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International Tower Hill: We're Not For Sale

NEW YORK ( TheStreet ) -- International Tower Hill (THM) has what many of the big gold miners want and need, but CEO Jim Komadina says they won't get it by trying to acquire his company.

"I didn't come on board to sell the thing," says Komadina, who took the helm of the company in May with the explicit goal of transforming the company from an explorer into a developer. "When I came on board, I took the for sale sign down."

Analysts and investors alike will be disappointed. Credit Suisse wrote in a recent note, "given the development and financing risks facing International Tower Hill, we believe the company will strongly consider alternatives to developing Livengood alone, including joint ventures or an outright sale of the company."

International Tower Hill has what big miners want -- 100% ownership of the 20th-largest gold deposit in the world, Livengood. It ranks in the top 2% of gold discoveries over the past 20 years. The mine could produce an average of 562,000 ounces of gold over a 23 year life, delivering 664,000 ounces of gold during the first five years.

The company has 7 more years of feasibility, permitting and construction ahead of it before it will start producing gold. Although it has $116 million in cash and no debt, its capital costs will still reach $1.6 billion -- all preproduction cost.

Credit Suisse is forecasting a 166% dilution to the existing share base as Tower Hill tries to raise money. The firm estimates that International Tower Hill spends $4.9 million a month and will run out of cash by mid-2012 and estimates the company will try to raise $147 million dollars in an equity offering.

Komadina says that the company has been notoriously lean with shares, with only 86 million share outstanding. "Other companies in the junior sector might have 400 or 500 million shares outstanding." He has tasked his new CFO, Tom Yip, to outline two or three financing options the company can lay out for investors with the hopes of calming fears. Komadina declined to comment on the specifics of any potential equity offering but Yip will be unveiling his options before November 24th.

"We have to be very innovative in how we are going to finance this," said the CEO. "I mean, 50-50 joint ventures are a hard thing to do ... when I look at our cash requirements, going forward, I can still keep the entire company at 100% instead of selling 50% off to a joint venture for roughly the same amount of money. So I would rather go out ... and raise the additional couple hundred million we need to get us across the finish line."

Komadina gave a definite no to a joint venture and a buyout but a hostile bid is out of his control. "We've prepped the board and I have talked to them about what I think the range of values are for Livengood," he said. "For us to be successful in permitting and building this, we have to be of single mind in focus ... So if someone writes us the letter, we will respond to it. We know what the asset is worth." Komadina said an attractive offer could value shares at a multiple of $11. The stock is currently trading at $5.13.

Canaccord, which has a buy rating on the stock, believes that "current management is qualified and capable of advancing the company's business plan, [but] there are no guarantees it will be successful."
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