“Rudderless” in a challenging gold market
Analyst slashes stock price target for International Tower Hill Mines, following the resignation of the company’s CEO.
5/16/2012

Dear Stockhouse Member,

Shares of International Tower Hill Mines Ltd. (TSX: T.ITH, Stock Forum) (NYSE: THM, Stock Forum) have taken a severe beating following the departure of chief executive officer Jim Komadina, who recently tendered his resignation, citing personal reasons for doing so.

Down another 5% to $2.52 on Wednesday, the stock has fallen all the way from $8 last October, leaving the company with a market cap of $218.4 million based on 86.6 million shares outstanding. The 52-week range for the stock is $8.45 and $2.41.

At least one analyst sees no quick recovery for International Tower Hill, which has been working to develop its flagship Livengood gold project, about 70 miles north of Fairbanks, Alaska, not far from the Arctic Circle where winter temperatures can dip as low as minus 55 degrees celcius.

Dubbed the 20th largest undeveloped gold deposit in the world, it is estimated to host a measured and indicated resource of 16.5 million ounces, grading 0.55 grams per tonne. The company is forecasting that it would cost at least $1.6 billion to install the plant and facilities associated with a 665,000 ounce per year gold mine.

A project on that scale will clearly require highly experienced management and Canaccord Genuity mining analyst Wendell Zerb has expressed the fear “that the company’s progress could now become rudderless in this difficult market for gold developers.”

It is a worry that sums up what triggered the sell-off, Canaccord said.

A metallurgical engineer, Komadina has 32 years of experience in project development, construction and operations with major gold producers, including the South African giant AngloGold Ltd. He has been a leader in advancing Livengood towards feasibility and was responsible for assembling many of the key individuals that are currently involved with the company, Canaccord said.

For its part, International Tower Hill said it has decided to undertake a review of the Livengood project in order to optimize available development alternatives, including infrastructure and processing options and financing opportunities.

The company is currently revising its 2012 work program to fit within its current financial position, it said in a May 15, 2012 release.

Canaccord said Zerb believes this review will be focused on cutting spending to conserve its current cash position of $39.7 million. “While prudent, this sends the message that Livengood is unlikely to advance toward production under the current market conditions,’’ the investment firm said.

“Due to ongoing global macroeconomic issues and sector specific concerns (capital and operating inflation, permitting challenges, political roadblocks, etc.), the market is especially challenging for a lower grade, capital intensive project like Livengood, the investment firm added.

As a result of Komadina’s departure, the poor financing environment and declining gold price environment, Zerb has slashed his stock price target and lowered his rating on International Tower Hill. Prior to the May 15 downgrade, Zerb rated the stock a “speculative buy” with a $9.90 target.

He has now put a “hold” rating on the stock with a target of $3.40.

International Tower Hills said its board accepted Komadina’s resignation as President and CEO after he expressed a desire to spend more time with his wife and family. However he will be available to act as a consultant to the company which has now begun the search for a successor.