UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
x |
|
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
September 30, 2015 |
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 |
N/A |
(State or other jurisdiction of incorporation
or
organization) |
(I.R.S. Employer
Identification No.) |
2300-1177 West Hastings Street |
|
Vancouver, British Columbia, Canada, V6E 2K3 |
V6E 2K3 |
(Address of Principal Executive Offices) |
(Zip code) |
Registrant’s telephone number, including
area code: (604) 683-6332
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 x No
¨
Indicate by check mark
whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted 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 and post such files).
Yes x No
¨
Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated
Filer |
¨ |
Accelerated Filer |
¨ |
Non-Accelerated filer |
¨ |
Smaller Reporting Company |
x |
(Do not check
if a smaller reporting company) |
|
|
Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No
x
As of October 27, 2015,
the registrant had 116,313,638 Common Shares outstanding.
Table of Contents
CAUTIONARY NOTE TO U.S. INVESTORS REGARDING
ESTIMATES OF MEASURED, INDICATED AND INFERRED RESOURCES AND PROVEN AND PROBABLE RESERVES
International Tower Hill Mines Ltd. (“we”, “us”,
“our,” “ITH” or the “Company”) is a mineral exploration company engaged in the acquisition
and exploration of mineral properties. As used in this Quarterly Report on Form 10-Q, the terms “mineral reserve”,
“proven mineral reserve” and “probable mineral reserve” are Canadian mining terms as defined in accordance
with Canadian National Instrument 43-101—Standards of Disclosure for Mineral Projects (“NI 43-101”) and the Canadian
Institute of Mining, Metallurgy and Petroleum (the “CIM”)—CIM Definition Standards on Mineral Resources and Mineral
Reserves, adopted by the CIM Council, as amended. These definitions differ from the definitions in the United States Securities
and Exchange Commission (“SEC”) Industry Guide 7 (“SEC Industry Guide 7”). Under SEC Industry Guide 7 standards,
a “final” or “bankable” feasibility study is required to report reserves, the three-year historical average
price is used in any reserve or cash flow analysis to designate reserves, and the primary environmental analysis or report must
be filed with the appropriate governmental authority. In addition, the terms “mineral resource”, “measured mineral
resource”, “indicated mineral resource” and “inferred mineral resource” are defined in and required
to be disclosed by NI 43-101; however, these terms are not defined terms under SEC Industry Guide 7 and are normally not permitted
to be used in reports and registration statements filed with the SEC. Investors are cautioned not to assume that all or any part
of a mineral deposit in these categories will ever be converted into reserves.
“Inferred mineral resources” have a great amount
of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that
all, or any part, of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of
inferred mineral resources may not form the basis of feasibility or pre-feasibility studies, except in rare cases. Investors are
cautioned not to assume that all or any part of an inferred mineral resource exists or is economically or legally mineable.
Disclosure of “contained ounces” in a resource is
permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does
not constitute “reserves” by SEC standards as in place tonnage and grade without reference to unit measures. Accordingly,
information contained in this report and the documents incorporated by reference herein contain descriptions of our mineral deposits
that may not be comparable to similar information made public by U.S. companies subject to the reporting and disclosure requirements
under the United States federal securities laws and the rules and regulations thereunder.
The term “mineralized material” as used in this
Quarterly Report on Form 10-Q, although permissible under SEC Industry Guide 7, does not indicate “reserves” by
SEC Industry Guide 7 standards. We cannot be certain that any part of the mineralized material will ever be confirmed or converted
into SEC Industry Guide 7 compliant “reserves”. Investors are cautioned not to assume that all or any part of the mineralized
material will ever be confirmed or converted into reserves or that mineralized material can be economically or legally extracted.
CAUTIONARY NOTE TO ALL INVESTORS CONCERNING
ECONOMIC ASSESSMENTS THAT INCLUDE INFERRED RESOURCES
The Company currently holds or has the right to acquire interests
in an advanced stage exploration project in Alaska referred to as the Livengood Gold Project (the “Livengood Gold Project”
or the “Project”). Mineral resources that are not mineral reserves have no demonstrated economic viability. The preliminary
assessments on the Project are preliminary in nature and include “inferred mineral resources” that have a great amount
of uncertainty as to their existence, and are considered too speculative geologically to have economic considerations applied to
them that would enable them to be categorized as mineral reserves. It cannot be assumed that all, or any part, of an inferred mineral
resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form
the basis of feasibility or pre-feasibility studies. There is no certainty that such inferred mineral resources at the Project
will ever be realized. Investors are cautioned not to assume that all or any part of an inferred mineral resource exists or is
economically or legally mineable.
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 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 potential for opportunities to improve the economics of the Livengood Gold Project by reducing
certain capital and operating costs; |
| · | the
potential for higher head grades at the Project; |
| · | the
Company’s ability to potentially include the results of the optimization process
in a new or updated feasibility study or any future financial analysis of the Project; |
| · | the
Company’s ability to carry forward and incorporate into future engineering studies
of the Project updated mine design, production schedule, and recovery concepts identified
during the optimization process; |
| · | the potential for the Company to carry out an engineering phase that will evaluate and optimize the Project configuration and
capital and operating expenses, including determining the optimum scale for the 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 Project; |
| · | the potential for the expansion of the estimated resources at the Livengood Gold Project; |
| · | the potential for a production decision concerning, and any production at, the Livengood Gold Project; |
| · | the potential for cost savings due to the high gravity gold concentration component of some of the Livengood Gold Project mineralization; |
| · | 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 resources at the Livengood Gold Project; |
| · | the timing and cost of the planned future exploration programs at the Livengood Gold Project, and the timing of the receipt
of results therefrom; |
| · | the Company’s future cash requirements, the Company’s ability to meet its financial obligations as they come due
(including payment of the derivative liability due in January 2017), and the Company’s ability to be able to raise the necessary
funds to continue operations on acceptable terms, if at all; 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; |
| · | 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 our property rights and claims; |
| · | conditions in the financial markets generally, the overall sentiment of the markets for public equity, interest rates and currency
rates; |
| · | 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 ability to commence and complete planned work programs at the Livengood Gold Project; |
| · | 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, 2014, which are incorporated herein by reference, as well as other factors described elsewhere
in this report and the Company’s other reports filed with 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.
PART 1
ITEM 1. FINANCIAL STATEMENTS
INTERNATIONAL TOWER HILL MINES LTD. |
(An Exploration Stage Company) |
CONDENSED CONSOLIDATED BALANCE SHEETS |
As at September 30, 2015 and December 31, 2014 |
(Expressed in US Dollars - Unaudited) |
| |
Note | |
September 30, 2015 | | |
December 31, 2014 | |
ASSETS | |
| |
| | | |
| | |
| |
| |
| | | |
| | |
Current | |
| |
| | | |
| | |
Cash and cash equivalents | |
| |
$ | 7,908,605 | | |
$ | 13,521,473 | |
Prepaid expenses and other | |
| |
| 214,271 | | |
| 242,058 | |
Total current assets | |
| |
| 8,122,876 | | |
| 13,763,531 | |
| |
| |
| | | |
| | |
Property and equipment | |
| |
| 31,835 | | |
| 37,128 | |
Capitalized acquisition costs | |
4 | |
| 55,204,041 | | |
| 55,204,041 | |
| |
| |
| | | |
| | |
Total assets | |
| |
$ | 63,358,752 | | |
$ | 69,004,700 | |
| |
| |
| | | |
| | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | |
| |
| | | |
| | |
| |
| |
| | | |
| | |
Current liabilities | |
| |
| | | |
| | |
Accounts payable | |
| |
$ | 178,506 | | |
$ | 270,488 | |
Accrued liabilities | |
| |
| 492,166 | | |
| 878,682 | |
Total current liabilities | |
| |
| 670,672 | | |
| 1,149,170 | |
| |
| |
| | | |
| | |
Non-current liabilities | |
| |
| | | |
| | |
Derivative liability | |
6 | |
| 14,200,000 | | |
| 14,700,000 | |
| |
| |
| | | |
| | |
Total liabilities | |
| |
| 14,870,672 | | |
| 15,849,170 | |
| |
| |
| | | |
| | |
Shareholders’ equity | |
| |
| | | |
| | |
Share capital, no par value; authorized 500,000,000 shares; 116,313,638 shares issued and outstanding at September 30, 2015 and December 31, 2014 | |
7 | |
| 243,692,185 | | |
| 243,692,185 | |
Contributed surplus | |
| |
| 33,887,559 | | |
| 33,439,249 | |
Accumulated other comprehensive income | |
| |
| 773,344 | | |
| 2,196,252 | |
Deficit | |
| |
| (229,865,008 | ) | |
| (226,172,156 | ) |
| |
| |
| | | |
| | |
Total shareholders’ equity | |
| |
| 48,488,080 | | |
| 53,155,530 | |
| |
| |
| | | |
| | |
Total liabilities and shareholders’ equity | |
| |
$ | 63,358,752 | | |
$ | 69,004,700 | |
Nature and continuance of operations (Note
1)
Commitments (Note 9)
The accompanying notes are an integral
part of these condensed consolidated interim financial statements.
INTERNATIONAL TOWER HILL MINES LTD. |
(An Exploration Stage Company) |
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS |
For the Three and Nine Months Ended September 30, 2015 and 2014 |
(Expressed in US Dollars - Unaudited) |
| |
| |
Three Months Ended | | |
Nine Months Ended | |
| |
Note | |
September 30, 2015 | | |
September 30, 2014 | | |
September 30, 2015 | | |
September 30, 2014 | |
Operating expenses | |
| |
| | | |
| | | |
| | | |
| | |
Consulting fees | |
| |
$ | 82,091 | | |
$ | 114,361 | | |
$ | 340,463 | | |
$ | 232,650 | |
Depreciation | |
| |
| 1,754 | | |
| 3,950 | | |
| 5,293 | | |
| 11,844 | |
Insurance | |
| |
| 68,137 | | |
| 71,923 | | |
| 206,222 | | |
| 205,206 | |
Investor relations | |
| |
| 19,209 | | |
| 28,925 | | |
| 112,289 | | |
| 197,356 | |
Mineral property exploration | |
4 | |
| 727,477 | | |
| 557,735 | | |
| 1,957,019 | | |
| 1,957,849 | |
Office | |
| |
| 6,144 | | |
| 14,290 | | |
| 24,255 | | |
| 51,324 | |
Other | |
| |
| 4,675 | | |
| 5,424 | | |
| 15,427 | | |
| 22,755 | |
Professional fees | |
| |
| 63,572 | | |
| 86,711 | | |
| 189,185 | | |
| 321,558 | |
Regulatory | |
| |
| 40,444 | | |
| 14,853 | | |
| 139,812 | | |
| 102,025 | |
Rent | |
| |
| 36,733 | | |
| 56,520 | | |
| 121,719 | | |
| 165,811 | |
Travel | |
| |
| 41,064 | | |
| 33,582 | | |
| 80,706 | | |
| 89,441 | |
Wages and benefits | |
| |
| 657,914 | | |
| 782,868 | | |
| 1,962,707 | | |
| 2,802,423 | |
Total operating expenses | |
| |
| (1,749,214 | ) | |
| (1,771,142 | ) | |
| (5,155,097 | ) | |
| (6,160,242 | ) |
| |
| |
| | | |
| | | |
| | | |
| | |
Other income (expenses) | |
| |
| | | |
| | | |
| | | |
| | |
Gain on foreign exchange | |
| |
| 334,228 | | |
| 186,038 | | |
| 905,123 | | |
| 301,598 | |
Interest income | |
| |
| 7,497 | | |
| 14,198 | | |
| 38,122 | | |
| 46,017 | |
Unrealized gain/(loss) on derivative | |
6 | |
| 400,000 | | |
| 400,000 | | |
| 500,000 | | |
| (300,000 | ) |
Other income | |
| |
| - | | |
| - | | |
| 19,000 | | |
| - | |
Total other income | |
| |
| 741,725 | | |
| 600,236 | | |
| 1,462,245 | | |
| 47,615 | |
| |
| |
| | | |
| | | |
| | | |
| | |
Net loss for the period | |
| |
| (1,007,489 | ) | |
| (1,170,906 | ) | |
| (3,692,852 | ) | |
| (6,112,627 | ) |
| |
| |
| | | |
| | | |
| | | |
| | |
Other comprehensive income (loss) | |
| |
| | | |
| | | |
| | | |
| | |
Unrealized income/(loss) on marketable securities
| |
| |
| 5,272 | | |
| (5,799 | ) | |
| (8,895 | ) | |
| (17,651 | ) |
Exchange difference on translating foreign operations | |
| |
| (583,280 | ) | |
| (385,516 | ) | |
| (1,414,013 | ) | |
| (518,383 | ) |
Total other comprehensive income (loss) for the period | |
| |
| (578,008 | ) | |
| (391,315 | ) | |
| (1,422,908 | ) | |
| (536,034 | ) |
Comprehensive loss for the period | |
| |
$ | (1,585,497 | ) | |
$ | (1,562,221 | ) | |
$ | (5,115,760 | ) | |
$ | (6,648,661 | ) |
| |
| |
| | | |
| | | |
| | | |
| | |
Basic and fully diluted loss per share | |
| |
$ | (0.01 | ) | |
$ | (0.01 | ) | |
$ | (0.03 | ) | |
$ | (0.06 | ) |
| |
| |
| | | |
| | | |
| | | |
| | |
Weighted average number of shares outstanding | |
| |
| 116,313,638 | | |
| 98,068,638 | | |
| 116,313,638 | | |
| 98,068,638 | |
The accompanying notes are an integral
part of these condensed consolidated interim financial statements.
INTERNATIONAL TOWER HILL MINES LTD. |
(An Exploration Stage Company) |
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS’
EQUITY |
For the Nine Months Ended September 30, 2015 and 2014 |
(Expressed in US Dollars - Unaudited) |
| |
Number of
shares | | |
Share capital | | |
Contributed
surplus | | |
Accumulated
other comprehensive income/(loss) | | |
Deficit | | |
Total | |
Balance, December 31, 2013 | |
| 98,068,638 | | |
$ | 236,401,096 | | |
$ | 32,153,864 | | |
$ | 3,021,281 | | |
$ | (218,405,060 | ) | |
$ | 53,171,181 | |
Stock based compensation | |
| - | | |
| - | | |
| 1,140,879 | | |
| - | | |
| - | | |
| 1,140,879 | |
Unrealized loss on available-for-sale
securities | |
| - | | |
| - | | |
| - | | |
| (17,651 | ) | |
| - | | |
| (17,651 | ) |
Exchange difference on
translating foreign operations | |
| - | | |
| - | | |
| - | | |
| (518,383 | ) | |
| - | | |
| (518,383 | ) |
Net
loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| (6,112,627 | ) | |
| (6,112,627 | ) |
Balance, September 30, 2014 | |
| 98,068,638 | | |
| 236,401,096 | | |
| 33,294,743 | | |
| 2,485,247 | | |
| (224,517,687 | ) | |
| 47,663,399 | |
Private placement | |
| 18,245,000 | | |
| 7,315,917 | | |
| - | | |
| - | | |
| - | | |
| 7,315,917 | |
Share issuance costs | |
| - | | |
| (24,828 | ) | |
| - | | |
| - | | |
| - | | |
| (24,828 | ) |
Stock based compensation | |
| - | | |
| - | | |
| 144,506 | | |
| - | | |
| - | | |
| 144,506 | |
Unrealized loss on
available-for-sale securities | |
| - | | |
| - | | |
| - | | |
| (7,066 | ) | |
| - | | |
| (7,066 | ) |
Exchange difference on
translating foreign operations | |
| - | | |
| - | | |
| - | | |
| (281,929 | ) | |
| - | | |
| (281,929 | ) |
Net
loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| (1,654,469 | ) | |
| (1,654,469 | ) |
Balance, December 31, 2014 | |
| 116,313,638 | | |
| 243,692,185 | | |
| 33,439,249 | | |
| 2,196,252 | | |
| (226,172,156 | ) | |
| 53,155,530 | |
Stock based compensation | |
| - | | |
| - | | |
| 448,310 | | |
| - | | |
| - | | |
| 448,310 | |
Unrealized loss on available-for-sale
securities | |
| - | | |
| - | | |
| - | | |
| (8,895 | ) | |
| - | | |
| (8,895 | ) |
Exchange difference on
translating foreign operations | |
| - | | |
| - | | |
| - | | |
| (1,414,013 | ) | |
| - | | |
| (1,414,013 | ) |
Net
loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| (3,692,852 | ) | |
| (3,692,852 | ) |
Balance, September 30, 2015 | |
| 116,313,638 | | |
$ | 243,692,185 | | |
$ | 33,887,559 | | |
$ | 773,344 | | |
$ | (229,865,008 | ) | |
$ | 48,488,080 | |
The accompanying notes are an integral
part of these condensed consolidated interim financial statements.
INTERNATIONAL TOWER HILL MINES LTD. |
(An Exploration Stage Company) |
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS |
For the Nine Months Ended September 30, 2015 and 2014 |
(Expressed in US Dollars - Unaudited) |
| |
Nine Months Ended | |
| |
September 30, 2015 | | |
September 30, 2014 | |
Operating Activities | |
| | | |
| | |
Loss for the period | |
$ | (3,692,852 | ) | |
$ | (6,112,627 | ) |
Add items not affecting cash: | |
| | | |
| | |
Depreciation | |
| 5,293 | | |
| 11,844 | |
Stock based compensation | |
| 448,310 | | |
| 1,140,879 | |
Unrealized (gain) loss on derivative liability | |
| (500,000 | ) | |
| 300,000 | |
Changes in non-cash items: | |
| | | |
| | |
Accounts receivable | |
| 84,838 | | |
| (2,746 | ) |
Prepaid expenses and other | |
| (10,994 | ) | |
| (25,933 | ) |
Accounts payable and accrued liabilities | |
| (461,699 | ) | |
| (832,054 | ) |
Cash used in operating activities | |
| (4,127,104 | ) | |
| (5,520,637 | ) |
| |
| | | |
| | |
Investing Activities | |
| | | |
| | |
Change in restricted cash | |
| - | | |
| 30,477 | |
Capitalized acquisition costs | |
| - | | |
| (30,477 | ) |
Cash used in investing activities | |
| - | | |
| - | |
| |
| | | |
| | |
Effect of foreign exchange on cash | |
| (1,485,764 | ) | |
| (543,361 | ) |
Decrease in cash and cash equivalents | |
| (5,612,868 | ) | |
| (6,063,998 | ) |
Cash and cash equivalents, beginning of the period | |
| 13,521,473 | | |
| 13,925,601 | |
| |
| | | |
| | |
Cash and cash equivalents, end of the period | |
$ | 7,908,605 | | |
$ | 7,861,603 | |
The accompanying notes are an integral
part of these condensed consolidated interim financial statements.
INTERNATIONAL TOWER HILL MINES LTD. |
(An Exploration Stage Company) |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS |
Nine Months Ended September 30, 2015 and 2014 |
(Expressed in US dollars – Unaudited) |
| 1. | GENERAL INFORMATION, NATURE
AND CONTINUANCE 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 2300-1177 West Hastings 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), Livengood Placers, Inc. (“LPI”) (a Nevada corporation),
and 813034 Alberta Ltd. (an Alberta 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 September 30, 2015, the Company was in the exploration stage and controls a 100% interest in its Livengood Gold Project in
Alaska, U.S.A.
The business of mining and exploration involves a
high degree of risk and there can be no assurance that current exploration programs will result in profitable mining operations.
The Company has no source of revenue, and has significant cash requirements to meet its administrative overhead and maintain its
mineral property interests. The recoverability of amounts shown for capitalized acquisition costs is dependent on several factors.
These include the discovery of economically recoverable reserves, the ability of the Company to obtain the necessary financing
to complete the development of the Livengood Gold Project, and future profitable production or proceeds from disposition of capitalized
acquisition costs. The success of the above initiatives cannot be assured. In the event that the Company is unable to obtain the
necessary financing, it may be necessary to defer certain discretionary expenditures and other planned activities.
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 10 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, 2014 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 September 30, 2015 and the results
of its operations for the nine months then ended. Operating results for the nine months ended September 30, 2015 are not
necessarily indicative of the results that may be expected for the year ending December 31, 2015. The 2014 year-end balance sheet
data was derived from audited financial statements but does not include all disclosures required by U.S. GAAP.
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 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 October 29, 2015, the Board approved the condensed
consolidated interim financial statements dated September 30, 2015.
Basis of consolidation
These consolidated financial statements include the
accounts of ITH and its wholly owned subsidiaries TH Alaska, TH US, LPI and 813034 Alberta Ltd. All intercompany transactions
and balances have been eliminated.
INTERNATIONAL TOWER HILL MINES LTD. |
(An Exploration Stage Company) |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS |
Nine Months Ended September 30, 2015 and 2014 |
(Expressed in US dollars – Unaudited) |
| 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 maturity
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. |
| |
Fair value as at September 30, 2015 | |
| |
Level 1 | | |
Level 2 | |
Financial assets: | |
| | | |
| | |
Marketable securities | |
$ | 9,706 | | |
$ | - | |
Total | |
$ | 9,706 | | |
$ | - | |
Financial liabilities: | |
| | | |
| | |
Derivative liability (Note 6) | |
$ | - | | |
$ | 14,200,000 | |
Total | |
$ | - | | |
$ | 14,200,000 | |
| |
Fair value as at December 31, 2014 | |
| |
Level 1 | | |
Level 2 | |
Financial assets: | |
| | | |
| | |
Marketable securities | |
$ | 26,894 | | |
$ | - | |
Total | |
$ | 26,894 | | |
$ | - | |
Financial liabilities: | |
| | | |
| | |
Derivative liability (Note 6) | |
$ | - | | |
$ | 14,700,000 | |
Total | |
$ | - | | |
$ | 14,700,000 | |
| 4. | CAPITALIZED ACQUISITION COSTS |
The Company had the following activity related to
capitalized acquisition costs:
Capitalized acquisition costs | |
Amount | |
| |
| |
Balance, December 31, 2014 | |
$ | 55,204,041 | |
Acquisition costs | |
| - | |
Balance, September 30, 2015 | |
$ | 55,204,041 | |
INTERNATIONAL TOWER HILL MINES LTD. |
(An Exploration Stage Company) |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS |
Nine Months Ended September 30, 2015 and 2014 |
(Expressed in US dollars – Unaudited) |
The following table presents costs incurred for exploration
and evaluation activities for the nine months ended September 30, 2015 and September 30, 2014:
| |
September 30, 2015 | | |
September 30, 2014 | |
Exploration costs: | |
| | | |
| | |
Aircraft services | |
$ | 4,185 | | |
$ | 10,286 | |
Assay | |
| 9,984 | | |
| 6,397 | |
Drilling | |
| - | | |
| 117,743 | |
Environmental | |
| 509,274 | | |
| 748,667 | |
Equipment rental | |
| 33,862 | | |
| 43,097 | |
Field costs | |
| 140,355 | | |
| 181,194 | |
Geological/geophysical | |
| 717,073 | | |
| 18,539 | |
Land maintenance & tenure | |
| 496,968 | | |
| 525,972 | |
Legal | |
| 18,262 | | |
| 250,223 | |
Surveying and mapping | |
| - | | |
| 26,502 | |
Transportation and travel | |
| 27,056 | | |
| 29,229 | |
Total expenditures for the period | |
$ | 1 ,957,019 | | |
$ | 1,957,849 | |
Livengood Gold
Project Property
The Livengood Gold Project property
is located in the Tintina gold belt approximately 113 kilometers (70 miles) 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 19 years until June 30, 2023, subject to
further extensions beyond June 30, 2023 by either commercial production or payment of
an advance minimum royalty equal to 125% of the amount paid in year 19 and diligent pursuit
of development. The lease requires minimum work expenditures and advance minimum royalties
(all of which minimum royalties are recoverable from production royalties) which escalate
annually with inflation. A net smelter return (“NSR”) production royalty
of between 2.5% and 5.0% (depending upon the price of gold) is payable to the lessor
with respect to the lands subject to this lease. In addition, an NSR production royalty
of l% is payable to the lessor with respect to the unpatented federal mining claims subject
to the lease described in b) below and an NSR production royalty of between 0.5% and
1.0% (depending upon the price of gold) is payable to the lessor with respect to the
lands acquired by the Company as a result of the purchase of Livengood Placers, Inc.
in December 2011. During the nine months ended September 30, 2015 and from the inception
of this lease the Company has paid $326,967 and $1,975,890, respectively. |
| b) | a lease of federal unpatented lode mining claims having an initial
term of ten years commencing on April 21, 2003 and continuing for so long thereafter
as advance minimum royalties are paid and mining related activities, including exploration,
continue on the property or on adjacent properties controlled by the Company. The lease
requires an advance minimum royalty of $50,000 on or before each anniversary date (all
of which minimum royalties are recoverable from production royalties). An NSR production
royalty of between 2% and 3% (depending on the price of gold) is payable to the lessors.
The Company may purchase 1% of the royalty for $1,000,000. During the nine months ended
September 30, 2015 and from the inception of this lease the Company has paid $50,000
and $580,000, respectively. |
INTERNATIONAL TOWER HILL MINES LTD. |
(An Exploration Stage Company) |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS |
Nine Months Ended September 30, 2015 and 2014 |
(Expressed in US dollars – Unaudited) |
| c) | a lease of patented lode mining claims having an initial term
of ten years commencing January 18, 2007, and continuing for so long thereafter as advance
minimum royalties are paid. The lease requires an advance minimum royalty of $20,000
on or before each anniversary date through January 18, 2017 and $25,000 on or before
each subsequent anniversary (all of which minimum royalties are recoverable from production
royalties). An NSR production royalty of 3% is payable to the lessors. The Company may
purchase all interests of the lessors in the leased property (including the production
royalty) for $1,000,000 (less all minimum and production royalties paid to the date of
purchase), of which $500,000 is payable in cash over four years following the closing
of the purchase and the balance of $500,000 is payable by way of the 3% NSR production
royalty. During the nine months ended September 30, 2015 and from the inception of this
lease the Company has paid $20,000 and $145,000, respectively. |
| d) | a lease of unpatented federal lode mining and federal unpatented
placer claims having an initial term of ten years commencing on March 28, 2007, and continuing
for so long thereafter as advance minimum royalties are paid and mining related activities,
including exploration, continue on the property or on adjacent properties controlled
by the Company. The lease requires an advance minimum royalty of $15,000 on or before
each anniversary date (all of which minimum royalties are recoverable from production
royalties). The Company is required to pay the lessor the sum of $250,000 upon making
a positive production decision, payable $125,000 within 120 days of the decision and
$125,000 within a year of the decision (all of which are recoverable from production
royalties). An NSR production royalty of 2% is payable to the lessor. The Company may
purchase all of the interest of the lessor in the leased property (including the production
royalty) for $1,000,000. During the nine months ended September 30, 2015 and from the
inception of this lease the Company has paid $15,000 and $98,000, respectively. |
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 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.
The following table presents the accrued liabilities
balances at September 30, 2015 and December 31, 2014.
| |
September
30,
2015 | | |
December
31,
2014 | |
| |
| | |
| |
Accrued liabilities | |
$ | 412,153 | | |
$ | 334,423 | |
Accrued severance | |
| 21,500 | | |
| 390,659 | |
Accrued salaries
and benefits | |
| 58,513 | | |
| 153,600 | |
Total accrued
liabilities | |
$ | 492,166 | | |
$ | 878,682 | |
Accrued liabilities at September 30, 2015 include
accruals for general corporate costs and project costs of $40,228 and $371,925, respectively. Accrued liabilities at December
31, 2014 include accruals for general corporate costs and project costs of $74,413 and $260,010, respectively.
During 2011, the Company acquired certain mining
claims and related rights in the vicinity of the Livengood Gold Project located near Fairbanks, Alaska. The aggregate consideration
was $13,500,000 in cash plus an additional contingent payment based on the five-year average daily gold price (“Average
Gold Price”) from the date of the acquisition. The contingent payment will equal $23,148 for every dollar that the Average
Gold Price exceeds $720 per troy ounce. If the Average Gold Price is less than $720, there will be no additional contingent payment.
INTERNATIONAL TOWER HILL MINES LTD. |
(An Exploration Stage Company) |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS |
Nine Months Ended September 30, 2015 and 2014 |
(Expressed in US dollars – Unaudited) |
At initial recognition on December 13, 2011 the derivative
liability was valued at $23,100,000. The key assumption used in the valuation of the derivative is the estimate of the future
Average Gold Price. The estimate of the future Average Gold Price was determined using a forward curve on future gold prices as
published by the CME Group. Using this forward curve, the Company estimated an Average Gold Price based on actual gold prices
to September 30, 2015 and projected gold prices from September 30, 2015 to the end of the five year period in December 2016 of
$1,332 per ounce of gold.
The fair value of the derivative liability and the
estimated Average Gold Price are as follows:
| |
Total | | |
Average Gold Price ($/oz.) | |
Derivative value at December 31, 2014 | |
$ | 14,700,000 | | |
$ | 1,356 | |
Unrealized gain for the period | |
| (500,000 | ) | |
| | |
Derivative value at September 30, 2015 | |
$ | 14,200,000 | | |
$ | 1,332 | |
Authorized
500,000,000 common shares without par value. At
September 30, 2015 and December 31, 2014 there were 116,313,638 shares issued and outstanding.
Share issuances
There were no share issuances
during the nine months ended September 30, 2015.
Stock options
The Company adopted an incentive stock option plan
in 2006, as amended September 19, 2012 and reapproved on May 28, 2015 at the Company’s Annual General Meeting (the “2006
Plan”). The essential elements of the 2006 Plan provide that the aggregate number of common shares of the Company’s
capital stock that may be made issuable pursuant to options granted under the 2006 Plan may not exceed 10% of the number of issued
shares of the Company at the time of the granting of the options. Options granted under the 2006 Plan will have a maximum term
of ten years. The exercise price of options granted under the 2006 Plan shall be fixed in compliance with the applicable provisions
of the 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 Toronto Stock Exchange. Options granted under the 2006 Plan vest immediately,
unless otherwise determined by the directors at the date of grant.
During the nine months ended September 30, 2015,
the Company granted incentive stock options to certain officers, employees and consultants of the Company to purchase a total
of 2,135,200 common shares in the capital stock of the Company. The options will vest as to one-third on the grant date, one-third
on the first anniversary and one-third on the second anniversary. The following table presents the options granted by the Company
during the nine months ended September 30, 2015:
Options Granted During the Nine Months Ended September 30, 2015 |
Grant Date | |
Expiry Date | |
Number of Options | | |
Exercise Price (C$) | |
March 16, 2015 | |
March 16, 2023 | |
| 1,260,000 | | |
$ | 1.00 | |
March 16, 2015 | |
March 16, 2023 | |
| 845,200 | | |
$ | 0.50 | |
June 9, 2015 | |
June 9, 2023 | |
| 30,000 | | |
$ | 1.00 | |
INTERNATIONAL TOWER HILL MINES LTD. |
(An Exploration Stage Company) |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS |
Nine Months Ended September 30, 2015 and 2014 |
(Expressed in US dollars – Unaudited) |
A summary of the status of the
stock option plan as of September 30, 2015 and December 31, 2014 and changes is presented below:
| |
Nine Months Ended | | |
Year Ended | |
| |
September 30, 2015 | | |
December 31, 2014 | |
| |
Number of Options | | |
Weighted Average Exercise Price (C$) | | |
Number of Options | | |
Weighted Average Exercise Price
(C$) | |
Balance, beginning of the period | |
| 5,854,000 | | |
$ | 2.68 | | |
| 5,493,000 | | |
$ | 3.57 | |
Granted | |
| 2,135,200 | | |
$ | 0.80 | | |
| 2,480,000 | | |
$ | 1.00 | |
Forfeited | |
| - | | |
| - | | |
| (600,000 | ) | |
$ | 3.17 | |
Cancelled | |
| (1,561,000 | ) | |
$ | 4.53 | | |
| (1,519,000 | ) | |
$ | 2.97 | |
Balance, end of the period | |
| 6,428,200 | | |
$ | 1.61 | | |
| 5,854,000 | | |
$ | 2.68 | |
The weighted average remaining
life of options outstanding at September 30, 2015 was 5.28 years.
Stock options outstanding
are as follows:
| |
September 30, 2015 | | |
December 31, 2014 | |
Expiry Date | |
Exercise Price (C$) | | |
Number of Options | | |
Exercisable | | |
Exercise Price (C$) | | |
Number of Options | | |
Exercisable | |
August 23, 2016 | |
| - | | |
| - | | |
| - | | |
$ | 8.07 | | |
| 600,000 | | |
| 600,000 | |
January 9, 2017 | |
$ | 4.60 | | |
| 30,000 | | |
| 30,000 | | |
$ | 4.60 | | |
| 30,000 | | |
| 30,000 | |
August 24, 2017 | |
$ | 3.17 | | |
| 1,775,000 | | |
| 1,775,000 | | |
$ | 3.17 | | |
| 2,275,000 | | |
| 2,275,000 | |
March 14, 2018 | |
$ | 2.18 | | |
| 344,000 | | |
| 344,000 | | |
$ | 2.18 | | |
| 469,000 | | |
| 312,660 | |
February 25, 2022 | |
$ | 1.11 | | |
| 1,030,000 | | |
| 686,666 | | |
$ | 1.11 | | |
| 1,360,000 | | |
| 453,333 | |
February 25, 2022 | |
$ | 0.73 | | |
| 684,000 | | |
| 456,000 | | |
$ | 0.73 | | |
| 690,000 | | |
| 230,000 | |
March 10, 2022 | |
$ | 1.11 | | |
| 430,000 | | |
| 286,666 | | |
$ | 1.11 | | |
| 430,000 | | |
| 143,333 | |
March 16, 2023 | |
$ | 1.00 | | |
| 1,260,000 | | |
| 419,999 | | |
$ | - | | |
| - | | |
| - | |
March 16, 2023 | |
$ | 0.50 | | |
| 845,200 | | |
| 281,733 | | |
$ | - | | |
| - | | |
| - | |
June 9, 2023 | |
$ | 1.00 | | |
| 30,000 | | |
| 10,000 | | |
$ | - | | |
| - | | |
| - | |
| |
| | | |
| 6,428,200 | | |
| 4,290,064 | | |
| | | |
| 5,854,000 | | |
| 4,044,326 | |
A summary of the non-vested
options as of September 30, 2015 and changes during the nine months ended September 30, 2015 is as follows:
Non-vested options: | |
Number of options | | |
Weighted average grant-
date fair value (C$) | |
Outstanding at December 31, 2014 | |
| 1,809,674 | | |
$ | 0.49 | |
Granted | |
| 2,135,200 | | |
$ | 0.25 | |
Cancelled | |
| (112,000 | ) | |
$ | 0.45 | |
Vested | |
| (1,694,738 | ) | |
$ | 0.40 | |
Outstanding at September 30, 2015 | |
| 2,138,136 | | |
$ | 0.34 | |
At September 30, 2015 there
was unrecognized compensation expense of C$287,737 related to non-vested options outstanding. The cost is expected to be recognized
over a weighted-average remaining period of approximately 0.90 years.
INTERNATIONAL TOWER HILL MINES LTD. |
(An Exploration Stage Company) |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS |
Nine Months Ended September 30, 2015 and 2014 |
(Expressed in US dollars – Unaudited) |
Share-based payments
During the nine month period ended September 30,
2015, the Company granted 2,135,200 stock options with a fair value of $435,213, calculated using the Black-Scholes option pricing
model. Share-based payment charges for the nine months ended September 30, 2015 totaled $448,309.
During the nine month period ended September 30,
2014, the Company granted 2,480,000 stock options with a fair value of $1,109,921, calculated using the Black-Scholes option pricing
model. Share-based payment charges for the nine months ended September 30, 2014 totaled $1,140,879.
The following weighted average assumptions
were used for the Black-Scholes option pricing model calculations:
| |
September 30, 2015 | | |
December 31, 2014 | |
Expected life of options | |
| 6 years | | |
| 6 years | |
Risk-free interest rate | |
| 0.97 | % | |
| 1.83 | % |
Annualized volatility | |
| 80.60 | % | |
| 81.02 | % |
Dividend rate | |
| 0.00 | % | |
| 0.00 | % |
Exercise price (C$) | |
$ | 0.80 | | |
$ | 1.00 | |
The expected volatility used in the Black-Scholes
option pricing model is based on the historical volatility of the Company’s shares.
| 8. | 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 | |
September 30, 2015 | |
| | | |
| | | |
| | |
Capitalized acquisition costs | |
$ | - | | |
$ | 55,204,041 | | |
$ | 55,204,041 | |
Property and equipment | |
| 9,782 | | |
| 22,053 | | |
| 31,835 | |
Current assets | |
| 7,525,571 | | |
| 597,305 | | |
| 8,122,876 | |
Total assets | |
$ | 7,535,353 | | |
$ | 55,898,399 | | |
$ | 63,358,752 | |
December 31, 2014 | |
| | | |
| | | |
| | |
Capitalized acquisition costs | |
$ | - | | |
$ | 55,204,041 | | |
$ | 55,204,041 | |
Property and equipment | |
| 10,477 | | |
| 26,651 | | |
| 37,128 | |
Current assets | |
| 13,003,412 | | |
| 760,119 | | |
| 13,763,531 | |
Total assets | |
$ | 13,013,889 | | |
$ | 55,990,811 | | |
$ | 69,004,700 | |
Three months ended | |
September 30, 2015 | | |
September 30, 2014 | |
Net gain/(loss) for the period – Canada | |
$ | 8,703 | | |
$ | (285,338 | ) |
Net loss for the period - United States | |
| (1,016,192 | ) | |
| (885,568 | ) |
Net loss for the period | |
$ | (1,007,489 | ) | |
$ | (1,170,906 | ) |
Nine months ended | |
September 30, 2015 | | |
September 30, 2014 | |
Net loss for the period – Canada | |
$ | (303,255 | ) | |
$ | (1,723,042 | ) |
Net loss for the period - United States | |
| (3,389,597 | ) | |
| (4,389,585 | ) |
Net loss for the period | |
$ | (3,692,852 | ) | |
$ | (6,112,627 | ) |
INTERNATIONAL TOWER HILL MINES LTD. |
(An Exploration Stage Company) |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS |
Nine Months Ended September 30, 2015 and 2014 |
(Expressed in US dollars – Unaudited) |
The following table discloses, as of September 30,
2015, the Company’s contractual obligations including anticipated mineral property payments and work commitments. Under
the terms of the Company’s mineral property purchase agreements, mineral leases and the terms of the unpatented mineral
claims held by it, 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 such payments or incur such expenditures, 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 | |
| |
2015 | | |
2016 | | |
2017 | | |
2018 | | |
2019 | | |
2020 and beyond | | |
Total | |
Livengood Property Purchase(1) | |
$ | - | | |
$ | - | | |
$ | 14,200,000 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 14,200,000 | |
Mineral Property Leases(2) | |
| - | | |
| 416,872 | | |
| 421,850 | | |
| 426,902 | | |
| 437,031 | | |
| 442,236 | | |
| 2,144,891 | |
Mining Claim Government Fees | |
| - | | |
| 114,445 | | |
| 114,445 | | |
| 114,445 | | |
| 114,445 | | |
| 114,445 | | |
| 572,225 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total | |
$ | - | | |
$ | 531,317 | | |
$ | 14,736,295 | | |
$ | 541,347 | | |
$ | 551,476 | | |
$ | 556,681 | | |
$ | 16,917,116 | |
| 1. | The amount payable on January 12, 2017 of $14,200,000 represents
the fair value of the Company’s derivative liability as at September 30, 2015 and
will be revalued at each subsequent reporting period. See Note 6. |
| 2. | 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. |
| 10. | RELATED PARTY TRANSACTIONS |
In December 2011, in accordance with a Stock and
Asset Purchase Agreement (the “Agreement”) between the Company, Alaska/Nevada Gold Mines, Ltd. (“AN Gold Mines”)
and the Heflinger Group, the Company acquired certain mining claims and related rights in the vicinity of the Livengood Gold Project
located near Fairbanks, Alaska. The Company’s derivative liability, as described in Note 6 above, represents the remaining
consideration for the purchase of these claims and related rights and is payable in January 2017. Under the Agreement, the payment
is due 70% to AN Gold Mines and 30% to the Heflinger Group.
Mr. Hanneman was appointed Chief Operating Officer
of the Company on March 26, 2015. Mr. Hanneman is a partner of the general partner, as well as a limited partner, of AN Gold Mines
and holds an 11.9% net interest in AN Gold Mines.
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, 2014. All currency amounts are stated in US dollars unless noted otherwise.
Current Business Activities
Livengood Gold Project
During the nine months ended September 30, 2015 and to the date
of this Quarterly Report on Form 10-Q, the Company progressed on its metallurgical, field and engineering work plan that was developed
due to the potential importance of the head grade evaluation performed during 2014. A significant multi-phase metallurgical test
work program is underway in an attempt to validate the observed higher calculated head grades. The objectives of the 2015 metallurgical
test program are to:
| · | Optimize the gravity circuit; |
| · | Optimize the grind size and power consumption; |
| · | Optimize the reagent consumption; |
| · | Optimize the leach retention time; |
| · | Confirm the overall recoveries by rock type; and |
| · | Provide additional confirmation of the Project head grades. |
Review of the feasibility test work to date indicates that there
is a potential that further optimization of the parameters noted above could result in capital and operating expenditure reductions
for the Project. However, until this multi-phase metallurgical program has been completed, there can be no assurance that
the head grade differences observed to date, or the potential process optimizations and cost savings opportunities identified,
will in fact be realized.
Field work is in progress to advance the environmental baseline
and to evaluate alternatives for fresh water supply with potential to reduce Project costs.
Once the test work and field work are completed and the process
costs are better defined, these costs will then serve as input to an engineering phase that will evaluate and optimize the Project
configuration and capital and operating expenditures, including determining the optimum scale for the Project, any of which may
be different than that assumed in the technical report entitled “Canadian National Instrument 43-101 Technical Report on
the Livengood Gold Project, Feasibility Study, Livengood, Alaska” dated September 4, 2013 and prepared by certain Qualified
Persons under NI 43-101, as filed under the Company’s profile on SEDAR (the “September 2013 Study”). In order
to support the completion of this work plan, the Company anticipates spending approximately $10 million, including general and
administrative expenses, of which approximately $9 million will be spent during the 2015 fiscal year ending December 31, 2015 and
the balance in 2016.
Management Changes
On May 11, 2015, the Company contracted with David Cross to
serve as its Chief Financial Officer. Mr. Cross is a partner in the firm of Cross Davis & Company LLP, Chartered Professional
Accountants, which has also been retained by the Company to provide corporate accounting support. Mr. Cross replaces Tom Yip who
resigned as Chief Financial Officer effective December 31, 2014 and who was providing transitional financial services up to May
31, 2015 as a consultant to the Company since his resignation.
On March 26, 2015, the Company appointed Karl Hanneman as its
Chief Operating Officer. Mr. Hanneman most recently has been serving as General Manager for the Company. Mr. Hanneman has
been with the Company since May 2010, during which time he was responsible for assembling the Alaska team and served as the Livengood
Gold Project Manager.
Results of Operations
Summary of Quarterly Results
Description | |
September 30, 2015 | | |
June 30, 2015 | | |
March 31, 2015 | | |
December 31, 2014 | |
Net loss | |
$ | (1,007,489 | ) | |
$ | (2,048,868 | ) | |
$ | (636,495 | ) | |
$ | (1,654,469 | ) |
Basic and diluted net loss per common share | |
$ | (0.01 | ) | |
$ | (0.02 | ) | |
$ | (0.01 | ) | |
$ | (0.02 | ) |
| |
| | | |
| | | |
| | | |
| | |
| |
| September 30, 2014 | | |
| June 30, 2014 | | |
| March 31, 2014 | | |
| December 31, 2014 | |
Net loss | |
$ | (1,170,906 | ) | |
$ | (1,431,402 | ) | |
$ | (3,510,319 | ) | |
$ | (1,022,387 | ) |
Basic and diluted net loss per common share | |
$ | (0.01 | ) | |
$ | (0.01 | ) | |
$ | (0.04 | ) | |
$ | (0.01 | ) |
Three Months Ended September 30, 2015 compared to Three
Months Ended September 30, 2014
The Company incurred a net loss of $1,007,489 for the three
month period ended September 30, 2015, compared to a net loss of $1,170,906 for the three month period ended September 30, 2014.
The decrease in net loss in the three months ended September 30, 2015 compared to the three months ended September 30, 2014 is
mainly a factor of changes in noncash items between periods as further discussed below. The following discussion highlights certain
selected financial information and changes in operations between the three months ended September 30, 2015 and the three months
ended September 30, 2014.
Mineral property expenditures increased to $727,477 for the
three months ended September 30, 2015 from $557,735 for the three months ended September 30, 2014 primarily due to the Company
moving forward with a multi-phase metallurgical test work program which was partially offset by limiting field activities to the
continuation of critical environmental baseline work.
Share-based payment charges were $86,319 during the three months
ended September 30, 2015 compared to $233,726 during the three months ended September 30, 2014. The decrease in share-based payment
charges during the period was mainly the result of a reduction in the fair value of options granted during the current year and
the vesting of prior period grants.
Share-based payment charges
Share-based payment charges for the three month periods ended
September 30, 2015 and 2014 were allocated as follows:
Expense category: | |
September 30, 2015 | | |
September 30, 2014 | |
Consulting | |
$ | 19,738 | | |
$ | 54,626 | |
Investor relations | |
| 4,638 | | |
| 9,328 | |
Wages and benefits | |
| 61,943 | | |
| 169,772 | |
| |
$ | 86,319 | | |
$ | 233,726 | |
Share-based payments to consultants decreased from $54,626 to
$19,738 as a result of a reduction in the fair value of options granted during the current year and vesting of prior period grants.
Excluding share-based payments, consulting expenses increased to $62,354 for the three months ended September 30, 2015 from $59,735
for the three months ended September 30, 2014 as a result of consulting fees paid for Chief Financial Officer services during the
current year which was partially offset by a decrease in fees paid for general administration support services.
Excluding share-based payment charges of $61,943 and $169,772
respectively, wages and benefits for the period decreased to $595,971 during the three months ended September 30, 2015 from $613,096
during the three months ended September 30, 2014 as a result of the resignation of the Company’s former Chief Financial Officer
effective December 31, 2014.
Most other expense categories reflected moderate decreases period
over period reflecting the Company’s efforts to reduce spending.
Total other income amounted to $741,725 during the three month
period ended September 30, 2015 compared to $600,236 during the three month period ended September 30, 2014. The Company incurred
a foreign exchange gain of $334,228 during the three month period ended September 30, 2015 compared to a gain of $186,038 during
the three month period ended September 30, 2014. The average exchange rate during the three month period ended September 30, 2015
was C$1 to US$0.7640 compared to C$1 to US$0.9183 for the three month period ended September 30, 2014.
Nine Months Ended September 30, 2015 compared to Nine
Months Ended September 30, 2014
The Company incurred a net loss of $3,692,852 for the nine month
period ended September 30, 2015, compared to a net loss of $6,112,627 for the nine month period ended September 30, 2014. The following
discussion highlights certain selected financial information and changes in operations between the nine months ended September
30, 2015 and the nine months ended September 30, 2014.
Professional fees for the nine months ended September 30, 2015
decreased by $132,373 from the nine month period ended September 30, 2014 as the Company negotiated lower rates in 2015 for various
third party-provided professional fees such as legal and accounting fees.
Share-based payment charges were $448,309 during the nine months
ended September 30, 2015 compared to $1,140,879 during the nine months ended September 30, 2014. The decrease in share-based payment
charges during the period was primarily the result of a reduction in the fair value of options granted during the period and vesting
of prior option grants offset by forfeitures during 2014. The Company granted 2,135,200 options during the nine months ended September
30, 2015 compared to 2,480,000 during the nine months ended September 30, 2014.
Share-based payment charges
Share-based payment charges for the nine month periods ended
September 30, 2015 and 2014 were allocated as follows:
Expense category: | |
September 30, 2015 | | |
September 30, 2014 | |
Consulting | |
$ | 93,802 | | |
$ | 58,451 | |
Investor relations | |
| 22,677 | | |
| 62,477 | |
Wages and benefits | |
| 331,830 | | |
| 1,019,951 | |
| |
$ | 448,309 | | |
$ | 1,140,879 | |
Share-based payments to consultants increased from $58,451 to
$93,802 as a result of forfeitures during 2014 offset by a reduction in the fair value of options granted during the current year
and vesting of prior period grants. Excluding share-based payments, consulting expenses increased to $246,661 for the nine months
ended September 30, 2015 from $174,199 for the nine months ended September 30, 2014 as a result of consulting fees paid for Chief
Financial Officer services during the current year.
Excluding share-based payment charges of $331,830 and $1,019,951,
respectively, wages and benefits decreased to $1,630,877 during the nine months ended September 30, 2015 from $1,782,472 during
the nine months ended September 30, 2014 as a result mainly of the resignation of the Company’s Chief Financial Officer
effective December 31, 2014.
All other expense categories reflected moderate decreases period
over period reflecting the Company’s efforts to reduce spending.
Total other income amounted to $1,462,245 during the nine month
period ended September 30, 2015 compared to $47,615 during the nine month period ended September 30, 2014. Total other income
in the current period resulted mainly from a foreign exchange gain of $905,123 during the nine month period ended September 30,
2015 compared to a gain of $301,598 during the nine month period ended September 30, 2014. The average exchange rate during the
nine month period ended September 30, 2015 was C$1 to US$0.7936 compared to C$1 to US$0.9139 for the nine month period ended September
30, 2014. In addition to the unrealized gain from foreign exchange, the Company incurred an unrealized gain of $0.5 million on
the revaluation of the derivative liability at September 30, 2015 resulting from a decrease in the calculated average price of
gold, compared to an unrealized loss of $0.3 million on the revaluation of the derivative liability during the prior period which
resulted from an increase in the calculated average price of gold
Liquidity and Capital Resources
The Company has no revenue generating operations from which
it can internally generate funds. To date, the Company’s ongoing operations have been predominantly financed through sale
of its equity securities by way of private placements and the subsequent exercise of share purchase and broker warrants and options
issued in connection with such private placements. However, the exercise of warrants/options is dependent primarily on the market
price and overall market liquidity of the Company’s securities at or near the expiry date of such warrants/options (over
which the Company has no control) and therefore there can be no guarantee that any existing warrants/options will be exercised.
There are currently no warrants outstanding.
As at September 30, 2015, the Company had cash and cash equivalents
of $7,908,605 compared to $13,521,473 at December 31, 2014. The decrease of approximately $5.6 million resulted mainly from expenditures
on the Livengood Gold Project of approximately $3.8 million, severance payments of approximately $0.4 million and a negative foreign
currency translation impact of approximately $1.4 million. The Company continues to utilize its cash resources to pursue opportunities
identified in the September 2013 Study and subsequently identified by the Company, to fund environmental activities required for
preservation of baseline database and future permitting as well as to complete corporate administrative requirements.
The Company had no cash flows from investing activities during
the nine month period ended September 30, 2015. Investing activities during the nine month period ended September 30, 2014 comprised
of solely the transfer of restricted cash to capitalized acquisition costs for land acquisitions that closed in January 2014.
The Company had no cash flows from financing activities during
the nine month periods ended September 30, 2015 and 2014.
As at September 30, 2015, the
Company had working capital of $7,452,204 compared to working capital of $12,614,361 at December 31, 2014. 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
for it to complete its anticipated 2015 work plan at the Livengood Gold Project and to fund
anticipated non-discretionary expenditures beyond the 2015 fiscal year for at least twelve months after September 30, 2015. To
advance the Livengood Gold Project towards permitting and development, the Company anticipates maintaining certain essential development
activities for the fiscal year ending December 31, 2015. These essential activities include maintaining environmental baseline
data that in its absence could materially delay future permitting of the Livengood Gold Project. Due to the potential importance
of the 2014 head grade evaluation to the Project, a significant multi-phase metallurgical test work program has begun in an attempt
to validate the observed higher calculated head grades. The Company anticipates spending approximately an aggregate of $9.0
million during fiscal year 2015 on metallurgical work and project engineering as well as to maintain the environmental baseline
activity, and perform required general and administrative duties. As at September 30, 2015 the Company had spent $4.7 million
of the planned 2015 expenditures.
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, the contingent payment due in January 2017 and the development of any mine that may be determined to 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.
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.”
disclosed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. The quantity
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. Due to this uncertainty, if the Company is unable to secure
additional financing, it may be required to reduce all discretionary activities at the Project to preserve its working capital
to fund anticipated non-discretionary expenditures beyond the 2015 fiscal year for at least twelve months after September 30,
2015.
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 the current market conditions.
Contractual Obligations
The following table discloses, as of September 30, 2015, the
Company’s contractual obligations including anticipated mineral property payments and work commitments. Under the terms of
the Company’s mineral property purchase agreements, mineral leases and the terms of the unpatented mineral claims held by
it, 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 such payments or incur such expenditures, 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 | |
| |
2015 | | |
2016 | | |
2017 | | |
2018 | | |
2019 | | |
2020 and beyond | | |
Total | |
Livengood Property Purchase(1) | |
$ | - | | |
$ | - | | |
$ | 14,200,000 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 14,200,000 | |
Mineral Property Leases(2) | |
| - | | |
| 416,872 | | |
| 421,850 | | |
| 426,902 | | |
| 437,031 | | |
| 442,236 | | |
| 2,144,891 | |
Mining Claim Government Fees | |
| - | | |
| 114,445 | | |
| 114,445 | | |
| 114,445 | | |
| 114,445 | | |
| 114,445 | | |
| 572,225 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total | |
$ | - | | |
$ | 531,317 | | |
$ | 14,736,295 | | |
$ | 541,347 | | |
$ | 551,476 | | |
$ | 556,681 | | |
$ | 16,917,116 | |
| 1. | The amount payable on January 12, 2017 of $14,200,000 represents the fair value of the Company’s derivative liability
as at September 30, 2015 and will be revalued at each subsequent reporting period. |
| 2. | Does not include required work expenditures, as it is assumed that the required expenditure level is significantly below the
work for which will actually be carried out by the Company. Does not include potential royalties that may be payable (other than
annual minimum royalty payments). |
Other – Related Party Transactions
In December 2011, in accordance with a Stock and Asset Purchase
Agreement (the “Agreement”) between the Company, Alaska/Nevada Gold Mines, Ltd. (“AN Gold Mines”) and the
Heflinger Group, the Company acquired certain mining claims and related rights in the vicinity of the Livengood Gold Project located
near Fairbanks, Alaska. The Company’s derivative liability, as described in Note 6 of the financial statements for the period
ended September 30, 2015, represents the remaining consideration for the purchase of these claims and related rights and is payable
in January 2017. Under the Agreement, the payment is due 70% to AN Gold Mines and 30% to the Heflinger Group.
Mr. Karl Hanneman was appointed Chief Operating Officer of the
Company on March 26, 2015. Mr. Hanneman is a partner of the general partner, as well as a limited partner, of AN Gold Mines and
holds an 11.9% net interest in AN Gold Mines. Mr. Hanneman’s interest in AN Gold Mines dates to the 1980’s and pre-dates
the Company’s interest in the Livengood Gold Project, pre-dates his May 2010 employment with the Company, and was disclosed
to the Company prior to his employment. Because of Mr. Hanneman’s interest in the derivative liability, the Company has excluded
and will continue to exclude Mr. Hanneman from participating in any discussions, calculations or other matters related to the derivative
liability on behalf of the Company, and any future agreements or arrangements related to the derivative liability will be subject
to the prior review and approval of the Company’s Audit Committee in accordance with the Company’s policies for related
party transactions.
Off-Balance Sheet Arrangements
The Company does not have any off balance sheet arrangements.
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 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, 2014,
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
The Company has exposure to market risk in areas of interest
rate risk, foreign currency exchange rate risk, concentration of credit risk and other price risk.
Interest Rate Risk
Interest rate risk consists of the risk that the fair value
or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
The Company’s cash and cash equivalents consists of cash
and cash equivalents held in bank accounts in the United States and Canada and short term deposit certificates or Guaranteed Investment
Certificates with a major Canadian financial institution that earn interest at variable interest rates. Future cash flows from
interest income on cash and cash equivalents will be affected by interest rate fluctuations. Due to the short-term nature of these
financial instruments, fluctuations in market rates do not have a significant impact on estimated fair values.
At September 30, 2015, the Company held a total of $7,908,605
in cash and cash equivalents which consist of interest bearing accounts and Guaranteed Investment Certificates.
The Company manages interest rate risk by maintaining an investment
policy that focuses primarily on preservation of capital and liquidity. The Company’s sensitivity analysis suggests that
a 0.5% change in interest rates would affect interest income by approximately $50,000.
Foreign Currency Risk
The Company is exposed to foreign currency risk to the extent
that certain monetary financial instruments and other assets are denominated in Canadian dollars. As the majority of the Company’s
assets are denominated in U.S. dollars, currency risk is limited to those Canadian cash balances. The Company has not entered into
any foreign currency contracts to mitigate this risk. Over the past twelve months, the U.S. to Canadian dollar exchange rate has
fluctuated as much as 15%. The Company’s sensitivity analysis suggests that a 15% change in the absolute rate of exchange
for the Canadian dollar would affect net assets by approximately $480,000. Furthermore, depending on the amount of cash held by
the Company in Canadian dollars at the end of each reporting period using the period end exchange rate, significant changes in
the exchange rates could cause significant changes to the currency translation amounts recorded to accumulated other comprehensive
income.
As at September 30, 2015, Canadian dollar balances were converted
at a rate of C$1 to $0.7466.
Credit Risk
Concentration of credit risk exists with respect to the Company’s
cash and cash equivalents as all amounts are held at one major Canadian financial institution. Credit risk with regard to cash
held in the United States at U.S. subsidiaries is mitigated as the amount held in the United States is only sufficient to cover
short-term cash requirements. With respect to receivables at September 30, 2015, the Company is not exposed to significant credit
risk as the receivables are principally interest accruals.
Other Price Risk
Other price risk is the risk that the fair value or future cash
flows of a financial instrument will fluctuate because of changes in market prices, other than those arising from interest rate
risk or foreign exchange risk. The Company’s investment in marketable securities is exposed to such risk. The Company’s
derivative liability, which consists of a future contingent payment valued using estimated future gold prices, is also exposed
to other price risk. See Note 6 of the notes to the unaudited condensed consolidated interim financial statements for the period
ended September 30, 2015. The fair value of this liability will fluctuate with the average daily price of gold as well as with
future projections for the average price of gold over the life of the obligation. For every dollar change in the average daily
price of gold, the value of the derivative liability will change by $23,148.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As of September 30, 2015, an evaluation was carried out under
the supervision of and with the participation of the Company’s management, including the Chief Executive Officer (the principal
executive officer) and Chief Financial Officer (the principal financial officer and accounting 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 September 30, 2015, the Company’s disclosure controls and procedures were effective in ensuring that information required
to be disclosed in reports filed or submitted to the SEC under the Exchange Act: (i) is recorded, processed, summarized and reported
within the time periods specified in applicable rules and forms and (ii) 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 September 30, 2015 that have materially, or are reasonably likely to materially affect, the Company’s
internal control over financial reporting.
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, 2014 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 requirement 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 September 30, 2015, 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.
ITEM 6. EXHIBITS
10.1
|
Consulting Agreement, dated for reference May 11, 2015, between the Company and David A. Cross (filed as Exhibit 10.1 to the Company’s Form 8-K on May 12, 2015 and incorporated herein by reference). |
|
|
10.2
|
Financial and Accounting Consulting Agreement, dated for reference May 11, 2015, between the Company and Cross Davis & Company LLP, Certified General Accountants (filed as Exhibit 10.2 to the Company’s Form 8-K on May 12, 2015 and incorporated herein by reference). |
|
|
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 Balance Sheets at September 30, 2015 and December 31, 2014, (ii) the Condensed Consolidated Interim Statements of Operations and Comprehensive Loss for the Three and Nine Months ended September 30, 2015 and 2014, (iii) the Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity for the Nine Months Ended September 30, 2015 and 2014, (iv) the Condensed Consolidated Interim Statements of Cash Flows for the Nine Months Ended September 30, 2015 and 2014, and (v) the Notes to the Condensed Consolidated Interim Financial Statements. |
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.
By: |
/s/ Thomas E. Irwin |
|
|
|
|
|
Thomas E. Irwin |
|
|
Chief Executive Officer |
|
|
(Principal Executive Officer) |
|
Date: October 30, 2015
By: |
/s/
David Cross |
|
|
|
|
|
David Cross |
|
|
Chief Financial Officer |
|
|
(Principal Financial and Accounting Officer) |
|
Date: October 30, 2015
EXHIBIT 31.1
CERTIFICATION
I, Thomas E. Irwin, certify that:
1. I have reviewed this Quarterly Report
on Form 10-Q of International Tower Hill Mines Ltd.;
2. Based on my knowledge, this report does not contain
any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not misleading with respect to the period covered
by this report;
3. Based on my knowledge, the financial
statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report;
4. The registrant's other certifying officer
and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant
and have:
(a) Designed such disclosure controls and procedures,
or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting,
or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer
and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's
auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses
in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: October 30, 2015 |
By: |
/s/ Thomas E. Irwin |
|
|
Thomas E. Irwin |
|
|
Chief Executive Officer
(Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATION
I, David Cross, certify that:
1. I have reviewed this Quarterly Report
on Form 10-Q of International Tower Hill Mines Ltd.;
2. Based on my knowledge, this report does not contain
any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not misleading with respect to the period covered
by this report;
3. Based on my knowledge, the financial
statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report;
4. The registrant's other certifying officer
and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant
and have:
(a) Designed such disclosure controls and procedures,
or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting,
or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer
and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's
auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses
in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: October 30, 2015 |
By: |
/s/ David Cross |
|
|
David Cross |
|
|
Chief Financial Officer
(Principal Financial and Accounting Officer) |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION
1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002
In connection with the Quarterly Report
on Form 10-Q of International Tower Hill Mines Ltd. (the "Company"), for the period ended September 30, 2015, as filed
with the Securities and Exchange Commission on the date hereof (the "Report"), I, Thomas E. Irwin, Chief Executive Officer
of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that, to my knowledge:
1. The Report fully complies with the requirements
of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents,
in all material respects, the financial condition and results of operation of the Company.
Date: October 30, 2015 |
By: |
/s/ Thomas E. Irwin |
|
|
Thomas E. Irwin |
|
|
Chief Executive Officer
(Principal Executive Officer) |
EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION
1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002
In connection with the Quarterly Report
on Form 10-Q of International Tower Hill Mines Ltd. (the "Company"), for the period ended September 30, 2015, as filed
with the Securities and Exchange Commission on the date hereof (the "Report"), I, David Cross, Chief Financial Officer
of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that, to my knowledge:
1. The Report fully complies with the requirements
of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents,
in all material respects, the financial condition and results of operation of the Company.
Date: October 30, 2015 |
By: |
/s/ David Cross |
|
|
David Cross |
|
|
Chief Financial Officer
(Principal Financial and Accounting Officer) |
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