CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited – Prepared by Management)

(Expressed in Canadian Dollars)

Three Months Ended August 31, 2011 and 2010

Corporate Head Office

2300-1177 West Hastings Street
Vancouver, BC
Canada
V6E 2K3
Tel: 604-683-6332

INTERNATIONAL TOWER HILL MINES LTD.

August 31, 2011 and 2010

INDEX	Page
Condensed Consolidated Interim Financial Statements
Condensed Consolidated Interim Statements of Financial Position	1
Condensed Consolidated Interim Statements of Operations and Comprehensive Loss	2
Condensed Consolidated Interim Statement of Changes in Shareholders’ Equity	3 – 4
Condensed Consolidated Interim Statements of Cash Flows	5
Notes to the Condensed Consolidated Interim Financial Statements	6 – 39

INTERNATIONAL TOWER HILL MINES LTD.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
(Expressed in Canadian Dollars - Unaudited)

			August 31,			May 31,			June 1,
	Note		2011			2011			2010
						(note 16)			(note 16)
ASSETS
Current
Cash and cash equivalents	4a	$	94,408,327		$	111,165,126		$	43,460,324
Marketable securities	5		781,500			662,500			360,000
Accounts receivable			336,518			185,733			110,214
Prepaid expenses			206,346			378,492			274,246
Current assets related to discontinued operations	2		-			-			13,663
Total current assets			95,732,691			112,391,851			44,218,447
Property and equipment	6		136,790			143,571			80,040
Exploration and evaluations assets	7		91,190,636			71,103,123			39,500,278
Long-term assets related to discontinued operations	2		-			-			11,672,708
Total assets		$	187,060,117		$	183,638,545		$	95,471,473
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities	9	$	6,647,743		$	4,037,428		$	1,187,865
Current liabilities related to discontinued operations	2		-			-			85,094
Total liabilities			6,647,743			4,037,428			1,272,959
Shareholders’ equity
Share capital	8		215,865,086			215,544,180			124,277,370
Contributed surplus			18,975,407			13,288,996			14,240,223
Accumulated other comprehensive loss			(3,599,484	)		(6,767,665	)		-
Deficit			(50,828,635	)		(42,464,394	)		(44,319,079	)
Total shareholders’ equity			180,412,374			179,601,117			94,198,514
Total liabilities and shareholders’ equity		$	187,060,117		$	183,638,545		$	95,471,473
Nature and continuance of operations (note 1)
Commitments (note 13)
Subsequent events (note 15)

On behalf of the Board:

“Hendrik Van Alphen” (signed)	Director	“Anton Drescher”(signed)	Director
Mr. Hendrik Van Alphen		Mr. Anton Drescher

The accompanying notes are an integral part of these condensed consolidated interim financial statements.
1

INTERNATIONAL TOWER HILL MINES LTD.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Expressed in Canadian Dollars - Unaudited)

			Three Months Ended August 31
	Note		2011			2010
						(note 16)
Expenses
Administration	9	$	1,881		$	7,841
Charitable donations			7,642			21,934
Consulting fees	8, 9		1,645,426			1,082,147
Depreciation			9,745			6,406
Insurance			51,990			46,210
Investor relations	8, 9		146,012			509,321
Office and miscellaneous			56,896			37,748
Professional fees	8, 9		283,011			165,815
Property investigations			-			807
Regulatory			59,400			16,809
Rent	9		74,623			24,108
Telephone			2,328			11,172
Travel			81,610			25,968
Wages and benefits	8, 9		6,420,625			2,015,304
Loss before other items			(8,841,189	)		(3,971,590	)
Other items
Gain on foreign exchange			37,385			89,357
Interest income			320,563			60,537
Income from mineral property earn-in			-			51,980
Spin-out (cost) recovery	2		-			(452,574	)
Unrealized gain on marketable securities	5		119,000			128,000
			476,948			(122,700	)
Loss from continuing operations			(8,364,241	)		(4,094,290	)
Loss from discontinued operations	2		-			(934,157	)
Net loss for the period			(8,364,241	)		(5,028,447	)
Other comprehensive income (loss)
Exchange difference on translating foreign operations			3,168,181			(1,566,753	)
Total other comprehensive income (loss) for the period			3,168,181			(1,566,753	)
Comprehensive loss for the period		$	(5,196,060	)	$	(6,595,200	)
Basic and fully diluted loss per share from continuing operations		$	(0.10	)	$	(0.06	)
Basic and fully diluted loss per share from discontinued operations		$	-		$	(0.01	)
Weighted average number of shares outstanding			86,683,919			66,986,979

The accompanying notes are an integral part of these condensed consolidated interim financial statements.
2

INTERNATIONAL TOWER HILL MINES LTD.
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
(Expressed in Canadian Dollars - Unaudited)

														Accumulated
						Number of								other
	Number of			Share capital		shares			Share capital		Contributed			comprehensive
	shares (old)			(old)		(new)			(new)		surplus			loss			Deficit			Total
Balance, June 1, 2010 (note 16)	66,117,922		$	124,277,370		-		$	-	$	14,240,223		$	-		$	(44,319,079	)	$	94,198,514
Exercise of warrants	48,099			141,892		-			-		-			-			-			141,892
Exercise of options	1,062,200			1,867,950		-			-		-			-			-			1,867,950
Share-based payments	-			-		-			-		3,885,118			-			-			3,885,118
Reallocation from contributed surplus	-			2,252,099		-			-		(2,252,099	)		-			-			-
Share issuance costs	-			(8,657	)	-			-		-			-			-			(8,657	)
Transfer of Nevada and Other Alaska      Business to Corvus				-					-		(24,599,328	)		-			11,773,545			(12,825,783	)
Working capital contribution to Corvus	-			-		-			-		(3,300,000	)		-			-			(3,300,000	)
Distribution of the common shares      of Corvus to ITH shareholders as      a return of capital	-			(27,899,328	)	-			-		27,899,328			-			-			-
Exchange of old shares of ITH for       new shares of ITH at a ratio of 1:1	(67,228,221	)		(100,631,326	)	67,228,221			100,631,326		-			-			-			-
Private placement	-			-		415,041			2,183,116		-			-			-			2,183,116
Adjustment due to rounding	-			-		(107	)		-		-						-			-
Net loss	-			-		-			-		-			-			(5,028,447	)		(5,028,447	)
Exchange difference on translating      foreign operations	-			-		-			-		-			(1,566,753	)		572,982			(993,771	)
Balance, August 31, 2010	-		$	-		67,643,155		$	102,814,442	$	15,873,242		$	(1,566,753	)	$	(37,000,999	)	$	80,119,932

The accompanying notes are an integral part of these condensed consolidated interim financial statements.
3

INTERNATIONAL TOWER HILL MINES LTD.
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (cont’d)
(Expressed in Canadian Dollars - Unaudited)

												Accumulated
				Number of								other
	Number of		Share capital	shares		Share capital			Contributed			comprehensive
	shares (old)		(old)	(new)		(new)			surplus			loss			Deficit			Total
Balance, August 31, 2010   (carried forward)	-	$		67,643,155	$	102,814,442		$	15,873,242		$	(1,566,753	)	$	(37,000,999	)	$	80,119,932
Private placement	-		-	17,090,764		107,251,111			-			-			-			107,251,111
Exercise of options	-		-	1,915,000		6,634,950			-			-			-			6,634,950
Share-based payments	-		-						511,868			-			-			511,868
Reallocation from contributed surplus	-		-	-		3,096,114			(3,096,114	)		-			-			-
Share issuance costs	-		-	-		(4,252,437	)		-			-			-			(4,252,437	)
Net loss	-		-	-		-			-			-			(5,463,395	)		(5,463,395	)
Exchange difference on translating      foreign operations	-		-	-		-			-			(5,200,912	)		-			(5,200,912	)
Balance, May 31, 2011	-		-	86,648,919		215,544,180			13,288,996			(6,767,665	)		(42,464,394	)		179,601,117
Exercise of options	-		-	35,000		229,950			-			-			-			229,950
Share-based payments	-		-			-			5,777,367			-			-			5,777,367
Reallocation from contributed      surplus	-		-	-		90,956			(90,956	)		-			-			-
Net loss	-		-	-		-			-			-			(8,364,241	)		(8,364,241	)
Exchange difference on translating      foreign operations	-		-	-		-			-			3,168,181			-			3,168,181
Balance, August 31, 2011	-	$	-	86,683,919	$	215,865,086		$	18,975,407		$	(3,599,484	)	$	(50,828,635	)	$	180,412,374

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

4

INTERNATIONAL TOWER HILL MINES LTD.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(Expressed in Canadian Dollars - Unaudited)

			Three Months Ended August 31
	Note		2011			2010
						(note 16)
Operating Activities
Loss for the period from continuing operations		$	(8,364,241	)	$	(4,094,290	)
Add items not affecting cash:
Depreciation			9,745			6,406
Share-based payment charges	8		5,777,367			3,063,947
Unrealized gain on marketable securities			(119,000	)		(128,000	)
Gain on foreign exchange			(37,385	)		(89,357	)
Changes in non-cash items:
Accounts receivable			(150,785	)		2,396
Prepaid expenses			170,079			38,262
Accounts payable and accrued liabilities			62,229			(20,452	)
Cash used in operating activities of continuing operations			(2,651,991	)		(1,221,088	)
Loss for the period from discontinued operations			-			(934,157	)
Add items not affecting cash:
Share-based payment charges			-			756,202
Gain on foreign exchange			-			(20,318	)
Cash used in operating activities of discontinued operations			-			(198,273	)
Financing Activities
Issuance of share capital	8		229,950			4,192,958
Share issuance costs			-			(8,657	)
Cash provided by financing activities of continuing operations			229,950			4,184,301
Additional funding to Corvus			-			(764,511	)
Cash transferred on Plan of Arrangement	2		-			(3,300,000	)
Cash used in financing activities of discontinued operations			-			(4,064,511	)
Investing Activities
Expenditures on exploration and evaluation assets			(14,616,215	)		(7,229,710	)
Expenditures on property and equipment			(2,964	)		(12,273	)
Cash used in investing activities of continuing operations			(14,619,179	)		(7,241,983	)
Expenditures on exploration and evaluation assets, net of costs recovered			-			616,684
Cash provided by investing activities of discontinued operations			-			616,684
Effect of foreign exchange on cash of continuing operations			284,421			(70,595	)
Effect of foreign exchange on cash of discontinued operations			-			20,318
Decrease in cash and cash equivalents			(16,756,799	)		(7,975,147	)
Cash and cash equivalents, beginning of the period			111,165,126			43,460,324
Cash and cash equivalents, end of the period		$	94,408,327		$	35,485,177
Supplemental cash flow information (note 14)

5

INTERNATIONAL TOWER HILL MINES LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Three Months Ended August 31, 2011 and 2010

(Expressed in Canadian dollars - Unaudited)

1.	NATURE AND CONTINUANCE OF OPERATIONS
	International Tower Hill Mines Ltd. (“ITH” or the "Company") is incorporated under the laws of British Columbia, Canada. The Company is in the business of acquiring, exploring and evaluating mineral properties, and either joint venturing or developing these properties further or disposing of them when the evaluation is completed. At August 31, 2011, the Company was in the exploration stage and controls a 100% interest in its Livengood project in Alaska, U.S.A.
	These consolidated financial statements have been prepared on a going-concern basis, which presume the realization of assets and discharge of liabilities in the normal course of business for the foreseeable future. The Company’s ability to continue as a going-concern is dependent upon achieving profitable operations and/or obtaining additional financing. During the current period, the Company has raised $229,950 (May 31, 2011 - $18,079,019) through the issuance of common shares and has working capital at August 31, 2011 of $89,084,948 (May 31, 2011 - $108,354,423) which is considered sufficient to fund its operations and exploration program for the ensuing year. These consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that might be necessary should the Company be unable to continue in business.
	The business of mining and exploration involves a high degree of risk and there can be no assurance that current exploration programs will result in profitable mining operations. The Company has no source of revenue, and has significant cash requirements to meet its administrative overhead and maintain its mineral property interests. The recoverability of amounts shown for exploration and evaluation assets is dependent on several factors. These include the discovery of economically recoverable reserves, the ability of the Company to obtain the necessary financing to complete the development of these properties, and future profitable production or proceeds from disposition of exploration and evaluation assets. The carrying values of the Company’s exploration and evaluation assets do not reflect current or future values.
2.	DISCONTINUED OPERATIONS AND TRANSFER OF EXPLORATION AND EVALUATION ASSETS
	On August 26, 2010, the Company completed a Plan of Arrangement (the “Arrangement”) under the British Columbia Business Corporation Act pursuant to which it indirectly transferred all of its existing Alaska assets (other than the Livengood project and associated assets), being the Chisna, West Pogo, Terra and LMS properties and related assets, and its Nevada assets, being the North Bullfrog property and related assets, (collectively, the “Nevada and Other Alaska Business”) to a new public company, Corvus Gold Inc. (“Corvus”). Under the Arrangement, each shareholder of ITH received (as a return of capital) one Corvus common share for every two ITH common shares held as at the effective date of the Arrangement and exchanged each old common share of ITH for a new common share of ITH. As part of the Arrangement, ITH transferred its wholly-owned subsidiaries, Raven Gold Alaska Inc. (“Raven Gold”), incorporated in Alaska, United States, and Corvus Gold Nevada Inc. (formerly “Talon Gold Nevada Inc.”), incorporated in Nevada, United States, (which held the North Bullfrog property) to Corvus. As a consequence of the completion of the Arrangement, Corvus now holds the Terra, Chisna, LMS, West Pogo and North Bullfrog properties (the “Spin-out Properties”).
	The Company did not realize any gain or loss on the transfer of the Nevada and Other Alaska Business, which was comprised of a working capital contribution of $3,300,000 and the other Nevada and Other Alaska Business assets and liabilities as at the effective date of the Arrangement. Costs of the Arrangement, comprised principally of legal and regulatory expense, amounted to expenses of $nil (2010 - $452,574).
	The Arrangement was approved by a favourable vote of ITH’s shareholders at a special meeting held on August 12, 2010.
	The Company has, in accordance with International Financial Reporting Standards (“IFRS”) 5, “Non-current Assets Held for Sale and Discontinued Operations”, accounted for the financial results associated with the Nevada and Other Alaska Business up to the date of the Arrangement as discontinued operations in these consolidated financial statements and has reclassified the related amounts for the current and prior years.

6

INTERNATIONAL TOWER HILL MINES LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Three Months Ended August 31, 2011 and 2010

(Expressed in Canadian dollars - Unaudited)

2.	DISCONTINUED OPERATIONS AND TRANSFER OF EXPLORATION AND EVALUATION ASSETS (cont’d)
	The amount recognized as loss from discontinued operations includes the direct operating results of the Nevada and Other Alaska Business and an allocation of head office general and administrative expense. The allocation of head office general and administrative expense was calculated on the basis of the ratio of costs incurred on the Spin-out Properties in each period presented as compared to the costs incurred on all mineral properties of the Company in each of the periods. Management cautions readers of these financial statements that the allocation of expenses does not necessarily reflect future general and administrative expenses.
	The following table shows the results related to discontinued operations for the three months periods ended August 31, 2011 and 2010. Included therein is $nil (2010 - $756,202) of share-based payment charges:

		2011		2010
Administration	$	-	$	1,780
Charitable donations		-		5,413
Consulting fees		-		265,721
Foreign exchange gain		-		(20,318	)
Insurance		-		10,099
Investor relations		-		130,737
Office and miscellaneous		-		7,214
Professional fees		-		40,741
Property investigations		-		291
Regulatory		-		3,816
Rent		-		5,302
Telephone		-		2,418
Travel		-		5,625
Wages and benefits		-		475,318
Write-off of exploration and evaluation assets		-		-
	$	-	$	934,157

The transfer of the assets is summarized in the table below:

		August 25, 2010
Cash and cash equivalents	$	1,203,240
Accounts receivable		199
Prepaid expenses		3,200
Exploration and evaluation assets		12,392,408
Accounts payable		(773,264	)
Net assets transferred to Corvus	$	12,825,783

7

INTERNATIONAL TOWER HILL MINES LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Three Months Ended August 31, 2011 and 2010

(Expressed in Canadian dollars - Unaudited)

3.	SIGNIFICANT ACCOUNTING POLICIES
	Basis of presentation
	The Canadian Institute of Chartered Accountants Handbook was revised in 2010 to incorporate IFRS and require publicly accountable enterprises to apply such standards effective for years beginning on or after January 1, 2011. The Company has commenced reporting on this basis in these condensed consolidated interim financial statements.
	These are the Company’s first IFRS condensed consolidated interim financial statements for the first quarter of the period covered by IFRS and have been prepared in accordance with IFRS applicable to the preparation of interim financial statements, including International Accounting Standard (“IAS”) 34, “Interim Financial Reporting” and IFRS 1, “First-Time Adoption of International Financial Reporting Standard”. Subject to certain transition elections disclosed in note 16, we have consistently applied the same accounting policies in our opening IFRS consolidated statement of financial position as at June 1, 2010 and throughout all periods presented, as if the policies had always been in effect.
	Note 16 discloses the impact of the transition from Canadian Generally Accepted Accounting Principles (“Canadian GAAP”) to IFRS on our reported financial position, operations and cash flows, including the nature and effect of significant changes in accounting policies from those used in our consolidated financial statements for year ended May 31, 2011.
	IFRS 1, which governs the first-time adoption of IFRS, generally requires accounting policies to be applied retrospectively to determine the opening statement of financial position on our transition date of June 1, 2010, and allows certain exemptions on transition to IFRS. The elections adopted by the Company have been disclosed in note 16.
	The policies applied in these condensed consolidated interim financial statements are presented in this note and are based on IFRS issued and outstanding as November 10, 2011, the date the Board of Directors approved the condensed consolidated interim financial statements. Any subsequent changes to IFRS that are given effect in our annual consolidated financial statements for the year ending May 31, 2012 could result in restatement of these condensed consolidated interim financial statements including the transition adjustments recognized on change-over to IFRS.
	Basis of consolidation
	These consolidated financial statements include the accounts of International Tower Hill Mines Ltd. (“ITH”) (a British Columbia corporation) and its wholly owned subsidiaries Tower Hill Mines, Inc. (formerly “Talon Gold Alaska, Inc.”) (“TH Alaska”) (an Alaska corporation), Tower Hill Mines (US) LLC (formerly “Talon Gold (US) LLC”) (“TH US”) (a Colorado limited liability company), and 813034 Alberta Ltd. (an Alberta corporation). All intercompany transactions and balances have been eliminated.
	Use of estimates
	The preparation of financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the period.
	Significant areas requiring the use of estimates include rates of depreciation and useful lives of property and equipment, impairment and recoverability of exploration and evaluation expenditures, amounts of provisions for environmental rehabilitation and restoration, accrual of liabilities, assumptions used to determine the fair value of share-based payments, allocation of administrative expenses to discontinued operations and the determination of the valuation allowance for deferred income tax assets. While management believes the estimates to be reasonable, actual results could differ from those estimates and could impact future results of operations and cash flows.

8

INTERNATIONAL TOWER HILL MINES LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Three Months Ended August 31, 2011 and 2010

(Expressed in Canadian dollars - Unaudited)

3.	SIGNIFICANT ACCOUNTING POLICIES (cont’d)
	Foreign currency transactions
	Foreign currency accounts are translated into Canadian dollars as follows:
	The presentation currency of the Company is the Canadian dollar.
	The functional currency of each of the parent Company and its subsidiary is measured using the currency of the primary economic environment in which that entity operates. The functional currency of TH Alaska and TH US is US dollars and for the parent company, the functional currency is Canadian dollars.
	Transactions and balances:
	Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the period-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non- monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.
	Exchange differences arising on the translation of monetary items or on settlement of monetary items are recognized in profit or loss in the statement of comprehensive income (loss) in the period in which they arise.
	Exchange differences arising on the translation of non-monetary items are recognized in other comprehensive income (loss) in the Statement of Operations and Comprehensive Loss to the extent that gains and losses arising on those non-monetary items are also recognized in other comprehensive income (loss). Where the nonmonetary gain or loss is recognized in profit or loss, the exchange component is also recognized in profit or loss.
	Parent and Subsidiary Companies:
	The financial results and position of foreign operations whose functional currency is different from the presentation currency are translated as follows:

• Assets and liabilities are translated at period-end exchange rates prevailing at that reporting date; and

• Income and expenses are translated at average exchange rates for the period.

Exchange differences arising on translation of foreign operations are transferred directly to the Group’s exchange difference on translating foreign operations on the Statement of Operations and Comprehensive Loss and are reported as a separate component of shareholders’ equity titled “Cumulative Translation Differences”. These differences are recognized in the profit or loss in the period in which the operation is disposed of.

Financial instruments

a)	Financial assets
	Financial assets are classified as into one of the following categories based on the purpose for which the asset was acquired. All transactions related to financial instruments are recorded on a trade date basis. The Company’s accounting policy for each category is as follows:

9

INTERNATIONAL TOWER HILL MINES LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Three Months Ended August 31, 2011 and 2010

(Expressed in Canadian dollars - Unaudited)

3.	SIGNIFICANT ACCOUNTING POLICIES (cont’d)
	Financial instruments
	a)	Financial assets (cont’d)
		Fair value through profit or loss (“FVTPL”)
		A financial asset is classified as FVTPL if it is classified as held for trading or is designated as such upon initial recognition. Financial assets are designated as FVTPL if the Company manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Company’s documented risk management or investment strategy. Upon initial recognition material transaction costs are recognized in profit or loss as incurred. Financial assets as FVTPL are measured at fair value, and changes therein are recognized in profit or loss. Cash and cash equivalents and marketable securities are classified as FVTPL and are accounted for at fair value.
		Held-to-maturity
		Held-to-maturity financial assets are measured at amortized cost. The Company does not have any financial assets classified as held-to-maturity.
		Transactions costs associated with FVTPL financial assets are expensed as incurred, while transaction costs associated with all other financial assets are included in the initial carrying amount of the asset.
		Loans and receivables
		Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. They are classified as current assets or non-current assets based on their maturity date. Loans and receivables are initially recognized at fair value and subsequently carried at amortized cost less any impairment. Loans and receivables comprise accounts receivables.
		Impairment of financial assets
		At each reporting date the Company assesses whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or group of financial assets is deemed to be impaired, if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset and that event has an impact on the estimated future cash flows of the financial asset or the group of financial assets.
	b)	Financial liabilities
		The Company classifies its financial liabilities in the following categories: other financial liabilities and derivative financial liabilities.
		Other financial liabilities
		Other financial liabilities are non-derivatives and are recognized initially at fair value, net of transaction costs incurred, and are subsequently stated at amortized cost. Any difference between the amounts originally received, net of transaction costs, and the redemption value is recognized in profit and loss over the period to maturity using the effective interest method.
		Other financial liabilities are classified as current or non-current based on their maturity date. Other financial liabilities include accounts payable and accrued liabilities.

10

INTERNATIONAL TOWER HILL MINES LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Three Months Ended August 31, 2011 and 2010

(Expressed in Canadian dollars - Unaudited)

3.	SIGNIFICANT ACCOUNTING POLICIES (cont’d)
	Financial instruments
	b)	Financial liabilities (cont’d)
		Derivative financial liabilities
		Derivative financial liabilities are initially recognized at their fair value on the date the derivative contract is entered into and are subsequently re-measured at their fair value at each reporting period with changes in the fair value recognized in profit and loss. Derivative financial liabilities would include warrants issued by the Company denominated in a currency other than the Company’s functional currency.

Cash and cash equivalents

Cash equivalents include highly liquid investments with original maturities of three months or less, and which are subject to an insignificant risk of change in value. Cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes.

Marketable securities

Marketable securities held in companies with an active market are classified as FVTPL. Marketable securities held in non-public companies without an active market are classified as non-current assets and are valued at fair value. In situations where fair value is indeterminable or impracticable to determine, the shares are recorded at cost. This may occur when non-public company shares are received as payment for mineral properties. In such situations cost is determined by reference to the issue price of similar shares issued by the non-public entity for cash, at or near the time of issue of the investment shares, and in similar volumes. When at future measurement dates fair value is still indeterminable, or impracticable, cost is used as the measure of fair value. When there is evidence of impairment the shares are written-down to expected realizable value.

Property and equipment

a)	Recognition and measurement
	On initial recognition, property and equipment are valued at cost, being the purchase price and directly attributable costs of acquisition or construction required to bring the asset to the location and condition necessary to be capable of operating in the manner intended by the Company, including appropriate borrowing costs and the estimated present value of any future unavoidable costs of dismantling and removing items. The corresponding liability is recognized within provisions.
	Property and equipment is subsequently measured at cost less accumulated depreciation, less any accumulated impairment losses, with the exception of land which is not depreciated.
	When parts of an item of property and equipment have different useful lives, they are accounted for as separate items (major components) of property and equipment.
b)	Subsequent costs
	The cost of replacing part of an item of property and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing of property and equipment are recognized in profit or loss as incurred.

11

INTERNATIONAL TOWER HILL MINES LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Three Months Ended August 31, 2011 and 2010

(Expressed in Canadian dollars - Unaudited)

3.	SIGNIFICANT ACCOUNTING POLICIES (cont’d)
	Property and equipment (cont’d)
	c)	Major maintenance and repairs
		Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the profit or loss during the financial period in which they are incurred.
	d)	Gains and losses
		Gains and losses on disposal of an item of property and equipment are determined by comparing the proceeds from disposal with the carrying amount, and are recognized net within other income in profit or loss.
	e)	Depreciation
		Depreciation is recorded over the estimated useful life of the assets at the following annual rates:

Computer equipment	-	30% declining balance
Computer software	-	3 years straight line
Furniture and equipment	-	20% declining balance
Leasehold improvements	-	straight-line over the lease term

Additions during the year are depreciated at one-half the annual rates.

Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.

Mineral Exploration and Evaluation Expenditures

All of the Company’s projects are currently in the exploration and evaluation phase.

a)	Pre-exploration costs
	Pre-exploration costs are expensed in the period in which they are incurred.
b)	Exploration and evaluation expenditures
	Once the legal right to explore a property has been acquired, costs directly related to exploration and evaluation expenditures (“E&E”) are capitalized. These include acquisition costs and direct expenditures such as analyzing historical exploration data, topographical, geochemical and geophysical studies, surveying costs, drilling costs, payments made to contractors and depreciation on plant and equipment during the exploration phase. Costs not directly attributable to exploration and evaluation activities, including general administrative overhead costs, are expensed in the period in which they occur.
	When a project is deemed to no longer have commercially viable prospects to the Company, exploration and evaluation expenditures in respect of that project are deemed to be impaired. As a result, those exploration and evaluation expenditure costs, in excess of estimated recoveries, are written off to the Statement of Operations and Comprehensive Loss.
	The Company assesses interests in exploration properties for impairment when facts and circumstances suggest that the carrying amount of an asset may exceed its recoverable amount.

12

INTERNATIONAL TOWER HILL MINES LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Three Months Ended August 31, 2011 and 2010

(Expressed in Canadian dollars - Unaudited)

3.	SIGNIFICANT ACCOUNTING POLICIES (cont’d)
	Mineral Exploration and Evaluation Expenditures (cont’d)
	b)	Exploration and evaluation assets (cont’d)
		Once the technical feasibility and commercial viability of extracting the mineral resource has been determined, the property is considered to be a mine under development and is classified as “mine development costs”. Exploration and evaluation assets are tested for impairment before the assets are transferred to development properties.
		As the Company currently has no operational income, any incidental revenues earned in connection with exploration activities are applied as a reduction to property carrying values.
		Mineral exploration and evaluation expenditures are classified as intangible assets.

Impairment of non-current assets

Non-current assets are evaluated at least annually by management for indicators that carrying value is impaired and may not be recoverable. When indicators of impairment are present the recoverable amount of an asset is evaluated at the level of a cash generating unit (“CGU”), the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets, where the recoverable amount of a CGU is the greater of the CGU’s fair value less costs to sell and its value in use. An impairment loss is recognized in profit or loss to the extent the carrying amount exceeds the recoverable amount.

In calculating recoverable amount, the Company uses discounted cash flow techniques to determine fair value when it is not possible to determine fair value either by quotes from an active market or a binding sales agreement. The determination of discounted cash flows is dependent on a number of factors, including future metal prices, the amount of reserves, the cost of bringing the project into production, production schedules, production costs, sustaining capital expenditures, and site closure, restoration and environmental rehabilitation costs. Additionally, the reviews take into account factors such as political, social and legal, and environmental regulations. These factors may change due to changing economic conditions or the accuracy of certain assumptions and, hence, affect the recoverable amount.

The Company uses its best efforts to fully understand all of the aforementioned to make an informed decision based upon historical and current facts surrounding the projects. Discounted cash flow techniques often require management to make estimates and assumptions concerning reserves and expected future production revenues and expenses.

Provisions for environmental rehabilitation

The Company records a liability based on the best estimate of costs for site closure and reclamation activities that the Company is legally or constructively required to remediate. The liability is recognized at the time environmental disturbance occurs and the resulting costs are capitalized to the corresponding asset. The provision for closure and reclamation liabilities is estimated using expected cash flows based on engineering and environmental reports prepared by third-party industry specialists and discounted at a pre-tax rate specific to the liability. The capitalized amount is depreciated on the same basis as the related asset. The liability is adjusted for the accretion of the discounted obligation and any changes in the amount or timing of the underlying future cash flows. Significant judgments and estimates are involved in forming expectations of the amounts and timing of future closure and reclamation cash flows.

Additional disturbances and changes in closure and reclamation estimates are accounted for as incurred with a change in the corresponding capitalized cost. Costs of rehabilitation projects for which a provision has been recorded are recorded directly against the provision as incurred, most of which are expected to be incurred at the end of the life of mine.

13

INTERNATIONAL TOWER HILL MINES LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Three Months Ended August 31, 2011 and 2010

(Expressed in Canadian dollars - Unaudited)

3.	SIGNIFICANT ACCOUNTING POLICIES (cont’d)
	Reversal of impairment
	An impairment loss is reversed if there is an indication that there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. An impairment loss with respect to goodwill is never reversed.
	Income taxes
	Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination or items recognized directly in equity or in other comprehensive loss/income.
	Current income taxes are recognized for the estimated income taxes payable or receivable on taxable income or loss for the current year and any adjustment to income taxes payable in respect of previous years. Current income taxes are determined using tax rates and tax laws that have been enacted or substantively enacted by the year-end date.
	Deferred tax assets and liabilities are recognized where the carrying amount of an asset or liability differs from its tax base, except for taxable temporary differences arising on the initial recognition of goodwill and temporary differences arising on the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting nor taxable profit or loss.
	Recognition of deferred tax assets for unused tax losses, tax credits and deductible temporary differences is restricted to those instances where it is probable that future taxable profit will be available against which the deferred tax asset can be utilized. At the end of each reporting period the Company reassesses unrecognized deferred tax assets. The Company recognizes a previously unrecognized deferred tax asset to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.
	Share capital
	The proceeds from the exercise of stock options and warrants are recorded as capital stock in the amount for which the option or warrant enabled the holder to purchase a share in the Company.
	Commissions paid to underwriters, and other related share issue costs, such as legal, auditing, and printing, on the issue of the Company’s shares are charged directly to capital stock.
	Valuation of equity units issued in private placements
	The Company has adopted a residual value method with respect to the measurement of shares and warrants issued as private placement units. The residual value method first allocates value to the more easily measurable component based on fair value and then the residual value, if any, to the less easily measurable component.
	The fair value of the common shares issued in the private placements was determined to be the more easily measurable component and were valued at their fair value, as determined by the closing quoted bid price on the announcement date. The balance, if any, is allocated to the attached warrants. Any fair value attributed to the warrants is recorded as warrants.

14

INTERNATIONAL TOWER HILL MINES LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Three Months Ended August 31, 2011 and 2010

(Expressed in Canadian dollars - Unaudited)

3.	SIGNIFICANT ACCOUNTING POLICIES (cont’d)
	Earnings (loss) per share
	Basic loss per share is calculated using the weighted average number of common shares outstanding during the period. The Company uses the treasury stock method to compute the dilutive effect of options, warrants and similar instruments. Under this method, the dilutive effect on earnings per share is calculated presuming the exercise of outstanding options, warrants and similar instruments. It assumes that the proceeds of such exercise would be used to repurchase common shares at the average market price during the period. However, the calculation of diluted loss per share excludes the effects of various conversions and exercise of options and warrants that would be anti- dilutive.
	Share-based payments
	Where equity-settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the Statement of Operations and Comprehensive Loss over the vesting period. Performance vesting condition are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognized over the vesting period is based on the number of options that eventually vest. Non-vesting conditions and market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether these vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition or where a non-vesting condition is not satisfied.
	Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the Statement of Operations and Comprehensive Loss over the remaining vesting period.
	Where equity instruments are granted to employees, they are recorded at the fair value of the equity instrument granted at the grant date. The grant date fair value is recognized in comprehensive loss/income over the vesting period, described as the period during which all the vesting conditions are to be satisfied.
	Where equity instruments are granted to non-employees, they are recorded at the fair value of the goods or services received in the Statement of Operations and Comprehensive Loss, unless they are related to the issuance of shares. Amounts related to the issuance of shares are recorded as a reduction of share capital.
	When the value of goods or services received in exchange for the share-based payment cannot be reliably estimated, the fair value is measured by use of a valuation model. The expected life used in the model is adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.
	All equity-settled share-based payments are reflected in contributed surplus, until exercised. Upon exercise, shares are issued from treasury and the amount reflected in contributed surplus is credited to share capital, adjusted for any consideration paid.
	Where a grant of options is cancelled or settled during the vesting period, excluding forfeitures when vesting conditions are not satisfied, the Company immediately accounts for the cancellation as an acceleration of vesting and recognizes the amount that otherwise would have been recognized for services received over the remainder of the vesting period. Any payment made to the employee on the cancellation is accounted for as the repurchase of an equity interest except to the extent the payment exceeds the fair value of the equity instrument granted, measured at the repurchase date. Any such excess is recognized as an expense.

15

INTERNATIONAL TOWER HILL MINES LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Three Months Ended August 31, 2011 and 2010

(Expressed in Canadian dollars - Unaudited)

3.	SIGNIFICANT ACCOUNTING POLICIES (cont’d)
	Non-monetary transactions
	All non-monetary transactions are measured at the fair value of the asset surrendered or the asset received, whichever is more reliable, unless the transaction lacks commercial substance or the fair value cannot be reliably established. The commercial substance requirement is met when the future cash flows are expected to change significantly as a result of the transaction. When the fair value of a non-monetary transaction cannot be reliably measured, it is recorded at the carrying amount (after reduction, when appropriate, for impairment) of the asset given up adjusted by the fair value of any monetary consideration received or given. When the asset received or the consideration given up is shares in an actively traded market, the value of those shares will be considered fair value.
	Joint venture accounting
	Where the Company’s exploration and development activities are conducted with others, the accounts reflect only the Company’s proportionate interest in such activities.
	Future accounting changes
	IFRS 9, Financial Instruments (“IFRS 9”) was issued in November 2009 and contained requirements for financial assets. This standard addresses classification and measurement of financial assets and replaces multiple category and measurement models in IAS 39 for debt instruments with a new mixed measurement model having only two categories: amortized cost and FVTPL. IFRS 9 also replaces the models for measuring equity instruments, and such investments are either recognised at FVTPL or at fair value through other comprehensive income. Where such equity instruments are measured at fair value through other comprehensive income, dividends are recognised in profit or loss to the extent not clearly representing a return of investment; however, other gains and losses (including impairments) associated with such instruments remain in accumulated comprehensive income indefinitely.
	Requirements for financial liabilities were added in October 2010 and they largely carried forward existing requirements in IAS 39, Financial Instruments – Recognition and Measurement, except that fair value changes due to credit risk for liabilities designated at fair value through profit and loss would generally be recorded in other comprehensive income.
	This standard is required to be applied for accounting periods beginning on or after January 1, 2013, with earlier adoption permitted. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.

16

INTERNATIONAL TOWER HILL MINES LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Three Months Ended August 31, 2011 and 2010

(Expressed in Canadian dollars - Unaudited)

4.	RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
	The carrying values of cash and cash equivalents, marketable securities, accounts receivable and accounts payable and accrued liabilities approximate their fair values due to the short-term maturity of these financial instruments. The fair values of amounts due to and from related parties have not been disclosed as their fair values cannot be reliably measured since the parties are not at arm’s length.
	The Company’s risk exposure and the impact on the Company’s financial instruments are summarized below:
	a)	Credit risk
		Credit risk is the risk of financial loss to the Company if a counterparty to a financial instrument fails to meet its contractual obligations. The Company manages credit risk, in respect of cash and cash equivalents, by purchasing highly liquid, short-term investment-grade securities held at a major Canadian financial institution in accordance with the Company’s investment policy. The Company has no asset backed securities.
		The Company’s concentration of credit risk and maximum exposure thereto is as follows relating to financial assets:

		August 31,		May 31,		June 1,
		2011		2011		2010
Cash and cash equivalents	$	94,408,327	$	111,165,126	$	43,460,324
Accounts receivable	$	336,518	$	185,733	$	110,214

At August 31, 2011, the Company held a total of $71,388,552 (May 31, 2011 - $102,310,928, June 1, 2010 - $26,537,499) cash equivalents which consist of interest saving accounts and Guaranteed Investment Certificates (“GICs”):

		Quantity	Maturity Date	Annual Yield
Renaissance High Interest Savings	$	7,662,139	N/A	N/A
RBC Investment Savings		4,158,413	N/A	N/A
TD Mortgage Corporation (GIC)		42,068,000	April 16, 2012	1.36%
Advisor’s Advantage Trust		17,500,000	May 7, 2012	1.30%
	$	71,388,552

	The Company’s cash and cash equivalents at August 31, 2011 consists of $79,937,114 in Canada and $14,471,213 in the United States. Concentration of credit risk exists with respect to the Company’s Canadian cash and cash equivalents as all amounts are held at two major Canadian financial institutions. Credit risk with regard to cash held in the United States is mitigated as the amount held in the United States is only sufficient to cover short-term requirements. With respect to receivables at August 31, 2011, the Company is not exposed to significant credit risk as the majority are from governmental agencies and interest accruals.
b)	Liquidity risk
	Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. The Company’s approach to managing liquidity risk is to provide reasonable assurance that it will have sufficient funds to meet liabilities when due. The Company manages its liquidity risk by forecasting cash flows for operations and anticipated investing and financing activities. The Company normally maintains sufficient cash and cash equivalents to meet the Company’s business requirements. At August 31, 2011, the Company had accounts payable and accrued liabilities of $6,647,743 (May 31, 2011 - $4,037,428, June 1, 2010 - $1,187,865), which are all payable within six months and are expected to be settled from available working

17

INTERNATIONAL TOWER HILL MINES LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Three Months Ended August 31, 2011 and 2010

(Expressed in Canadian dollars - Unaudited)

4. RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (cont’d)

(b)	Liquidity Risk (continued)
	capital as they come due. The cash and cash equivalents balance of $94,408,327 will likely be sufficient to meet the needs for the coming year.

c)	Market risk
	Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, foreign currency risk and other price risk.
	(i)	Interest rate risk
		Interest rate risk consists of the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
		The Company’s cash and cash equivalents consists of cash and cash equivalents held in bank accounts and short term deposit certificates of GIC’s with two major Canadian financial institutions that earn interest at variable interest rates. Future cash flows from interest income on cash and cash equivalents will be affected by interest rate fluctuations. Due to the short-term nature of these financial instruments, fluctuations in market rates do not have a significant impact on estimated fair values.
		The Company manages interest rate risk by maintaining an investment policy that focuses primarily on preservation of capital and liquidity. The Company’s sensitivity analysis suggests that a 0.5% change in interest rates would affect interest income by approximately $298,000.
	(ii)	Foreign currency risk
		The Company is exposed to foreign currency risk to the extent that certain monetary financial instruments and other assets are denominated in United States dollars. The Company has not entered into any foreign currency contracts to mitigate this risk, as it believes this risk is minimized by the minimal amount of cash held in United States funds, nor entered into any hedging arrangements with respect to mineral property expenditure commitments denominated in United States dollars. The Company’s sensitivity analysis suggests that a consistent 8% change in the absolute rate of exchange for the United States dollars, the foreign currency for which the Company has net assets employed, would affect net assets and foreign exchange gain (loss) by approximately $1,504,000. As at August 31, 2011, the Company had the following financial instruments in USD:

		CAD equivalent		USD
Cash	$	15,145,757	$	15,480,128
Accounts payable and accrued liabilities	$	6,456,917	$	6,599,464

	As at August 31, 2011, USD amounts were converted at a rate of USD 1 to CAD 0.9784.
(iii)	Other price risk
	Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices, other than those arising from interest rate risk or foreign exchange risk. The Company’s investment in marketable securities is exposed to such risk.

18

INTERNATIONAL TOWER HILL MINES LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Three Months Ended August 31, 2011 and 2010

(Expressed in Canadian dollars - Unaudited)

5. MARKETABLE SECURITIES

		August 31,		May 31,		June 1,
		2011		2011		2010
Millrock Resources Inc.	$	409,500	$	422,500	$	273,000
Ocean Park Ventures Corp.		372,000		240,000		87,000
	$	781,500	$	662,500	$	360,000

	On April 4, 2008 the Company sold its South Estelle, Alaska property to Millrock Resources Inc. (“Millrock”) for 650,000 Millrock shares or $247,000 based upon their market value on that date of $0.38 per share.
	On March 15, 2010, the Company received the initial 200,000 common shares of Ocean Park Ventures Corp. (“OPV”), valued on that date at $0.72 per share or $144,000, in consideration for providing the resources for Raven Gold to enter into a joint venture with an Alaskan subsidiary of OPV on the Chisna property, Alaska. The Company received an additional 200,000 common shares of OPV on March 15, 2011, valued on that date at $0.60 per share at $120,000.
	Fair value adjustment for the three months ended August 31, 2011, amounted to an unrealized gain of $119,000 (2010 – $128,000).
6.	PROPERTY AND EQUIPMENT

		Furniture
		and			Computer			Computer			Leasehold
		Equipment			Equipment			Software			Improvements			Total
Cost
Balance at June 1, 2010	$	8,215		$	125,576		$	89,476		$	17,061		$	240,328
Additions		46,192			59,714			-			-			105,906
Disposals		-			-			-			-			-
Balance at May 31, 2011		54,407			185,290			89,476			17,061			346,234
Additions		-			2,964			-			-			2,964
Disposals		-			-			-			-			-
Balance at August 31, 2011	$	54,407		$	188,254		$	89,476		$	17,061		$	349,198
Depreciation and impairment losses
Balance at June 1, 2010	$	(3,700	)	$	(60,148	)	$	(89,476	)	$	(6,964	)	$	(160,288	)
Depreciation for the period		(5,313	)		(26,965	)		-			(10,097	)		(42,375	)
Disposals		-			-			-			-			-
Balance at May31, 2011		(9,013	)		(87,113	)		(89,476	)		(17,061	)		(202,663	)
Depreciation for the period		(2,270	)		(7,475	)		-			-			(9,745	)
Disposals		-			-			-			-			-
Balance at August 31, 2011	$	(11,283	)	$	(94,588	)	$	(89,476	)	$	(17,061	)	$	(212,408	)
Carrying amounts At June 1, 2010	$	4,515		$	65,428		$	-		$	10,097		$	80,040
At May 31, 2011	$	45,394		$	98,177		$	-		$	-		$	143,571
At August 31, 2011	$	43,124		$	93,666		$	-		$	-		$	136,790

19

INTERNATIONAL TOWER HILL MINES LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Three Months Ended August 31, 2011 and 2010

(Expressed in Canadian dollars - Unaudited)

7. EXPLORATION AND EVALUATION ASSETS

		Total
Balance, June 1, 2010	$	39,500,278
Acquisition costs:
Cash payments		31,070
Common shares issued		-
		31,070
Deferred exploration costs:
Advance to contractors		276,555
Aircraft services		346,568
Assay		3,502,374
Drilling		13,633,947
Equipment rental		2,015,862
Field costs		5,281,089
Geological/geophysical		9,984,494
Land maintenance & tenure		2,660,912
Legal		58,075
Transportation		319,041
Travel		235,700
		38,314,617
Total expenditures for the year		38,345,687
Cumulative translation adjustments		(6,742,842	)
Balance, May 31, 2011		71,103,123
Acquisition costs:
Cash payments		-
Common shares issued		-
		-
Deferred exploration costs:
Advance to contractors		(138,010	)
Aircraft services		1,318,931
Assay		795,736
Drilling		5,627,819
Environmental		1,164,057
Equipment rental		577,633
Field costs		3,733,954
Geological/geophysical		3,177,586
Land maintenance & tenure		483,943
Legal		48,492
Surveying and mapping		425,732
Transportation		4,771
Travel		(6,154	)
		17,214,490
Total expenditures for the year		17,214,490
Cumulative translation adjustments		2,873,023
Balance, August 31, 2011	$	91,190,636

20

INTERNATIONAL TOWER HILL MINES LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Three Months Ended August 31, 2011 and 2010

(Expressed in Canadian dollars - Unaudited)

7.	EXPLORATION AND EVALUATION ASSETS (cont’d)
	Properties acquired from AngloGold, Alaska
	Pursuant to an Asset Purchase and Sale and Indemnity Agreement dated June 30, 2006, as amended on July 26, 2007, (the “AngloGold Agreement”) among the Company, AngloGold Ashanti (U.S.A.) Exploration Inc. (“AngloGold”) and TH Alaska, the Company acquired all of AngloGold’s interest in a portfolio of seven mineral exploration projects in Alaska (then aggregating 246 square kilometres) and referred to as the Livengood, Chisna, Gilles, Coffee Dome, West Pogo, Blackshell, and Caribou properties (the “Sale Properties”) in consideration of cash payment USD 50,000 on August 4, 2006, and the issuance of 5,997,295 common shares, representing approximately 19.99% of the Company’s issued shares following the closing of the acquisition and two private placement financings raising an aggregate of $11,479,348. AngloGold has the right to maintain its percentage equity interest in the Company, on an ongoing basis, provided that such right will terminate if AngloGold’s interest falls below 10% at any time after January 1, 2009.
	As further consideration for the transfer of the Sale Properties, the Company granted to AngloGold a 90 day right of first offer with respect to the Sale Properties and any additional mineral properties in Alaska in which the Company acquires an interest and which interest the Company proposes to farm out or otherwise dispose of. If AngloGold’s equity interest in the Company is reduced to less than 10%, then this right of first offer will terminate. Details of the Livengood Property (being the only Sale Property still held by the Company) are as follows:
	(i)	Livengood Property
		The Livengood property is located in the Tintina gold belt approximately 110 kilometres north of Fairbanks, Alaska. The property is approximately 145 square kilometres and consists of fee land leased from the Alaska Mental Health Trust, a number of smaller private mineral leases, Alaska state mining claims located by the Company and patented ground held by the Company.
		Details of the leases are as follows:

• a lease of the Alaska State mineral rights having an initial term of three years, commencing July 1, 2004 (subject to extension for two extensions of three years each) and requires work expenditures of USD 10/acre/year in years 1 – 3, USD 20/acre/year in years 4 – 6 and USD 30/acre/year in years 7 – 9 and advance royalty payments of USD 5/acre/year in years 1 – 3, USD 15/acre/year in years 4 – 6 and USD 25/acre/year in years 7 – 9. An NSR production royalty of between 2.5% and 5.0% (depending upon the price of gold) is payable to the lessor with respect to the lands subject to this lease. In addition, an NSR production royalty of 1% is payable to the lessor with respect to the unpatented federal mining claims subject to the lease below.

• a lease of State of Alaska mining claims for a term of ten years, commencing on September 11, 2006. The lease requires payments of USD 75,000 on execution (paid), USD 50,000 in each of years 2 – 5 (paid to year 4) and USD 100,000 in each of years 6 – 10 and work expenditures of USD 100,000 in year one (incurred), USD 200,000 in each of years 2 – 5 (incurred to year 4) and USD 300,000 in each of years 6 – 10. An NSR production royalty of between 2% and 5% is payable to the lessors (depending upon the price of gold). The Company may buy all interest in the property subject to the lease (including the retained royalty) for USD 10,000,000.

21

INTERNATIONAL TOWER HILL MINES LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Three Months Ended August 31, 2011 and 2010

(Expressed in Canadian dollars - Unaudited)

7. EXPLORATION AND EVALUATION ASSETS (cont’d) Properties acquired from AngloGold, Alaska (cont’d)

(i)	Livengood Property (cont’d)
	Details of the leases are as follows (cont’d):

• a lease of US federal unpatented claims having an initial term of ten years, commencing on April 21, 2003 and for so long thereafter as mining related activities are carried out. The lease requires a bonus payment of USD 5,000 on signing (paid), and advance royalties of USD 20,000 on execution (paid), USD 30,000 on or before April 21, 2004 (paid), USD 40,000 on or before April 21, 2005 (paid), USD 50,000 on or before April 21, 2006 (paid), USD 40,000 on or before April 21, 2007 (paid) and an additional USD 50,000 on or before each subsequent April 21 during the term (paid USD 200,000). An NSR production royalty of between 2% and 3% (depending on the price of gold) is payable to the lessors. The Company may purchase 1% of the royalty for USD 1,000,000.

• a lease of patented federal claims having an initial term of ten years, and for so long thereafter as the Company pays the lessors the minimum royalties required under the lease. The lease requires a bonus payment of USD 10,000 on signing (paid), and minimum royalties of USD 10,000 on or before January 18, 2008 (paid), USD 10,000 on or before January 18, 2009 (paid), USD 10,000 on or before January 18, 2010 (paid) and an additional USD 20,000 on or before each of January 18, 2011 through January 18, 2016 (paid USD 20,000 on December 14, 2010) and an additional USD 25,000 on each subsequent January 18 thereafter during the term (all of which minimum royalties are recoverable from production royalties). An NSR production royalty of 3% is payable to the lessors. The Company may purchase all interest of the lessors in the leased property (including the production royalty) for USD 1,000,000 (less all minimum and production royalties paid to the date of purchase), of which USD 500,000 is payable in cash over four years following the closing of the purchase and the balance of USD 500,000 is payable by way of the 3% NSR production royalty.

• a mining lease of unpatented federal lode mining and federal unpatented placer claims having an initial term of ten years, commencing on March 28, 2007, and for so long thereafter as mining related activities are carried out. The lease requires payment of advance royalties of USD 3,000 on execution (paid), USD 5,000 on or before March 28, 2009 (paid), USD 10,000 on or before March 28, 2010 (paid) and an additional USD 15,000 on or before each subsequent March 28 thereafter during the initial term (all of which minimum royalties are recoverable from production royalties) (paid USD 15,000 on February 15, 2011). The Company is required to pay the lessor the sum of USD 250,000 upon making a positive production decision. An NSR production royalty of 2% is payable to the lessor. The Company may purchase all interest of the lessor in the leased property (including the production royalty) for USD 1,000,000.

22

INTERNATIONAL TOWER HILL MINES LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Three Months Ended August 31, 2011 and 2010

(Expressed in Canadian dollars - Unaudited)

7.	EXPLORATION AND EVALUATION ASSETS (cont’d)
	Acquisitions
	The acquisition of title to mineral properties is a detailed and time-consuming process. The Company has taken steps, in accordance with industry standards, to verify title to mineral properties in which it has an interest. Although the Company has taken every reasonable precaution to ensure that legal title to its properties is properly recorded in the name of the Company, there can be no assurance that such title will ultimately be secured.
	Environmental Expenditures
	The operations of the Company may in the future be affected from time to time in varying degrees by changes in environmental regulations, including those for future removal and site restoration costs. Both the likelihood of new regulations and their overall effect upon the Company vary greatly and are not predictable. The Company’s policy is to meet or, if possible, surpass standards set by relevant legislation by application of technically proven and economically feasible measures.
	Environmental expenditures that relate to ongoing environmental and reclamation programs are charged against earnings as incurred or capitalized and amortized depending on their future economic benefits. Estimated future removal and site restoration costs, when the ultimate liability is reasonably determinable, are charged against earnings over the estimated remaining life of the related business operation, net of expected recoveries. The Company does not have any provisions for environmental rehabilitation as of August 31, 2011.
8.	SHARE CAPITAL
	Authorized
	500,000,000 common shares without par value.
	Share issuances
	During the period ended August 31, 2011, the Company:
	a)	Issued 35,000 common shares pursuant to the exercise of stock options for total proceeds of $229,950 and transferred related contributed surplus of $90,956.

During the year ended May 31, 2011 the Company:

a)	Sold to AngloGold, on March 24, 2011, on a private placement basis, an aggregate of 230,764 common shares at a price of $8.13 per share for gross proceeds of $1,876,111 and, on August 26, 2010, sold to AngloGold, on a private placement basis, an aggregate of 415,041 common shares at a price of $5.26 per share for gross proceeds of $2,183,116. These issuances were pursuant to AngloGold’s right to maintain its 13.2907% equity interest in the Company.
b)	Closed a bought deal short form prospectus financing (“the Offering”) on November 10, 2010 through the issuance of 10,400,000 common shares at a price of $6.25 per common share for gross proceeds of $65,000,000. The Underwriters also exercised their over-allotment option to acquire an additional 1,560,000 common shares for additional gross proceeds of $9,750,000. Including the proceeds from the exercise of the over-allotment option, the total gross proceeds of the Offering were $74,750,000. In connection with the Offering, the Underwriters received a cash commission equal to 5% of the gross proceeds raised through the Offering, amounting to $3,737,500 in share issuance costs.
c)	Closed a non-brokered private placement through the issuance of 4,900,000 common shares at a price of $6.25 per common share for gross proceeds of $30,625,000 on November 10, 2010. Included in the non-brokered private placement was the issuance of 754,765 common shares to AngloGold for gross proceeds of $4,717,281.

23

INTERNATIONAL TOWER HILL MINES LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Three Months Ended August 31, 2011 and 2010

(Expressed in Canadian dollars - Unaudited)

8.	SHARE CAPITAL (cont’d)
	d)	Issued 3,025,299 common shares for the exercise of 2,977,200 stock options and 48,099 warrants for proceeds of $8,644,792 and transferred related contributed surplus of $5,348,213.

Warrants

Warrant transactions are summarized as follows:

	August 31, 2011			May 31, 2011
			Weighted				Weighted
	Number of		Average	Number of			Average
	Warrants		Exercise Price	Warrants			Exercise Price
Balance, beginning of the period	-	$	-	48,099		$	2.95
Issued – agent’s warrants	-	$	-	-		$	-
Exercised	-	$	-	(48,099	)	$	(2.95	)
Expired	-	$	-	-		$	-
Balance, end of the period	-	$	-	-		$	-

There are no warrants outstanding at May 31, 2011 and August 31, 2011.

Stock options

The Company has adopted an incentive stock option plan (the “2006 Plan”). The essential elements of the 2006 Plan provide that the aggregate number of common shares of the Company’s capital stock that may be made issuable pursuant to options granted under the 2006 Plan may not exceed 10% of the number of issued shares of the Company at the time of the granting of the options. Options granted under the 2006 Plan will have a maximum term of ten years. The exercise price of options granted under the 2006 Plan will not be less than the discounted market price of the common shares (defined as the last closing market price of the Company’s common shares immediately preceding the issuance of a news release announcing the granting of the options, less the maximum discount permitted under applicable stock exchange policies), or such other price as may be agreed to by the Company and accepted by the Toronto Stock Exchange. Options granted under the 2006 Plan vest immediately, unless otherwise determined by the directors at the date of grant.

Pursuant to the 2006 Plan, on August 23, 2011, the Company granted incentive stock options to an officer and an employee of the Company to purchase 650,000 common shares in the capital of the Company. The options are exercisable on or before August 23, 2016 at a price of $8.07 per share. The options will vest as to one-third on August 23, 2011, one-third on August 23, 2012 and the balance on August 23, 2013.

On July 28, 2011, the Company granted incentive stock options to directors of the Company to purchase 950,000 common shares in the capital of the Company. The options are exercisable on or before July 28, 2013 at a price of $7.47 per share.

On June 1, 2011, the Company granted incentive stock options to an officer of the Company to purchase 1,000,000 common shares in the capital of the Company. The options are exercisable on or before May 9, 2016 at a price of $8.35 per share. The options will vest as to one-third on June 1, 2011, one-third on May 9, 2012 and the balance on May 9, 2013.

On January 10, 2011, the Company granted incentive stock options to officers, employees and consultants of the Company to purchase 265,000 common shares in the capital stock of the Company. The options are exercisable on or before January 10, 2013 at a price of $9.15 per share. The options will vest evenly over 12 months with the first vesting date being April 10, 2011.

24

INTERNATIONAL TOWER HILL MINES LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Three Months Ended August 31, 2011 and 2010

(Expressed in Canadian dollars - Unaudited)

8.	SHARE CAPITAL (cont’d)
	Stock options (cont’d)
	On August 19, 2010, the Company granted incentive stock options to officers, directors, employees and consultants of the Company to purchase 1,495,000 common shares in the capital stock of the Company. The options are exercisable on or before August 19, 2012 at a price of $6.57 per share.
	A summary of the status of the stock option plan as of August 31, 2011, and May 31, 2011 and changes is presented below:

	Three Months Ended					Year Ended
	August 31, 2011					May 31, 2011
				Weighted					Weighted
	Number of			Average		Number of			Average
	Options			Exercise Price		Options			Exercise Price
Balance, beginning of the period	4,600,000		$	7.24		5,822,200		$	5.08
Granted	2,600,000		$	7.96		1,760,000		$	6.96
Exercised	(35,000	)	$	(6.57	)	(2,977,200	)	$	(2.86	)
Expired	-		$	-		(5,000	)	$	(1.75	)
Balance, end of the period	7,165,000		$	7.50		4,600,000		$	7.24

The weighted average remaining life of options outstanding at August 31, 2011 was 1.85 years.

Stock options outstanding are as follows:

		August 31, 2011				May 31, 2011
		Exercise	Number of			Exercise	Number of
Expiry Date		Price	Options	Exercisable		Price	Options	Exercisable
January 12, 2012	$	7.95	250,000	250,000	$	7.95	250,000	250,000
April 14, 2012	$	7.34	2,660,000	2,660,000	$	7.34	2,660,000	2,660,000
August 19, 2012	$	6.57	1,390,000	1,390,000	$	6.57	1,425,000	1,425,000
January 10, 2013	$	9.15	265,000	132,500	$	9.15	265,000	66,250
July 28, 2013	$	7.47	950,000	950,000	$	-	-	-
May 9, 2016	$	8.35	1,000,000	333,333	$	-	-	-
August 23, 2016	$	8.07	650,000	216,667	$	-	-	-
			7,165,000	5,932,500			4,600,000	4,401,250

Share-based payments

During the period ended August 31, 2011, the Company granted 2,600,000 stock options with a fair value of $10,597,541, calculated using the Black-Scholes option pricing model. Share-based payment charges for the three months ended August 31, 2011 totaled $5,777,367 (2010 - $3,063,947) for continuing operations and $nil (2010 - $821,171) for discontinued operations.

During the year ended May 31, 2011, the Company granted 1,760,000 stock options with a fair value of $4,648,591, calculated using the Black-Scholes option pricing model. Share-based payment charges for the year ended May 31, 2011 totaled $3,254,815 for continuing operations and $821,171 for discontinued operations.

25

INTERNATIONAL TOWER HILL MINES LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Three Months Ended August 31, 2011 and 2010

(Expressed in Canadian dollars - Unaudited)

8.	SHARE CAPITAL (cont’d) Share-based payments (cont’d)
	The following weighted average assumptions were used for the Black-Scholes option pricing model calculations:

		August 31,		May 31,
		2011		2011
Expected life of options		4 years		2 years
Risk-free interest rate		1.78%		1.42%
Annualized volatility		71.96%		68.91%
Dividend rate		0.00%		0.00%
Exercise price	$	7.96	$	6.96

		Weighted average fair value of
		options granted
		August 31,		May 31,
		2011		2011
Exercise price
equals	$	-	$	-
exceeds	$	2.92	$	2.88
less than	$	1.16	$	2.60
The market price of the stock on the grant date

Share-based payment charges of $5,777,367 (2010 - $3,063,947) were allocated as follows for continuing operations:

		Before
		allocation of				After allocation
		share-based		Share-based		of share-based
		payment		payment		payment
Three months ended August 31, 2011		charges		charges		charges
Consulting	$	183,749	$	1,461,677	$	1,645,426
Investor relations		102,254		43,758		146,012
Professional fees		271,342		11,669		283,011
Wages and benefits		2,160,362		4,260,263		6,420,625
			$	5,777,367

26

INTERNATIONAL TOWER HILL MINES LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Three Months Ended August 31, 2011 and 2010

(Expressed in Canadian dollars - Unaudited)

8. SHARE CAPITAL (cont’d) Share-based payments (cont’d)

		Before
		allocation of				After allocation
		share-based		Share-based		of share-based
		payment		payment		payment
Three months ended August 31, 2010		charges		charges		charges
Consulting	$	71,253	$	1,010,894	$	1,082,147
Investor relations		196,674		312,647		509,321
Professional fees		92,864		72,951		165,815
Wages and benefits		347,849		1,667,455		2,015,304
			$	3,063,947

9.	RELATED PARTY TRANSACTIONS AND BALANCES
	During the three months period ended August 31, 2011, the Company entered into the following transactions with related parties:
	Management compensation
	Key management personnel compensation comprised:

		2011		2010
Consulting fees	$	60,500	$	18,337
Directors fees		30,000		34,228
Investor relations		36,000		35,858
Professional fees		64,903		10,425
Wages and benefits		1,178,242		150,437
Share-based payments		5,273,410		2,709,612
	$	6,643,055	$	2,958,897

Transactions with other related parties

Paid or accrued $7,719 (2010 - $5,204) in rent and $1,881 (2010 - $7,841) in administration to a company with common officers and directors.

Paid or accrued $2,400 (2010 - $nil) in rent to an officer.

At August 31, 2011, included in accounts payable and accrued liabilities was $31,415 (May 31, 2011 - $10,091) to companies related by common directors and officers. Included in share issuance costs was $nil (May 31, 2011 - $63,333) paid to a company related to an officer of the Company.

These amounts were unsecured, non-interest bearing and had no fixed terms of repayment. Accordingly, fair value could not be readily determined.

27

INTERNATIONAL TOWER HILL MINES LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Three Months Ended August 31, 2011 and 2010

(Expressed in Canadian dollars - Unaudited)

9.	RELATED PARTY TRANSACTIONS AND BALANCES (cont’d)
	The Company has entered into a retainer agreement dated August 1, 2008 with Lawrence W. Talbot Law Corporation (“LWTLC”), pursuant to which LWTLC agrees to provide legal services to the Company. Pursuant to the retainer agreement, the Company has agreed to pay LWTLC a minimum annual retainer of $50,000 (plus applicable taxes and disbursements). The retainer agreement may be terminated by LWTLC on reasonable notice, and by the Company on one year’s notice (or payment of one year’s retainer in lieu of notice). An officer of the Company is a director and shareholder of LWTLC.
	The Company has also entered into change of control agreements during the year with officers of the Company. In the case of termination, the officers are entitled to an amount equal to a multiple (ranging from once to twice) of the sum of the annual base salary then payable to the officer, the aggregate amount of bonus(es) (if any) paid to the officer within the calendar year immediate preceding the Effective Date of Termination, and an amount equal to the vacation pay which would otherwise be payable for the one year period next following the Effective Date of Termination.
	These transactions with related parties have been valued in these financial statements at the exchange amount, which is the amount of consideration established and agreed to by the related parties.
10.	SEGMENTED INFORMATION

		Canada		United States		Total
August 31, 2011
Exploration and evaluation assets – continuing operations	$	-	$	91,190,636	$	91,190,636
Property and equipment	$	18,349	$	118,441	$	136,790
Current assets	$	81,195,478	$	14,537,213	$	95,732,691
Total assets	$	81,213,827	$	105,846,290	$	187,060,117
May 31, 2011
Exploration and evaluation assets – continuing operations	$	-	$	71,103,123	$	71,103,123
Property and equipment	$	16,753	$	126,818	$	143,571
Current assets	$	110,544,083	$	1,847,768	$	112,391,851
Total assets	$	110,560,836	$	73,077,709	$	183,638,545

28

INTERNATIONAL TOWER HILL MINES LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Three Months Ended August 31, 2011 and 2010

(Expressed in Canadian dollars - Unaudited)

10. SEGMENTED INFORMATION (cont’d)

Three months ended August 31,		2011			2010
Net loss from continuing operations for the period – Canada	$	(5,785,061	)	$	(3,600,033	)
Net loss from continuing operations for the period - United States		(2,579,180	)		(494,257	)
Net loss from discontinued operations for the period – Canada		-			(844,813	)
Net loss from discontinued operations for the period - United States		-			(89,344	)
Net loss for the period	$	(8,364,241	)	$	(5,028,447	)

11.	CAPITAL MANAGEMENT
	The Company manages its capital structure, being its share capital, and makes adjustments to it, based on the funds available to the Company, in order to support future business opportunities. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s management to sustain future development of the business.
	The Company currently has no source of revenues; as such the Company is dependent upon external financings to fund activities. In order to carry future projects and pay for administrative costs, the Company will spend its existing working capital and raise additional funds as needed. Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable.
	There were no changes in the Company’s approach to capital management during the period ended August 31, 2011. The Company is not subject to externally imposed capital requirements.
12.	SUBSIDIARY
	Significant subsidiaries are:

			ITH’s effective
	Country of	Principal	interest for
	Incorporation	Activity	2011 and 2010
Tower Hill Mines, Inc.	USA	Exploration company	100%
Tower Hill Mines (US) LLC	USA	Exploration company	100%

13.	COMMITMENTS
	a)	Commitments for exploration and evaluation assets (note 7).
	b)	The Company has entered into several office and warehouse lease agreements with options to renew expiring on July 31, 2013. Total rental to that date is $203,085 (USD 207,568). Future minimum lease payments for the next three fiscal years are as follows:

2012	$	88,632
2013		99,575
2014		14,878
	$	203,085

29

INTERNATIONAL TOWER HILL MINES LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Three Months Ended August 31, 2011 and 2010

(Expressed in Canadian dollars - Unaudited)

14. SUPPLEMENTAL CASH FLOW INFORMATION

		2011		2010
Interest paid	$	-	$	-
Income taxes paid	$	-	$	-
Non-cash investing and financing transactions – continuing operations:
Accounts payable and accrued liabilities included in exploration and evaluation assets	$	6,239,691	$	3,679,404
Non-cash investing and financing transactions – discontinued operations:
Shares issued to acquire long-term assets related to discontinued operations	$	-	$	-
Accounts payable and accrued liabilities included in exploration and evaluation assets	$	-	$	-

15.	SUBSEQUENT EVENTS
	No material events subsequent to August 31, 2011.

30

INTERNATIONAL TOWER HILL MINES LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Three Months Ended August 31, 2011 and 2010

(Expressed in Canadian dollars - Unaudited)

16.	TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS
	As stated in note 3, these are the Company’s first condensed consolidated interim financial statements for the period covered by the first annual consolidated financial statements prepared in accordance with IFRS. An explanation of how the transition from previous Canadian GAAP to IFRS has affected the Company’s financial position and comprehensive loss is set out in this note.
	The accounting policies set out in note 3 have been applied in preparing the condensed consolidated interim financial statements as at and for the three month period ended August 31, 2011, the comparative information presented in these financial statements as at and for the three month period ended August 31, 2010 and as at and for the year ended May 31, 2011, and in the preparation of an opening IFRS Statement of Financial Position at June 1, 2010 (the Company’s date of transition).
	First time adoption of IFRS
	The Company’s consolidated financial statements for the year ending May 31, 2012 are the first annual financial statements that will be prepared in accordance with IFRS. The Company has adopted IFRS on June 1, 2011 with a transition date of June 1, 2010. Under IFRS 1, “First time adoption of International Financial Reporting Standards” (“IFRS 1”), the IFRS standards are applied retrospectively at the transition date with all adjustments to assets and liabilities as stated under Canadian GAAP taken to deficit, and IFRS 1 providing for certain optional and mandatory exemptions to this principle.
	Below are the adjustments necessary for the IFRS transition, including exemptions taken at the transition date:

a)	Share-based payment transactions
	IFRS 1 allows that a first-time adopter can elect to not apply IFRS 2 to share-based payments granted after November 7, 2002 that vested before the later of (a) the date of transition to IFRS and (b) January 1, 2005. The Company has elected this exemption and will apply IFRS 2 only to unvested stock options as at June 1, 2010, being the transition date.
	IFRS 2 and Canadian GAAP are largely converged, with the exception of two main differences affecting the Company’s stock option grants. IFRS 2 does not allow straight-line amortization of share-based payments related to stock options granted with a graded vesting schedule. The attribution method is required which effectively splits the grant into separate units for valuation purposes based on the vesting schedule. Additionally, IFRS 2 requires the incorporation of an estimate of forfeiture rates. Under Canadian GAAP, the Company’s policy was to account for forfeitures as they occurred.
	Impact on Consolidated Financial Statements

		May 31,			August 31,		June 1,
		2011			2010		2010
Contributed surplus	$	321,000		$	-	$	-
Adjustment to deficit	$	(321,000	)	$	-	$	-
Adjustment to share-based payment charges	$	321,000		$	-	$	-

b)	Business combinations
	IFRS 1 allows that a first-time adopter may elect not to apply IFRS 3 Business Combinations (IFRS 3) retrospectively to business combinations prior to the date of transition, avoiding the requirement to restate prior business combinations. The Company has elected to only apply IFRS 3 to business combinations that occur on or after June 1, 2010.

31

INTERNATIONAL TOWER HILL MINES LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Three Months Ended August 31, 2011 and 2010

(Expressed in Canadian dollars - Unaudited)

16.	TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (cont’d)
	First time adoption of IFRS (cont’d)
	c)	Marketable securities
		IAS 39 permits a financial asset to be designated on initial recognition as available-for-sale or a financial instrument (provided it meets certain criteria) to be designated as a financial asset or financial liability at fair value through profit or loss. The Company has taken this election as at the transition date.
	d)	Cumulative translation differences
		IFRS 1 allows first-time adopter to elect to deem all cumulative translation differences to be zero at the date of transition. The Company has elected this exemption and as such all cumulative translations amounts to June 1, 2010 have been included in the deficit.
		Functional and presentation currency
		The functional currency of TH Alaska and TH US is the US dollars and for all other entities within the Group, the functional currency is the Canadian dollar at the transition date of June 1, 2010. The consolidated financial statements are presented in Canadian Dollar (“CAD”) which is the Group’s presentation currency.
		Translation of transactions and balances
		Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the Statement of Operations and Comprehensive Loss.
		Group companies
		The results and financial position of all the Group entities (none of which has the currency of a hyper- inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• Assets and liabilities for each Statement of Financial Position presented are translated at the closing rate at the date of that financial period end;

• Income and expenses for each Statement of Operations and Comprehensive Loss are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions);

• Equity transactions are translated using the exchange rate at the date of the transaction; and

• All resulting exchange differences are recognized in other comprehensive income and reported as a separate component of equity.

On consolidation, exchange differences arising from the translation of functional to presentation are taken to Accumulative Other Comprehensive Income.

IAS 21 – “The effects of Changes in Foreign Exchange Rates” differs from the Canadian GAAP equivalent, applied by the Group until May 31, 2011. IAS 21 requires an entity to measure its assets, liabilities, revenue and expenses in its functional currency. It has been determined that as at the transition date of June 1, 2010, TH Alaska and TH US is US dollars (“USD”) and for all other entities within the Group, the functional currency is Canadian dollars. Prior to the adoption of IFRS, the functional currency of the Group was the CAD.

32

INTERNATIONAL TOWER HILL MINES LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Three Months Ended August 31, 2011 and 2010

(Expressed in Canadian dollars - Unaudited)

16.	TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (cont’d)
	d)	Cumulative translation differences (cont’d)
		Group companies (cont’d)
		Under IAS 21, the assets and liabilities of the Group are translated from TH Alaska and TH US’ functional currency USD, to the presentation currency at the reporting date. The income and expenses are translated to the Group’s presentation currency, which is CAD at the dates of the transactions. Foreign currency differences are recognized directly in other comprehensive income within the foreign currency translation reserve.
		Impact on Consolidated Financial Statements

		May 31,			August 31,			June 1,
		2011			2010			2010
Exploration and evaluation assets	$	(9,066,545	)	$	(3,842,076	)	$	(2,349,207	)
Long-term assets related to discontinued operations	$	-		$	-		$	(572,982	)
Accumulated to other comprehensive income	$	(6,767,665	)	$	(1,556,753	)	$	-
Adjustment to deficit	$	(2,298,880	)	$	(2,275,323	)	$	(2,922,189	)

e)	Fair value as deemed cost
	The Company may elect among two options when measuring the value of its assets under IFRS. It may elect, on an asset by asset basis, to use either historical cost as measured under retrospective application of IFRS or fair value of an asset at the opening balance sheet date. The Company has elected to use historical cost for its assets.
f)	Consolidated and Separate Financial Statements
	In accordance with IFRS 1, if a company elects to apply IFRS 3 Business Combinations retrospectively, IAS 27 Consolidated and Separate Financial Statements must also be applied retrospectively. As the Company elected to apply IFRS 3 prospectively, the Company has applied IAS 27 prospectively.
g)	Estimates
	The estimates previously made by the Company under pre-changeover Canadian GAAP were not revised for the application of IFRS except where necessary to reflect any difference in accounting policy or where there was objective evidence that those estimates were in error. As a result the Company has not used hindsight to revise estimates.

33

INTERNATIONAL TOWER HILL MINES LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Three Months Ended August 31, 2011 and 2010

(Expressed in Canadian dollars - Unaudited)

16.	TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (cont’d)
	First time adoption of IFRS (cont’d)
	Reconciliation to previously reported financial statements
	A reconciliation of the above noted changes is included in these following Consolidated Statements of Financial Position and Consolidated Statements of Operations and Comprehensive Loss for the dates and periods noted below.

• Transitional Consolidated Statement of Financial Position Reconciliation – June 1, 2010

• Interim Consolidated Statement of Financial Position Reconciliation - August 31, 2010.

• Interim Consolidated Statement of Operations and Comprehensive Loss Reconciliation – August 31, 2010.

• Consolidated Statement of Financial Position Reconciliation – May 31, 2011.

• Consolidated Statement of Operations and Comprehensive Loss Reconciliation – May 31, 2011.

As there have been no adjustments to net cash flows, no reconciliation of the Statement of Cash Flows has been prepared.

34

INTERNATIONAL TOWER HILL MINES LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Three Months Ended August 31, 2011 and 2010

(Expressed in Canadian dollars - Unaudited)

16.       TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (cont’d)

Reconciliation to previously reported financial statements (cont’d)

Transition Consolidated Statement of Financial Position Reconciliation – June 1, 2010

					Effect of
		Canadian			Transition to
		GAAP			IFRS		Ref		IFRS
ASSETS
Current assets
Cash and cash equivalents	$	43,460,324		$	-			$	43,460,324
Marketable securities		360,000			-				360,000
Accounts receivable		110,214			-				110,214
Prepaid expenses		274,246			-				274,246
Current assets related to discontinued operations		13,663			-				13,663
Total current assets		44,218,447			-				44,218,447
Property and equipment		80,040			-				80,040
Exploration and evaluations assets		41,849,485			(2,349,207	)	d)		39,500,278
Long-term assets related to discontinued operations		12,245,690			(572,982	)	d)		11,672,708
Total assets	$	98,393,662		$	(2,922,189	)		$	95,471,473
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current liabilities
Accounts payable and accrued liabilities	$	1,187,865		$	-			$	1,187,865
Current liabilities of discontinued operations		85,094			-				85,094
Total liabilities		1,272,959			-				1,272,959
Shareholders' equity (deficiency)
Share capital		124,277,370			-				124,277,370
Contributed surplus		14,240,223			-				14,240,223
Accumulated other comprehensive loss		-			-				-
Deficit		(41,396,890	)		(2,922,189	)	d)		(44,319,079	)
Total shareholders’ equity (deficiency)		97,120,703			(2,922,189	)			94,198,514
Total liabilities and shareholders’ equity (deficiency)	$	98,393,662		$	(2,922,189	)		$	95,471,473

35

INTERNATIONAL TOWER HILL MINES LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Three Months Ended August 31, 2011 and 2010

(Expressed in Canadian dollars - Unaudited)

16. TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (cont’d) Reconciliation to previously reported financial statements (cont’d) Interim Consolidated Statement of Financial Position Reconciliation – August 31, 2010

					Effect of
		Canadian			Transition to
		GAAP			IFRS		Ref		IFRS
ASSETS
Current assets
Cash and cash equivalents	$	35,485,177		$	-			$	35,485,177
Marketable securities		488,000			-				488,000
Accounts receivable		107,818			-				107,818
Due from related parties		38,018			-				38,018
Prepaid expenses		215,742			-				215,742
Current assets related to discontinued operations		-			-				-
Total current assets		36,334,755			-				36,334,755
Property and equipment		85,907			-				85,907
Exploration and evaluations assets		51,737,941			(3,842,076	)	d)		47,895,865
Long-term assets related to discontinued operations		-			-				-
Total assets	$	88,158,603		$	(3,842,076	)		$	84,316,527
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current liabilities
Accounts payable and accrued liabilities	$	4,196,595		$	-			$	4,196,595
Current liabilities of discontinued operations		-			-				-
Total liabilities		4,196,595			-				4,196,595
Shareholders' equity (deficiency)
Share capital		102,814,442			-				102,814,442
Contributed surplus		15,873,242			-				15,873,242
Accumulated other comprehensive loss		-			(1,556,753	)	d)		(1,556,753	)
Deficit		(34,725,676	)		(2,275,323	)	d)		(37,000,999	)
Total shareholders’ equity (deficiency)		83,962,008			(3,842,076	)			80,119,932
Total liabilities and shareholders’ equity (deficiency)	$	88,158,603		$	(3,842,076	)		$	84,316,527

36

INTERNATIONAL TOWER HILL MINES LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Three Months Ended August 31, 2011 and 2010

(Expressed in Canadian dollars - Unaudited)

16.	TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (cont’d) Reconciliation to previously reported financial statements (cont’d)
	Interim Consolidated Statement of Operations and Comprehensive Loss Reconciliation – August 31, 2010

					Effect of
					Transition to
		Canadian GAAP			IFRS		Ref		IFRS
Expenses
Administration	$	7,841		$	-			$	7,841
Charitable donations		21,934			-				21,934
Consulting fees		1,082,147			-				1,082,147
Depreciation		6,406			-				6,406
Insurance		46,210			-				46,210
Investor relations		509,321			-				509,321
Office and miscellaneous		37,748			-				37,748
Professional fees		165,815			-				165,815
Property investigations		807			-				807
Regulatory		16,809			-				16,809
Rent		24,108			-				24,108
Telephone		11,172			-				11,172
Travel		25,968			-				25,968
Wages and benefits		2,015,304			-				2,015,304
Loss before other items		(3,971,590	)		-				(3,971,590	)
Other items
Gain on foreign exchange		15,473			73,884		d)		89,357
Interest income		60,537			-				60,537
Income from mineral property earn-in		51,980			-				51,980
Spin-out cost		(452,574	)		-				(452,574	)
Unrealized gain on marketable securities		128,000			-				128,000
		(196,584	)		73,884				(122,700	)
Loss from continuing operations		(4,168,174	)		73,884				(4,094,290	)
Loss from discontinued operations		(934,157	)		-				(934,157	)
Net loss for the period		(5,102,331	)		73,884				(5,028,447	)
Other comprehensive loss
Exchange difference on translating foreign operations		-			(1,566,753	)	d)		(1,566,753	)
Total other comprehensive loss		-			(1,566,753	)			(1,566,753	)
Comprehensive loss for the period	$	(5,102,331	)	$	(1,492,869	)		$	(6,595,200	)
Basic and fully diluted loss per share from continuing operations	$	(0.06	)	$	-			$	(0.06	)
Basic and fully diluted loss per share from discontinued operations	$	(0.01	)	$	-			$	(0.01	)
Weighted average number of shares outstanding		66,986,979			-				66,986,979

37

INTERNATIONAL TOWER HILL MINES LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Three Months Ended August 31, 2011 and 2010

(Expressed in Canadian dollars - Unaudited)

16.       TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (cont’d)

Reconciliation to previously reported financial statements (cont’d)

Consolidated Statement of Financial Position Reconciliation – May 31, 2011

					Effect of
		Canadian			Transition to
		GAAP			IFRS		Ref		IFRS
ASSETS
Current assets
Cash and cash equivalents	$	111,165,126		$	-			$	111,165,126
Marketable securities		662,500			-				662,500
Accounts receivable		185,733			-				185,733
Prepaid expenses		378,492			-				378,492
Current assets related to discontinued operations		-			-				-
Total current assets		112,391,851			-				112,391,851
Property and equipment		143,571			-				143,571
Exploration and evaluations assets		80,169,668			(9,066,545	)	d)		71,103,123
Long-term assets related to discontinued operations		-			-				-
Total assets	$	192,705,090		$	(9,066,545	)		$	183,638,545
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current liabilities
Accounts payable and accrued liabilities	$	4,037,428		$	-			$	4,037,428
Current liabilities of discontinued operations		-			-				-
Total liabilities		4,037,428			-				4,037,428
Shareholders' equity (deficiency)
Share capital		215,544,180			-				215,544,180
Contributed surplus		12,967,996			321,000		a)		13,288,996
Accumulated other comprehensive loss		-			(6,767,665	)	d)		(6,767,665	)
Deficit		(39,844,514	)		(2,619,880	)	a) d)		(42,464,394	)
Total shareholders’ equity (deficiency)		188,667,662			(9,066,545	)			179,601,117
Total liabilities and shareholders’ equity (deficiency)	$	192,705,090		$	(9,066,545	)		$	183,638,545

38

INTERNATIONAL TOWER HILL MINES LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Three Months Ended August 31, 2011 and 2010

(Expressed in Canadian dollars - Unaudited)

16. TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (cont’d) Reconciliation to previously reported financial statements (cont’d) Consolidated Statement of Operations and Comprehensive Loss Reconciliation – May 31, 2011

					Effect of
					Transition to
		Canadian GAAP			IFRS		Ref		IFRS
Expenses
Administration	$	31,544		$	-			$	31,544
Charitable donations		64,637			-				64,637
Consulting fees		1,570,146			-				1,570,146
Depreciation		42,375			-				42,375
Insurance		215,228			-				215,228
Investor relations		1,148,359			90,849		a)		1,239,208
Office and miscellaneous		281,840			-				281,840
Professional fees		667,405			(11,786	)	a)		655,619
Property investigations		2,557			-				2,557
Regulatory		188,121			-				188,121
Rent		167,697			-				167,697
Telephone		49,688			-				49,688
Travel		210,192			-				210,192
Wages and benefits		5,263,652			241,937		a)		5,505,589
Loss before other items		(9,903,441	)		(321,000	)			(10,224,441	)
Other items
Gain on foreign exchange		41,225			50,327		d)		91,552
Interest income		675,146			-				675,146
Income from mineral property earn-in		311,312			-				311,312
Spin-out cost		(593,754	)		-				(593,754	)
Unrealized gain on marketable securities		182,500			-				182,500
		616,429			50,327				666,756
Loss from continuing operations		(9,287,012	)		(270,673	)			(9,557,685	)
Loss from discontinued operations		(934,157	)		-				(934,157	)
Net loss for the year		(10,221,169	)		(270,673	)			(10,491,842	)
Other comprehensive loss
Exchange difference on translating foreign operations		-			(6,767,665	)	d)		(6,767,665	)
Total other comprehensive loss		-			(6,767,665	)			(6,767,665	)
Comprehensive loss for the year	$	(10,221,169	)	$	(7,038,338	)		$	(17,259,507	)
Basic and fully diluted loss per share from continuing operations	$	(0.12	)	$	-			$	(0.12	)
Basic and fully diluted loss per share from discontinued operations	$	(0.01	)	$	-			$	(0.01	)
Weighted average number of shares outstanding		77,550,644			-				77,550,644

39