Billionaire investor John Paulson (Trades, Portfolio) has increased to one-third his ownership stake in a Canadian mining company that is trying to become the first miner in history to cash in on a large gold deposit in central Alaska.
International Tower Hill Mines Ltd. (TSX:ITH, Financial) (THM, Financial), a gold exploration company headquartered in Vancouver, is trying to solve a puzzle that has confounded people for centuries. That is, how to dig out the millions of microscopic particles of gold embedded in the rock across thousands of acres in central Alaska.
International Tower Hill Mines reports that it has new technology that can tap into this massive gold rush. Just days ago, it sold 24 million shares in a $12 million non-brokered, private offering to investors, hoping to use the cash stream to support new capital, base studies and technology efforts.
Paulson took note of the prospect of riches and bought 5 million shares, increasing his ownership to 32%. The company's stock is cheap, reflecting a steady stream of negative earnings since 2002. However, the company has no debt. It was trading at 45 cents a share on Monday afternoon.
The balance of the shares, which totaled over 19 million, were purchased by The Electrum Group, a New York-based investment firm. As a result, Electrum has 10% ownership in the company.
Livengood Gold
The widely-accepted belief at Livengood Gold, located in the interior region of the state, is that there are more than 20 million ounces of gold sitting on more than 50,000 acres. The tricky part is how to pry it from the ground.
The company hopes to use the cash stream from the private offering to conduct more studies and support the mining efforts there.
In its last gold resources report, it recorded 9 million ounces of gold reserves at $1,250 per ounce of proven and probable reserves. It also reported 11.5 million ounces of gold resources at $1.230 measured and indicated resource. A total of 783 drill holes totaling 717,433 feet define the resource.
The miner was founded in 1978 as International Tower Hill Mines. It had been formerly known as Tower Hill Mines until it changed its name in 1991.
Buying shares
In the private offering, shares sold for 50 cents a share, according to the company’s press release. Paulson paid an average of 45 cents a share, GuruFocus shows. All told, he owns 59,593,314 shares.
In his first buy in the last five years, he bought 14 million shares at an average price of 40 cents per share in the fourth quarter of 2014. Two years later, he bought an additional 140,000 shares. The average price in the second quarter of 2016 was 64 cents a share. In the final months of the year, the stock averaged 45 cents a share.
In Monday trading, the stock was at 46 cents a share, down 2.4%. In the last 12 months, it has seen a 13% drop. The stock price has been flat year to date.
Financial results
The company filed its audited year-end results on Friday. As of Dec. 31, the company reported a working capital of $2 million. It has a market cap of $85 million. The offering represented 14.6% of the 162.4 million shares issued and outstanding.
GuruFocus ranks it 3 out of 10 in profitability and growth. It has a low Piotroski-F Score, which usually signals poor business operations. It also has a Beneish-M score that implies it may have manipulated its financial results.
The company has reported consistently negative earnings since 2002. Its price-book ratio is 1.33 versus versus an industry median of 2.06.
The company has no debt.
