6-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 16d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of March, 2012

Commission File Number: 001-33638

INTERNATIONAL TOWER HILL MINES LTD.
(Translation of registrant's name into English)

2300 - 1177 West Hastings Street, Vancouver, BC, V6E 2K3
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

[] Form 20-F   [ x ] Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): []

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): []

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes [] No [ x ]

If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- _________

SUBMITTED HEREWITH

Exhibits

99.1	Consolidated Financial Statements for the Year Ended December 31, 2011
99.2	Management Discussion & Analysis for the Year Ended December 31, 2011

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	International Tower Hill Mines Ltd.
	(Registrant)
Date: March 19, 2012	By:	/s/ James Komadina
		James Komadina
	Title:	CEO

In connection with the Company's listing on the American Stock Exchange, LLC, the Company prepared its U.S. GAAP Balance Sheet as at August 3, 2007.

EX-99.1

CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

Seven Months Ended December 31, 2011
Year Ended May 31, 2011

Corporate Head Office

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

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS

The consolidated financial statements and all information in the annual report are the responsibility of the Board of Directors and management. The consolidated financial statements have been prepared by management in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. Management maintains the necessary systems of internal controls, policies and procedures to provide assurance that assets are safeguarded and that the financial records are reliable and form a proper basis for the preparation of consolidated financial statements.

The Board of Directors ensures that management fulfills its responsibilities for financial reporting and internal control through an Audit Committee. This committee, which reports to the Board of Directors, meets with the independent auditors and reviews the consolidated financial statements.

The consolidated financial statements have been audited by MacKay LLP, Chartered Accountants, who were appointed by the shareholders. The independent auditor’s report outlines the scope of their examination and their opinion on the consolidated financial statements.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of the Company’s financial reporting for external purposes in accordance with International Financial Reporting Standards (“IFRS”). Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions and dispositions of the assets of the Company; providing reasonable assurance that transactions are recorded as necessary for preparation of our consolidated financial statements in accordance with IFRS; providing reasonable assurance that receipts and expenditures are made in accordance with authorizations of management and the directors of the Company; and providing reasonable assurance that unauthorized acquisition, use or disposition of Company’s assets that could have a material effect on our consolidated financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our consolidated financial statements would be prevented or detected.

Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework and criteria established in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2011.

“James Komadina”	“Tom S. Q. Yip”
James Komadina,	Tom S. Q. Yip,
Chief Executive Officer	Chief Financial Officer
March 16, 2012
Vancouver, Canada

2

INTERNATIONAL TOWER HILL MINES LTD.

December 31, 2011 and May 31, 2011

INDEX	Page
Audited Consolidated Financial Statements
Independent Auditor’s Report	4
Independent Auditor’s Report on Internal Controls under Standards of the Public Company Accounting Oversight Board (United States)	5
Consolidated Statements of Financial Position	6
Consolidated Statements of Comprehensive Loss	7
Consolidated Statement of Changes in Shareholders’ Equity	8 – 9
Consolidated Statements of Cash Flows	10
Notes to the Consolidated Financial Statements	11 – 46

3

CHARTERED ACCOUNTANTS MacKay LLP	1100 – 1177 West Hastings Street
	Vancouver, BC V6E 4T5
	Tel: (604) 687-4511
	Fax: (604) 687-5805
	Toll Free: 1-800-351-0426
	www.mackay.ca

Independent Auditor's Report

To the Shareholders of
International Tower Hill Mines Ltd.

We have audited the accompanying consolidated financial statements of International Tower Hill Mines Ltd. and its subsidiaries, which comprise the consolidated statements of financial position as at December 31, 2011, May 31, 2011, and June 1, 2010, and the consolidated statements of comprehensive loss, changes in shareholders' equity, cash flows for the period ended December 31, 2011 and year ended May 31, 2011, and a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of International Tower Hill Mines Ltd. and its subsidiaries as at December 31, 2011, May 31, 2011, and June 1, 2010 and their financial performance and their cash flows for the period ended December 31, 2011 and the year ended May 31, 2011 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Emphasis of matter
Without modifying our opinion, we draw attention to Note 1 to the consolidated financial statements which describes the material uncertainty that may cast significant doubt about the ability of International Tower Hill Mines Ltd. to continue as a going concern.

Vancouver, Canada	“MacKay LLP”
March 16, 2012	Chartered Accountants

4

CHARTERED ACCOUNTANTS MacKay LLP	1100 – 1177 West Hastings Street
	Vancouver, BC V6E 4T5
	Tel: (604) 687-4511
	Fax: (604) 687-5805
	Toll Free: 1-800-351-0426
	www.mackay.ca

Independent Auditor’s Report on Internal Controls under Standards of the
Public Company Accounting Oversight Board (United States)

To the Board of Directors and Shareholders of
International Tower Hill Mines Ltd.

We have audited the internal control over financial reporting of International Tower Hill Mines Ltd. and subsidiaries (the “Company”) as of December 31, 2011, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, including in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on the COSO criteria.

We have also audited, in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the period ended December 31, 2011 of the Company and our report dated March 16, 2012 expressed an unqualified opinion on those financial statements.

Vancouver, Canada	“MacKay LLP”
March 16, 2012	Chartered Accountants

5

INTERNATIONAL TOWER HILL MINES LTD.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Expressed in Canadian Dollars)
			December 31,			May 31,			June 1,
	Note		2011			2011			2010
						(note 18)			(note 18)
ASSETS
Current
Cash and cash equivalents	4a	$	55,642,179		$	111,165,126		$	43,460,324
Marketable securities	5		302,500			662,500			360,000
Accounts receivable			468,806			185,733			110,214
Prepaid expenses			185,854			378,492			274,246
Current assets related to discontinued operations	2		-			-			13,663
Total current assets			56,599,339			112,391,851			44,218,447
Property and equipment	6		124,744			143,571			80,040
Exploration and evaluation assets	7		158,041,441			71,103,123			39,500,278
Long-term assets related to discontinued operations	2		-			-			11,672,708
Total assets		$	214,765,524		$	183,638,545		$	95,471,473
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities		$	10,495,049		$	4,037,428		$	1,187,865
Current liabilities related to discontinued operations	2		-			-			85,094
Total current liabilities			10,495,049			4,037,428			1,272,959
Non-current liabilities
Derivative liability	8		21,153,600			-			-
Total liabilities			31,648,649			4,037,428			1,272,959
Shareholders’ equity
Share capital	10		215,865,086			215,544,180			124,277,370
Contributed surplus			20,673,111			13,288,996			14,240,223
Accumulated other comprehensive loss			82,959			(6,767,665	)		-
Deficit			(53,504,281	)		(42,464,394	)		(44,319,079	)
Total shareholders’ equity			183,116,875			179,601,117			94,198,514
Total liabilities and shareholders’ equity		$	214,765,524		$	183,638,545		$	95,471,473
Nature and continuance of operations (note 1)
Commitments (note 15)
Subsequent event (note 17)

On behalf of the Board:

“James Komadina” (signed)	Director	“Anton Drescher”(signed)	Director
Mr. James J. Komadina		Mr. Anton J. Drescher

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

6

INTERNATIONAL TOWER HILL MINES LTD.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Expressed in Canadian Dollars)
	Note		December 31, 2011			May 31, 2011
						(note 18)
Expenses
Administration		$	4,389		$	31,544
Charitable donations			16,665			64,637
Consulting fees	10, 11		1,807,563			1,570,146
Depreciation			21,789			42,375
Insurance			129,354			215,228
Investor relations	10, 11		322,777			1,239,208
Office and miscellaneous			133,177			281,840
Professional fees	10, 11		649,763			655,619
Property investigations			-			2,557
Regulatory			133,829			188,121
Rent			144,660			167,697
Telephone			4,155			49,688
Travel			200,150			210,192
Wages and benefits	10, 11		9,981,236			5,505,589
Loss before other items			(13,549,507	)		(10,224,441	)
Other items
Gain (loss) on foreign exchange			72,624			91,552
Interest income			590,913			675,146
Income from mineral property earn-in			-			311,312
Spin-out cost	2		(148,657	)		(593,754	)
Unrealized gain on derivative liability	8		2,354,740			-
Unrealized gain (loss) on marketable securities	5		(360,000	)		182,500
			2,509,620			666,756
Loss from continuing operations			(11,039,887	)		(9,557,685	)
Loss from discontinued operations	2		-			(934,157	)
Net loss for the period			(11,039,887	)		(10,491,842	)
Other comprehensive income (loss)
Exchange difference on translating foreign operations			6,850,624			(6,767,665	)
Total other comprehensive income (loss) for the period			6,850,624			(6,767,665	)
Comprehensive loss for the period		$	(4,189,263	)	$	(17,259,507	)
Basic and fully diluted loss per share from continuing operations		$	(0.13	)	$	(0.12	)
Basic and fully diluted loss per share from discontinued operations		$	-		$	(0.01	)
Weighted average number of shares outstanding			86,683,919			77,550,644

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

7

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(Expressed in Canadian Dollars)

															Accumulated
	Number of					Number of									other
	shares			Share capital		shares			Share capital			Contributed			comprehensive
	(old)			(old)		(new)			(new)			surplus			loss			Deficit			Total
Balance, June 1, 2010 (note 18)	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	)		-			12,346,527			(12,252,801	)
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	-			-		17,505,805			109,434,227			-			-			-			109,434,227
Exercise of options	-			-		1,915,000			6,634,950			-			-			-			6,634,950
Share-based payments	-			-		-			-			511,868			-			-			511,868
Adjustment due to rounding	-			-		(107	)		-			-			-			-			-
Reallocation of contributed surplus	-			-		-			3,096,114			(3,096,114	)		-			-			-
Share issuance costs	-			-		-			(4,252,437	)		-			-			-			(4,252,437	)
Net loss	-			-		-			-			-			-			(10,491,842	)		(10,491,842	)
Exchange difference on translating foreign operations	-			-		-			-			-			(6,767,665	)		-			(6,767,665	)
Balance, May 31, 2011	-		$	-		86,648,919		$	215,544,180		$	13,288,996		$	(6,767,665	)	$	(42,464,394	)	$	179,601,117

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

8

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (cont’d)

(Expressed in Canadian Dollars)

								Accumulated
	Number of							other
	shares		Share capital		Contributed			comprehensive
	(new)		(new)		surplus			loss			Deficit			Total
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			-		7,475,071			-			-			7,475,071
Reallocation from contributed surplus	-		90,956		(90,956	)		-			-			-
Share issuance costs	-		-		-			-			-			-
Net loss	-		-		-			-			(11,039,887	)		(11,039,887	)
Exchange difference on translating foreign operations	-		-		-			6,850,624			-			6,850,624
Balance, December 31, 2011	86,683,919	$	215,865,086	$	20,673,111		$	82,959		$	(53,504,281	)	$	183,116,875

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

9

INTERNATIONAL TOWER HILL MINES LTD.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in Canadian Dollars)
	Note		December 31, 2011			May 31, 2011
Operating Activities
Loss for the period from continuing operations		$	(11,039,887	)	$	(9,557,685	)
Add items not affecting cash:
Depreciation			21,789			42,375
Share-based payments	10		7,475,071			3,575,815
Unrealized gain on derivative liability			(2,354,740	)		-
Unrealized (gain) loss on marketable securities			360,000			(182,500	)
Spin-out recovery			-			(120,000	)
(Gain) loss on foreign exchange			(72,624	)		(91,552	)
Changes in non-cash items:
Accounts receivable			(283,073	)		(75,519	)
Prepaid expenses			183,793			(108,943	)
Accounts payable and accrued liabilities			126,387			(152,916	)
Cash used in operating activities of continuing operations			(5,583,284	)		(6,670,925	)
Loss for the year from discontinued operations			-			(934,157	)
Add items not affecting cash:
Stock-based compensation			-			756,202
(Gain) loss on foreign exchange			-			(20,318	)
Cash used in operating activities of discontinued operations			-			(198,273	)
Financing Activities
Issuance of share capital			229,950			118,079,019
Share issuance costs			-			(4,261,094	)
Cash provided by financing activities of continuing operations			229,950			113,817,925
Additional funding to Corvus			-			(764,512	)
Cash transferred on Plan of Arrangement	2		-			(3,300,000	)
Cash used in financing activities of discontinued operations			-			(4,064,512	)
Investing Activities
Expenditures on exploration and evaluation assets			(50,407,378	)		(35,896,786	)
Expenditures on property and equipment			(2,962	)		(105,906	)
Cash used in investing activities of continuing operations			(50,410,340	)		(36,002,692	)
Expenditures on exploration and evaluation assets, net of costs recovered			-			616,684
Cash provided by (used in) investing activities of discontinued operations			-			616,684
Effect of foreign exchange on cash of continuing operations			240,727			186,277
Effect of foreign exchange on cash of discontinued operations			-			20,318
(Decrease) increase in cash and cash equivalents			(55,522,947	)		67,704,802
Cash and cash equivalents, beginning of period			111,165,126			43,460,324
Cash and cash equivalents, end of period		$	55,642,179		$	111,165,126

Supplemental cash flow information (note 16)

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

10

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

1.	GENERAL INFORMATION, 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’s head office address is 2300-1177 West Hastings Street, Vancouver, British Columbia, Canada. International Tower Hill Mines Ltd. consists of ITH 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), Livengood Placers, Inc. (“LPI”) (a Nevada corporation), and 813034 Alberta Ltd. (an Alberta corporation). 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 December 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 - $118,079,019) through the issuance of common shares and has working capital at December 31, 2011 of $46,104,290 (May 31, 2011 - $108,354,423; June 1, 2010 – $42,945,488) which is considered sufficient to fund its operations and exploration program for the ensuing year.
	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. 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.
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 tax, legal and regulatory expense, amounted to expenses of $148,657 (May 31, 2011 - $593,754).
	The Arrangement was approved by a favorable vote of ITH’s shareholders at a special meeting held on August 12, 2010.

11

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

2.	DISCONTINUED OPERATIONS AND TRANSFER OF EXPLORATION AND EVALUATION ASSETS (cont’d)
	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 prior years.
	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 seven months ended December 31, 2011 and the year ended May 31, 2011. Included therein is $nil (May 31, 2011 - $756,202) of share-based payment charges:

		December 31, 2011		May 31, 2011
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
	$	-	$	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

12

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

3.	SIGNIFICANT ACCOUNTING POLICIES
	Basis of presentation
	The Canadian Institute of Chartered Accountants Handbook was revised in 2010 to incorporate International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”),and require publicly accountable enterprises to apply such standards effective for years beginning on or after January 1, 2011. Accordingly the Company has commenced reporting on this basis in its consolidated financial statements.
	These consolidated financial statements have been prepared in accordance with IFRS 1, “First-Time Adoption of International Financial Reporting Standard”. The accounting policies followed in these consolidated financial statements are the same as those applied in the Company’s condensed consolidated interim financial statements for the three months ended August 31, 2011. The Company has consistently applied the same accounting policies throughout all periods presented, as if the policies had always been in effect.
	Note 18 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 the year ended May 31, 2011.
	The policies applied in these consolidated financial statements are presented in this note and are based on IFRS issued and outstanding as of March 16, 2012, the date the Board of Directors approved the consolidated financial statements for issue.
	The Company changed its fiscal year end from May 31 to December 31. This change will better align the Company’s financial reporting with its operational and budgeting cycle as well as align the financial reporting to those of other industry participants in the mineral resource exploration, development and production sectors. As a result of the Company changing its fiscal year end to December 31, these consolidated financial statements are for the seven month period from the previous year ended May 31, 2011 to December 31, 2011. Due to the change in year end, amounts presented in these consolidated financial statements may not be comparable and therefore these consolidated financial statements should be read in conjunction with the Company’s Canadian GAAP annual financial statements for the year ended May 31, 2011.
	Basis of consolidation
	These consolidated financial statements include the accounts of ITH and its wholly owned subsidiaries TH Alaska, TH US, LPI and 813034 Alberta Ltd. All intercompany transactions and balances have been eliminated.
	Basis of measurement
	These consolidated financial statements have been prepared on a historical cost basis except for financial instruments classified as FVTPL which are stated at their fair value. In addition, these consolidated financial statements have been prepared using the accrual basis of accounting, except for cash flow information.
	These consolidated financial statements are presented in Canadian dollars.
	Significant judgments, estimates and assumptions
	The preparation of financial statements in accordance with IFRS requires management to make judgments, 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. These judgments, estimates and assumptions are continuously evaluated and are based on management’s experience and knowledge of the relevant facts and circumstances. 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.

13

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (cont’d)

The areas which require significant judgment and estimates that management has made at the financial reporting date, that could result in a material change to the carrying amounts of assets and liabilities, in the event actual results differ from the assumptions made, relate to, but are not limited to the following:

Significant estimates

a)	the fair value determination and inputs used in the valuation of the derivative liability;
b)	the tax basis of assets and liabilities and related deferred income tax assets and liabilities;
c)	the fair value determination and inputs used in valuation of share-based payments;
d)	amounts of provisions, if any, for environmental rehabilitation and restoration; and
e)	the allocation of administrative expenses to discontinued operations.

Significant judgments

a)	the estimated useful lives of property and equipment;
b)	the determination of functional currencies; and
c)	the analysis of resource calculations, drill results, labwork, etc. which can impact the Company’s assessment of impairments, calculation of depreciation, and provisions, if any, for environmental rehabilitation and restoration.

Foreign currency transactions

The presentation currency of the Company is the Canadian dollar.

Foreign currency accounts are translated into Canadian dollars as follows:

The functional currency of each of the parent Company and each subsidiary is measured using the currency of the primary economic environment in which that entity operates. The functional currency of TH Alaska, TH US, and LPI 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 consolidated statements of comprehensive 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 consolidated statements of 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.

14

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

3.	SIGNIFICANT ACCOUNTING POLICIES (cont’d)
	Foreign currency transactions
	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 Comprehensive Loss and are reported as a separate component of shareholders’ equity titled “accumulated other comprehensive loss”. 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:

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. Financial assets classified 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.

Transaction 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.

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.

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.

15

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

3.	SIGNIFICANT ACCOUNTING POLICIES (cont’d)
	Financial instruments
	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.
		Derivative financial liabilities
		Derivative financial liabilities are classified as held for trading. Derivatives 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 include the Company’s future contingent payment valued using estimated future gold prices.
	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.

16

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

3.	SIGNIFICANT ACCOUNTING POLICIES (cont’d)
	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.
	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.

17

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

3.	SIGNIFICANT ACCOUNTING POLICIES (cont’d)
	Mineral Exploration and Evaluation Expenditures
	The Company’s mineral project is 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 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.
		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.

18

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Impairment of non-current assets (cont’d)

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.

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.

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 they relate 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.

19

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (cont’d)

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.

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 Comprehensive Loss over the vesting period. Performance vesting conditions 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. Equity-settled awards are not revalued subsequent to the initial grant date.

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 Comprehensive Loss over the remaining vesting period.

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 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. Equity instruments granted to non-employees that vest over time are revalued over the vesting period.

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.

20

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Share-based payments (cont’d)

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.

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, 2015, with earlier adoption permitted. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.

21

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

3.	SIGNIFICANT ACCOUNTING POLICIES (cont’d)
	Future accounting changes (cont’d)
	In May 2011 the International Accounting Standards Board (“IASB”) issued the following five new standards: IFRS 10, Consolidated Financial Statements; IFRS 11, Joint Arrangements; IFRS 12, Disclosure of Involvement in Other Entities; along with amendments to the current and renamed IAS 27, Separate Financial Statements & IAS 28, Investments in Associates and Joint Ventures. These standards are required to be applied for annual periods beginning on or after January 1, 2013, with earlier adoption permitted. The Company has not yet assessed the impact of the standards or determined whether it will adopt the standards early.
	In October 2011 the IASB issued IFRIC 20, Stripping Costs in the Production Phase of a Mine. This interpretation clarifies when production stripping should lead to the recognition of an asset and how that asset should be measured, both initially and in subsequent periods. This interpretation is effective for annual periods beginning on or after January 1, 2013 with early adoption permitted. The Company has not yet assessed the impact of the interpretation or determined whether it will adopt the interpretation early.
4.	RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
	Fair Value
	The carrying values of cash and cash equivalents, accounts receivable and accounts payable and accrued liabilities approximate their fair values due to the short-term maturity of these financial instruments.
	Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the significance of the inputs used in making the measurement. The three levels of the fair value hierarchy are as follows:
		Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities
		Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and,
		Level 3 – Inputs that are not based on observable market data.

		Financial assets and liabilities at fair value as at
		December 31, 2011
		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	55,642,179	$	-	$	-
Marketable securities (note 5)		302,500		-		-
	$	55,944,679	$	-	$	-
Financial liabilities:
Derivative liability (note 8)	$	-	$	21,153,600	$	-
	$	-	$	21,153,600	$	-

22

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

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

		Financial assets at fair value as at May 31, 2011
		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	111,165,126	$	-	$	-
Marketable securities (note 5)		662,500		-		-
	$	111,827,626	$	-	$	-

		Financial assets at fair value as at June 1, 2010
		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	43,460,324	$	-	$	-
Marketable securities (note 5)		360,000		-		-
	$	43,820,324	$	-	$	-

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 relating to financial assets is as follows:

		December 31,		May 31,		June 1,
		2011		2011		2010
Cash and cash equivalents	$	55,642,179	$	111,165,126	$	43,460,324
Accounts receivable	$	468,806	$	185,733	$	110,214

At December 31, 2011, the Company held a total of $45,068,000 (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
TD Mortgage Corporation (GIC)	$	42,068,000	April 16, 2012	1.36%
Advisor’s Advantage Trust		3,000,000	May 7, 2012	1.30%
	$	45,068,000

The Company’s cash and cash equivalents at December 31, 2011 consists of $47,008,802 in Canada and $8,633,377 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 December 31, 2011, the Company is not exposed to significant credit risk as the receivables are from governmental agencies and interest accruals.

23

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

4.	RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (cont’d)
	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 December 31, 2011, the Company had accounts payable and accrued liabilities of $10,495,049 (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 capital as they come due. The cash and cash equivalents balance of $55,642,179 will be sufficient to meet the mandatory 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 $225,000.
		(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 exploration and evaluation asset 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 $623,000. Furthermore, because of the Company’s significant amount of evaluation and exploration assets which are revalued at the end of each reporting period using the period end exchange rate, significant changes in the exchange rates could cause significant changes to the amounts recorded to accumulated other comprehensive income.

24

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

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

c) Market risk

(ii) Foreign currency risk (cont’d)

As at December 31, 2011, the Company had the following financial instruments in USD:

		CAD equivalent		USD
Cash	$	8,709,370	$	8,563,785
Accounts payable and accrued liabilities	$	10,184,489	$	10,014,246
Derivative liability	$	21,153,600	$	20,800,000

As at December 31, 2011, USD amounts were converted at a rate of USD 1 to CAD 1.017.

(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. The Company’s derivative liability is also exposed to other price risk. The fair value of this liability will fluctuate with the average daily price of gold as well as with future projections for the average price of gold over the life of the obligation. For every dollar change in the average daily price of gold, the value of the derivative liability will change by USD 23,148.

5. MARKETABLE SECURITIES

		December 31,		May 31,		June 1,
		2011		2011		2010
Millrock Resources Inc.	$	214,500	$	422,500	$	273,000
Ocean Park Ventures Corp.		88,000		240,000		87,000
	$	302,500	$	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 seven months ended December 31, 2011 amounted to an unrealized loss of $360,000 (May 31, 2011 - $182,500 gain).

25

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

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		-			2,962			-			-			2,962
Disposals		-			-			-			-			-
Balance at Dec 31, 2011	$	54,407		$	188,252		$	89,476		$	17,061		$	349,196
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 May 31, 2011		(9,013	)		(87,113	)		(89,476	)		(17,061	)		(202,663	)
Depreciation for the period		(5,206	)		(16,583	)		-			-			(21,789	)
Disposals		-			-			-			-			-
Balance at Dec 31, 2011	$	(14,219	)	$	(103,696	)	$	(89,476	)	$	(17,061	)	$	(224,452	)
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 Dec 31, 2011	$	40,188		$	84,556		$	-		$	-		$	124,744

26

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

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 consideration (see note 8)		48,777,927
Common shares issued		-
		48,777,927
Deferred exploration costs:
Advance to contractors		(411,865	)
Aircraft services		2,223,419
Assay		1,769,256
Drilling		9,982,001
Environmental		2,838,071
Equipment rental		1,125,811
Field costs		7,460,642
Geological/geophysical		5,670,982
Land maintenance & tenure		565,799
Legal		164,488
Surveying and mapping		405,680
Transportation		6,178
Travel		(209	)
		31,800,253
Total expenditures for the year		80,578,180
Cumulative translation adjustments		6,360,138
Balance, December 31, 2011	$	158,041,441

27

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

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 5) 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 5) 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). During December 2011 the Company exercised its option to acquire all the interests in the 169 State of Alaska claims previously held under this lease. Total cash consideration of USD 11,044,000 was paid by the Company for the acquisition of these claims. There are no further outstanding or ongoing obligations to the sellers on these state claims.

28

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

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 40,000 in December 2010 and 2011) 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.

Livengood land purchase

In December 2011, the Company completed a transaction to acquire certain mining claims and related rights in the vicinity of the Livengood Project. This acquisition included both mining claims and all of the shares of Livengood Placers, Inc. (an Alaska corporation). These assets were purchased for aggregate consideration of USD 36,600,000 allocated between cash consideration of USD 13,500,000 and a derivative liability of USD 23,100,000. Of the USD 13,500,000 cash consideration, USD 5,000,000 was paid at the date of acquisition and USD 8,500,000 is payable in March 2012 and is included in “accounts payable and accrued liabilities” on the consolidated statements of financial position. The derivative liability is a contingent payment based on the five-year average daily gold price (“Average Gold Price”)

29

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

7. EXPLORATION AND EVALUATION ASSETS (cont’d)

Properties acquired from AngloGold, Alaska (cont’d)

(i) Livengood Property (cont’d)

Livengood land purchases (cont’d):

from the date of the acquisition (see note 8). The derivative liability (payable in December 2016) will equal USD 23,148 for every dollar that the Average Gold Price exceeds USD 720 per troy ounce. If the Average Gold Price is less than USD 720, there will be no additional contingent payment. The subject ground was previously vacant or was used for placer gold mining.

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 material provisions for environmental rehabilitation as of December 31, 2011.

8.	DERIVATIVE LIABILITY
	As discussed in note 7 above, the Company acquired certain mining claims and related rights in the vicinity of the Livengood Project located near Fairbanks, Alaska. The aggregate consideration was USD 13,500,000 in cash plus an additional contingent payment based on the five-year average daily gold price (“Average Gold Price”) from the date of the acquisition. The contingent payment will equal USD 23,148 for every dollar that the Average Gold Price exceeds USD 720 per troy ounce. If the Average Gold Price is less than USD 720, there will be no additional contingent payment. This additional contingent payment is classified as a derivative liability and is recognized at FVTPL.
	At initial recognition on December 13, 2011 the derivative liability was valued at USD 23,100,000. The key assumption used in the valuation of the derivative is the estimate of the future Average Gold Price. The estimate of the future Average Gold Price was determined using a forward curve on future gold prices as published by the CME Group. The CME Group represents the merger of the Chicago Mercantile Exchange (CME), the Chicago Board of Trade (CBOT), the New York Mercantile Exchange (NYMEX) and its commodity exchange division, Commodity Exchange, Inc. (COMEX). Using this forward curve, the Company estimated an Average Gold Price five years from the date of acquisition of USD 1,720 per ounce of gold. Based on the inputs and assumptions used in valuing the derivative liability, it has been classified as a Level 2 financial instrument as defined in note 4 above.

30

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

8.	DERIVATIVE LIABILITY (cont’d)
	At December 31, 2011 the derivative was revalued using the same methodology as above. The Company estimated an Average Gold Price over the term of the agreement at December 31, 2011 of USD 1,619 per ounce of gold. This estimate of the Average Gold Price resulted in a fair value of the derivative liability of USD 20,800,000. As the derivative liability is classified as a FVTPL, the change in fair value from initial recognition to December 31, 2011 was recognized as a gain in the consolidated statements of comprehensive loss.
9.	INCOME TAXES
	A reconciliation of income taxes at statutory rates with the reported taxes is as follows for the period ended December 31, 2011 and the year ended May 31, 2011:

		December 31, 2011			May 31, 2011
Loss from continuing operations before income taxes	$	(11,039,887	)	$	(9,557,685	)
Statutory Canadian corporate tax rate		26.50%			27.67%
Income tax recovery at statutory rates	$	(2,925,570	)	$	(2,644,611	)
Share-based payments		1,980,894			1,216,646
Unrecognized items for tax purposes		(423,885	)		(282,595	)
Effect of tax rate change		17,655			43,858
Difference in tax rates in other jurisdictions		(348,000	)		(690,466	)
Unrecognized amounts		1,698,906			2,357,168
Income tax recovery	$	-		$	-

The significant components of the Company’s deferred income tax assets and liabilities are as follows:

		December 31, 2011			May 31, 2011
Deferred income tax assets (liabilities)
Mineral properties	$	656,948		$	656,966
Equipment		(4,544	)		(5,345	)
Marketable securities		22,188			(22,813	)
Derivative liability		(510,979	)		-
Charitable donations		92,481			85,249
Share issue costs		972,747			1,171,193
Non-capital losses available for future periods		12,321,366			9,966,068
		13,550,207			11,851,318
Unrecognized deferred tax assets		(13,550,207	)		(11,851,318	)
Deferred income tax asset	$	-		$	-

31

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

9. INCOME TAXES (cont’d)

At December 31, 2011, the Company has available non-capital tax losses for Canadian income tax purposes of approximately $13,373,000 and net operating losses for US income tax purposes of approximately $20,687,000 available for carry-forward to reduce future years’ taxable income, if not utilized, expiring as follows:

		Canada		United States
2025	$	82,000	$	-
2026		92,000		-
2027		1,031,000		1,423,000
2028		1,301,000		1,402,000
2029		2,378,000		2,982,000
2030		3,014,000		6,063,000
2031		5,475,000		8,817,000
	$	13,373,000	$	20,687,000

In addition, the Company has available mineral resource related expenditure pools for Canadian income tax purposes totalling approximately $2,628,000 which may be deducted against future taxable income in Canada on a discretionary basis. The Company also has available mineral resource expenses that are related to the Company’s exploration activities in the United States of approximately $132,224,000 which may be deductible for US tax purposes. Future tax benefits, which may arise as a result of applying these deductions to taxable income, have not been recognized in these accounts due to the uncertainty of future taxable income. As disclosed in Note 7, the Company has accounted for the acquisition of Livengood Placers Inc. as an asset acquisition. Accordingly, $26,154,304 in mineral property expenditures and $26,229,756 in equity investments has not been recognized for deferred income tax purposes.

10.	SHARE CAPITAL
	Authorized
	500,000,000 common shares without par value.
	Share issuances
	During the seven months ended December 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.

32

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

10.	SHARE CAPITAL (cont’d)
	Share issuances (cont’d)
	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.
	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:

	December 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 December 31, 2011 and May 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.

On November 15, 2011, the Company granted incentive stock options to an employee to purchase 100,000 common shares in the capital of the Company. The options are exercisable on or before November 15, 2016 at a price of $5.64 per share. The options will vest as to one-third on November 15, 2011, one-third on November 15, 2012 and the balance on November 15, 2013.

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.

33

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

10.	SHARE CAPITAL (cont’d)
	Stock options (cont’d)
	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.
	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 December 31, 2011, and May 31, 2011 and changes is presented below:

	Seven Months Ended					Year Ended
	December 31, 2011					May 31, 2011
				Weighted					Weighted
				Average Exercise
	Number of					Number of			Average
				Price
	Options					Options			Exercise Price
Balance, beginning of the period	4,600,000		$	7.24		5,822,200		$	5.08
Granted	2,700,000		$	7.87		1,760,000		$	6.96
Exercised	(35,000	)	$	(6.57	)	(2,977,200	)	$	(2.86	)
Cancelled/Expired	(50,000	)	$	(6.96	)	(5,000	)	$	(1.75	)
Balance, end of the period	7,215,000		$	7.48		4,600,000		$	7.24

The weighted average share price at the date of exercise for options exercised during the period was $7.88. The weighted average remaining life of options outstanding at December 31, 2011 was 1.57 years.

Stock options outstanding are as follows:
		December 31, 2011				May 31, 2011
		Exercise	Number of				Number of
Expiry Date		Price	Options	Exercisable		Exercise Price	Options	Exercisable
January 12, 2012	$	7.95	250,000	250,000	$	7.95	250,000	250,000
April 14, 2012	$	7.34	2,635,000	2,635,000	$	7.34	2,660,000	2,660,000
August 19, 2012	$	6.57	1,365,000	1,365,000	$	6.57	1,425,000	1,425,000
January 10, 2013	$	9.15	265,000	198,750	$	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	$	-	-	-
November 15, 2016	$	5.64	100,000	33,333	$	-	-	-
			7,215,000	5,982,083			4,600,000	4,401,250

34

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

10.	SHARE CAPITAL (cont’d)
	Share-based payments
	During the period ended December 31, 2011, the Company granted 2,700,000 stock options with a fair value of $10,894,938, calculated using the Black-Scholes option pricing model. Share-based payment charges for the seven months ended December 31, 2011 totaled $7,475,071 for continuing operations and $nil 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 $3,575,815 for continuing operations and $756,202 for discontinued operations.
	The following weighted average assumptions were used for the Black-Scholes option pricing model calculations:

		December 31,		May 31,
		2011		2011
Expected life of options		4 years		2 years
Risk-free interest rate		1.77%		1.42%
Expected volatility		71.80%		68.91%
Dividend rate		0.00%		0.00%
Exercise price	$	7.87	$	6.96

The expected volatility used in the Black-Scholes option pricing model is based on the historical volatility of the Company’s shares.

Share-based payment charges of $7,475,071 (May 31, 2011 - $3,575,815) were allocated as follows for continuing operations:

		Before
		allocation of				After allocation
		share-based		Share-based		of share-based
		payment		payment		payment
Seven months ended December 31, 2011		charges		charges		charges
Consulting	$	345,886	$	1,461,677	$	1,807,563
Investor relations		253,048		69,729		322,777
Professional fees		631,169		18,594		649,763
Wages and benefits		4,056,165		5,925,071		9,981,236
			$	7,475,071

35

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

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

		Before				After
		allocation of				allocation of
		share-based				share-based
		payment		Share-based payment		payment
Year ended May 31, 2011		charges		charges		charges
Consulting	$	559,252	$	1,010,894	$	1,570,146
Investor relations		781,692		457,516		1,239,208
Professional fees		580,049		75,570		655,619
Wages and benefits		3,473,754		2,031,835		5,505,589
			$	3,575,815

11.	RELATED PARTY TRANSACTIONS AND BALANCES
	During the seven month period ended December 31, 2011 and the year ended May 31, 2011, the Company entered into the following transactions with related parties:
	Management compensation
	Key management personnel compensation comprised:

		December 31, 2011		May 31, 2011
Fees, wages and benefits	$	2,047,224	$	2,029,370
Share-based payments		6,748,799		2,333,401
	$	8,796,023	$	4,362,771

Transactions with other related parties

Paid or accrued $22,399 (May 31, 2011 - $56,795) in rent and administration to a company with common officers and directors.

Paid or accrued $6,000 (May 31, 2011 - $nil) in rent to an officer.

At December 31, 2011, included in accounts payable and accrued liabilities was $10,946 (May 31, 2011 - $nil; June 1, 2010 – $19,760) in expenses owing to officers of the Company and $53,988 (May 31, 2011 - $10,091; June 1, 2010 – $8,790) 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.

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.

36

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

11.	RELATED PARTY TRANSACTIONS AND BALANCES (cont’d)
	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.
12.	SEGMENTED INFORMATION
	The Company has chosen to organise its segments based on geographic location. The following tables present selected financial information by segment:

		Canada		United States		Total
December 31, 2011
Exploration and evaluation assets – continuing operations	$	-	$	158,041,441	$	158,041,441
Property and equipment		16,514		108,230		124,744
Current assets		47,907,054		8,692,285		56,599,339
Total assets	$	47,923,568	$	166,841,956	$	214,765,524
Current liabilities	$	310,484	$	10,184,565	$	10,495,049
Non-current liabilities		-		21,153,600		21,153,600
Total liabilities	$	310,484	$	31,338,165	$	31,648,649
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
Current liabilities	$	181,890	$	3,855,538	$	4,037,428
Non-current liabilities		-		-		-
Total liabilities	$	181,890	$	3,855,538	$	4,037,428

37

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

12. SEGMENTED INFORMATION (cont’d)

June 1, 2010
Exploration and evaluation assets – continuing operations	$	1	$	39,500,277	$	39,500,278
Exploration and evaluation assets – discontinued
operations		-		11,672,708		11,672,708
Property and equipment		11,918		68,122		80,040
Current assets		43,227,795		990,652		44,218,447
Total assets	$	43,239,714	$	55,153,948	$	95,471,473
Current liabilities	$	386,246	$	801,619	$	1,187,865
Current liabilities – discontinued operations		-		85,094		85,094
Non-current liabilities		-		-		-
Total liabilities	$	386,246	$	886,713	$	1,272,959

		December 31, 2011			May 31, 2011
Net loss from continuing operations for the period – Canada	$	(8,490,228	)	$	(5,218,523	)
Net loss from continuing operations for the period - United States		(2,549,659	)		(4,339,162	)
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	$	(11,039,887	)	$	(10,491,842	)

13.	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 December 31, 2011. The Company is not subject to externally imposed capital requirements.

38

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

14. SUBSIDIARIES

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%

15.	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 in July 2013. Total rental to that date is $220,502 (USD 216,817). Future minimum lease payments for the next five fiscal years and beyond are as follows:

2012	$	278,659
2013		219,139
2014		107,000
2015		6,196
2016		6,196
2017 and thereafter		12,392
	$	629,582

16. SUPPLEMENTAL CASH FLOW INFORMATION

		December 31, 2011		May 31, 2011
Interest paid	$	-	$	-
Income taxes paid	$	-	$	-
Non-cash investing and financing transactions – continuing operations:
Accounts payable and accrued liabilities included in exploration and evaluation assets	$	10,012,833	$	3,676,106
Derivative liability included in exploration and evaluation assets	$	23,508,340	$	-
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	$	-	$	-

39

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

17.	SUBSEQUENT EVENTS
	Subsequent to December 31, 2011, the Company
	a)	On January 3, 2012, the Company granted incentive stock options to an officer of the Company to purchase 650,000 common shares in the capital stock of the Company. The options are exercisable on or before January 3, 2017 at a price of $4.43 per share and will vest as to 216,666 shares on January 3, 2012, as to 216,666 shares on January 3, 2013 and as to the balance on January 3, 2014.
	b)	On January 9, 2012 the Company granted incentive stock options to an employee of the Company to purchase 30,000 common shares in the capital of the Company. The options are exercisable on or before January 9, 2017 at a price of $4.60 and will vest as to 10,000 shares on January 9, 2012, as to 10,000 shares on January 9, 2013 and the balance on January 9, 2014.
18.	TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS
	As stated in note 3, these are the Company’s first 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 consolidated financial statements as at and for the seven month period ended December 31, 2011, the comparative information presented in these financial statements 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 seven month period ending December 31, 2011 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.

40

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

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

First time adoption of IFRS (cont’d)

Impact on Consolidated Financial Statements

		May 31,			June 1,
		2011			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, of which there were none.
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, LPI, 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 Dollars (“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 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;

41

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

 

18. TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (cont’d) First time adoption of IFRS (cont’d)

d) Cumulative translation differences (cont’d)

Group companies (cont’d)

• Income and expenses for each Statement of 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 currency 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.

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,			June 1,
		2011			2010
Exploration and evaluation assets	$	(9,066,545	)	$	(2,349,207	)
Long-term assets related to discontinued operations	$	-		$	(572,982	)
Accumulated to other comprehensive income	$	(6,767,665	)	$	-
Adjustment to deficit	$	(2,298,880	)	$	(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.

42

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

18.	TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (cont’d)
	First time adoption of IFRS (cont’d)
	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.
	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 Comprehensive Loss for the dates and periods noted below.

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

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

• Consolidated Statement of 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.

43

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

18. 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
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
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		97,120,703			(2,922,189	)			94,198,514
Total liabilities and shareholders’ equity	$	98,393,662		$	(2,922,189	)		$	95,471,473

44

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

18. 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
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
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		188,667,662			(9,066,545	)			179,601,117
Total liabilities and shareholders’ equity	$	192,705,090		$	(9,066,545	)		$	183,638,545

45

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Seven Months Ended December 31, 2011 and

Year Ended May 31, 2011

(Expressed in Canadian dollars)

18. TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (cont’d) Reconciliation to previously reported financial statements (cont’d) Consolidated Statement of 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

46

EX-99.2

INTERNATIONAL TOWER HILL MINES LTD.

(An Exploration Stage Company)

FORM 51-102F1

MANAGEMENT DISCUSSION & ANALYSIS

March 16, 2012

Introduction

During 2011, International Tower Hill Mines Ltd. (the “Company” or “ITH”) changed its fiscal year end to December 31. This Management Discussion & Analysis (“MD&A”) covers the seven month fiscal year ended December 31, 2011 has been prepared by management, in accordance with the requirements of National Instrument 51-102, as of March 16, 2012 and should be read in conjunction with the Company’s audited consolidated financial statements for the seven month period ended December 31, 2011 and for the year ended May 31, 2011. The Company’s audited consolidated financial statements for the seven month period ending December 31, 2011 are the first annual financial statements that will be prepared in accordance with International Financial Reporting Standards (“IFRS”). The Company has adopted IFRS on June 1, 2011 with a transition date of June 1, 2010. Except where otherwise noted, all dollar amounts are stated in Canadian dollars.

Caution Regarding Forward Looking Statements

This MD&A contains forward-looking statements and forward-looking information (collectively, “forward-looking statements”) within the meaning of applicable Canadian and US securities legislation. These statements relate to future events or the future activities or performance of the Company. All statements, other than statements of historical fact are forward-looking statements. Information concerning mineral resource estimates also may be deemed to be forward-looking statements in that it reflects a prediction of the mineralization that would be encountered if a mineral deposit were developed and mined. Forward-looking statements are typically identified by words such as: believe, expect, anticipate, intend, estimate, postulate, plans and similar expressions, or which by their nature refer to future events. These forward looking statements include, but are not limited to, statements concerning:

• the Company’s strategies and objectives, both generally and specifically in respect of the Livengood project;

• the potential for the expansion of the estimated resources at Livengood;

• the potential for a production decision concerning, and any production at, the Livengood project;

• the completion of a Pre-feasibility Study for the Livengood project;

• the potential for higher grade mineralization to form the basis for a starter surface mine shell in any production scenario at Livengood;

• the potential overburden geometry of the Livengood deposit being amenable for a low cost surface mine that could support a high production rate and economies of scale;

• the potential for cost savings due to the high gravity gold concentration component of some of the Livengood mineralization;

• the sequence of decisions regarding the timing and costs of development programs with respect to, and the issuance of the necessary permits and authorizations required for the Livengood project;

• the Company’s estimates of the quality and quantity of the resources at Livengood;

• the timing and cost of the planned future exploration programs at Livengood, and the timing of the receipt of results therefrom;

• the Company’s future cash requirements;

• general business and economic conditions;

• the Company’s ability to meet its financial obligations as they come due, and to be able to raise the necessary funds to continue operations on acceptable terms, if at all;

• the use of the proceeds from the financing which closed November 10, 2010;

• the ability of the Company to continue to refine the project economics for the Livengood project, including by increasing proposed production and shortening the proposed mine life; and

• the potential for the production of placer gold, whether near-term or at all, on certain placer mining claims acquired in December 2011.

Although the Company believes that such statements are reasonable, it can give no assurance that such expectations will prove to be correct. Inherent in forward looking statements are risks and uncertainties beyond the Company’s ability to predict or control, including, but not limited to, risks related to the Company’s inability to identify one or more economic deposits on its property, variations in the nature, quality and quantity of any mineral deposits that may be located, variations in the market price of any mineral products the Company may produce or plan to produce, the Company’s inability to obtain any necessary permits, consents or authorizations required for its activities, to produce minerals from its property successfully or profitably, to continue its projected growth, to raise the necessary capital or to be fully able to implement its business strategies, and other risks identified herein under “Risk Factors”.

The Company cautions investors that any forward-looking statements by the Company are not guarantees of future performance, and that actual results are likely to differ, and may differ materially, from those expressed or implied by forward looking statements contained in this MD&A. Such statements are based on a number of assumptions which may prove incorrect, including, but not limited to, assumptions about:

• the demand for, and level and volatility of the price of, gold;

• general business and economic conditions;

• the timing of the receipt of regulatory and governmental approvals, permits and authorizations necessary to implement and carry on the Company’s planned exploration and potential development program at Livengood;

2

• conditions in the financial markets generally;

• the Company’s ability to secure the necessary consulting, drilling and related services and supplies on favourable terms in connection with not only its ongoing exploration program at Livengood but also in connection with the completion of its pre-feasibility study and in connection with any feasibility study that may be commissioned;

• the Company’s ability to attract and retain key staff, particularly in connection with the carrying out of a feasibility study and the development of any mine at Livengood;

• the accuracy of the Company’s resource estimates (including with respect to size and grade) and the geological, operational and price assumptions on which these are based;

• the timing of the ability to commence and complete the planned work at Livengood;

• the anticipated terms of the consents, permits and authorizations necessary to carry out the planned exploration and development programs at Livengood and the Company’s ability to comply with such terms on a safe and cost-effective basis;

• the ongoing relations of the Company with its underlying lessors and the applicable regulatory agencies;

• that the metallurgy and recovery characteristics of samples from certain of the Company’s mineral properties are reflective of the deposit as a whole;

• the continued development of and potential construction of any mine at the Livengood property not requiring consents, approvals, authorizations or permits that are materially different from those identified to date by the Company;

• the ability of the Company to predict how the net proceeds of the financing which closed on November 10, 2010 will be used; and

• the timetables for the completion of a pre-feasibility study at Livengood and for any feasibility study that may be commissioned.

These forward looking statements are made as of the date hereof and the Company does not intend and does not assume any obligation, to update these forward looking statements, except as required by applicable law. For the reasons set forth above, investors should not attribute undue certainty to or place undue reliance on forward-looking statements.

Historical results of operations and trends that may be inferred from the following discussion and analysis may not necessarily indicate future results from operations. In particular, the current state of the global securities markets may cause significant reductions in the price of the Company’s securities and render it difficult or impossible for the Company to raise the funds necessary to continue operations. See “Risk Factors – Insufficient Financial Resources/Share Price Volatility”.

3

Caution Regarding Adjacent or Similar Mineral Properties

This MD&A contains information with respect to adjacent or similar mineral properties in respect of which the Company has no interest or rights to explore or mine. The Company advises US investors that the mining guidelines of the US Securities and Exchange Commission (the “SEC”) set forth in the SEC’s Industry Guide 7 (“SEC Industry Guide 7”) strictly prohibit information of this type in documents filed with the SEC. As a foreign private issuer preparing this MD&A pursuant to Canadian disclosure requirements under the Canada-U.S. Multi-Jurisdictional Disclosure System, this MD&A is not subject to the requirements of SEC Industry Guide 7. Readers are cautioned that the Company has no interest in or right to acquire any interest in any such properties, and that mineral deposits on adjacent or similar properties, and any production therefore or economics with respect thereto, are not indicative of mineral deposits on the Company’s properties or the potential production from, or cost or economics of, any future mining of any of the Company’s mineral properties.

Cautionary Note to US Investors Concerning Reserve and Resource Estimates

The terms “mineral reserve”, “proven mineral reserve” and “probable mineral reserve” are Canadian mining terms as defined in accordance with Canadian National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) and the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) - CIM Definition Standards on Mineral Resources and Mineral Reserves, adopted by the CIM Council, as amended (“CIM Standards”). These definitions differ from the definitions in SEC Industry Guide 7 under the United States Securities Act of 1933, as amended (the “Securities Act”). Under SEC Industry Guide 7 standards, a “final” or “bankable” feasibility study is required to report reserves, the three-year historical average price is used in any reserve or cash flow analysis to designate reserves and the primary environmental analysis or report must be filed with the appropriate governmental authority.

In addition, the terms “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource” are defined in and required to be disclosed by NI 43-101 and the CIM Standards; however, these terms are not defined terms under SEC Industry Guide 7 and are normally not permitted to be used in reports and registration statements filed with the SEC. Investors are cautioned not to assume that all or part of a mineral deposit in these categories will ever be converted into reserves. “Inferred mineral resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies, except in rare cases. Investors are cautioned not to assume that all or any part of an inferred mineral resource exists or is economically or legally mineable. Disclosure of “contained ounces” in a resource is permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute “reserves” by SEC Industry Guide 7 standards as in place tonnage and grade without reference to unit measures.

Accordingly, information contained in this MD&A and the documents incorporated by reference herein contain descriptions of the Company’s mineral deposits that may not be comparable to similar information made public by U.S. companies subject to the reporting and disclosure requirements under the United States federal securities laws and the rules and regulations thereunder.

All of the Company's public disclosure filings, including its most recent Annual Information Form, management information circular, material change reports, press releases and other information, may be accessed via www.sedar.com and readers are urged to review these materials, including the technical reports filed with respect to the Company’s Livengood project.

4

Current Business Activities

General

During the seven month period ended December 31, 2011, and to the date of this MD&A, the Company advanced its Livengood Gold Project in Alaska with the continuation of activities in support of the Pre-feasibility Study (“PFS”). This included completion of drill programs, analyzing results thereof, the advancement of engineering and environmental studies, and the build-up of its team in Fairbanks, Alaska and Englewood, Colorado.

Highlights of activities during and subsequent to the period include:

• The PFS work proceeded as planned with substantial progress, including that the majority of engineering studies have been timely completed. A detailed metallurgical review of the flow- sheet utilized in the Company’s Preliminary Economic Assessment (“PEA”) of the Livengood Project as contained in the August 25, 2011 NI43-101 technical report entitled “August 2011 Summary Report on the Livengood Project, Tolovana District, Alaska” (“August 2011 Report”) indicated further optimization is possible. The PFS will be completed in the third quarter of 2012 to include results of these optimization studies.

• The 2011 summer drill program at the Livengood Project was completed. Based on the latest results, new internal resource estimates calculated for three areas of the deposit have been verified within 1% to contain the same tonnage, grade and contained ounces of gold as those calculated from the nominal 50-metre-spaced grid drilling used to calculate the May 2011 resource.

• Ongoing environmental baseline data gathering for Livengood permitting activities continued with samples developed for large scale field testing of material geochemical characteristics.

• Request for Proposals (“RFP”) were issued to third party firms to perform various engineering, geotechnical design, and metallurgical test work for the Livengood Project Feasibility Study (“FS”) planned to be completed within the next fifteen months.

• The Company’s 2011 annual general meeting of shareholders was held in November with three new members being elected to the board of directors.

• In December 2011, the Company completed two acquisitions in connection with the Livengood Project. The first acquisition consisted of the exercise of an existing lease buyout option with respect to certain mining claims leased by the Company, thereby giving the Company a 100% ownership interest. The second acquisition was of certain placer mining claims and related rights in the vicinity of the Livengood Project, and included all the shares of LPI (which corporation holds some of the subject placer mining claims). This land was previously vacant or was used for placer gold mining. The acquisitions complete a planned lease buyout and also enable the Company to pursue additional site facility locations and to investigate other land use opportunities including the potential for placer gold extraction.

• In January 2012, two major contracts were awarded: process engineering services and geotechnical infrastructure engineering services for the FS. Feasibility level work commenced in February 2012.

5

Corporate Personnel

Mr. Robert D. Comer was appointed as the Company’s new Chief Administrative Officer and General Counsel, effective January 1, 2012. Mr. Comer has nearly 25 years of experience practicing natural resource and mineral law in the United States and will be responsible for all legal affairs and corporate administration matters at the Company. He will play an influential role in the Company’s permitting activities at the Livengood Project.

Mr. Comer served at the Department of the Interior from 2002 to 2010 in the executive positions of Associate Solicitor for Minerals, Land and Water, Regional Solicitor and Counselor to the Solicitor. During 2007, Mr. Comer also served as General Counsel and Principal Deputy to the Office of the Federal Coordinator for Alaska Natural Gas Transportation Projects where he helped to establish a new federal office involved with permitting an international natural gas pipeline from Alaska to the Alberta hub. Additional responsibilities included development and implementation of original office programmatic policy, procedures, hiring and procurement. From 1994 to 2000, Mr. Comer served as Mining Attorney and Associate General Counsel with Asarco Incorporated, a Fortune 500 mining, mineral processing and specialty chemical company. In that capacity, he performed legal services for their mining and smelting operations. Mr. Comer has also held positions with significant national law firms providing strategic legal services to mineral and natural resource companies and also is known for his expertise in environmental law. He holds a B.A., cum laude from the University of Colorado in Environmental Biology and Conservation, a Masters of Forest Science from Yale University and Juris Doctorate from the University of Colorado’s School of Law.

The Company appointed Mr. Allen R. Thabit as the Company's new Manager of Engineering, effective November 15, 2011. Mr. Thabit has over 33 years of experience in project engineering, construction, maintenance and management of mining and milling equipment with companies such as Cyprus Mines Corporation and Newmont Gold Company.

Mr. Thabit is the president of Jade Diamond Consulting Inc., which has provided consulting services to mining and petrochemical industries on management training and project management, troubleshooting, maintenance and construction since 2001. Prior to that, he was the President of Garfield Steel and Machine, Inc. which also consulted to the mining and petrochemical industries. Among the projects that he has consulted on are Kennecott's Utah Copper-MAP project, IAMGOLD's Rosebel gold mine in Suriname, Anglo Nevada Metals Corporation's Taylor silver project, Alacer Gold Corp's Copler project in Turkey, Goldfields Peru's Cerro Corona project and AngloGold Ashanti's Cripple Creek & Victor mine.

From 1987 to 1995, Mr. Thabit was a Project Manager/Senior Project Engineer and Mill Maintenance Superintendent for Newmont Gold Company where he was responsible for engineering design and construction of treatment plants and mine de-watering projects with a total budget in excess of $300 million. From 1983 to 1987, he was the Maintenance Manager of the Atlas Plant for Atlas Powder Company responsible for the total maintenance function in a large industrial complex manufacturing chemicals and explosives with a $3 million annual maintenance budget. From 1973 to 1983, he served as Maintenance, Construction and Project Engineer for numerous mining and petrochemical companies, including Cyprus Mines Corporation, where he was responsible for design and specification review for a $400 million surface mine and mill project. Mr. Thabit has a Bachelor of Science degree in Mechanical Engineering from the Polytechnic Institute of Brooklyn, New York.

At its 2011 annual general meeting of shareholders on November 17, 2011, ITH shareholders elected eight directors, including the following three new directors; Donald C. Ewigleben, Mark R. Hamilton, and Roger R. Taplin.

6

Mr. Ewigleben is a lawyer with 35 years of experience in the mining industry overseeing legal, regulatory environmental and government affairs. He is currently the President and Chief Executive Officer of Uranium Resources, Inc., a uranium producer with ISR mining projects in the state of Texas. Previously, he was President and Chief Executive Officer of AngloGold Ashanti North America and served as the Executive Officer – Sustainability & Legal Affairs for AngloGold Ashanti in the Americas. Mr. Ewigleben served as the Executive Officer – Law, Safety, Health & Environment for AngloGold Ashanti Ltd. in Johannesburg, South Africa in 2006 and 2007. Prior to becoming the CEO of AngloGold in 2004, Mr. Ewigleben served as President and CAO and as Vice President and General Counsel. Before joining AngloGold in 2000, he was the Vice President, Environmental and Public Affairs, for Echo Bay Mines. Prior to AngloGold and Echo Bay, Mr. Ewigleben served in various capacities for AMAX Gold and AMAX Coal Industries. He began his career as a governmental affairs representative for AMAX in Washington, DC and multiple state legislatures. He has been responsible for the development of several award-winning environmental programs and has directed the permitting for many successful operations in the United States, Canada, Mexico, Russia, New Zealand and the Philippines.

Mr. Ewigleben has served on the Board of Directors for the National Mining Association, the Gold Institute, the Mining Association of Canada, numerous state and provincial coal and hard-rock mining associations and as a trustee of the Northwest Mining Association, the Eastern Mineral Law Foundation and the Rocky Mountain Mineral Law Foundation. A graduate of the Indiana University School of Law, he also holds Bachelor of Science degrees in American history, political science and music from Ball State University. Mr. Ewigleben is a member of the American Bar Association and is admitted to the practice of law in Colorado and Indiana.

Mr. Hamilton retired as a U.S. Army Major General following 31 years of active military duty, primarily in the fields of teaching, management and administration. Most recently, he was the past president of the University of Alaska System from 1998 to 2011. Prior to 1998, Mr. Hamilton served as Chief of Staff of the Alaskan Command at Elmendorf Air Force Base and Commander of Division Artillery at Fort Richardson. He is a graduate of the U.S. Military Academy at West Point and is the recipient of the Army’s highest peacetime award, the Distinguished Service Medal. He received his Masters degree in English Literature from Florida State University. In addition, he graduated from the Armed Forces Staff College in Virginia, and the U.S. Army War College in Pennsylvania. Mr. Hamilton currently serves as a director of the Aerospace Corporation Board, the BP Advisory Board and the Alaska Sealife Center Board. He previously served as a Director of Alaska Air Group Inc. from 2001 to February 9, 2011.

Mr. Taplin is a partner in McCarthy Tétrault’s Business Law Group and is the co-leader of the Global Mining Group. His practice is primarily focused on the areas of mergers and acquisition and securities, particularly in the mining sector.

Mr. Taplin advises on significant mining M&A transactions, including friendly and hostile takeover bids. Prior to joining McCarthy Tétrault in May 2003, he was a partner at Deneys Reitz Attorneys in Johannesburg, South Africa. During 1998, he was seconded to Slaughter and May solicitors in London, UK, as a visiting lawyer. He received a BA in Political Science (cum laude) and Law in 1992 and his LLB in 1994 from the University of Witwatersrand. Mr. Taplin was called to the British Columbia bar in 2003 and was admitted as an attorney of the High Court of South Africa in 1997.

Effective January 10, 2012, the Company added Jonathan A. Berg to its Board of Directors. The appointment of Mr. Berg increases the number of directors on the ITH board from eight to nine.

7

Mr. Berg has over 36 years of experience in finance and investments. Currently, he is a member of the board of directors, chairman of the compensation committee and member of the audit committee at Scorpio Mining Corporation. Previously, Mr. Berg was a member of the board of directors and non-executive chairman at Colombia Goldfields from March 2007 to October 2009 when Colombia merged into Medoro Resources. From 2005 to 2010, he was the vice-president, finance, of PeriCor Therapeutics Inc. where he was responsible for various medical support and business activities of the company. Formerly, Mr. Berg was president, chief information officer and founder of Berg Capital Corp., a registered investment adviser based in New York, where he was involved with the start-up of several companies; acted as a consultant on finance and corporate structure; and assisted in the financing of early-stage companies in the fields of energy, technology, health care and consumer electronics. Prior to Berg Capital, he held positions as vice-president/portfolio manager with Oppenheimer Capital Corp. and Standard & Poor's InterCapital. He holds a Bachelors of Science from the University of California at Berkeley and an MBA from the Wharton School of Finance at the University of Pennsylvania.

Livengood Project

Pre-feasibility Study

A PFS for the Livengood Project is currently underway and scheduled to be released in the third quarter of 2012. The PFS work continued as planned during the quarter, with the majority of engineering studies having been timely completed. A detailed metallurgical review of the flow-sheet utilized in the PEA has indicated further optimization is possible. The Livengood PFS will provide an update of the anticipated project configuration and an overview of the geological, exploration, surface mine planning, metallurgical test work, process plant and infrastructure engineering, and environmental baseline studies that have been completed to date. The PFS will update the PEA, which was based on a surface mining operation supplying mineralized material to a processing plant with average throughput of 91,000 tonnes per day. The processing plant would produce gravity and flotation concentrates with gold recovered by Carbon-in-Leach processing of the concentrates.

Environmental baseline data gathering for Livengood permitting activities continues and includes samples for field geochemical testing.

RFPs were issued to third party firms to perform various engineering, geotechnical design, metallurgical test work and chemical analyses for the FS to be completed within the next fifteen months.

In January 2012, the Company selected Samuel Engineering, Inc. of Greenwood Village, Colorado, to provide process engineering services for its feasibility study. The Company has also engaged AMEC Environment & Infrastructure, Inc. of Denver, Colorado, to provide geotechnical infrastructure engineering services for the feasibility study. Feasibility level work commenced in February 2012

Samuel Engineering is a highly respected engineering firm known for its work on large-scale gold projects around the world. Important work elements include:

• Identifying potential enhancements to the prefeasibility study design basis;
• Participating in the metallurgical optimization program;
• Developing feasibility-level design documents such as process flow sheets, design criteria, piping and instrumentation drawings, control philosophy, general arrangement drawings, construction and equipment specifications; and
• Completing feasibility-level design of the concentrator, primary crusher, overland conveyor and ancillary facilities such as the administration building, truck shop/warehouse, laboratory building, main substation, site-wide power distribution, and fresh, potable water systems.

8

Services to be provided by AMEC Environment & Infrastructure, a division of AMEC Americas Ltd. and one of the world’s leading engineering companies, include:

• Hydrogeological and geotechnical field investigations supporting the feasibility-level design work;
• Feasibility level design of the tailing management facility, overburden storage facility, pro temp ore storage facility, water storage facility, topsoil storage facility and sanitary landfill;
• Identification of suitable borrow sources for construction of the facilities;
• Design of the main access and site roads; and
• Development of a site-wide water balance.

Selection of these firms was based on their extensive experience in cold weather climates as well as previous work performed in Alaska. Both firms have assembled a first-class team of engineers to work on the Livengood FS. The Company anticipates that the FS will be completed by the first half of calendar year 2013 and, if the results are favourable, will be followed by a detailed design effort.

The Company will continue its investigations and studies at the Livengood Project. For the seven months ended December 31, 2011, total expenditures on the Livengood Project were $80,578,180 which includes the December 2011 acquisitions of $48,777,927 (inclusive of the initial measurement value of the derivative liability of $23,649,780), drilling related to exploration activities of $9,982,001 (see Drilling below) and field costs and other investigations and studies of $21,818,252.

Drilling

During the summer 2011 field program, completion of several studies to demonstrate grade continuity and confirm precision of modeling with increased drill density provided important verification of the current resource estimation (as at May 31, 2011).

Results from 92 drill holes completed since June 2011 were released in November 2011; these findings enable the Company to define the higher grade zones in the Livengood gold deposit which may be targeted during the initial phase of mining and support the identification of potential infrastructure locations. An initial district-wide geophysical program was completed, which confirmed a strong response to alteration directly associated with the currently known deposit. Analysis of geophysical data along trend is in process and will greatly aid further definition for the next phase of district exploration drill targets.

Exploration drilling was completed on the Moose and Lucky target areas located approximately 5 kilometers to the northeast of the current Money Knob deposit. These targets were previously identified through surface soil geochemistry. While these holes did not produce any significant intercepts, previous holes and surface geochemical anomalies in the area warrant additional exploration.

In March 2012 the Company received the results for 73 in-fill drill holes completed late in 2011 which confirm the integrity of the May 2011 resource estimate reported in the August 2011 Report. Based on the latest results, new internal resource estimates calculated for three areas of the deposit have been verified within 1% to contain the same tonnage, grade and contained ounces of gold as those calculated from the nominal 50-metre-spaced grid drilling used to calculate the May 2011 resource. This positive outcome marks the conclusion of confirmation drilling at the Livengood Project as the Company focuses on district-wide exploration within its 145 km² land package as well as condemnation/geotechnical drilling in support of permitting activities in 2012.

9

Use of Financing Proceeds

The Company closed a bought deal short form prospectus and a private placement financing on November 10, 2010. The Company disclosed that it intended to use the net proceeds from the two financings for continued work on the Livengood Project and for general working capital purposes. The “Use of Proceeds” plan contained in the Company’s short form prospectus dated November 5, 2010, projected total Livengood project expenditures dating from September 1, 2010 (beginning of Q2 for the Fiscal Year ending May 31, 2011) to May 31, 2014. The use of proceeds plan totalled $136,575,000 for the period ending May 31, 2014. Table 1 shows the expenditures to December 31, 2011 compared with the intended use of proceeds.

Table 1: Comparison of Proposed Use of Proceeds with Actual Use of Proceeds to December 31, 2011

				Total Plan
		Total Budget		(Year Ended		Actual
		Year ended		May 31, 2011		Sept 1, 2010		Variance
		May 2011 to		and Period		through		(Plan – Actual
Project Cost		Period ended		ended May 31,		December 31,		through December
Center		May 2014(2)		2012)(2)		2011(1)		31, 2011)
Project administration	$	31,101,700	$	13,813,500	$	5,755,868	$	8,057,632
Geological and field operations		67,136,000		37,748,800		49,935,510		(12,186,710	)
Metallurgical studies		6,883,400		5,369,500		3,568,571		1,800,929
Infrastructure and engineering		8,887,400		4,721,900		7,747,429		(3,025,529	)
Environmental and community engagement		14,431,300		5,352,100		6,025,668		(673,568	)
Mining studies		2,415,400		1,094,200		512,410		581,790
Project integration		1,882,300		600,000		464,178		135,822
Land purchases(3)		-		-		25,137,346		(25,137,346	)
Subtotal		132,737,500		68,700,000		99,146,980		(30,446,980	)
Offering costs		3,837,500		-		502,208		(502,208	)
Total	$	136,575,000	$	68,700,000	$	99,649,188	$	(30,949,188	)

(1)	Unaudited Livengood Project Reporting
(2)	As disclosed in the prospectus dated November 5, 2010
(3)	Land purchases amount includes $8,644,500 payable within 30 days of December 31, 2011. The amount does not include the value of the Company’s derivative liability related to the land purchase.

Table 1 shows a variance of approximately $30.9M from the $68.7M for the total plan period ending May 31, 2012, and total spending of $99.6M is approximately 73% of the total budget to mid-2014.

10

The activities planned for the total plan period are generally on schedule and the completion of the PFS is expected in the third quarter of 2012, including additional optimization opportunities that have been identified to date. Project administration expenditures are below the plan rate but are adequate for the needs of the project; during the period of reported results the Company has added several key employees in both the Alaska and in its corporate offices. Geological and field operations have been accelerated to support detailed evaluation and increased confidence in the resource as well as for geotechnical studies. Metallurgical studies were nominally below plan and have advanced as necessary to support the PFS. Field programs in support of infrastructure geotechnical investigations have been expanded and accelerated, helicopter supported drills were increased from two to six working outside the resource area during the June 1 to December 31, 2011 period. The acceleration has added confidence in the infrastructure characterization, which is a critical path item in the PFS. Engineering expenditures were nominally on plan. Environmental and community engagement is on schedule, and has required less expenditure than planned. Expenditure for mining studies was nominally on plan for the period ending December 31, 2011. Project integration is below plan, as the technical components of the PFS were just beginning to be compiled near the end of the period. The land purchases were not originally budgeted for the period prior to May, 2014, but were accelerated to facilitate infrastructure engineering and permitting. Offering costs were higher than expected due to the length of time in filing the short form prospectus incurred in the quarter ended February 2011.

Livengood Land Purchases

During December 2011 the Company completed two acquisitions in connection with the Livengood project. The first acquisition consisted of the exercise of an existing lease buyout option on the interests in 169 State of Alaska claims. Total cash consideration of USD 11,044,000 was paid by the Company for the acquisition of these claims.

The second acquisition was of certain mining claims and related rights in the vicinity of the Livengood Project, and included all of the shares of Livengood Placers, Inc. (which corporation holds a number of the subject mining claims). These assets were purchased for aggregate consideration of USD 36,600,000 allocated between cash consideration of USD 13,500,000 and a derivative liability of USD 23,100,000. The derivative liability is a contingent payment based on the five-year average daily gold price (“Average Gold Price”) from the date of the Acquisitions. The contingent payment (due in December 2016) will equal USD 23,148 for every dollar that the Average Gold Price exceeds USD 720 per troy ounce. If the Average Gold Price is less than USD 720, there will be no additional contingent payment. The ground acquired in such acquisition was previously vacant or was used for placer gold mining.

These acquisitions enable the Company to pursue additional site facility locations and to investigate other land use opportunities including the potential for placer gold extraction.

Qualified Person and Quality Control/Quality Assurance

Development work at the Livengood Project was directed by Carl E. Brechtel (Colorado PE 23212, Nevada PE 8744) until Oct 24, 2011. Thomas E. Irwin, Alaska General Manager has assumed the responsibility for directing the development work at the Livengood Project. Mr. Irwin has over 37 years of experience in the natural resource industry having constructed, optimized, operated and permitted major mining projects with companies such as Amax Gold and Kinross. Prior to joining ITH, Mr. Irwin served for six years as the Commissioner of the Alaska Department of Natural Resources. From 1996 to 1999, he was the Operations Manager responsible for mine start-up and operation at the Fort Knox mine located 60 miles southeast of the Livengood project and General Manager of the mine from 1999 to 2001. From 2001 to 2003, he was the Vice President, Business Development for Fairbanks Gold Mining Inc., a subsidiary of Kinross Gold, responsible for new project permitting, business development and governmental and public relations in Alaska. Prior to his work at Fort Knox, Mr. Irwin was General Manager of Amax Gold’s Sleeper Mine in Nevada and manager of the Climax Mine in Colorado.

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The geologic work program at Livengood was designed and is supervised by Chris Puchner, Chief Geologist (CPG 07048) of the Company who is a qualified person as defined by National Instrument 43-101. Mr. Puchner is responsible for all aspects of the work, including the quality control/quality assurance program. On-site project personnel photograph the core from each individual borehole prior to preparing the split core. Duplicate reverse circulation drill samples are collected with one split sent for analysis. Representative chips are retained for geological logging. On-site personnel at the project log and track all samples prior to sealing and shipping. All sample shipments are sealed and shipped to ALS Chemex in Fairbanks, Alaska, for preparation and then on to ALS Chemex in Reno, Nevada, or Vancouver, B.C., for assay. ALS Chemex’s quality system complies with the requirements for the International Standards ISO 9001:2000 and ISO 17025:1999. Analytical accuracy and precision are monitored by the analysis of reagent blanks, reference material and replicate samples. Quality control is further assured by the use of international and in-house standards. Finally, representative blind duplicate samples are forwarded to ALS Chemex and an ISO compliant third party laboratory for additional quality control.

Risk Factors

Due to the nature of the Company’s proposed business and the present stage of exploration of its Livengood property interests (which is an advanced stage exploration project, but with no known reserves), the following risk factors, among others, will apply:

          Resource Exploration and Development is Generally a Speculative Business: Resource exploration and development is a speculative business and involves a high degree of risk, including, among other things, unprofitable efforts resulting both from the failure to discover mineral deposits and from finding mineral deposits which, though present, are insufficient in size and grade at the then prevailing market conditions to return a profit from production. The marketability of natural resources which may be acquired or discovered by the Company will be affected by numerous factors beyond the control of the Company. These factors include market fluctuations, the proximity and capacity of natural resource markets, government regulations, including regulations relating to prices, taxes, royalties, land use, importing and exporting of minerals and environmental protection. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in the Company not receiving an adequate return on invested capital.

          While the Livengood project has estimated measured, inferred and indicated resources identified, there are no known reserves on any of the Company’s properties. The majority of exploration projects do not result in the discovery of commercially mineable deposits of ore. Substantial expenditures are required to; establish ore reserves through drilling and metallurgical and other testing techniques, determine metal content and metallurgical recovery processes to extract metal from the ore, and construct, renovate or expand mining and processing facilities. No assurance can be given that any level of recovery of ore reserves will be realized or that any identified mineral deposit will ever qualify as a commercial mineable ore body which can be legally and economically exploited.

          Fluctuation of Metal Prices: Even if commercial quantities of mineral deposits are discovered by the Company, there is no guarantee that a profitable market will exist for the sale of the metals produced. The Company’s long-term viability and profitability depend, in large part, upon the market price of metals which have experienced significant movement over short periods of time, and are affected by numerous factors beyond the control of the Company, including international economic and political trends, expectations of inflation, currency exchange fluctuations, interest rates and global or regional consumption patterns, speculative activities and increased production due to improved mining and production methods. The supply of and demand for metals are affected by various factors, including political events, economic conditions and production costs in major producing regions. There can be no assurance that the price of any minerals produced from the Company’s properties will be such that any such deposits can be mined at a profit.

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          Permits and Licenses: The operations of the Company will require licenses and permits from various governmental authorities. There can be no assurance that the Company will be able to obtain all necessary licenses and permits that may be required to carry out exploration, development and mining operations at its projects, on reasonable terms or at all. Delays in obtaining, or a failure to obtain, any such licenses and permits, or a failure to comply with the terms of any such licenses and permits that the Company does obtain, could have a material adverse effect on the Company.

          Acquisition of Mineral Claims under Agreements: The agreements pursuant to which the Company has the right to acquire interests in a number of its properties at Livengood provide that the Company must make a series of cash payments over certain time periods and/or expend certain minimum amounts on the exploration of the properties. Failure by the Company to make such payments or make such expenditures in a timely fashion may result in the Company losing its interest in such properties. There can be no assurance that the Company will have, or be able to obtain, the necessary financial resources to be able to maintain all of its property agreements in good standing, or to be able to comply with all of its obligations thereunder, with the result that the Company could forfeit its interest in one or more of its mineral properties.

          Proposed Amendments to the United States General Mining Law of 1872: In recent years, the United States Congress has considered a number of proposed amendments to the U.S. General Mining Law of 1872 (“Mining Law”). If adopted, such legislation, among other things, could impose royalties on mineral production from unpatented mining claims located on United States federal lands (which includes certain of the mining claims at Livengood), result in the denial of permits to mine after the expenditure of significant funds for exploration and development, reduce estimates of mineral reserves and reduce the amount of future exploration and development activity on United States federal lands, all of which could have a material and adverse effect on the Company’s cash flow, results of operations and financial condition.

          Uncertainties Relating to Unpatented Mining Claims: Some of the mining claims at the Livengood property are federal or Alaska State unpatented mining claims. There is a risk that a portion of such unpatented mining claims could be determined to be invalid, in which case the Company could lose the right to mine any minerals contained within those mining claims. Unpatented mining claims are created and maintained in accordance with the applicable US federal and Alaska state mining laws. Unpatented mining claims are unique to United States property interests, and are generally considered to be subject to greater title risk than other real property interests due to the validity of unpatented mining claims often being uncertain. This uncertainty arises, in part, out of the complex federal and state laws and regulations under the Mining Law. Unpatented mining claims are always subject to possible challenges of third parties or contests by the United States federal or Alaska State governments. The validity of an unpatented mining claim, in terms of both its location and its maintenance, is dependent on strict compliance with a complex body of federal and state statutory and decisional law. Title to the unpatented mining claims may also be affected by undetected defects such as unregistered agreements or transfers. The Company has not obtained full title opinions for the majority of its mineral properties. Not all the mineral properties in which the Company has an interest have been surveyed, and their actual extent and location may be in doubt.

          Surface Rights and Access: Although the Company acquires the rights to some or all of the minerals in the ground subject to the mineral tenures that it acquires, or has a right to acquire, in most cases it does not thereby acquire any rights to, or ownership of, the surface to the areas covered by its mineral tenures. In such cases, applicable mining laws usually provide for rights of access to the surface for the purpose of carrying on mining activities, however, the enforcement of such rights through the courts can be costly and time consuming. It is necessary to negotiate surface access or to purchase the surface rights if long-term access is required. There can be no guarantee that, despite having the right at law to access the surface and carry on mining activities, the Company will be able to negotiate satisfactory agreements with any such existing landowners/occupiers for such access or purchase of such surface rights, and therefore it may be unable to carry out planned mining activities. In addition, in circumstances where such access is denied, or no agreement can be reached, the Company may need to rely on the assistance of local officials or the courts in such jurisdiction the outcomes of which cannot be predicted with any certainty. The inability of the Company to secure surface access or purchase required surface rights could materially and adversely affect the timing, cost or overall ability of the Company to develop any mineral deposits it may locate.

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          No Assurance of Profitability: The Company has no history of production or earnings and due to the nature of its business there can be no assurance that the Company will be profitable. The Company has not paid dividends on its shares since incorporation and does not anticipate doing so in the foreseeable future. The Company’s property is in the exploration stage and the Company has not defined or delineated any proven or probable reserves on its property. The Company’s property is not currently under development. Continued exploration of its existing property and the future development of any properties found to be economically feasible, will require significant funds. The only present source of funds available to the Company is through the sale of its equity shares, short-term, high-cost borrowing or the sale or optioning of a portion of its interest in its mineral properties. Even if the results of exploration are encouraging, the Company may not have sufficient funds to conduct the further exploration that may be necessary to determine whether or not a commercially mineable deposit exists. While the Company may generate additional working capital through further equity offerings, short-term borrowing or through the sale or possible syndication of its property, there is no assurance that any such funds will be available on favourable terms, or at all. At present, it is impossible to determine what amounts of additional funds, if any, may be required. Failure to raise such additional capital could put the continued viability of the Company at risk.

          Uninsured or Uninsurable Risks: Exploration, development and mining operations involve various hazards, including environmental hazards, industrial accidents, metallurgical and other processing problems, unusual or unexpected rock formations, structural cave-ins or slides, flooding, fires, metal losses and periodic interruptions due to inclement or hazardous weather conditions. These risks could result in damage to or destruction of mineral properties, facilities or other property, personal injury, environmental damage, delays in operations, increased cost of operations, monetary losses and possible legal liability. The Company may not be able to obtain insurance to cover these risks at economically feasible premiums or at all. The Company may elect not to insure where premium costs are disproportionate to the Company’s perception of the relevant risks. The payment of such insurance premiums and of such liabilities would reduce the funds available for exploration and production activities.

         Government Regulation: Any exploration, development or mining operations carried on by the Company will be subject to government legislation, policies and controls relating to prospecting, development, production, environmental protection, mining taxes and labour standards. The Company cannot predict whether or not such legislation, policies or controls, as presently in effect, will remain so, and any changes therein (for example, significant new royalties or taxes), which are completely outside the control of the Company, may materially adversely affect to ability of the Company to continue its planned business within any such jurisdictions.

          Market events and conditions: Since 2008, the U.S. credit markets have experienced serious disruption due to a deterioration in residential property values, defaults and delinquencies in the residential mortgage market (particularly, sub-prime and non-prime mortgages) and a decline in the credit quality of mortgage backed securities. These problems have led to a slow-down in residential housing market transactions, declining housing prices, delinquencies in non-mortgage consumer credit and a general decline in consumer confidence. These conditions caused a loss of confidence in the broader U.S. and global credit and financial markets and resulting in the collapse of, and government intervention in, major banks, financial institutions and insurers and creating a climate of greater volatility, less liquidity, widening of credit spreads, a lack of price transparency, increased credit losses and tighter credit conditions. Notwithstanding various actions by the U.S. and foreign governments, concerns about the general condition of the capital markets, financial instruments, banks, investment banks, insurers and other financial institutions caused the broader credit markets to further deteriorate and stock markets to decline substantially. In addition, general economic indicators have deteriorated, including declining consumer sentiment, increased unemployment and declining economic growth and uncertainty about corporate earnings.

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          While these conditions appear to have improved slightly in 2011 and into 2012, unprecedented disruptions in the credit and financial markets have had a significant material adverse impact on a number of financial institutions and have limited access to capital and credit for many companies. These disruptions could, among other things, make it more difficult for the Company to obtain, or increase its cost of obtaining, capital and financing for its operations. The Company’s access to additional capital may not be available on terms acceptable to it or at all.

          General economic conditions: The recent unprecedented events in global financial markets have had a profound impact on the global economy. Many industries, including the gold and base metal mining industry, are impacted by these market conditions. Some of the key impacts of the current financial market turmoil include contraction in credit markets resulting in a widening of credit risk, devaluations and high volatility in global equity, commodity, foreign exchange and precious metal markets, and a lack of market liquidity. A continued or worsened slowdown in the financial markets or other economic conditions, including but not limited to, consumer spending, employment rates, business conditions, inflation, fuel and energy costs, consumer debt levels, lack of available credit, the state of the financial markets, interest rates, and tax rates may adversely affect our growth and profitability. Specifically:

• The global credit/liquidity crisis could impact the cost and availability of financing and the Company’s overall liquidity;

• the volatility of gold and other base metal prices may impact the Company’s future revenues, profits and cash flow;

• volatile energy prices, commodity and consumables prices and currency exchange rates impact potential production costs;

• the devaluation and volatility of global stock markets impacts the valuation of the common shares, which may impact the Company’s ability to raise funds through the issuance of common shares.

These factors could have a material adverse effect on the Company’s financial condition and results of operations.

          Insufficient Financial Resources: The Company does not presently have sufficient financial resources to undertake by itself the preparation of a feasibility study and, if a production decision is made, the construction of a mine at Livengood. The completion of a feasibility study, and any construction of a mine at Livengood following the making of a production decision, will therefore depend upon the Company’s ability to obtain financing through the sale of its equity securities, a possible joint venturing of the project or the securing of significant debt financing. There is no assurance that the Company will be successful in obtaining the required financing to complete a feasibility study or construct and operate a mine at Livengood (should a production decision be made). Failure to raise the required funds could result in the interest of the Company in the Livengood project being significantly diluted or lost altogether or the Company being unable to complete a feasibility study or construct a mine at Livengood (following any production decision that may be made).

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          Financing Risks: The Company has limited financial resources, has no source of operating cash flow and has no assurance that additional funding will be available to it for further exploration and development of the Livengood project or to fulfil its obligations under any applicable agreements. Although the Company has been successful in the past in obtaining financing through the sale of equity securities, there can be no assurance that it will be able to obtain adequate financing in the future or that the terms of such financing will be favourable. Failure to obtain such additional financing could result in delay or indefinite postponement of further exploration and development of Livengood with the possible loss of its interest in such property.

          Dilution to the Company’s existing shareholders: The Company may require additional equity financing be raised in the future. The Company may issue securities on less than favourable terms to raise sufficient capital to fund its business plan. Any transaction involving the issuance of equity securities or securities convertible into Common Shares would result in dilution, possibly substantial, to present and prospective holders of Common Shares.

          Increased costs: Management anticipates that costs at the Company’s projects will frequently be subject to variation from one year to the next due to a number of factors, such as changing ore grade, metallurgy and revisions to mine plans, if any, in response to the physical shape and location of the ore body. In addition, costs are affected by the price of commodities such as fuel, rubber and electricity. Such commodities are at times subject to volatile price movements, including increases that could make production at certain operations less profitable. A material increase in costs at any significant location could have a significant effect on the Company’s profitability.

          Dependence Upon Others and Key Personnel: The success of the Company’s operations will depend upon numerous factors, many of which are beyond the Company’s control, including (i) the ability of the Company to enter into strategic alliances through a combination of one or more joint ventures, mergers or acquisition transactions; and (ii) the ability to attract and retain additional key personnel in exploration, mine development, sales, marketing, technical support and finance. These and other factors will require the use of outside suppliers as well as the talents and efforts of the Company. There can be no assurance of success with any or all of these factors on which the Company’s operations will depend. The Company has relied and may continue to rely upon consultants and others for operating expertise.

          Currency Fluctuations: The Company maintains its accounts in Canadian and U.S. dollars, making it subject to foreign currency fluctuations. Such fluctuations may materially affect the Company’s financial position and results.

          Share Price Volatility: In recent years, the securities markets in the United States and Canada have experienced a high level of price and volume volatility, and the market price of securities of many companies, particularly those considered exploration or development stage companies, have experienced wide fluctuations in price which have not necessarily been related to the operating performance, underlying asset values or prospects of such companies. There can be no assurance that significant fluctuations in the trading price of the Company’s common shares will not occur, or that such fluctuations will not materially adversely impact on the Company’s ability to raise equity funding without significant dilution to its existing shareholders, or at all.

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          Exploration and Mining Risks: Fires, power outages, labour disruptions, flooding, explosions, cave-ins, landslides and the inability to obtain suitable or adequate machinery, equipment or labour are other risks involved in the operation of mines and the conduct of exploration programs. Substantial expenditures are required to establish reserves through drilling, to develop metallurgical processes, to develop the mining and processing facilities and infrastructure at any site chosen for mining. Although substantial benefits may be derived from the discovery of a major mineralized deposit, no assurance can be given that minerals will be discovered in sufficient quantities to justify commercial operations or that funds required for development can be obtained on a timely basis. The economics of developing mineral properties is affected by many factors including the cost of operations, variations of the grade of ore mined, fluctuations in the price of gold or other minerals produced, costs of processing equipment and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals and environmental protection. In addition, the grade of mineralization ultimately mined may differ from that indicated by drilling results and such differences could be material. Short term factors, such as the need for orderly development of ore bodies or the processing of new or different grades, may have an adverse effect on mining operations and on the results of operations. There can be no assurance that minerals recovered in small scale laboratory tests will be duplicated in large scale tests under on-site conditions or in production scale operations. Material changes in geological resources, grades, stripping ratios or recovery rates may affect the economic viability of projects.

          Environmental Restrictions: The activities of the Company are subject to environmental regulations promulgated by government agencies in different countries from time to time. Environmental legislation generally provides for restrictions and prohibitions on spills, releases or emissions into the air, discharges into water, management of waste, management of hazardous substances, protection of natural resources, antiquities and endangered species and reclamation of lands disturbed by mining operations. Certain types of operations require the submission and approval of environmental impact assessments. Environmental legislation is evolving in a manner which means stricter standards, and enforcement, fines and penalties for non-compliance are more stringent. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies and directors, officers and employees. The cost of compliance with changes in governmental regulations has a potential to reduce the profitability of operations.

          Regulatory Requirements: The activities of the Company are subject to extensive regulations governing various matters, including environmental protection, management and use of toxic substances and explosives, management of natural resources, exploration, development of mines, production and post-closure reclamation, exports, price controls, taxation, regulations concerning business dealings with indigenous peoples, labour standards on occupational health and safety, including mine safety, and historic and cultural preservation. Failure to comply with applicable laws and regulations may result in civil or criminal fines or penalties, enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions, any of which could result in the Company incurring significant expenditures. The Company may also be required to compensate those suffering loss or damage by reason of a breach of such laws, regulations or permitting requirements. It is also possible that future laws and regulations, or more stringent enforcement of current laws and regulations by governmental authorities, could cause additional expense, capital expenditures, restrictions on or suspension of the Company’s operations and delays in the exploration and development of the Company’s property.

          Limited Experience with Development-Stage Mining Operations: The Company has limited experience in placing resource properties into production, and its ability to do so will be dependent upon using the services of appropriately experienced personnel or entering into agreements with other major resource companies that can provide such expertise. There can be no assurance that the Company will have available to it the necessary expertise when and if it places the Livengood project into production.

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          Estimates of Mineral Reserves and Resources and Production Risks: The mineral resource estimates included in this MD&A are estimates only and no assurance can be given that any particular level of recovery of minerals will in fact be realized or that an identified reserve or resource will ever qualify as a commercially mineable (or viable) deposit which can be legally and economically exploited. The estimating of mineral resources and mineral reserves is a subjective process and the accuracy of mineral resource and mineral reserve estimates is a function of the quantity and quality of available data, the accuracy of statistical computations, and the assumptions used and judgments made in interpreting available engineering and geological information. There is significant uncertainty in any mineral resource or mineral reserve estimate and the actual deposits encountered and the economic viability of a deposit may differ materially from the Company’s estimates. In addition, the grade of mineralization ultimately mined may differ from that indicated by drilling results and such differences could be material. Production can be affected by such factors as permitting regulations and requirements, weather, environmental factors, unforeseen technical difficulties, unusual or unexpected geological formations and work interruptions. Short term factors, such as the need for orderly development of deposits or the processing of new or different grades, may have a material adverse effect on mining operations and on the results of operations. There can be no assurance that minerals recovered in small scale laboratory tests will be duplicated in large scale tests under on-site conditions or in production scale operations. Material changes in reserves or resources, grades, stripping ratios or recovery rates may affect the economic viability of projects. The estimated resources described in this MD&A should not be interpreted as assurances of mine life or of the profitability of future operations. Estimated mineral resources and mineral reserves may have to be re-estimated based on changes in applicable commodity prices, further exploration or development activity or actual production experience. This could materially and adversely affect estimates of the volume or grade of mineralization, estimated recovery rates or other important factors that influence mineral resource or mineral reserve estimates. Market price fluctuations for gold, silver or base metals, increased production costs or reduced recovery rates or other factors may render any particular reserves uneconomical or unprofitable to develop at a particular site or sites. A reduction in estimated reserves could require material write downs in investment in the affected mining property and increased amortization, reclamation and closure charges.

          Mineral resources are not mineral reserves and there is no assurance that any mineral resources will ultimately be reclassified as proven or probable reserves. Mineral resources which are not mineral reserves do not have demonstrated economic viability.

          Enforcement of Civil Liabilities: As substantially all of the assets of the Company and its subsidiaries are located outside of Canada, and certain of the directors and officers of the Company are resident outside of Canada, it may be difficult or impossible to enforce judgements granted by a court in Canada against the assets of the Company or the directors and officers of the Company residing outside of Canada.

          Mining Industry is Intensely Competitive: The Company’s business of the acquisition, exploration and development of mineral properties is intensely competitive. The Company may be at a competitive disadvantage in acquiring additional mining properties because it must compete with other individuals and companies, many of which have greater financial resources, operational experience and technical capabilities than the Company. The Company may also encounter increasing competition from other mining companies in efforts to hire experienced mining professionals. Competition for exploration resources at all levels is currently very intense, particularly affecting the availability of manpower, drill rigs and helicopters. Increased competition could adversely affect the Company’s ability to attract necessary capital funding or acquire suitable producing properties or prospects for mineral exploration in the future.

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          ITH may be a “passive foreign investment company” under the U.S. Internal Revenue Code, which may result in material adverse U.S. federal income tax consequences to investors in Common Shares that are U.S. taxpayers: Investors in Common Shares that are U.S. taxpayers should be aware that ITH believes that it has been in prior years, and expects it will be in the current year, a “passive foreign investment company” under Section 1297(a) of the U.S. Internal Revenue Code (a “PFIC”). If ITH is or becomes a PFIC, generally any gain recognized on the sale of the Common Shares and any “excess distributions” (as specifically defined) paid on the Common Shares must be rateably allocated to each day in a U.S. taxpayer’s holding period for the Common Shares. The amount of any such gain or excess distribution allocated to prior years of such U.S. taxpayer’s holding period for the Common Shares generally will be subject to U.S. federal income tax at the highest tax applicable to ordinary income in each such prior year, and the U.S. taxpayer will be required to pay interest on the resulting tax liability for each such prior year, calculated as if such tax liability had been due in each such prior year.

          Alternatively, a U.S. taxpayer that makes a “qualified electing fund” (a “QEF”) election with respect to ITH generally will be subject to U.S. federal income tax on such U.S. taxpayer’s pro rata share of ITH’s “net capital gain” and “ordinary earnings” (as specifically defined and calculated under U.S. federal income tax rules), regardless of whether such amounts are actually distributed by ITH. U.S. taxpayers should be aware, however, that there can be no assurance that ITH will satisfy record keeping requirements under the QEF rules or that ITH will supply U.S. taxpayers with required information under the QEF rules, in event that ITH is a PFIC and a U.S. taxpayer wishes to make a QEF election. As a second alternative, a U.S. taxpayer may make a “mark-to-market election” if ITH is a PFIC and the Common Shares are “marketable stock” (as specifically defined). A U.S. taxpayer that makes a mark-to-market election generally will include in gross income, for each taxable year in which ITH is a PFIC, an amount equal to the excess, if any, of (a) the fair market value of the Common Shares as of the close of such taxable year over (b) such U.S. taxpayer’s adjusted tax basis in the Common Shares.

Selected Financial Information

The Company’s audited consolidated financial statements for the seven month period ended December 31, 2011 and the fiscal year ended May 31, 2011 (the “Financial Statements”) have been prepared in accordance with International Financial Reporting Standards and practices. The following selected financial information is taken from the Company’s Financial Statements for the period ended December 31, 2011 and the year ended May 31, 2011 and should be read in conjunction with those statements. The Company changed its year end to December 31 from May 31 effective December 31, 2011. Selected annual financial information appears below.

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		December 31, 2011			May 31, 2011
		$			$
		(seven months)			(annual)
Description		IFRS			IFRS
Operations:
Interest Income	$	590,913		$	675,146
Consulting fees (including share-based payments)		1,807,563			1,570,146
Property investigation		-			2,557
Wages and benefits (including share-based payments)		9,981,236			5,505,589
Investor relations (including share-based payments)		322,777			1,239,208
Foreign exchange gain (loss)		72,624			91,552
Gain on derivative liability		2,354,740			-
Loss from continuing operations		(11,039,887	)		(9,557,685	)
Loss from discontinued operations		-			(934,157	)
Exchange difference on translating foreign operations		6,850,624			(6,767,665	)
Net and comprehensive loss	$	(4,189,263	)	$	(17,259,507	)
Basic and fully diluted loss per share from continuing operations	$	(0.13	)	$	(0.12	)
Basic and fully diluted loss per share from discontinued operations	$	-		$	(0.01	)
Statement of Financial Position:
Cash and cash equivalents	$	55,642,179		$	111,165,126
Total Current Assets		56,599,339			112,391,851
Exploration and Evaluation Assets – continuing operations		158,041,441			71,103,123
Exploration and Evaluation Assets – discontinued operations		-			-
Long term financial liabilities		21,153,600			-
Cash dividends	$	-		$	-

Period Ended December 31, 2011

The Company ended the year with $56,642,179 of cash and cash equivalents. The Company spent $50,407,378 (May 31, 2011 - $35,896,786) in acquisition and exploration costs of continuing operations, used $5,583,284 (May 31, 2011 - $6,670,925) in operating activities of continuing operations, and raised $229,950 (May 31, 2011 – $113,817,925) through the issuance of common shares, net of costs. Share-based payment charges of $7,475,071 (May 31, 2011 - $3,575,815) from continuing operations in the period ended December 31, 2011 was due to the granting of options and recognizing the expense associated with the vesting of certain stock options granted in the period and in the prior year to employees and consultants. The Company also recognized a gain of $2,354,740 from the change in the estimated fair value of its derivative liability (May 31, 2011 - $nil).

Seven Months ended December 31, 2011 compared to the year ended May 31, 2011

Due to the Company changing its fiscal year end to December 31 from May 31, the Company’s results and activity will not be comparable to the previous audited financial statements for the year ended May 31, 2011. The following discussion highlights certain selected financial information and changes in operations between the year ended May 31, 2011 and the seven month period ended December 31, 2011.

20

The Company incurred a net loss of $11,039,887 for the period ended December 31, 2011, compared to a net loss of $10,491,842 for the year ended May 31, 2011. Share-based payment charges were $7,475,071 during the seven month period ended December 31 compared to $3,575,815 for the year ended May 31, 2011. The increase in share-based payment charges during the period was mainly the result of stock option grants to new employees and vesting of prior stock option grants. The Company granted 2,700,000 options during the seven months ended December 31, 2011 compared to 1,760,000 during the year ended May 31, 2011.

Excluding share-based payment charges of $5,925,071 and $2,031,835 (May 31, 2011), wages and benefits for the period ended December 31, 2011 increased to $4,056,165 from $3,473,754 (May 31, 2011) as a result of certain severance payments along with increased personnel and hiring of new officers during the period.

Professional fees decreased to $649,763 (May 31, 2011 - $655,619) due to share-based payment charges of $18,594 during the current period compared to $75,570 in the year ended May 31, 2011. Additional professional fees were incurred in the current period for additional personnel hired to perform legal and accounting services.

Aside from the impact of share-based payment charges, most other expense categories reflected only moderate change period over period.

Other items amounted to a gain of $2,509,620 during the current period compared to a gain of $666,756 in year ended May 31, 2011. The increased gain in the current period resulted from a gain of $2,354,740 on the revaluation of a derivative liability at December 31, 2011. In addition to the gain on derivative liability the Company recognized interest income of $590,913 (May 31, 2011 – $675,146) and foreign exchange gain of $72,624 (May 31, 2011 - $91,552). Offsetting these other gains were unrealized losses on marketable securities of $360,000 (May 31, 2011 - $182,500 gain) and net spin-out costs of $148,657 (May 31, 2011 - $282,442).

Share-based payment charges

Share-based payment charges for the period ended December 31, 2011 of $7,475,071 (May 31, 2011 - $3,575,815) were allocated as follows:

		Before allocation				After Allocation
		of share-based		Share-based		of share-based
Seven months ended December 31, 2011		payment charges		payment charges		payment charges
Consulting	$	345,886	$	1,461,677	$	1,807,563
Investor relations		253,048		69,729		322,777
Professional fees		631,169		18,594		649,763
Wages and benefits		4,056,165		5,925,071		9,981,236
			$	7,475,071

		Before allocation				After Allocation
		of share-based		Share-based		of share-based
Year ended May 31, 2011		payment charges		payment charges		payment charges
Consulting	$	559,252	$	1,010,894	$	1,570,146
Investor relations		781,692		457,516		1,239,208
Professional fees		580,049		75,570		655,619
Wages and benefits		3,473,754		2,031,835		5,505,589
			$	3,575,815

21

Discontinued Operations and Transfer of the Nevada and Other Alaska Business under the Arrangement

On August 26, 2010, the Company completed an arrangement under a Plan of Arrangement (the “Arrangement”) pursuant to which it transferred its other existing Alaska (other than the Livengood project) and Nevada assets to a new public company, Corvus Gold Inc. (“Corvus”).

Under the Arrangement, each shareholder of the Company received one Corvus common share for every two ITH common shares held as at the effective date of the Arrangement as a return of capital and exchanged each existing common share of ITH for a new common share of ITH. The “new” ITH common shares are identical in every respect (other than CUSIP number) to the “old” ITH common shares. ITH has transferred its wholly-owned subsidiaries, Raven Gold Alaska Inc. (“Raven Gold”), incorporated in Alaska, and Corvus Gold Nevada Inc. (formerly “Talon Gold Nevada Inc.”), incorporated in Nevada to Corvus. As a result of the Arrangement, there was an effective spin-out by ITH of certain of its mineral properties, being Chisna, West Pogo, Terra and LMS in Alaska, and North Bullfrog in Nevada (the “Spin-out Properties”), together the “Nevada and Other Alaska Business”, to Corvus.

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 in cash and the 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, off-set by property facilitation payments and interest from payments made in connection with the Chisna spin-out property, amounted to a net expense of $148,657 (May 31, 2011 - $593,754) during the year.

As a result of the Arrangement being completed, the Company has accounted for results related to the Nevada and Other Alaska Business up to the effective date of the Arrangement as discontinued operations (see below) and as a result the statement of financial position of the Company at May 31, 2011 excludes the assets and liabilities related to the discontinued operations and reflects the decreased deficit which arises on the transfer of the Nevada and Other Alaska Business assets to Corvus. Due to the ongoing exploration at Livengood and the transfer of $3.3 million in cash and the Nevada and Other Alaska Business to Corvus, the net assets of the Company have decreased by approximately $12.8 million.

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 its consolidated financial statements and has reclassified the related amounts for the current and prior period.

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 the Company’s consolidated 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 seven months ended December 31, 2011 and the year ended May 31, 2011. Included therein is $nil (May 31, 2011 - $756,202) of share-based payment charges:

22

		December 31, 2011		May 31, 2011
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
	$	-	$	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
Mineral Properties		12,392,408
Accounts payable		(773,264	)
Net assets transferred to Corvus	$	12,825,783

Comparison to Selected Prior Quarterly Periods

The following selected financial information is a summary of results for the four months ended December 31, 2011 and the three months ended May 31, 2011 taken from the audited consolidated financial statements of the Company. The information relates to the Company’s continuing operations.

		December 31,
		2011			May 31, 2011
Interest Income	$	270,350		$	317,865
Stock-based compensation		1,697,704			190,868
Net loss from continuing operations		(2,675,646	)		(1,603,186	)
Basic and diluted loss per common share from continuing operations	$	(0.03	)	$	(0.02	)

		December 31,		May 31,
As at		2011		2011
Working capital from continuing operations	$	46,104,290	$	108,354,423
Total assets from continuing operations	$	214,765,524	$	183,638,545
Total liabilities from continuing operations	$	31,648,649	$	4,037,428
Share capital	$	215,865,086	$	215,544,180

23

Supplemental Information: Comparison to Prior Quarterly Periods

The following selected financial information is a summary of quarterly results taken from the Company’s unaudited quarterly consolidated financial statements:

		4 months
		December 31,			August 31,			May 31,			February 28,
		2011			2011			2011			2011
Description		(IFRS)			(IFRS)			(IFRS)			(IFRS)
Interest Income	$	270,350		$	320,563		$	317,865		$	269,602
Net loss – continuing operations		(2,675,646	)		(8,364,241	)		(1,904,306	)		(1,424,785	)
Net loss		(2,675,646	)		(8,364,241	)		(1,904,306	)		(1,424,785	)
Basic and diluted loss per common share	$	(0.03	)	$	(0.10	)	$	(0.01	)	$	(0.02	)

		November 30, 2010			August 31, 2010
Description		(IFRS)			(IFRS)
Interest Income	$	27,142		$	60,537
Net loss – continuing operations		(2,134,304	)		(4,094,290	)
Net loss – discontinued operations		-			(934,157	)
Net loss		(2,134,304	)		(5,028,447	)
Basic and diluted loss per common share from continuing operations	$	(0.03	)	$	(0.06	)

The discussion above provides certain reasons for some of the variations in the quarterly numbers but, as with most junior mineral exploration companies, the results of operations (including interest income and net losses) are not the main factor in establishing the financial health of the Company. Of far greater significance are the mineral properties in which the Company has, or may earn, an interest, its working capital and its number of shares outstanding. The results over quarters is primarily dependent upon the success of the Company’s ongoing property evaluation program and the timing and results of the Company’s exploration activities on its then current properties (following the spin-out of its non-Livengood properties to Corvus, its only mineral property is the Livengood project), none of which are possible to predict with any accuracy. There are no general trends regarding the Company’s quarterly results, and the Company’s business of mineral exploration is not seasonal. Quarterly results can vary significantly depending on whether the Company has abandoned any properties or granted any stock options or paid any employee bonuses. These are factors that account for material variations in the Company’s quarterly net losses, none of which are predictable. The write-off of mineral properties can have a material effect on quarterly results as and when they occur. Another factor which can cause a material variation in net loss on a quarterly basis is the grant of stock options due to the resulting share based payment charges which can be significant. The payment of employee bonuses (which have tended to be awarded in November/December), being once-yearly charges can also materially affect operating losses. During the period ended December 31, 2011, net loss was significantly impacted by the change in value of the Company’s derivative liability. General operating costs other than the specific items noted above tend to be quite similar from period to period, although they will increase quarter over quarter as the Company increases the number of employees as necessary to meet the requirements of its increased work at the Livengood project. The variation in income is related solely to the interest earned on funds held by the Company, which is dependent upon the success of the Company in raising the required financing for its activities which will vary with overall market conditions, and is therefore difficult to predict.

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Liquidity and Capital Resources

The Company has no revenue generating operations from which it can internally generate funds. To date, the Company’s ongoing operations have been predominantly financed through sale of its equity securities by way of private placements and the subsequent exercise of share purchase and broker warrants and options issued in connection with such private placements. However, the exercise of warrants/options is dependent primarily on the market price and overall market liquidity of the Company’s securities at or near the expiry date of such warrants/options (over which the Company has no control) and therefore there can be no guarantee that any existing warrants/options will be exercised. This situation is unlikely to change until such time as the Company can develop a bankable feasibility study for the Livengood projects.

As at December 31, 2011, the Company reported cash and cash equivalents of $55,642,179 compared to $111,165,126 at May 31, 2011. The decrease of approximately $55.5 million resulted mainly from expenditures on the Livengood Project through the 2011 exploration season, advancing work towards the PFS, as well as the acquisition of certain mining claims and related rights in the vicinity of the Livengood Project. The Company continues to utilize its cash resources to fund the Livengood Project exploration, permitting, prefeasibility data compilation, including related metallurgical and geotechnical studies, and administrative requirements. Investing activities comprised primarily of mineral property expenditures of $50,407,378 (May 31, 2011 - $35,896,786). General operating costs during the period were $5,583,284 (May 31, 2011 - $6,670,925). Financing activities provided $229,950 (May 31, 2011 - $113,817,925) on the issuance of common shares as a result of the exercise of stock options.

As at December 31, 2011, the Company had working capital of $46,104,290 compared to working capital of $108,354,423 at May 31, 2011. The Company expects that it will operate at a loss for the foreseeable future, but believes the current cash and cash equivalents will be sufficient for it to complete the mandatory drilling programs, pre-feasibility and permitting activities at Livengood, and its currently anticipated general and administrative costs, for the next fiscal year to December 31, 2012. However, the Company will require significant additional financing to continue its operations (including general and administrative expenses) beyond that date, particularly in connection with any post FS activities at Livengood and the development of any mine that may be determined to be built at Livengood, and there is no assurance that the Company will be able to obtain the additional financing required on acceptable terms, if at all. In addition, any significant delays in the issuance of required permits for the ongoing work at Livengood, or unexpected results in connection with the ongoing work, could result in the Company being required to raise additional funds to complete the planned FS.

Despite the Company’s success to date in raising significant equity financing to fund its operations, there is significant uncertainty that the Company will be able to secure any additional financing in the current or future equity markets – see “Risk Factors – Insufficient Financial Resources/Share Price Volatility”. The quantity of funds to be raised and the terms of any proposed equity financing that may be undertaken will be negotiated by management as opportunities to raise funds arise. Specific plans related to the use of proceeds will be devised once financing has been completed and management knows what funds will be available for these purposes.

The Company has no exposure to any asset-backed commercial paper. Other than cash held by its subsidiaries for their immediate operating needs in Alaska and Colorado, all of the Company’s cash reserves are on deposit with a major Canadian chartered bank or invested in Government of Canada Treasury Bills or Banker’s Acceptances issued by major Canadian chartered banks. The Company does not believe that the credit, liquidity or market risks with respect thereto have increased as a result of the current market conditions. However, to achieve greater security for the preservation of its capital, the Company has, of necessity, been required to accept lower rates of interest which has also lowered its potential interest income.

25

The following table discloses, as of December 31, 2011, the Company’s contractual obligations for optional mineral property payments and work commitments and committed office and equipment lease obligations. The table also includes amounts payable under the purchase agreement related to the acquisition of certain mining claims and related rights in the vicinity of the Livengood project (“Livengood Property Purchase”). The Company does not have any other long-term debt or loan obligations. Under the terms of the Company’s mineral property purchase agreements, mineral leases and the terms of the unpatented mineral claims held by it, the Company is required to make certain scheduled acquisition payments, incur certain levels of expenditures, make lease and/or advance royalty payments, make payments to government authorities and incur assessment work expenditures as summarized in the table below in order to maintain and preserve the Company’s interests in the related mineral properties. If the Company is unable or unwilling to make any such payments or incur any such expenditures, it is likely that the Company would lose or forfeit its rights to acquire or hold the related mineral properties. The following table assumes that the Company retains the rights to all of its current mineral properties, but no other lease purchase or royalty buyout options:

Contractual Obligations	Payments Due by Period(5)
	Total	Prior to December 31, 2012 (12 months)	January 1, 2013 to December 31, 2015 (36 months)	January 1, 2016 to December 31, 2018 (36 months)
Livengood Property Purchase(1)	$ 29,798,100	$ 8,644,500	$ -	$21,153,600
Mineral Property Leases(2)(3)	3,800,275	791,480	1,983,913	1,024,882
Mining Claim Government Fees	379,941	54,277	162,832	162,832
Office and Equipment Lease Obligations(4)	965,000	278,659	602,533	83,808
Total Contractual Obligations	$ 34,943,316	$ 9,768,916	$ 2,749,278	$22,425,122

Notes:

1.	The amount payable in December 2016 of $21,153,600 represents the fair value of the Company’s derivative liability as at December 31, 2011 and will be revalued at each subsequent reporting period.
2.	Does not include required work expenditures, as it is assumed that the required expenditure level is significantly below the work for which will actually be carried out by the Company.
3.	Does not include potential royalties that may be payable (other than annual minimum royalty payments).
4.	Assumes that current office and storage leases are extended beyond current termination dates at the same terms.
5.	Assumes the exchange rate at December 31, 2011 of USD to CAD of 1.017 remains constant.

26

Transactions with Related Parties

During the seven months ended December 31, 2011, the Company incurred the following related party expenditures. These figures do not include share-based payments.

Name	Relationship	Purpose of transaction		Amount
Anton Drescher	Director of the Company	Director’s fees	$	14,500
Daniel Carriere	Director of the Company	Director’s fees	$	15,000
Ronald Sheardown	Director of the Company (ceased on November 17, 2011 )	Director’s fees	$	12,500
Steve Aaker	Director of the Company (ceased on November 17, 2011 )	Director’s fees	$	12,000
Timothy Haddon	Director of the Company	Director’s fees	$	14,500
Donald Ewigleben	Director of the Company (as of November 17, 2011 )	Director’s fees	$	3,000
Mark Hamilton	Director of the Company (as of November 17, 2011 )	Director’s fees	$	3,000
Roger Taplin	Director of the Company (as of November 17, 2011 )	Director’s fees	$	2,500
James Komadina	Director and CEO of the Company	Wages & Benefits (including signing bonus)	$	394,263
Jeff Pontius	Director and former CEO of the Company (resigned as CEO on	Wages & Benefits (including severance pay)	$	879,120
	June 1, 2011, director since June 1,	Professional fees	$	105,983
	2011 )	Director’s fees	$	2,500
Carl Brechtel	President & COO of the Company (resigned on October 24, 2011 )	Wages & Benefits	$	121,510
Lawrence Talbot	VP & General Counsel of the Company	Wages & Benefits	$	29,167
Winslow Associates Management and Communications Inc.	Company controlled by the former CFO of the Company (resigned on September 7, 2011 )	Consulting (including severance pay)	$	57,500
Tom Yip	CFO of the Company	Wages & Benefits (including signing bonus)	$	197,889
Marla Ritchie	Corporate Secretary	Consulting	$	7,000
Shirley Zhou	VP Corporate Communications	Investor relations	$	84,000
		Rent	$	6,000
Lawrence W. Talbot Law	Company controlled by VP&	Professional fees	$	41,667
Corporation	General Counsel of the Company
McCarthy Tetrault	Law firm in which a director is a partner	Professional fees	$	49,625
Cardero Resource Corp.	Company with common officers and directors	Administration	$	4,389
Cardero Resource Corp.	Company with common officers and directors	Rent	$	18,010

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.

27

These transactions with related parties have been valued in the consolidated financial statements at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

Proposed Transactions

As at the date of this MD&A there are no proposed transactions that the board of directors, or senior management who believe that confirmation of the decision by the board is probable, have decided to proceed with and that have not been publicly disclosed, except that management of the Company, having been granted authority to do so by the board, is currently negotiating with a number of landowners to acquire additional ground in the vicinity of the Livengood project and believes that it will be successful in negotiating one or more of such acquisitions at prices acceptable to the Company. If this is the case, the Company will proceed with such acquisitions. However, to date, no agreements regarding any such acquisitions have been executed and there can be no certainty that any such agreements will be successfully concluded or executed.

Critical Accounting Estimates

The preparation of the Company’s consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Areas requiring the use of estimates in the preparation of the Company’s consolidated financial statements 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 and the derivative liability, allocation of administrative expenses to discontinued operations and the determination of the valuation allowance for deferred income tax assets. Management believes the estimates used are reasonable; however, actual results could differ materially from those estimates and, if so, would impact future results of operations and cash flows.

Changes in Accounting Policies Including Initial Adoption

Please refer to Note 3 of the audited consolidated financial statements for a comprehensive list of the accounting policies adopted upon transition to IFRS.

Financial Instruments and Other Instruments

The carrying values of the Company’s financial instruments, which include cash and cash equivalents, marketable securities, accounts receivable, and accounts payable and accrued liabilities, approximate their respective fair values due to their short-term maturity. Due to the short term of all such instruments, the Company does not believe that it is exposed to any material risk with respect thereto.

The Company’s cash and cash equivalents at December 31, 2011 was $55,642,179 of which $8,709,370 was held in US dollars.

The Company’s accounts receivables and payables at December 31, 2011 were normal course business items that are settled on a regular basis. The Company’s investment in Millrock Resources Inc. (‘Millrock”) and Ocean Park Ventures Corp. (“OPV”) were carried at quoted market value, and were classified as “fair value through profit and loss” for accounting purposes. The Company has no current plans to dispose of any significant portion of its investments in Millrock and OPV.

28

The Company acquired certain mining claims and related rights in the vicinity of the Livengood Project located near Fairbanks, Alaska. The assets were purchased for aggregate consideration of USD 36,600,000 allocated between cash consideration of USD 13,500,000 and a derivative liability of USD 23,100,000. The derivative liability is a contingent payment based on the five-year average gold price (“Average Gold Price”) from the date of the acquisitions. The contingent payment will equal USD 23,148 for every dollar that the Average Gold Price exceeds USD 720 per troy ounce. If the Average Gold Price is less than USD 720, there will be no additional contingent payment. This additional contingent payment is classified as a derivative liability.

At initial recognition on December 13, 2011, the derivative liability was valued at USD 23,100,000. The key assumption used in the valuation of the derivative is the estimate of the future Average Gold Price. The estimate of the future Average Gold Price was determined using a forward curve on future gold prices as published by the CME Group. The CME Group represents the merger of the Chicago Mercantile Exchange (CME), the Chicago Board of Trade (CBOT), the New York Mercantile Exchange (NYMEX) and its commodity exchange division, Commodity Exchange, Inc. (COMEX). Using this forward curve, the Company estimated an Average Gold Price five years from the date of acquisition of USD 1,720 per ounce of gold.

At December 31, 2011, the derivative was revalued using the same methodology as above. The Company estimated an Average Gold Price over the term of the agreement at December 31, 2011 of USD 1,619 per ounce of gold. This estimate of the Average Gold Price resulted in a fair value of the derivative liability of USD 20,800,000. The change in fair value of the derivative from initial recognition to December 31, 2011 was recognized as a gain on the Consolidated Statements of Comprehensive Loss. The derivative will revalued at each reporting period with any changes in value recorded to profit or loss.

Management’s Report on Internal Control Over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of the Company’s financial reporting for external purposes in accordance with IFRS. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect the Company’s transactions and dispositions of the assets of the Company; providing reasonable assurance that transactions are recorded as necessary for preparation of the Company’s consolidated financial statements in accordance with IFRS; providing reasonable assurance that receipts and expenditures are made in accordance with authorizations of management and the directors of the Company; and providing reasonable assurance that unauthorized acquisition, use or disposition of Company’s assets that could have a material effect on the Company’s consolidated financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of the Company’s consolidated financial statements would be prevented or detected.

Management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the framework and criteria established in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2011.

29

Changes in Internal Control Over Financial Reporting

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. The Chief Executive Officer and Chief Financial Officer have concluded that there has been no change in the Company’s internal control over financial reporting during the period ended December 31, 2011 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Disclosure of Outstanding Share Data (as at March 16, 2012)

Authorized and Issued capital stock:

Authorized	Issued	Value
500,000,000 common shares without par value	86,683,919	$               215,865,086

Incentive Stock Options Outstanding:

Number	Exercise Price	Expiry Date
2,485,000	$    7.34	April 14, 2012
1,165,000	$    6.57	August 19, 2012
215,000	$    9.15	January 10, 2013
1,000,000	$    8.35	May 9, 2016
950,000	$    7.47	July 28, 2013
650,000	$    8.07	August 23, 2016
100,000	$    5.64	November 15, 2016
650,000	$    4.43	January 3, 2017
30,000	$    4.60	January 9, 2017
7,245,000

Warrants Outstanding:

There were no share purchase warrants outstanding at the date of this MD&A.

30

The Company’s consolidated financial statements for the seven month period ending December 31, 2011 (the Company changed its year end from May 31 to December 31 effective December 31, 2011) 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,			June 1,
		2011			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.
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.

31

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 the Company’s two significant subsidiaries, Tower Hill Mines, Inc. and Tower Hill Mines (US) LLC, is the US dollar and for all other entities within the Company’s corporate group (“Group”), the functional currency is the Canadian dollar, as 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 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 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, the functional currency of Tower Hill Mines, Inc. and Tower Hill Mines (US) LLC 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.

Under IAS 21, the assets and liabilities of the Group are translated from Tower Hill Mines Inc. and Tower Hill Mines (US) LLCs’ 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.

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Impact on Consolidated Financial Statements

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

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.

Reconciliation to previously reported financial statements

A reconciliation of the above noted changes is included in the following Consolidated Statements of Financial Position and Consolidated Statements of Comprehensive Loss for the dates and periods noted below.

• Transitional Consolidated Statement of Financial Position Reconciliation – June 1, 2010
• Consolidated Statement of Financial Position Reconciliation – May 31, 2011.
• Consolidated Statement of 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.

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

					Effect of
		Canadian			Transition
		GAAP			to 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

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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

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Consolidated Statement of Comprehensive Loss Reconciliation – May 31, 2011

					Effect of
		Canadian			Transition to
		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
Cumulative translation adjustments – exploration and evaluation assets		-			(6,717,338	)	d)		(6,717,338	)
Cumulative translation adjustments – foreign subsidiaries		-			(50,327	)	d)		(50,327	)
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

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Additional Sources of Information

Additional disclosures pertaining to the Company, including its most recent Annual Information Form, financial statements, management information circular, material change reports, press releases and other information, are available on the SEDAR website at www.sedar.com or on the Company’s website at www.ithmines.com. Readers are urged to review these materials, including the technical reports filed with respect to the Company’s mineral properties.

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