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International Tower Hill Mines’ Livengood Project is attracting a lot of attention from analysts

|Includes: AU, BZOFF, TECK, International Tower Hill Mines Ltd (THM)

Vancouver based International Tower Hill Mines (TSE:ITH; AMEX:THM) is focused on the development of its 100% owned Livengood Gold Project near Fairbanks, Alaska. The Livengood Project marks one of the largest new discoveries in recent years and is being advanced by veterans of the industry -- newly appointed CEO James J. Komadina, who was previously Chief Operating Officer of Brazauro Resources and President & CEO of AngloGold, North America, while President and COO Carl Brechtel was formerly the prefeasibility study manager at AngloGold Ashanti.

Gold has lost a bit of its luster these last few weeks as commodities in general have come down from recent highs. Interestingly, analysts have noticed divergent market action between metal prices and stock performance of miners. For the past month or so, mining stocks have dropped while gold headed toward record highs. The recent decline in gold prices has only exasperated the fall in shares of mining companies, even as gold still trades over $1,500 per ounce.    

International Tower, which has a market cap of approximately $690 million, has not been immune to the recent divergence between gold and gold companies.  Most recently traded at $8.00, the company’s share price is down more than 20% from its high of $10.49 reached in mid-April. Gold on the other hand is down a mere 4% from its record settle of $1,566.70 per once.  

International Tower’s emerging production status has attracted the attention of the analyst community – it is covered by at least seven analysts, several of whom issued new reports following a new resource update at Livengood. The report updated total resources to 20.2 million ounces, with a healthy 51% in the measured category, 24% indicated and 24% inferred. This equals 7.4 million ounces measured, 3.2 million ounces indicated, and 2.7 million ounces inferred gold.

Canaccord Genuity, Credit Suisse, and Macquarie each have “buy” or “outperform” recommendations on International Tower with price targets ranging from C$12.00 to C$13.00.  

BMO Capital Markets maintained a Market Perform status on the stock with no price target, but noted the new resource as having a positive impact. Analyst John Hayes further noted intermediate producers trade on average at a 29% premium to its 0% NAV estimates while International Tower is trading at a 20% discount to its estimated 0% NAV.

Analyst recommendations or not, International Tower is moving quickly to advance its Livengood Project. The current resource is located on a parcel measuring approximately 1 km by 2.5 km within a much larger land package of 145 km squared.  Gold is found disseminated or in veinlets hosted in sedimentary and volcanic rocks.  So far, 98% of the 600 holes drilled were within the 2.5 km square resource and mineralization extends along a 10 km unexplored trend, indicating potential for greater discovery on the land package. 

Infill and step-out drilling is ongoing to expand and upgrade the current resource. Geotechnical drilling is also underway, as well as a highly anticipated pre-feasibility study, expected to be completed by Q4 2011.  Approximately $7.5 million is being spent on the 45,000 meter infill/expansion drill portion and $2.4 million for a 10,000 meter new discovery and district wide target generation program. 90% of the 145 square km land package is unexplored. A total of seven drill rigs are in operation.

In early May, the company released results from 29 holes from its Winter 2011 drill program focused on confirming the continuity and grade of the mineralization of its existing deposit as well as follow-up exploration of a new, deeper higher grade zone showing mineralization. 

Management believes the configuration and characteristics of the main deposit make it potentially amenable to high volume open pit mining. Based on a Preliminary Economic Assessment (PEA) completed in September 2010, when fully operational the mine could run at a rate of up to 100,000 to 130,000 tons per day. In ongoing processing reviews, average mill recovery is estimated to be about 81%.

By 2012, International Tower will be working towards permitting and by 2014 construction is expected to begin. Gold production is penciled in for 2016. At a production rate of a whopping 833,000 ounces per annum, the mine has an expected life of 12.6 years. 

The Livengood sits near quality infrastructure, with direct access to paved highways. Alaska provides the ultimate in political stability as well as a highly trained work force.  While a multitude of permits, the state’s well-defined permitting path makes dealing with the government a smoother and manageable process. 

International Tower is sitting on a very large resource that has the potential to expand further. It is focused on quickly developing the project and beginning production in as little as five years to become a mid-tier producer. The company is well capitalized with $120 million in cash - enough to see it through to 2013. In the meantime, investors can look forward to oodles of drill data, a feasibility study and the advancement of the one of Alaska’s largest gold discoveries.