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International Tower Hill Mines Ltd (NYSEMKT:THM) Is Today's Mining Focus

International Tower Hill Mines Ltd (NYSEMKT:THM) Is Today's Mining Focus
Written by
Alex Carlson
Published on
August 30, 2016
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When I first looked into International Tower Hill Mines Ltd. (NYSEMKT: THM) I couldn’t help but think of the times I sat watching Gold Rush, a reality show on the Discovery Channel. In the first season, it featured six men from Sandy, Oregon, a small town 30 miles (48 km) southeast of Portland, who, due to the economic downturn, have lost their jobs. They decided on an all-stakes gamble – travel to Porcupine Creek, Alaska and prospect for gold. Needless to say, things didn’t work out as expected. They would have been much better off betting on junior miner THM, which is up over 300% in the past year.First, a little background on the mining company International Tower Hill Mines Ltd. was founded in 1978. The company was incorporated under the Company Act (British Columbia) in 1978. It was formerly known as Ashnola Mining Company Ltd. and changed its name to Tower Hill Mines Ltd. in 1988. Further, the company changed its name to International Tower Hill Mines Ltd. in 1991.International Tower Hill Mines Ltd. operates as a mineral exploration company that engages in the acquisition and exploration of mineral properties. The company holds or has the right to acquire interests in an advanced stage exploration project in Alaska referred to as the ‘Livengood Gold Project’. The company controls 100% of the Livengood Gold Project, which has a mineral resource of 731 million measured tonnes at an average grade of 0.61 g/tonne (14.4 million ounces at 0.3 g/tonne cut-off), 71 million indicated tonnes at an average grade of 0.56 g/tonne (1.3 million ounces at 0.3 g/tonne cut-off) and 266 million inferred tonnes at an average grade of 0.52 g/tonne (4.4 million ounces at 0.3 g/tonne cut-off).In 2013 the company issued the results of a feasibility study that was summarized in the September 2013 Study, which converted a portion of the mineral resources at the Project into proven reserves of 434 million tonnes at an average grade of 0.69 g/tonne (9.6 million ounces) and probable reserves of 20 million tonnes at an average grade of 0.70 g/tonne (454,000 ounces) based on a gold price of $1,500 per ounce.On August 5th, THM reported a net loss of $2.06 million, or $(0.02) per basic and diluted share, in Q2 compared to net loss of $2.048 million, or $(0.02) per basic and diluted share, in the year ago quarter. The company's working capital at June 30th, 2016 was negative USD 11.9 million, including consideration of the January 2017 derivative payment of USD 14.7 million. At June 30th, 2016, the company had a cash balance of $2.9 million which is expected to allow the company to advance the Livengood Gold Project through 2016. The Livengood Gold Project is said to contain 15.7 M oz. of gold (807 MT at 0.61 g/t) measured & indicated and 4.4 M oz. (266 MT at 0.52 g/t) inferred, all at a 0.30 g/t gold cutoff, located along the paved Elliott Highway, 70 miles north of Fairbanks, Alaska. through 2016.THM has a number of challenges facing the company. The company has only $2,900,000 worth of cash on hand which is expected to carry them through the exploration of the Livengood Gold Project in 2016. This company has never made money. It’s net income in the entire year of 2015 was a loss of $6.16M and, if nobody is keeping track, we are almost in the 4th quarter already.Another major issue is that a large payment is due at the end of this year. The company acquired mining claims in 2011 in return for a payment due after the completion of a five-year period that concludes in December 2016 and which is partially based on the average gold price during the five-year period. As of the end of the first quarter of 2016, the payment due was estimated at $14.6 million, but it rises $23,148 for every dollar that the average gold price rises over the entire period. (See the company's quarterly financial statement for the details.)Due to the fact that the company does not have the cash available, the only way THM will be able to meet this is to obtain financing to make this $15 million or more payment after the end of this year. Even if they were to tap their well-capitalized institutional investors, shareholders should be aware that the financing will likely involve some sort of dilution. Hedge fund billionaire John Paulson's investment firm holds a 19.8% stake in THM, Tocqueville Asset Management L.P. holds 19.7% and AngloGold Ashanti holds a 9.5% stake. Tocqueville’s Gold Fund is obligated to invest 80% of its assets in gold and other precious metals and the securities of companies located throughout the world that are engaged in mining or processing gold.Currently trading with a market cap of $116 million, THM could be a phenomenal investment if the company is able to mine every single ounce of the 15 million ounces that the property is said to contain. With gold trading above $1300 an ounce and many forecasters expecting $2000 an ounce within the next few years, THM could deliver big gains for investors. We are monitoring THM closely and the entire gold mining sector. For the latest updates on THM and other junior miners, sign up below!Disclosure: We have no position in THM and have not been compensated for this article.

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