General Information and Nature of Operations
(Note 1)
Commitments (Note 8)
Subsequent Event (Note 9)
The accompanying notes are an integral part
of these condensed consolidated interim financial statements.
INTERNATIONAL TOWER HILL MINES LTD.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS
For the Three and Six Months Ended June 30, 2020 and 2019
(Expressed in US Dollars - Unaudited)
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
Note
|
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting fees
|
|
|
6
|
|
|
$
|
340,576
|
|
|
$
|
43,637
|
|
|
$
|
380,995
|
|
|
$
|
87,508
|
|
Depreciation
|
|
|
|
|
|
|
442
|
|
|
|
579
|
|
|
|
885
|
|
|
|
1,158
|
|
Insurance
|
|
|
|
|
|
|
35,662
|
|
|
|
30,791
|
|
|
|
66,886
|
|
|
|
60,629
|
|
Investor relations
|
|
|
6
|
|
|
|
31,558
|
|
|
|
20,284
|
|
|
|
42,048
|
|
|
|
34,200
|
|
Mineral property exploration
|
|
|
4
|
|
|
|
536,603
|
|
|
|
911,947
|
|
|
|
652,023
|
|
|
|
1,162,538
|
|
Office
|
|
|
|
|
|
|
6,107
|
|
|
|
6,221
|
|
|
|
13,727
|
|
|
|
11,033
|
|
Other
|
|
|
|
|
|
|
5,190
|
|
|
|
4,532
|
|
|
|
9,082
|
|
|
|
7,581
|
|
Professional fees
|
|
|
|
|
|
|
37,040
|
|
|
|
44,656
|
|
|
|
89,160
|
|
|
|
92,117
|
|
Regulatory
|
|
|
|
|
|
|
19,083
|
|
|
|
21,620
|
|
|
|
80,256
|
|
|
|
84,433
|
|
Rent
|
|
|
|
|
|
|
33,939
|
|
|
|
33,931
|
|
|
|
67,872
|
|
|
|
67,864
|
|
Travel
|
|
|
|
|
|
|
3,599
|
|
|
|
5,138
|
|
|
|
5,761
|
|
|
|
8,095
|
|
Wages and benefits
|
|
|
6
|
|
|
|
230,203
|
|
|
|
176,777
|
|
|
|
384,733
|
|
|
|
332,528
|
|
Total operating expenses
|
|
|
|
|
|
|
(1,280,002
|
)
|
|
|
(1,300,113
|
)
|
|
|
(1,793,428
|
)
|
|
|
(1,949,684
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)/gain on foreign exchange
|
|
|
|
|
|
|
(225,095
|
)
|
|
|
(159,708
|
)
|
|
|
316,091
|
|
|
|
(363,246
|
)
|
Interest income
|
|
|
|
|
|
|
13,341
|
|
|
|
49,036
|
|
|
|
50,666
|
|
|
|
81,233
|
|
Other income
|
|
|
|
|
|
|
5,292
|
|
|
|
23,731
|
|
|
|
5,292
|
|
|
|
23,731
|
|
Total other income (expenses)
|
|
|
|
|
|
|
(206,462
|
)
|
|
|
(86,941
|
)
|
|
|
372,049
|
|
|
|
(258,282
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
|
|
|
|
|
(1,486,464
|
)
|
|
|
(1,387,054
|
)
|
|
|
(1,421,379
|
)
|
|
|
(2,207,966
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange difference on translating foreign operations
|
|
|
|
|
|
|
230,652
|
|
|
|
160,694
|
|
|
|
(322,682
|
)
|
|
|
366,719
|
|
Total other comprehensive income (loss) for the period
|
|
|
|
|
|
|
230,652
|
|
|
|
160,694
|
|
|
|
(322,682
|
)
|
|
|
366,719
|
|
Comprehensive loss for the period
|
|
|
|
|
|
$
|
(1,255,812
|
)
|
|
$
|
(1,226,360
|
)
|
|
$
|
(1,744,061
|
)
|
|
$
|
(1,841,247
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share
|
|
|
|
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding – basic and diluted
|
|
|
|
|
|
|
187,573,671
|
|
|
|
187,238,729
|
|
|
|
187,573,671
|
|
|
|
187,142,553
|
|
The accompanying notes are an integral part
of these condensed consolidated interim financial statements.
INTERNATIONAL TOWER HILL MINES LTD.
CONDENSED CONSOLIDATED INTERIM STATEMENTS
OF CHANGES IN SHAREHOLDERS’ EQUITY
For the Three and Six Months Ended June 30, 2020 and 2019
(Expressed
in US Dollars - Unaudited)
|
|
|
Six-Month Period Ended June 30, 2020
|
|
|
|
Number of
shares
|
|
|
Share
capital
|
|
|
Contributed
surplus
|
|
|
Accumulated
other
comprehensive
income
|
|
|
Deficit
|
|
|
Total
|
|
Balance, December 31, 2019
|
|
|
187,573,671
|
|
|
$
|
278,213,801
|
|
|
$
|
35,069,274
|
|
|
$
|
1,574,011
|
|
|
$
|
(252,626,110
|
)
|
|
$
|
62,230,976
|
|
Stock-based compensation-options
|
|
|
-
|
|
|
|
-
|
|
|
|
53,635
|
|
|
|
-
|
|
|
|
-
|
|
|
|
53,635
|
|
Stock-based compensation-DSUs
|
|
|
-
|
|
|
|
-
|
|
|
|
294,617
|
|
|
|
-
|
|
|
|
-
|
|
|
|
294,617
|
|
Exchange difference on translating foreign operations
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(322,682
|
)
|
|
|
-
|
|
|
|
(322,682
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,421,379
|
)
|
|
|
(1,421,379
|
)
|
Balance, June 30, 2020
|
|
|
187,573,671
|
|
|
$
|
278,213,801
|
|
|
$
|
35,417,526
|
|
|
$
|
1,251,329
|
|
|
$
|
(254,047,489
|
)
|
|
$
|
60,835,167
|
|
|
|
Three-Month Period Ended June 30, 2020
|
|
|
|
Number of
shares
|
|
|
Share
capital
|
|
|
Contributed
surplus
|
|
|
Accumulated
other
comprehensive
income
|
|
|
Deficit
|
|
|
Total
|
|
Balance, March 31, 2020
|
|
|
187,573,671
|
|
|
$
|
278,213,801
|
|
|
$
|
35,069,274
|
|
|
$
|
1,020,677
|
|
|
$
|
(252,561,025
|
)
|
|
$
|
61,742,727
|
|
Stock-based compensation-options
|
|
|
-
|
|
|
|
-
|
|
|
|
53,635
|
|
|
|
-
|
|
|
|
-
|
|
|
|
53,635
|
|
Stock-based compensation-DSUs
|
|
|
-
|
|
|
|
-
|
|
|
|
294,617
|
|
|
|
-
|
|
|
|
-
|
|
|
|
294,617
|
|
Exchange difference on translating foreign operations
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
230,652
|
|
|
|
-
|
|
|
|
230,652
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,486,464
|
)
|
|
|
(1,486,464
|
)
|
Balance, June 30, 2020
|
|
|
187,573,671
|
|
|
$
|
278,213,801
|
|
|
$
|
35,417,526
|
|
|
$
|
1,251,329
|
|
|
$
|
(254,047,489
|
)
|
|
$
|
60,835,167
|
|
|
|
Six-Month Period Ended June 30, 2019
|
|
|
|
Number of
shares
|
|
|
Share
capital
|
|
|
Contributed
surplus
|
|
|
Accumulated
other
comprehensive
income
|
|
|
Deficit
|
|
|
Total
|
|
Balance, December 31, 2018
|
|
|
186,990,683
|
|
|
$
|
277,852,672
|
|
|
$
|
34,960,292
|
|
|
$
|
1,162,900
|
|
|
$
|
(248,799,703
|
)
|
|
$
|
65,176,161
|
|
Stock-based compensation-options
|
|
|
-
|
|
|
|
-
|
|
|
|
1,686
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,686
|
|
Exchange difference on translating foreign operations
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
366,719
|
|
|
|
-
|
|
|
|
366,719
|
|
Share issuance
|
|
|
461,814
|
|
|
|
245,592
|
|
|
|
(245,592
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercise of options
|
|
|
121,174
|
|
|
|
64,254
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
64,254
|
|
Reallocation from contributed surplus
|
|
|
-
|
|
|
|
51,283
|
|
|
|
(51,283
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,207,966
|
)
|
|
|
(2,207,966
|
)
|
Balance, June 30, 2019
|
|
|
187,573,671
|
|
|
$
|
278,213,801
|
|
|
$
|
34,665,103
|
|
|
$
|
1,529,619
|
|
|
$
|
(251,007,669
|
)
|
|
$
|
63,400,854
|
|
|
|
Three-Month Period Ended June 30, 2019
|
|
|
|
Number of
shares
|
|
|
Share
capital
|
|
|
Contributed
surplus
|
|
|
Accumulated
other
comprehensive
income
|
|
|
Deficit
|
|
|
Total
|
|
Balance, March 31, 2019
|
|
|
187,111,857
|
|
|
$
|
277,968,209
|
|
|
$
|
34,910,695
|
|
|
$
|
1,368,925
|
|
|
$
|
(249,620,615
|
)
|
|
$
|
64,627,214
|
|
Exchange difference on translating foreign operations
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
160,694
|
|
|
|
-
|
|
|
|
160,694
|
|
Share issuance
|
|
|
461,814
|
|
|
|
245,592
|
|
|
|
(245,592
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,387,054
|
)
|
|
|
(1,387,054
|
)
|
Balance, June 30, 2019
|
|
|
187,573,671
|
|
|
$
|
278,213,801
|
|
|
$
|
34,665,103
|
|
|
$
|
1,529,619
|
|
|
$
|
(251,007,669
|
)
|
|
$
|
63,400,854
|
|
The accompanying notes are an integral part
of these condensed consolidated interim financial statements.
INTERNATIONAL TOWER HILL MINES LTD.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2020 and 2019
(Expressed in US Dollars - Unaudited)
|
|
Six Months Ended
|
|
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
Operating Activities
|
|
|
|
|
|
|
|
|
Loss for the period
|
|
$
|
(1,421,379
|
)
|
|
$
|
(2,207,966
|
)
|
Add items not affecting cash:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
885
|
|
|
|
1,158
|
|
Stock-based compensation-option
|
|
|
53,635
|
|
|
|
1,686
|
|
Stock-based compensation-DSU
|
|
|
294,617
|
|
|
|
-
|
|
Changes in non-cash items:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
103,194
|
|
|
|
48,874
|
|
Prepaid expenses and other
|
|
|
(75,260
|
)
|
|
|
(58,476
|
)
|
Accounts payable and accrued liabilities
|
|
|
(87,358
|
)
|
|
|
(106,678
|
)
|
Cash used in operating activities
|
|
|
(1,131,666
|
)
|
|
|
(2,321,402
|
)
|
|
|
|
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
Issuance of common shares
|
|
|
-
|
|
|
|
64,254
|
|
Cash provided by financing activities
|
|
|
-
|
|
|
|
64,254
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
Capitalized acquisition costs
|
|
|
-
|
|
|
|
(31,819
|
)
|
Cash used in investing financing activities
|
|
|
-
|
|
|
|
(31,819
|
)
|
Effect of foreign exchange on cash
|
|
|
(315,828
|
)
|
|
|
362,182
|
|
Decrease in cash and cash equivalents
|
|
|
(1,447,494
|
)
|
|
|
(1,926,785
|
)
|
Cash and cash equivalents, beginning of the period
|
|
|
6,937,621
|
|
|
|
10,228,964
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of the period
|
|
$
|
5,490,127
|
|
|
$
|
8,302,179
|
|
The accompanying notes are an integral part
of these condensed consolidated interim financial statements.
INTERNATIONAL TOWER HILL MINES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2020 and 2019
(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 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), and Livengood Placers, Inc. (“LPI”)
(a Nevada corporation). The Company is in the business of acquiring, exploring and evaluating mineral properties, and either joint
venturing or developing these properties further or disposing of them when the evaluation is completed. At June 30, 2020, the Company
has a 100% interest in its Livengood Gold Project, an exploration-stage project in Alaska, U.S.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 June 30, 2020, the Company
had cash and cash equivalents of $5,490,127 compared to $6,937,621 at December 31, 2019. The Company has no revenue generating
operations from which it can internally generate funds.
The Company will require significant
additional financing to continue its operations (including general and administrative expenses) in connection with advancing activities
at the Livengood Gold Project and the development of any mine that may be determined to 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 pursuing 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 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.
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, 2019 as filed in our Annual Report on Form 10-K. In the opinion of the Company’s management, these financial statements
reflect all adjustments, consisting of normal recurring adjustments, necessary to present fairly the Company’s financial
position at June 30, 2020 and the results of its operations for the six months then ended. Operating results for the six months
ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.
INTERNATIONAL TOWER HILL MINES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2020 and 2019
(Expressed in US dollars
– Unaudited)
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 August 7, 2020, the Board
of Directors of the Company (the “Board”) approved these condensed consolidated interim financial statements.
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 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.
|
|
4.
|
CAPITALIZED ACQUISITION COSTS
|
The Company had the following activity related to
capitalized acquisition costs:
Capitalized acquisition costs
|
|
Amount
|
|
Balance, December 31, 2019
|
|
$
|
55,375,124
|
|
Acquisition costs
|
|
|
-
|
|
Balance, June 30, 2020
|
|
$
|
55,375,124
|
|
The following table presents costs incurred for exploration
and evaluation activities for the six months ended June 30, 2020 and 2019:
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
Exploration costs:
|
|
|
|
|
|
|
|
|
Aircraft services
|
|
$
|
-
|
|
|
$
|
4,351
|
|
Environmental
|
|
|
80,189
|
|
|
|
82,216
|
|
Equipment rental
|
|
|
23,363
|
|
|
|
36,119
|
|
Field costs
|
|
|
49,942
|
|
|
|
50,604
|
|
Geological/geophysical
|
|
|
54,906
|
|
|
|
505,061
|
|
Land maintenance and tenure
|
|
|
425,212
|
|
|
|
438,827
|
|
Legal
|
|
|
12,947
|
|
|
|
39,936
|
|
Transportation and travel
|
|
|
5,464
|
|
|
|
5,424
|
|
Total expenditures for the period
|
|
$
|
652,023
|
|
|
$
|
1,162,538
|
|
INTERNATIONAL TOWER HILL MINES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2020 and 2019
(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 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 six months
ended June 30, 2020 and from the inception of this lease, the Company has paid $344,553 and $3,651,168, 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 for the duration of the lease (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 six months ended June 30, 2020 and from the inception of
this lease, the Company has paid $50,000 and $830,000, respectively.
|
|
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 is payable by way of the 3% NSR production royalty. The Company paid $15,000
of royalties during the six months ended June 30, 2020, for a total of $250,000 from the inception of this lease. The Company has
acquired a 40% interest in the mining claims subject to the lease, providing the Company with a 40% interest in the lease.
|
INTERNATIONAL TOWER HILL MINES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2020 and 2019
(Expressed in US dollars
– Unaudited)
|
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 for the duration of the lease (all
of which minimum royalties are recoverable from production royalties). The Company is required to pay the lessor the additional
sum of $250,000 upon making a positive production decision, of which $125,000 is payable within 120 days of the decision and $125,000
is payable 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. The Company paid $15,000 of royalties during the six months ended June 30, 2020, for a total of $173,000
from the inception of this lease.
|
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 June 30, 2020 and December 31, 2019.
|
|
June 30, 2020
|
|
|
December 31,
2019
|
|
Accrued liabilities
|
|
$
|
204,003
|
|
|
$
|
278,644
|
|
Accrued salaries and benefits
|
|
|
33,721
|
|
|
|
38,680
|
|
Total accrued liabilities
|
|
$
|
237,724
|
|
|
$
|
317,324
|
|
Accrued liabilities at June
30, 2020 include accruals for general corporate costs and project costs of $37,684 and $166,319, respectively. Accrued liabilities
at December 31, 2019 include accruals for general corporate costs and project costs of $57,114 and $221,530, respectively.
Authorized
The Company’s authorized
share capital consists of 500,000,000 common shares without par value. At December 31, 2019 and June 30, 2020, there were 187,573,671
shares issued and outstanding.
Share issuances
There were no share issuances
during the six months ended June 30, 2020.
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 and
May 30, 2018 (the “Stock Option Plan”). The essential elements of the Stock Option Plan provide that the aggregate
number of common shares of the Company that may be issued pursuant to options granted under the Stock Option Plan and any other
share-based compensation arrangements may not exceed 10% of the number of issued shares of the Company at the time of the granting
of the options. Options granted under the Stock Option Plan will have a maximum term of ten years. The exercise price of options
granted under the Stock Option Plan shall be fixed in compliance with the applicable provisions of the Toronto Stock Exchange (“TSX”)
Company Manual in force at the time of grant and, in any event, shall not be less than the closing price of the Company’s
common shares on the TSX on the trading day immediately preceding the day on which the option is granted, or such other price as
may be agreed to by the Company and accepted by the TSX. Options granted under the Stock Option Plan vest immediately, unless otherwise
determined by the directors at the date of grant.
A summary of the options granted
under the Stock Option Plan as of June 30, 2020 and December 31, 2019 is presented below:
INTERNATIONAL TOWER HILL MINES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2020 and 2019
(Expressed in US dollars
– Unaudited)
|
|
Six Months Ended
|
|
|
Year Ended
|
|
|
|
June 30, 2020
|
|
|
December 31, 2019
|
|
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise
Price (C$)
|
|
|
Aggregate
Intrinsic
Value (C$)
|
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise
Price (C$)
|
|
|
Aggregate
Intrinsic
Value (C$)
|
|
Balance, beginning of the period
|
|
|
2,452,049
|
|
|
$
|
0.94
|
|
|
|
|
|
|
|
3,655,991
|
|
|
$
|
0.98
|
|
|
|
|
|
Granted
|
|
|
255,000
|
|
|
|
0.92
|
|
|
|
|
|
|
|
187,232
|
|
|
|
0.85
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
(121,174
|
)
|
|
|
0.70
|
|
|
|
|
|
Cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
(1,270,000
|
)
|
|
|
1.06
|
|
|
|
|
|
Balance, end of the period
|
|
|
2,707,049
|
|
|
$
|
0.94
|
|
|
$
|
4,046,844
|
|
|
|
2,452,049
|
|
|
$
|
0.94
|
|
|
$
|
59,734
|
|
The weighted average remaining
life of options outstanding at June 30, 2020 was 3.1 years.
Stock options outstanding
are as follows:
|
|
June 30, 2020
|
|
|
December 31, 2019
|
|
Expiry Date
|
|
Exercise Price
(C$)
|
|
|
Number of
Options
|
|
|
Exercisable
|
|
|
Exercise Price
(C$)
|
|
|
Number of
Options
|
|
|
Exercisable
|
|
February 25, 2022
|
|
$
|
1.11
|
|
|
|
510,000
|
|
|
|
510,000
|
|
|
$
|
1.11
|
|
|
|
510,000
|
|
|
|
510,000
|
|
February 25, 2022
|
|
$
|
0.73
|
|
|
|
270,000
|
|
|
|
270,000
|
|
|
$
|
0.73
|
|
|
|
270,000
|
|
|
|
270,000
|
|
March 10, 2022
|
|
$
|
1.11
|
|
|
|
120,000
|
|
|
|
120,000
|
|
|
$
|
1.11
|
|
|
|
120,000
|
|
|
|
120,000
|
|
March 16, 2023
|
|
$
|
1.00
|
|
|
|
580,000
|
|
|
|
580,000
|
|
|
$
|
1.00
|
|
|
|
580,000
|
|
|
|
580,000
|
|
March 16, 2023
|
|
$
|
0.50
|
|
|
|
130,000
|
|
|
|
130,000
|
|
|
$
|
0.50
|
|
|
|
130,000
|
|
|
|
130,000
|
|
June 9, 2023
|
|
$
|
1.00
|
|
|
|
30,000
|
|
|
|
30,000
|
|
|
$
|
1.00
|
|
|
|
30,000
|
|
|
|
30,000
|
|
March 21, 2024
|
|
$
|
0.61
|
|
|
|
374,817
|
|
|
|
374,817
|
|
|
$
|
0.61
|
|
|
|
374,817
|
|
|
|
374,817
|
|
February 1, 2025
|
|
$
|
1.35
|
|
|
|
250,000
|
|
|
|
250,000
|
|
|
$
|
1.35
|
|
|
|
250,000
|
|
|
|
250,000
|
|
August 8, 2025
|
|
$
|
0.85
|
|
|
|
187,232
|
|
|
|
187,232
|
|
|
$
|
0.85
|
|
|
|
187,232
|
|
|
|
187,232
|
|
May 27, 2026
|
|
$
|
0.92
|
|
|
|
255,000
|
|
|
|
85,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
2,707,049
|
|
|
|
2,537,049
|
|
|
|
|
|
|
|
2,452,049
|
|
|
|
2,452,049
|
|
A summary of the non-vested options
as of June 30, 2020 and changes during the six months ended June 30, 2020 is as follows:
Non-vested options:
|
|
Number of
options
|
|
|
Weighted
average
grant-date fair
value (C$)
|
|
Outstanding at December 31, 2019
|
|
|
-
|
|
|
$
|
-
|
|
Granted
|
|
|
255,000
|
|
|
$
|
0.76
|
|
Vested
|
|
|
(85,000
|
)
|
|
$
|
0.76
|
|
Outstanding at June 30, 2020
|
|
|
170,000
|
|
|
$
|
0.76
|
|
At June 30, 2020, there was unrecognized
compensation expense of C$120,533 related to non-vested options outstanding. The cost is expected to be recognized over a weighted-average
remaining period of approximately 1.42 years.
INTERNATIONAL TOWER HILL MINES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2020 and 2019
(Expressed in US dollars
– Unaudited)
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. The maximum aggregate number of common shares
that may be issued under the DSU Plan and the Stock Option Plan is 10% of the number of issued and outstanding common shares (on
a non-diluted basis).
During the six months ended June
30, 2020, the Company granted each of the members of the Board (other than those directors nominated for election by Paulson &
Co., Inc.) 90,217 deferred share units (“DSUs”) with a grant date fair value (defined as the weighted average of the
prices at which the common shares traded on the exchange with the most volume for the five days immediately preceding the grant)
of C$0.92 per DSU, representing C$83,000 per director or C$415,000 in the aggregate. The DSUs entitle the holders to receive common
shares of the Company without the payment of any consideration. The DSUs vested immediately upon being granted but the common shares
underlying the DSUs are not deliverable to the holder until the holder is no longer serving on the Board.
DSUs outstanding are as follows:
|
|
Six Months Ended
|
|
|
Year Ended
|
|
|
|
June 30, 2020
|
|
|
December 31, 2019
|
|
|
|
Number of
Units
|
|
|
Weighted
Average
Exercise Price
(C$)
|
|
|
Number of
Units
|
|
|
Weighted
Average
Exercise Price
(C$)
|
|
Balance, beginning of the period
|
|
|
1,383,396
|
|
|
$
|
0.77
|
|
|
|
1,356,975
|
|
|
$
|
0.72
|
|
Issued
|
|
|
451,085
|
|
|
$
|
0.92
|
|
|
|
488,235
|
|
|
$
|
0.85
|
|
Delivered
|
|
|
-
|
|
|
|
-
|
|
|
|
(461,814
|
)
|
|
$
|
0.71
|
|
Balance, end of the period
|
|
|
1,834,481
|
|
|
$
|
0.81
|
|
|
|
1,383,396
|
|
|
$
|
0.77
|
|
Share-based payments
During the six-month period ended
June 30, 2020, there were 255,000 stock options granted under the Stock Option Plan and 451,085 DSUs granted under the DSU Plan.
Share-based payment compensation for the six months ended June 30, 2020 totaled $348,252 ($53,635 related to stock options and
$294,617 related to DSUs). Of the total expense for the period ended June 30, 2020, $300,927 was included in consulting fees ($6,310
related to stock options and $294,617 related to DSUs), $3,155 was included in investor relations, and $44,170 was included in
wages and benefits in the statement of operations and comprehensive loss.
During the six-month period ended
June 30, 2019, there were no stock options granted under the Stock Option Plan and no DSUs granted under the DSU Plan. Share-based
payment compensation for the six months ended June 30, 2019 totaled $1,686, which was included in wages and benefits in the statement
of operations and comprehensive loss.
|
|
YTD June 30, 2020
|
|
Expected life of options
|
|
|
6 years
|
|
Risk-free interest rate
|
|
|
0.40
|
%
|
Annualized volatility
|
|
|
80.92
|
%
|
Dividend rate
|
|
|
0.00
|
%
|
Exercise price (C$)
|
|
$
|
0.92
|
|
INTERNATIONAL TOWER HILL MINES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2020 and 2019
(Expressed in US dollars
– Unaudited)
|
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
|
|
June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized acquisition costs
|
|
$
|
-
|
|
|
$
|
55,375,124
|
|
|
$
|
55,375,124
|
|
Property and equipment
|
|
|
7,907
|
|
|
|
6,643
|
|
|
|
14,550
|
|
Current assets
|
|
|
5,116,493
|
|
|
|
575,235
|
|
|
|
5,691,728
|
|
Total assets
|
|
$
|
5,124,400
|
|
|
$
|
55,957,002
|
|
|
$
|
61,081,402
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized acquisition costs
|
|
$
|
-
|
|
|
$
|
55,375,124
|
|
|
$
|
55,375,124
|
|
Property and equipment
|
|
|
7,979
|
|
|
|
7,455
|
|
|
|
15,434
|
|
Current assets
|
|
|
6,652,289
|
|
|
|
523,886
|
|
|
|
7,176,175
|
|
Total assets
|
|
$
|
6,660,268
|
|
|
$
|
55,906,465
|
|
|
$
|
62,566,733
|
|
Three months ended
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
Net loss for the period – Canada
|
|
$
|
(701,159
|
)
|
|
$
|
(255,125
|
)
|
Net loss for the period – United States
|
|
|
(785,305
|
)
|
|
|
(1,131,929
|
)
|
Net loss for the period
|
|
$
|
(1,486,464
|
)
|
|
$
|
(1,387,054
|
)
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
June 30, 2020
|
|
|
|
June 30, 2019
|
|
Net loss for the period – Canada
|
|
$
|
(287,621
|
)
|
|
$
|
(601,504
|
)
|
Net loss for the period – United States
|
|
|
(1,133,758
|
)
|
|
|
(1,606,462
|
)
|
Net loss for the period
|
|
$
|
(1,421,379
|
)
|
|
$
|
(2,207,966
|
)
|
The following table discloses
the Company’s contractual obligations as of June 30, 2020, 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
|
|
|
|
2020
|
|
|
2021
|
|
|
2022
|
|
|
2023
|
|
|
2024
|
|
|
2025 and
beyond
|
|
|
Total
|
|
Mineral Property Leases(1)
|
|
$
|
-
|
|
|
$
|
428,951
|
|
|
$
|
434,185
|
|
|
$
|
439,498
|
|
|
$
|
444,890
|
|
|
$
|
450,363
|
|
|
$
|
2,197,887
|
|
Mining Claim Government Fees
|
|
|
132,460
|
|
|
|
132,460
|
|
|
|
132,460
|
|
|
|
132,460
|
|
|
|
132,460
|
|
|
|
132,460
|
|
|
|
794,760
|
|
Total
|
|
$
|
132,460
|
|
|
$
|
561,411
|
|
|
$
|
566,645
|
|
|
$
|
571,958
|
|
|
$
|
577,350
|
|
|
$
|
582,823
|
|
|
$
|
2,992,647
|
|
|
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.
|
INTERNATIONAL TOWER HILL MINES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2020 and 2019
(Expressed in US dollars
– Unaudited)
In March 2020, the World Health
Organization declared the novel coronavirus 2019 (“COVID-19”) a global pandemic. This contagious disease outbreak,
which has continued to spread, and any related adverse public health developments, has adversely affected workforces, economies,
and financial markets globally, potentially leading to an economic downturn. While it is not possible for the Company to predict
the duration or magnitude of the adverse results of the outbreak and its ultimate effects on the Company’s business, results
of operations or ability to raise funds at this time, as of the date of this Quarterly Report on Form 10-Q, the COVID-19 pandemic
has not had any material adverse effects on the Company.