ITH: TSX / THM: NYSE-A
Chairman: Daniel Carriere
President and CEO: Don Ewigleben
Vice President, Alaska: Tom Irwin
Alaska General Manager: Karl Hanneman
During the first half of 2013, International Tower Hill Mines Ltd. focused on finalizing a feasibility study for its 20-million-ounce Livengood gold project in Interior Alaska. Released in July, this assessment outlines a 100,000-ton-per-day operation averaging 577,600 ounces of gold per annum over a 14-year mine life. The all-in costs to mine an ounce of gold at Livengood with the operation described in the feasibility study are estimated to be US$1,474. This includes US$987/oz of operating, royalty and smelting costs; US$416/oz to payback capital expenditures; US$43/oz for reclamation; and US$27/oz for taxes. “While the study results are not economically feasible in today’s specific gold market, the Livengood project remains a very significant gold deposit in one of the most favorable geopolitical jurisdictions in the world; and we believe the project will be economically viable in an acceptable timeframe, when considering the timelines for permitting and development,” explained International Tower Hill Mines CEO Don Ewigleben. At a US$1,900 per ounce, the after-tax net present value (5.0 percent discount) for Livengood is projected to be US$1.1 billion, the internal rate of return would be 12 percent and the payback period would be 5.2 years, according to the feasibility study. The Livengood development team believes that mill throughput and production schedule optimization studies may provide opportunities to reduce project capital costs. A lower mill throughput may offer an opportunity to enhance mill head grades in early years by a more aggressive stockpile management strategy than is assumed in the feasibility study.
Using a cutoff grade of 0.3 grams per metric ton, the Livengood project hosts a measured and indicated resource of 15.7 million ounces of gold; plus an inferred resource of 4.4 million ounces of gold. At a US$1,500/oz gold price, roughly half of this gold reported to the reserves. The feasibility study includes proven reserves of 434 million metric tons averaging 0.69 g/t (9.6 million ounces) gold and probable reserves of 20 million metric tons averaging 0.70 g/t (454,000 ounces) gold. These reserves provide sufficient ore to produce 8.1 million ounces over the 14-year mine-life. During the first five years, the operation would average 698,500 ounces of gold per year. The initial capital expenditures to build a mine of this scale at Livengood are estimated to be US$2.8 billion, a 75 percent increase over the US$1.6 billion of capital expenditures anticipated in a 2011 preliminary economic assessment for a similar scale operation at the Interior Alaska project. An additional US$667 million of sustaining capital would be needed over the life of the operation. International Tower Hill management attributes much of the cost increases to the level of detail presented in the feasibility study and additional infrastructure components, such as lining the tailings facility and building a 440-worker camp, not considered in the PEA.
The on-site operating costs of US$933/oz are a key area in which the company sees an opportunity to lower costs. Finding ways to lower the estimated US$113 million per year electrical costs is one area to directly dial back the operating expenditures. Alaska Senate Bill 23, which received unanimous legislative approval in April, aims to lower the notoriously high energy costs in Interior Alaska by authorizing the Alaska Industrial Development and Export Authority to provide up to US$275 million in financing for a natural gas liquefaction plant on the North Slope and a liquefied natural gas distribution system in the Fairbanks region. Additional drilling to convert a larger portion of the in-pit resource into reserves would bring down the all-in costs by spreading the capital expenditures over more ounces of gold. International Tower Hill though is in cash conservation mode and does not plan to do any exploration drilling in the immediate future. International Tower Hill will focus the cash it has on-hand on optimizing the feasibility study and continuing the five years of environmental baseline studies completed at Livengood. “We will continue to review opportunities that were identified in the feasibility study for cost reduction, while we preserve our cash and, most importantly, while we preserve the asset. We will do this while we wait for an inevitable better economic environment for gold,” Ewigleben explained. The CEO said International Tower Hill Mines is in talks “with various potential joint venture projects and strategic alliance investors regarding participation and funding for further development of the Livengood project.”
Cash and short-term deposits: US$19.87 million (June 30, 2013)
Working capital: US$19.01 million (June 30, 2013)
Market capitalization: US$56.88 million (Sept. 11, 2013)
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