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|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;

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- 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

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- 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.

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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.

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|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.

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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 laudefrom 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.

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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.

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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 themajority 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.

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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.

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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

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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.

11

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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.

13

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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.

14

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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).

15

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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.

16

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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.

17

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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.

18

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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 CommonShares 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.

19

---

|                                                                          |   | 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

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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.

24

---

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
      $ -
      $21,153,600Mineral Property Leases(2)(3)
      3,800,275
      791,480
      1,983,913
      1,024,882Mining Claim Government Fees
      379,941
      54,277
      162,832
      162,832Office and Equipment Lease Obligations(4)
      965,000
      278,659
      602,533
      83,808Total 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.

32

---

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.

33

---

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  |  

34

---

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 |  

35

---

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  |  

36

---

|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.comor 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.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

37

---