable market data. |
There were
4. MINERAL PROPERTY
The Company had the following activity related to its Livengood Gold Project:
Capitalized acquisition costs |
| Amount | |
Balance, December 31, 2022 | $ | | |
Acquisition costs |
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Balance, March 31, 2023 | $ | | |
The following table presents costs incurred for exploration and evaluation activities for the three months ended March 31, 2023 and 2022:
| March 31, 2023 |
| March 31, 2022 | |||
Exploration costs: |
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Environmental | $ | | $ | | ||
Equipment rental |
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Field costs |
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Geological/geophysical |
| — |
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Land maintenance and tenure |
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Legal |
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Transportation and travel |
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Total expenditures for the period | $ | | $ | | ||
10
INTERNATIONAL TOWER HILL MINES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three Months Ended March 31, 2023 and 2022
(Expressed in US dollars – Unaudited)
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:
| a) | A lease of the Alaska Mental Health Trust mineral rights having a term beginning July 1, 2004 and extending |
| b) | A lease of federal unpatented lode mining claims having an initial term of |
| c) | A lease of patented lode mining claims having an initial term of |
| d) | A lease of unpatented federal lode mining and federal unpatented placer claims having an initial term of |
11
INTERNATIONAL TOWER HILL MINES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three Months Ended March 31, 2023 and 2022
(Expressed in US dollars – Unaudited)
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 March 31, 2023 and December 31, 2022.
| March 31, 2023 |
| December 31, 2022 | |||
Accrued liabilities | $ | | $ | | ||
Accrued salaries and benefits |
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Total accrued liabilities | $ | | $ | | ||
Accrued liabilities at March 31, 2023 include accruals for general corporate costs and project costs of $
6. SHARE CAPITAL
Authorized
The Company’s authorized share capital consists of an unlimited number of common shares without par value. At December 31, and March 31, 2023, there were
12
INTERNATIONAL TOWER HILL MINES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three Months Ended March 31, 2023 and 2022
(Expressed in US dollars – Unaudited)
Share issuances
There were
During the three months ended March 31, 2022, the Company issued
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
A summary of the options granted under the Stock Option Plan as of March 31, 2023 and December 31, 2022 is presented below:
Three Months Ended | Year Ended | ||||||||||||||||
March 31, 2023 | December 31, 2022 | ||||||||||||||||
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Number of | Exercise Price | Intrinsic Value | Number of | Exercise Price | Intrinsic Value | ||||||||||||
Options | (C$) | (C$) | Options | (C$) | (C$) | ||||||||||||
Balance, beginning of the period |
| | $ | |
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Granted |
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Exercised |
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Expired |
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Balance, end of the period |
| | $ | | $ | | | $ | | $ | | ||||||
The weighted average remaining life of options outstanding at March 31, 2023 was
13
INTERNATIONAL TOWER HILL MINES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three Months Ended March 31, 2023 and 2022
(Expressed in US dollars – Unaudited)
Stock options outstanding as at March 31, 2023 and December 31, 2022 are as follows:
| March 31, 2023 |
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| December 31, 2022 | |||||||||||
Exercise | Number of |
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| Exercise | Number of | ||||||||||
Expiry Date |
| Price (C$) |
| Options |
| Exercisable | Price (C$) |
| Options |
| Exercisable | ||||
March 16, 2023 | — |
| — |
| — | $ | | |
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March 16, 2023 | — |
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| — | $ | | |
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June 9, 2023 | $ | |
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March 21, 2024 | $ | |
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February 1, 2025 | $ | |
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August 8, 2025 | $ | | | | $ | | | | |||||||
May 27, 2026 | $ | | | | $ | | | | |||||||
May 25, 2027 | $ | | | | $ | | | | |||||||
May 24, 2028 | $ | | | | $ | | | | |||||||
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A summary of the non-vested options as of March 31, 2023 and changes during the three months ended March 31, 2023 is as follows:
Weighted average | |||||
Number of | grant-date fair value | ||||
Non-vested options: |
| options |
| (C$) | |
Outstanding at December 31, 2022 |
| | $ | | |
Outstanding at March 31, 2023 |
| | $ | | |
At March 31, 2023, there was unrecognized compensation expense of C$
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
There were no DSU grants during the three months ended March 31, 2023.
During the year ended December 31, 2022, 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.)
The DSUs entitle the holders to receive common shares of the Company’s stock without the payment of any consideration. The DSUs vested immediately upon being granted, but the common shares of stock underlying the DSUs are not deliverable to the grantee until the grantee is no longer serving on the Company’s Board of Directors.
14
INTERNATIONAL TOWER HILL MINES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three Months Ended March 31, 2023 and 2022
(Expressed in US dollars – Unaudited)
DSUs outstanding as at March 31, 2023 and December 31, 2022 are as follows:
| Three Months Ended | Year Ended | |||||||||
March 31, 2023 |
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| December 31, 2022 | ||||||||
| Weighted Average |
| Weighted | ||||||||
Number of | Exercise Price | Number of | Average Exercise | ||||||||
Units | (C$) | Units | Price (C$) | ||||||||
Balance, beginning of the period |
| | $ | |
| | $ | | |||
Issued |
| | |
| | $ | | ||||
Balance, end of the period |
| | $ | |
| | $ | | |||
Share-based payments
During the three months ended March 31, 2023, there were
During the three months ended March 31, 2022, there were
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 |
| Total | ||||
March 31, 2023 |
|
|
|
|
|
| |||
Capitalized acquisition costs | $ | | $ | | $ | | |||
Property and equipment |
| |
| |
| | |||
Current assets |
| |
| |
| | |||
Total assets | $ | | $ | | $ | | |||
December 31, 2022 |
|
|
| ||||||
Capitalized acquisition costs | $ | | $ | | $ | | |||
Property and equipment |
| |
| |
| | |||
Current assets |
| |
| |
| | |||
Total assets | $ | | $ | | $ | | |||
Three Months Ended |
| March 31, 2023 |
| March 31, 2022 | ||
Net loss for the period – Canada | $ | ( | $ | ( | ||
Net loss for the period – United States |
| ( |
| ( | ||
Net loss for the period | $ | ( | $ | ( | ||
15
INTERNATIONAL TOWER HILL MINES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three Months Ended March 31, 2023 and 2022
(Expressed in US dollars – Unaudited)
8. COMMITMENTS
The following table discloses the Company’s contractual obligations as of March 31, 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 | ||||||||||||||||||||
2023 |
| 2024 |
| 2025 |
| 2026 |
| 2027 |
| 2028 and beyond |
| Total | |||||||||
Mineral Property Leases(1) | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||
Mining Claim Government Fees |
| |
| |
| |
| |
| |
| |
| | |||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||
| 1. | Does not include required work expenditures, as it is assumed that the required expenditure level is significantly below the level of work that will actually be carried out by the Company. Does not include potential royalties that may be payable (other than annual minimum royalty payments). See Note 4. |
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 March 31, 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.
17
Results of Operations
Summary of Quarterly Results
Description |
| March 31, 2023 |
| December 31, 2022 |
| September 30, 2022 |
| June 30, 2022 | ||||
Net income (loss) | $ | (503,537) | $ | (832,181) | $ | (295,260) | $ | (1,200,279) | ||||
Basic and diluted net gain (loss) per common share | $ | (0.00) | $ | (0.00) | $ | (0.00) | $ | (0.01) | ||||
| March 31, 2022 |
| December 31, 2021 |
| September 30, 2021 |
| June 30, 2021 | |||||
Net income (loss) | $ | (713,973) | $ | (1,015,489) | $ | (1,648,913) | $ | (2,178,014) | ||||
Basic and diluted net gain (loss) per common share | $ | (0.00) | $ | (0.01) | $ | (0.01) | $ | (0.01) | ||||
Three Months Ended March 31, 2023 compared to Three Months Ended March 31, 2022
The Company had a net loss of $503,537 for the three months ended March 31, 2023, compared to a net loss of $713,973 for the three months ended March 31, 2022.
Mineral property expenditures were $145,895 for the three months ended March 31, 2023, compared to $203,093 for the three months ended March 31, 2022. The decrease of $57,198 was primarily due to the completion of the PFS for the Livengood Gold Project in the fourth quarter of 2021 which amounted to a decrease of $58,205. Additionally, there were timing variances for environmental activities for an increase of $30,144, legal services for a decrease of $29,257, and land maintenance fees for an increase of $120.
Professional fees were $41,305 for the three months ended March 31, 2023 compared to $66,233 for the three months ended March 31, 2022. The decrease of $24,928 was primarily due to timing variances for Sarbanes-Oxley Act review services for a decrease of $12,934, legal services for a decrease of $12,492, audit services for an increase of $5,304, XBRL services for a decrease of $4,640, and accounting services for a decrease of $166.
Regulatory costs were $61,364 for the three months ended March 31, 2023 compared to $73,696 for the three months ended March 31, 2022. The decrease of $12,332 was primarily due to decreased EDGAR/SEDAR filing expenses of $7,645, reduced Toronto Stock Exchange (“TSX”) listing fees of $5,654 partially offset by increased NYSE American listing fees of $1,155, and timing variances for other services of ($188).
Excluding share-based costs of $1,267 and $1,803 for the three months ended March 31, 2023 and March 31, 2022, respectively, investor relations costs were $2,804 for the three months ended March 31, 2023 compared to $13,450 for the three months ended March 31, 2022. The decrease of $10,646 was primarily due to reduced investor relations services.
Insurance costs were $49,574 for the three months ended March 31, 2023 compared to $42,450 for the three months ended March 31, 2022. The increase of $7,124 was primarily due to increased renewal premiums.
Excluding share-based costs of $17,734 and $25,246 for the three months ended March 31, 2023 and March 31, 2022, respectively, wages and benefits were $97,915 for the three months ended March 31, 2023 compared to $104,303 for the three months ended March 31, 2022. The decrease of $6,388 was primarily due to the timing of payroll benefits.
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 March 31, 2023 and 2022 were allocated as follows:
Expense category: |
| March 31, 2023 |
| March 31, 2022 | ||
Consulting | $ | 1,267 | $ | 2,175 | ||
Investor relations |
| 1,267 |
| 1,803 | ||
Wages and benefits |
| 17,734 |
| 25,246 | ||
Total | $ | 20,268 | $ | 29,224 | ||
18
Share-based payment charges were $20,268 during the three months ended March 31, 2023 compared to $29,224 during the three months ended March 31, 2022. The decrease of $8,956 was mainly the result of the stock options for common shares of the Company issued to its employees and consultants on May 27, 2020 being fully vested during the three months ended March 31, 2023.
Other items amounted to total other income of $14,793 during the three-month period ended March 31, 2023, compared to total other expense of $80,534 during the three-month period ended March 31, 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 $6,773 during the three-month period ended March 31, 2023, compared to a loss of $94,755 during the three-month period ended March 31, 2022. The average exchange rate during the three-month period ended March 31, 2023 was C$1 to $0.7394, compared to C$1 to $0.7898 during the three-month period ended March 31, 2022. Interest income was $21,566 for the three-month period ended March 31, 2023, compared to $1,569 for the three-month period ended March 31, 2022. The increase of $19,997 was primarily due to short-term investment certificates being re-invested upon maturity at a higher interest rate. Other income was $Nil for the three-month period ended March 31, 2023, compared to $12,652 for the three-month period ended March 31, 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 March 31, 2023, the Company had cash and cash equivalents of $4,231,301 compared to $4,847,429 at December 31, 2022. The decrease of approximately $0.6 million resulted mainly from expenditures on operating activities. Foreign currency transaction impact was $Nil.
The Company had no cash flows from financing activities during the three-month period ended March 31, 2023.
Financing activities during the three-month period ended March 31, 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 three-month periods ended March 31, 2023 and 2022.
As at March 31, 2023, the Company had working capital of $4,228,962 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 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.
19
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 March 31, 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 March 31, 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 March 31, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
20
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
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
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
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 three-month period ended March 31, 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
Not applicable.
21
ITEM 6. EXHIBITS
Exhibit Number |
| Description |
31.1* | ||
|
| |
31.2* | ||
|
| |
32.1+ | ||
|
| |
32.2+ | ||
|
| |
101* | Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Condensed Consolidated Interim Balance Sheets at March 31, 2023 and December 31, 2022, (ii) the Condensed Consolidated Interim Statements of Operations and Comprehensive Loss for the Three Months ended March 31, 2023 and 2022, (iii) the Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity for the Three Months Ended March 31, 2023 and 2022, (iv) the Condensed Consolidated Interim Statements of Cash Flows for the Three Months Ended March 31, 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.
22
SIGNATURES
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: May 5, 2023 | ||
By: | /s/ David Cross |
|
| David Cross |
|
| Chief Financial Officer |
|
| (Principal Financial and Accounting Officer) |
|
| ||
Date: May 5, 2023 | ||
23