Vancouver-based International Tower Hill Mines (TSX: ITH; NYSE-MKT: THM) is shuffling its senior management while trimming its workforce, to conserve cash while advancing its rather expensive Livengood gold project near Fairbanks, Alaska.
As part of the shakeup, Thomas Irwin, the company’s current vice-president, is replacing president and CEO Don Ewigleben. Ewigleben steps down from the board along with three other directors.
Irwin has been contributing to Tower Hill’s corporate development and is in charge of technical matters at Livengood. Before becoming Tower Hill’s vice-president in August 2012, he held various positions, including the Alaska general manager for Livengood, the commissioner of the Alaska Department of Natural Resources, and senior roles at Kinross Gold’s (TSX: K; NYSE: KGC) Fort Knox gold mine, 72 km southeast of Livengood.
“With the benefit of my long history in Alaska, I am confident the region remains one of the best mining jurisdictions in the world, and I believe in Livengood as a world-class, multi-million ounce gold project,” Irwin said in a release.
The project — estimated to cost nearly US$2.8 billion to build — hosts reserves of 10 million oz. from 454 million tonnes grading 0.68 gram gold per tonne, but the possibility of mining those ounces with the current US$1,200 gold price is far-fetched. A July 2013 feasibility study — envisioning Livengood as a 100,000-ton-per-day (91,000-tonne-per-day) open-pit operation producing 8 million oz. gold over its 14-year mine life — showed a bleak rate of return for the project, even using a three-year trailing gold price of US$1,500 per oz. At that price, Livengood had a 1.7% after-tax internal rate of return (IRR) and a negative US$440 million net present value (NPV) at a 5% discount rate. It’s only after applying a US$1,700 per oz. gold price that the NPV and IRR become positive, at US$336 million and 7.3%.
The gold explorer is optimizing the project and hopes to move it forward with a joint-venture partner, adding that discussions with interested companies are progressing.
But BMO analyst John Hayes is skeptical that Tower Hill can lower the project’s costs. “The company is evaluating plans for a revised development scenario, but it remains to be seen if a smaller capex project can advance,” he wrote in a year-end note. Hayes has a 41¢ target and an “underperform speculative” rating on the stock.
Along with the corporate reorganization, Tower Hill will slash its workforce by 30% on Jan. 1 to rein in costs. It had US$16.6 million in cash and equivalents at the end of September 2013.
Tower Hill closed at 40¢ within a 52-week range of 31¢ to $2.48. It has 98 million shares outstanding.
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