ITEM 1. FINANCIAL STATEMENTS
INTERNATIONAL TOWER HILL MINES LTD.
CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS
As at September 30, 2020 and December 31, 2019
(Expressed in US Dollars - Unaudited)
|
|
Note
|
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
$
|
13,768,843
|
|
|
$
|
6,937,621
|
|
Prepaid expenses and other
|
|
|
|
|
|
|
158,765
|
|
|
|
238,554
|
|
Total current assets
|
|
|
|
|
|
|
13,927,608
|
|
|
|
7,176,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
|
|
|
|
14,106
|
|
|
|
15,434
|
|
Capitalized acquisition costs
|
|
|
4
|
|
|
|
55,375,124
|
|
|
|
55,375,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
|
|
$
|
69,316,838
|
|
|
$
|
62,566,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
|
|
$
|
335,360
|
|
|
$
|
18,433
|
|
Accrued liabilities
|
|
|
5
|
|
|
|
468,755
|
|
|
|
317,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
|
|
|
|
804,115
|
|
|
|
335,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital, no par value; authorized 500,000,000 shares; 187,573,671 and 194,104,944 shares issued and outstanding at December 31, 2019 and September 30, 2020, respectively
|
|
|
6
|
|
|
|
287,050,971
|
|
|
|
278,213,801
|
|
Contributed surplus
|
|
|
|
|
|
|
35,435,959
|
|
|
|
35,069,274
|
|
Accumulated other comprehensive income
|
|
|
|
|
|
|
1,175,045
|
|
|
|
1,574,011
|
|
Deficit
|
|
|
|
|
|
|
(255,149,252
|
)
|
|
|
(252,626,110
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders’ equity
|
|
|
|
|
|
|
68,512,723
|
|
|
|
62,230,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity
|
|
|
|
|
|
$
|
69,316,838
|
|
|
$
|
62,566,733
|
|
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 Nine Months Ended September 30, 2020
and 2019
(Expressed in US Dollars - Unaudited)
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
Note
|
|
|
September 30, 2020
|
|
|
September 30, 2019
|
|
|
September 30, 2020
|
|
|
September 30, 2019
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting fees
|
|
|
6
|
|
|
$
|
42,175
|
|
|
$
|
353,478
|
|
|
$
|
423,170
|
|
|
$
|
440,986
|
|
Depreciation
|
|
|
|
|
|
|
443
|
|
|
|
579
|
|
|
|
1,328
|
|
|
|
1,737
|
|
Insurance
|
|
|
|
|
|
|
37,913
|
|
|
|
31,378
|
|
|
|
104,799
|
|
|
|
92,007
|
|
Investor relations
|
|
|
6
|
|
|
|
7,193
|
|
|
|
1,723
|
|
|
|
49,241
|
|
|
|
35,923
|
|
Mineral property exploration
|
|
|
4
|
|
|
|
718,541
|
|
|
|
179,692
|
|
|
|
1,370,564
|
|
|
|
1,342,230
|
|
Office
|
|
|
|
|
|
|
4,976
|
|
|
|
7,059
|
|
|
|
18,703
|
|
|
|
18,092
|
|
Other
|
|
|
|
|
|
|
3,905
|
|
|
|
3,685
|
|
|
|
12,987
|
|
|
|
11,266
|
|
Professional fees
|
|
|
|
|
|
|
74,029
|
|
|
|
54,720
|
|
|
|
163,189
|
|
|
|
146,837
|
|
Regulatory
|
|
|
|
|
|
|
59,065
|
|
|
|
52,118
|
|
|
|
139,321
|
|
|
|
136,551
|
|
Rent
|
|
|
|
|
|
|
33,943
|
|
|
|
33,937
|
|
|
|
101,815
|
|
|
|
101,801
|
|
Travel
|
|
|
|
|
|
|
14,425
|
|
|
|
17,264
|
|
|
|
20,186
|
|
|
|
25,359
|
|
Wages and benefits
|
|
|
6
|
|
|
|
190,665
|
|
|
|
257,279
|
|
|
|
575,398
|
|
|
|
589,807
|
|
Total operating expenses
|
|
|
|
|
|
|
(1,187,273
|
)
|
|
|
(992,912
|
)
|
|
|
(2,980,701
|
)
|
|
|
(2,942,596
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)/gain on foreign exchange
|
|
|
|
|
|
|
73,542
|
|
|
|
82,426
|
|
|
|
389,633
|
|
|
|
(280,820
|
)
|
Interest income
|
|
|
|
|
|
|
11,968
|
|
|
|
44,880
|
|
|
|
62,634
|
|
|
|
126,113
|
|
Other income
|
|
|
|
|
|
|
-
|
|
|
|
7,200
|
|
|
|
5,292
|
|
|
|
30,931
|
|
Total other income (expenses)
|
|
|
|
|
|
|
85,510
|
|
|
|
134,506
|
|
|
|
457,559
|
|
|
|
(123,776
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
|
|
|
|
|
(1,101,763
|
)
|
|
|
(858,406
|
)
|
|
|
(2,523,142
|
)
|
|
|
(3,066,372
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange difference on translating foreign operations
|
|
|
|
|
|
|
(76,284
|
)
|
|
|
(101,570
|
)
|
|
|
(398,966
|
)
|
|
|
265,149
|
|
Total other comprehensive income (loss) for the period
|
|
|
|
|
|
|
(76,284
|
)
|
|
|
(101,570
|
)
|
|
|
(398,966
|
)
|
|
|
265,149
|
|
Comprehensive loss for the period
|
|
|
|
|
|
$
|
(1,178,047
|
)
|
|
$
|
(959,976
|
)
|
|
$
|
(2,922,108
|
)
|
|
$
|
(2,801,223
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share
|
|
|
|
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding – basic and diluted
|
|
|
|
|
|
|
189,497,956
|
|
|
|
187,573,671
|
|
|
|
188,219,781
|
|
|
|
187,287,838
|
|
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 Nine Months Ended September 30,
2020 and 2019
(Expressed in US Dollars - Unaudited)
|
|
Nine-Month
Period Ended September 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
|
|
|
-
|
|
|
|
-
|
|
|
|
72,068
|
|
|
|
-
|
|
|
|
-
|
|
|
|
72,068
|
|
Stock-based compensation-DSUs
|
|
|
-
|
|
|
|
-
|
|
|
|
294,617
|
|
|
|
-
|
|
|
|
-
|
|
|
|
294,617
|
|
Exchange difference on translating
foreign operations
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(398,966
|
)
|
|
|
-
|
|
|
|
(398,966
|
)
|
Share issuance
|
|
|
6,531,273
|
|
|
|
9,164,024
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,164,024
|
|
Share issuance costs
|
|
|
-
|
|
|
|
(326,854
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(326,854
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,523,142
|
)
|
|
|
(2,523,142
|
)
|
Balance, September 30, 2020
|
|
|
194,104,944
|
|
|
$
|
287,050,971
|
|
|
$
|
35,435,959
|
|
|
$
|
1,175,045
|
|
|
$
|
(255,149,252
|
)
|
|
$
|
68,512,723
|
|
|
|
Three-Month
Period Ended September 30, 2020
|
|
|
|
Number of
shares
|
|
|
Share
capital
|
|
|
Contributed
surplus
|
|
|
Accumulated
other
comprehensive
income
|
|
|
Deficit
|
|
|
Total
|
|
Balance, June 30, 2020
|
|
|
187,573,671
|
|
|
$
|
278,213,801
|
|
|
$
|
35,417,526
|
|
|
$
|
1,251,329
|
|
|
$
|
(254,047,489
|
)
|
|
$
|
60,835,167
|
|
Stock-based compensation-options
|
|
|
-
|
|
|
|
-
|
|
|
|
18,433
|
|
|
|
-
|
|
|
|
-
|
|
|
|
18,433
|
|
Exchange difference on translating
foreign operations
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(76,284
|
)
|
|
|
-
|
|
|
|
(76,284
|
)
|
Share issuance
|
|
|
6,531,273
|
|
|
|
9,164,024
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,164,024
|
|
Share issuance costs
|
|
|
-
|
|
|
|
(326,854
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(326,854
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,101,763
|
)
|
|
|
(1,101,763
|
)
|
Balance, September 30, 2020
|
|
|
194,104,944
|
|
|
$
|
287,050,971
|
|
|
$
|
35,435,959
|
|
|
$
|
1,175,045
|
|
|
$
|
(255,149,252
|
)
|
|
$
|
68,512,723
|
|
|
|
Nine-Month
Period Ended September 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
|
|
|
-
|
|
|
|
-
|
|
|
|
89,140
|
|
|
|
-
|
|
|
|
-
|
|
|
|
89,140
|
|
Stock-based compensation-DSUs
|
|
|
-
|
|
|
|
-
|
|
|
|
316,717
|
|
|
|
-
|
|
|
|
-
|
|
|
|
316,717
|
|
Exchange difference on translating
foreign operations
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
265,149
|
|
|
|
-
|
|
|
|
265,149
|
|
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
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,066,372
|
)
|
|
|
(3,066,372
|
)
|
Balance, September 30, 2019
|
|
|
187,573,671
|
|
|
$
|
278,213,801
|
|
|
$
|
35,069,274
|
|
|
$
|
1,428,049
|
|
|
$
|
(251,866,075
|
)
|
|
$
|
62,845,049
|
|
|
|
Three-Month
Period Ended September 30, 2019
|
|
|
|
Number of
shares
|
|
|
Share
capital
|
|
|
Contributed
surplus
|
|
|
Accumulated
other
comprehensive
income
|
|
|
Deficit
|
|
|
Total
|
|
Balance, June 30, 2019
|
|
|
187,573,671
|
|
|
$
|
278,213,801
|
|
|
$
|
34,665,103
|
|
|
$
|
1,529,619
|
|
|
$
|
(251,007,669
|
)
|
|
$
|
63,400,854
|
|
Stock-based compensation-options
|
|
|
-
|
|
|
|
-
|
|
|
|
87,454
|
|
|
|
-
|
|
|
|
-
|
|
|
|
87,454
|
|
Stock-based compensation-DSUs
|
|
|
-
|
|
|
|
-
|
|
|
|
316,717
|
|
|
|
-
|
|
|
|
-
|
|
|
|
316,717
|
|
Exchange difference on translating
foreign operations
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(101,570
|
)
|
|
|
-
|
|
|
|
(101,570
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(858,406
|
)
|
|
|
(858,406
|
)
|
Balance, September 30, 2019
|
|
|
187,573,671
|
|
|
$
|
278,213,801
|
|
|
$
|
35,069,274
|
|
|
$
|
1,428,049
|
|
|
$
|
(251,866,075
|
)
|
|
$
|
62,845,049
|
|
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 Nine Months Ended September 30, 2020 and 2019
(Expressed in US Dollars - Unaudited)
|
|
Nine Months Ended
|
|
|
|
September 30,
2020
|
|
|
September 30,
2019
|
|
Operating Activities
|
|
|
|
|
|
|
|
|
Loss for the period
|
|
$
|
(2,523,142
|
)
|
|
$
|
(3,066,372
|
)
|
Add items not affecting cash:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
1,328
|
|
|
|
1,737
|
|
Stock-based compensation-option
|
|
|
72,068
|
|
|
|
89,140
|
|
Stock-based
compensation-DSU
|
|
|
294,617
|
|
|
|
316,717
|
|
Changes in non-cash items:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
93,448
|
|
|
|
13,553
|
|
Prepaid expenses and other
|
|
|
(18,705
|
)
|
|
|
(9,750
|
)
|
Accounts
payable and accrued liabilities
|
|
|
341,619
|
|
|
|
(269,642
|
)
|
Cash used in operating activities
|
|
|
(1,738,767
|
)
|
|
|
(2,924,617
|
)
|
|
|
|
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
Issuance of common shares
|
|
|
9,164,024
|
|
|
|
64,254
|
|
Share issuance costs
|
|
|
(198,464
|
)
|
|
|
-
|
|
Cash provided by financing
activities
|
|
|
8,965,560
|
|
|
|
64,254
|
|
Investing
Activities
|
|
|
|
|
|
|
|
|
Capitalized
acquisition costs
|
|
|
-
|
|
|
|
(101,692
|
)
|
Cash used in investing financing
activities
|
|
|
-
|
|
|
|
(101,692
|
)
|
Effect
of foreign exchange on cash
|
|
|
(395,571
|
)
|
|
|
261,924
|
|
Change in cash and cash equivalents
|
|
|
6,831,222
|
|
|
|
(2,700,131
|
)
|
Cash and cash equivalents,
beginning of the period
|
|
|
6,937,621
|
|
|
|
10,228,964
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents,
end of the period
|
|
$
|
13,768,843
|
|
|
$
|
7,528,833
|
|
Supplementary Disclosures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing transactions
|
|
|
|
|
|
|
|
|
Share issuance costs in accounts
payable
|
|
|
119,916
|
|
|
|
-
|
|
Share
issuance costs in accrued liabilities
|
|
|
8,474
|
|
|
|
-
|
|
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 Nine Months Ended September 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 September 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 September 30, 2020,
the Company had cash and cash equivalents of $13,768,843 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.
COVID-19 Pandemic
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.
2. BASIS
OF PRESENTATION
These unaudited condensed consolidated
interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States
(“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of
Regulation S-X under the Securities Exchange Act of 1934, as amended. Accordingly, they do not include all of the information
and footnotes required by U.S. GAAP for annual financial statements. These unaudited condensed consolidated interim financial
statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31,
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 September 30, 2020 and the results of its operations for the nine months then ended. Operating results for the
nine months ended September 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 Nine Months Ended September 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 November 5, 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, September 30, 2020
|
|
$
|
55,375,124
|
|
The following table presents costs incurred for exploration
and evaluation activities for the nine months ended September 30, 2020 and 2019:
INTERNATIONAL TOWER HILL MINES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three and Nine Months Ended September 30, 2020 and 2019
(Expressed in US dollars
– Unaudited)
|
|
September 30, 2020
|
|
|
September 30, 2019
|
|
Exploration costs:
|
|
|
|
|
|
|
|
|
Aircraft services
|
|
$
|
-
|
|
|
$
|
4,350
|
|
Environmental
|
|
|
135,782
|
|
|
|
131,160
|
|
Equipment rental
|
|
|
39,675
|
|
|
|
57,876
|
|
Field costs
|
|
|
57,529
|
|
|
|
63,375
|
|
Geological/geophysical
|
|
|
523,768
|
|
|
|
496,763
|
|
Land maintenance and tenure
|
|
|
521,416
|
|
|
|
534,773
|
|
Legal
|
|
|
84,535
|
|
|
|
47,725
|
|
Transportation and travel
|
|
|
7,859
|
|
|
|
6,208
|
|
Total expenditures for the period
|
|
$
|
1,370,564
|
|
|
$
|
1,342,230
|
|
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 nine months ended September 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 nine months ended September 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 nine months ended September 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 Nine Months Ended September 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 nine months ended September 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 September 30, 2020 and December 31, 2019.
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
Accrued liabilities
|
|
$
|
439,683
|
|
|
$
|
278,644
|
|
Accrued salaries and benefits
|
|
|
29,072
|
|
|
|
38,680
|
|
Total accrued liabilities
|
|
$
|
468,755
|
|
|
$
|
317,324
|
|
Accrued liabilities at September 30,
2020 include accruals for general corporate costs and project costs of $93,466 and $346,217, 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 September 30, 2020,
there were 187,573,671 and 194,104,944 shares issued and outstanding, respectively.
Share issuances
On August 31, 2020, the
Company entered into an At Market Issuance Sales Agreement (the “sales agreement”) with B. Riley Securities, Inc.
(“B. Riley”), pursuant to which the Company was entitled, at its discretion and from time-to-time during the term
of the sales agreement, to sell through B. Riley such number of common shares of the Company as would result in aggregate gross
proceeds to the Company of up to $10.3 million (the “Offering”). No offers or sales of common shares were made in
Canada through the facilities of the Toronto Stock Exchange (“TSX”) or other trading markets.
As of September 30, 2020,
the Company had issued an aggregate of 6,531,273 common shares under the sales agreement at an average price of $1.40 for gross
proceeds of $9.2 million.
INTERNATIONAL TOWER HILL MINES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three and Nine Months Ended September 30, 2020 and 2019
(Expressed in US dollars
– Unaudited)
Stock options
The
Company adopted an incentive stock option plan in 2006, as amended September 19, 2012 and reapproved by the Company’s
shareholders on May 28, 2015 and May 30, 2018 (the “Stock Option Plan”). The essential elements of the Stock
Option Plan provide that the aggregate number of common shares of the Company that may be issued pursuant to options granted under
the Stock Option Plan and any other share-based compensation arrangements may not exceed 10% of the number of issued shares of
the Company at the time of the granting of the options. Options granted under the Stock Option Plan will have a maximum
term of ten years. The exercise price of options granted under the Stock Option Plan shall be fixed in compliance with the applicable
provisions of the TSX Company Manual in force at the time of grant and, in any event, shall not be less than the closing price
of the Company’s common shares on the TSX on the trading day immediately preceding the day on which the option is granted,
or such other price as may be agreed to by the Company and accepted by the TSX. Options granted under the Stock Option Plan vest
immediately, unless otherwise determined by the directors at the date of grant.
A summary of the options granted
under the Stock Option Plan as of September 30, 2020 and December 31, 2019 is presented below:
|
|
Nine Months Ended
|
|
Year Ended
|
|
|
|
September 30, 2020
|
|
December 31, 2019
|
|
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise Price (C$)
|
|
|
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
|
|
|
$
|
2,124,839
|
|
|
2,452,049
|
|
|
$
|
0.94
|
|
|
$
|
59,734
|
|
The weighted average remaining
life of options outstanding at September 30, 2020 was 2.9 years.
Stock options outstanding
are as follows:
|
|
September 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 September 30, 2020 and changes during the nine months ended September 30, 2020 is as follows:
INTERNATIONAL TOWER HILL MINES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three and Nine Months Ended September 30, 2020 and 2019
(Expressed in US dollars
– Unaudited)
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 September 30, 2020
|
|
|
170,000
|
|
|
$
|
0.76
|
|
At September 30, 2020, there
was unrecognized compensation expense of C$95,981 related to non-vested options outstanding. The cost is expected to be recognized
over a weighted-average remaining period of approximately 1.2 years.
Deferred Share Unit Incentive Plan
On April 4, 2017, the Company
adopted a Deferred Share Unit Plan (the “DSU Plan”). The DSU Plan was approved by the Company’s shareholders
on May 24, 2017 and reapproved by the Company’s shareholders on May 27, 2020. 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 nine months ended
September 30, 2020, the Company granted each of the members of the Board (other than those directors nominated for election
by Paulson 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$415,000 in the aggregate. The DSUs entitle the holders to receive common
shares of the Company without the payment of any consideration. The DSUs vested immediately upon being granted but the common shares
underlying the DSUs are not deliverable to the holder until the holder is no longer serving on the Board.
DSUs outstanding are as follows:
|
|
Nine Months Ended
|
|
|
Year Ended
|
|
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
|
|
Number of
Units
|
|
|
Weighted Average
Exercise Price
(C$)
|
|
|
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 nine-month period ended September 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 nine months ended September 30, 2020
totaled $366,685 ($72,068 related to stock options and $294,617 related to DSUs). Of the total expense for the period ended September 30,
2020, $303,096 was included in consulting fees ($8,479 related to stock options and $294,617 related to DSUs), $4,239 was included
in investor relations, and $59,350 was included in wages and benefits in the statement of operations and comprehensive loss.
During the nine-month period
ended September 30, 2019, the Company granted 187,232 stock options and 488,235 DSUs for common shares of the Company. Share-based
payment compensation for the nine months ended September 30, 2019 totaled $405,857 ($89,140 related to stock options and $316,717
related to DSUs). Of the total expense for the period ended September 30, 2019, $316,717 was included in consulting fees and
$89,140 was included in wages and benefits in the statement of operations and comprehensive loss.
INTERNATIONAL TOWER HILL MINES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three and Nine Months Ended September 30, 2020 and 2019
(Expressed in US dollars
– Unaudited)
The following weighted average
assumptions were used for the Black Scholes valuation model for stock options granted during the period:
|
|
YTD September 30,
2020
|
|
Expected life of options
|
|
|
6 years
|
|
Risk-free interest rate
|
|
|
0.40
|
%
|
Annualized volatility
|
|
|
80.92
|
%
|
Dividend rate
|
|
|
0.00
|
%
|
Exercise price (C$)
|
|
$
|
0.92
|
|
|
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
|
|
September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized acquisition costs
|
|
$
|
-
|
|
|
$
|
55,375,124
|
|
|
$
|
55,375,124
|
|
Property and equipment
|
|
|
7,870
|
|
|
|
6,236
|
|
|
|
14,106
|
|
Current assets
|
|
|
13,518,707
|
|
|
|
408,901
|
|
|
|
13,927,608
|
|
Total assets
|
|
$
|
13,526,577
|
|
|
$
|
55,790,261
|
|
|
$
|
69,316,838
|
|
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
|
|
September 30, 2020
|
|
|
September 30, 2019
|
|
Net loss for the period – Canada
|
|
$
|
(118,528
|
)
|
|
$
|
(422,405
|
)
|
Net loss for the period – United States
|
|
|
(983,235
|
)
|
|
|
(436,001
|
)
|
Net loss for the period
|
|
$
|
(1,101,763
|
)
|
|
$
|
(858,406
|
)
|
|
|
|
|
|
|
|
|
|
Nine months ended
|
|
|
September 30, 2020
|
|
|
|
September 30, 2019
|
|
Net loss for the period – Canada
|
|
$
|
(406,149
|
)
|
|
$
|
(1,023,909
|
)
|
Net loss for the period – United States
|
|
|
(2,116,993
|
)
|
|
|
(2,042,463
|
)
|
Net loss for the period
|
|
$
|
(2,523,142
|
)
|
|
$
|
(3,066,372
|
)
|
INTERNATIONAL TOWER HILL MINES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three and Nine Months Ended September 30, 2020 and 2019
(Expressed in US dollars
– Unaudited)
The following table discloses
the Company’s contractual obligations as of September 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
|
|
|
92,035
|
|
|
|
132,460
|
|
|
|
132,460
|
|
|
|
132,460
|
|
|
|
132,460
|
|
|
|
132,460
|
|
|
|
754,335
|
|
Total
|
|
$
|
92,035
|
|
|
$
|
561,411
|
|
|
$
|
566,645
|
|
|
$
|
571,958
|
|
|
$
|
577,350
|
|
|
$
|
582,823
|
|
|
$
|
2,952,222
|
|
|
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.
|
As further described in Note
6, on August 31, 2020, the Company entered into a sales agreement with B. Riley, pursuant to which the Company was entitled,
at its discretion and from time-to-time during the term of the sales agreement, to sell through B. Riley such number of common
shares of the Company as would result in aggregate gross proceeds to the Company of up to $10.3 million. Subsequent to September 30,
2020, the Company issued an additional 803,240 common shares at an average price of $1.40 for gross proceeds of $1.1 million pursuant
to the sales agreement described in Note 6. As of October 16, 2020, the Company had raised the full $10.3 million available
under the sales agreement. The Company issued a total of 7,334,513 common shares at an average price of $1.40, for gross proceeds
of $10.3 million.
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, 2019. All currency amounts are stated in U.S. dollars unless noted
otherwise.
Current Business Activities
General
In response to rising gold prices and changing
worldwide macroeconomic conditions that are now supportive of accelerating work on the Livengood Gold Project, on May 7, 2020,
the Board directed management to prepare an updated pre-feasibility study (“PFS”) for the Project.
On
July 15, 2020, the Company announced that it had finalized the key contracts for completion of the previously announced PFS
on the Livengood Gold Project and expected to release the details of the PFS and the associated NI 43-101 Technical Report in October 2021.
The comprehensive study will incorporate work that has been done since the April 2017 NI 43-101 report was completed to further
de-risk and identify the optimal project configuration. The Company has engaged BBA, Inc. in Montreal as its lead consultant
and has retained Whittle Consulting, Resource Modeling, Inc., and NewFields Companies, LLC to provide specialized technical
support. The estimated cost of the updated PFS through October 2021 is $3.8 million.
Recent Developments
On August 31, 2020, the Company entered
into an At Market Issuance Sales Agreement (the “sales agreement”) with B. Riley Securities, Inc. (“B. Riley”),
pursuant to which the Company was entitled, at its discretion and from time-to-time during the term of the sales agreement, to
sell through B. Riley such number of common shares of the Company as would result in aggregate gross proceeds to the Company of
up to $10.3 million. As of October 16, 2020, the Company had raised the full $10.3 million available under the sales agreement.
The Company issued a total of 7,334,513 common shares at an average price of $1.40 for gross proceeds of $10.3 million. This included
participation by all of the four largest shareholders of the Company. Paulson & Co. Inc. acquired 2,337,410 shares, Sprott
Asset Management USA acquired 1,111,386 shares, Electrum Strategic Opportunities Fund II, L.P. acquired 1,042,201 shares and Kopernik
Global Investors LLC, acquired 1,180,000 shares.
The
Company intends to use the proceeds of the sales agreement for working capital and general corporate purposes, including the completion
of the PFS announced on July 15, 2020 to further de-risk the Livengood Gold Project and for environmental baseline studies.
Results of Operations
Summary of Quarterly Results
Description
|
|
September 30, 2020
|
|
|
June 30, 2020
|
|
|
March 31, 2020
|
|
|
December 31, 2019
|
|
Net income (loss)
|
|
$
|
(1,101,763
|
)
|
|
$
|
(1,486,464
|
)
|
|
$
|
65,085
|
|
|
$
|
(760,035
|
)
|
Basic and diluted net gain (loss) per common share
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
0.00
|
|
|
$
|
(0.00
|
)
|
|
|
September 30, 2019
|
|
|
June 30, 2019
|
|
|
March 31, 2019
|
|
|
December 31, 2018
|
|
Net income (loss)
|
|
$
|
(858,406
|
)
|
|
$
|
(1,387,054
|
)
|
|
$
|
(820,912
|
)
|
|
$
|
(901,767
|
)
|
Basic and diluted net gain (loss) per common share
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.01
|
)
|
Three Months Ended September 30, 2020 compared to
Three Months Ended September 30, 2019
The Company had a net loss of $1,101,763
for the three months ended September 30, 2020, compared to a net loss of $858,406 for the three months ended September 30,
2019.
Excluding share-based costs of $2,169 and
$316,717 for the 2020 and 2019 periods, respectively, consulting costs were $40,006 for the three months ended September 30,
2020 compared to $36,761 for the three months ended September 30, 2019. The increase of $3,245 is primarily due to variation
in timing of computer support services.
Insurance costs were $37,913 for the three
months ended September 30, 2020 compared to $31,378 for the three months ended September 30, 2019. The increase of $6,535
is primarily due to premium increases.
Excluding share-based costs of $1,084,
investor relations costs were $6,109 for the three months ended September 30, 2020 compared to $1,723 for the three months
ended September 30, 2019. The increase of $4,386 is primarily due to the Company’s participation in an investor conference
during the three months ended September 30, 2020.
Mineral property expenditures were $718,541
for the three months ended September 30, 2020 compared to $179,692 for the three months ended September 30, 2019. The
increase of $538,849 is primarily due to the differences in the scope of technical and baseline environmental work completed during
the periods.
Professional fees were $74,029 for the
three months ended September 30, 2020 compared to $54,720 for the three months ended September 30, 2019. The increase
of $19,309 is primarily due to increased land-related legal activity and variation in timing of audit/tax services.
Regulatory costs were $59,065 for the three
months ended September 30, 2020 compared to $52,118 for the three months ended September 30, 2019. The increase of $6,947
is primarily due to additional TSX fees related to the deferred share unit (“DSU”) plan reserve.
Excluding share-based costs of $15,180
and $87,454 for the 2020 and 2019 periods, respectively, wages and benefits were $175,485 for the three months ended September 30,
2020 compared to $169,825 for the three months ended September 30, 2019. The increase of $5,660 is primarily due to a variation
in timing of employee benefits.
Share-based payment charges
Share-based payment charges for the three-month periods ended
September 30, 2020 and 2019 were allocated as follows:
Expense category:
|
|
September 30,
2020
|
|
|
September 30,
2019
|
|
Consulting
|
|
$
|
2,169
|
|
|
$
|
316,717
|
|
Investor relations
|
|
|
1,084
|
|
|
|
-
|
|
Wages and benefits
|
|
|
15,180
|
|
|
|
87,454
|
|
Total
|
|
$
|
18,433
|
|
|
$
|
404,171
|
|
Share-based payment charges were $18,433
during the three months ended September 30, 2020 compared to $404,171 during the three months ended September 30, 2019.
The decrease of $385,738 is mainly the result of the DSUs issued on August 8, 2019 being fully vested upon issuance and the
options issued on August 8, 2019 being exercisable upon grant.
Other items amounted to total other income
of $85,510 during the three-month period ended September 30, 2020 compared to total other income of $134,506 during the three-month
period ended September 30, 2019. As a result of the impact of exchange rates on certain of the Company’s U.S. dollar
cash balances, the Company had a foreign exchange gain of $73,542 during the three-month period ended September 30, 2020 compared
to a gain of $82,426 during the three-month period ended September 30, 2019. The average exchange rate during the three-month
period ended September 30, 2020 was C$1 to US$0.7508 compared to C$1 to US$0.7574 during the three-month period ended September 30,
2019. Interest income was $11,968 for the three-month period ended September 30, 2020 compared to $44,880 for the three-month
period ended September 30, 2019. The decrease of $32,912 is primarily due to short-term investment certificates being re-invested
upon maturity at a lower interest rate.
Nine Months Ended September 30, 2020 compared to
Nine Months Ended September 30, 2019
The Company had a net loss of $2,523,142
for the nine months ended September 30, 2020, compared to a net loss of $3,066,372 for the nine months ended September 30,
2019.
Excluding share-based costs of $303,096
and $316,717 for the 2020 and 2019 periods, respectively, consulting costs were $120,074 for the nine months ended September 30,
2020 compared to $124,269 for the nine months ended September 30, 2019. The decrease of $4,195 is primarily due to two less
members of the Board.
Insurance costs were $104,799 for the nine
months ended September 30, 2020 compared to $92,007 for the nine months ended September 30, 2019. The increase of $12,792
is primarily due to premium increases.
Excluding share-based costs of $4,239,
investor relations costs were $45,002 for the nine months ended September 30, 2020 compared to $35,923 for the nine months
ended September 30, 2019. The increase of $9,079 is primarily due to investor conferences.
Professional fees were $163,189 for the
nine months ended September 30, 2020 compared to $146,837 for the nine months ended September 30, 2019. The increase
of $16,352 is primarily due to land-related legal services.
Travel costs were $20,186 for the nine
months ended September 30, 2020 compared to $25,359 for the nine months ended September 30, 2019. The decrease of $5,173
is primarily due to reduced travel as a result of the COVID-19 pandemic.
Excluding share-based costs of $59,350
and $89,140 for the 2020 and 2019 periods, respectively, wages and benefits were $516,048 for the nine months ended September 30,
2020 compared to $500,667 for the nine months ended September 30, 2019. The increase of $15,381 is primarily due to a variation
in timing of employee benefits.
Share-based payment charges
Share-based payment charges for the nine-month periods ended
September 30, 2020 and 2019 were allocated as follows:
Expense category:
|
|
September 30,
2020
|
|
|
September 30,
2019
|
|
Consulting
|
|
$
|
303,096
|
|
|
$
|
316,717
|
|
Investor relations
|
|
|
4,239
|
|
|
|
-
|
|
Wages and benefits
|
|
|
59,350
|
|
|
|
89,140
|
|
Total
|
|
$
|
366,685
|
|
|
$
|
405,857
|
|
Share-based payment charges were $366,685
during the nine months ended September 30, 2020 compared to $405,857 during the nine months ended September 30, 2019.
The decrease of $39,172 is mainly the result of the options issued on August 8, 2019 being exercisable upon grant.
Other items amounted to total other income
of $457,559 during the nine-month period ended September 30, 2020 compared to total other expenses of $123,776 during the
nine-month period ended September 30, 2019. As a result of the impact of exchange rates on certain of the Company’s
U.S. dollar cash balances, the Company had a foreign exchange gain of $389,633 during the nine-month period ended September 30,
2020 compared to a loss of $280,820 during the nine-month period ended September 30, 2019. The average exchange rate during
the nine-month period ended September 30, 2020 was C$1 to US$0.7391 compared to C$1 to US$0.7524 during the nine-month period
ended September 30, 2019. Interest income was $5,292 for the nine-month period ended September 30, 2020 compared to $30,931
for the nine-month period ended September 30, 2019. The decrease of $25,639 is primarily due to short-term investment certificates
being re-invested upon maturity at a lower interest rate.
Liquidity Risk and Capital Resources
The Company has no revenue generating operations
from which it can internally generate funds. To date, the Company has predominantly financed its ongoing operations through the
sale of its equity securities by way of public offerings and private placements and the subsequent exercise of share purchase and
broker warrants and options issued in connection with such private placements.
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.
As at September 30, 2020, the Company
had cash and cash equivalents of $13,768,843 compared to $6,937,621 at December 31, 2019. The increase of approximately $6.8
million resulted mainly from a sales agreement for “at the market” net proceeds of $9.0 million partially offset by
expenditures on operating activity of approximately $1.7 million and a negative foreign currency transaction impact of approximately
$0.4 million.
Financing
activities during the nine-month period ended September 30, 2020 included the issuance of common shares pursuant to the sales
agreement entered into by the Company for “at the market offerings” with B. Riley, which allowed the Company
to offer and sell up to $10.3 million of common shares from time to time, at prevailing market prices at the time of the sale,
through B. Riley, acting as sales agent. In the three months ended September 30, 2020, the Company sold 6,531,273 common shares
under the sales agreement and raised approximately $9.2 million in aggregate gross proceeds before commissions and expenses and
paid B. Riley aggregate commissions of $0.1 million. At September 30, 2020, there remained approximately $1.2 million of availability
to sell common shares through the sales agreement, all of which was sold subsequent to period end.
Financing activities during the nine-month
period ended September 30, 2019 included the exercise of stock options. Proceeds of $64,254 were received on the issuance
of 121,174 common shares.
The Company had no cash flows from investing
activities during the nine-month period ended September 30, 2020.
Investing activities of $101,692 during
the nine-month period ended September 30, 2019 were comprised of the capitalized acquisition costs for land acquisitions of
$31,189 that closed in the second quarter and $70,503 that closed in the third quarter.
As at September 30, 2020, the Company
had working capital of $13,123,493 compared to working capital of $6,840,418 at December 31, 2019. 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 2020 work plan at the Livengood Gold Project and satisfy its currently anticipated general and administrative
costs through at least the next 12 months.
The Company will require significant additional
financing to continue its operations (including general and administrative expenses) in connection with advancing activities at
the Livengood Gold Project and the development of any mine that may be 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. 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. See “Risk Factors – We will require
additional financing to fund exploration and, if warranted, development and production. Failure to obtain additional financing
could have a material adverse effect on our financial condition and results of operation and could cast uncertainty on our ability
to continue as a going concern” included in Part I, Item 1A of the Company’s Annual Report on Form 10-K
for the year ended December 31, 2019.
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 and Commitments
The following table discloses the Company’s
contractual obligations as of September 30, 2020, including anticipated mineral property payments and work commitments. 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
|
|
|
92,035
|
|
|
|
132,460
|
|
|
|
132,460
|
|
|
|
132,460
|
|
|
|
132,460
|
|
|
|
132,460
|
|
|
|
754,335
|
|
Total
|
|
$
|
92,035
|
|
|
$
|
561,411
|
|
|
$
|
566,645
|
|
|
$
|
571,958
|
|
|
$
|
577,350
|
|
|
$
|
582,823
|
|
|
$
|
2,952,222
|
|
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).
|
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, 2019, 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.”