UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
For the fiscal year ended December 31, 2023
OR
For
the transition period from to
Commission
file number: 333-150028
BUNKER
HILL MINING CORP.
(Exact
name of registrant as specified in its charter)
82 Richmond Street East
Toronto, Ontario, Canada M5C 1P1
(Address of principal executive offices) (Zip Code)
(416)477-7771
(Registrant’s
Telephone Number, including area code)
Securities
registered pursuant to Section 12(b) of the Act: None
Securities
registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐ No ☒
Indicate
by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes ☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller
reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☐
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by check mark whether the registrant is a shell company, as defined in Rule 12b-2 of the Exchange Act. Yes ☐ No
☒
As
of June 30, 2023, the aggregate market value of the voting and non-voting shares of common stock of the registrant issued and outstanding
on such date, excluding shares held by affiliates of the registrant as a group, was $46,175,584.
Number
of shares of common stock outstanding as of March 12, 2024: 330,054,341.
TABLE
OF CONTENTS
PART I 4
ITEM 1. BUSINESS 4
ITEM 1A. RISK FACTORS 10
ITEM 1B. UNRESOLVED STAFF COMMENTS 24
ITEM 1C. CYBERSECURITY 24
ITEM 2. PROPERTIES 25
ITEM 3. LEGAL PROCEEDINGS 35
ITEM 4. MINE SAFETY DISCLOSURES 35
ITEM 6. [RESERVED] 38
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 41
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 42
ITEM 9A. CONTROLS AND PROCEDURES 77
ITEM 9B. OTHER INFORMATION 79
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 79
PART III 80
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE 80
ITEM 11. EXECUTIVE COMPENSATION 82
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 90
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 91
SIGNATURES 93
Cautionary
Note to U.S. Residents Concerning Disclosure of Mineral Resources
Bunker
Hill Mining Corp. (“Bunker Hill,” “BHMC,” “we,” “us,” “our” or the “Company”)
is a U.S. domestic issuer for U.S. Securities and Exchange Commission (“SEC”) purposes, it is required to report its financial
results under U.S. Generally Accepted Accounting Principles (“U.S. GAAP”), and its shares of common stock trade on the TSX
Venture Exchange (the “TSXV”) and the OTCQB Venture Market. However, certain prior regulatory filings made in Canada contain
or incorporate by reference therein certain disclosure that satisfies the additional requirements of Canadian securities laws, which
differ from the requirements of United States’ securities laws. Unless otherwise indicated, all resource estimates included in
those Canadian filings, and in the documents incorporated by reference therein, had been prepared 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 (“CIM”) classification system. NI 43-101 is a rule developed by the Canadian Securities
Administrators which establishes standards for all public disclosure an issuer makes of scientific and technical information concerning
mineral projects.
Canadian
standards, including NI 43-101, may differ from the requirements of subpart 1300 of Regulation S-K (“S-K 1300”). Thus, resource
information contained, or incorporated by reference, in the Company’s Canadian filings, and in the documents incorporated by reference
therein, may not be comparable to similar information disclosed by companies reporting mineral reserve and mineral resource information
under S-K 1300.
The
terms “mineral reserve,” “proven mineral reserve” and “probable mineral reserve” are Canadian mining
terms as defined in accordance with NI 43-101 and CIM standards. Pursuant to S-K 1300, the SEC now recognizes estimates of “measured
mineral resources,” “indicated mineral resources” and “inferred mineral resources.” In addition, the SEC
has amended its definitions of “proven mineral reserves” and “probable mineral reserves” to be substantially
similar to the corresponding standards of the CIM.
Investors
are cautioned that while terms are substantially similar to CIM standards, there are differences in the definitions and standards under
S-K 1300 and the CIM standards. Accordingly, there is no assurance any mineral reserves or mineral resources that the Company may report
as “proven reserves,” “probable reserves,” “measured mineral resources,” “indicated mineral
resources” and “inferred mineral resources” under NI 43-101 will be the same as the reserve or resource estimates prepared
under the standards adopted under S-K 1300.
Investors
are also cautioned that while the SEC now recognizes “measured mineral resources,” “indicated mineral resources”
and “inferred mineral resources,” investors should not assume that any part or all of mineral deposits in these categories
will ever be converted into mineral reserves.
Mineralization
described using these terms has 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 “measured mineral resource,” “indicated mineral resource”
or “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 standards as in place tonnage and grade without reference to unit measures.
PART
I
ITEM
1. BUSINESS
Our
Business
Overview
The
Company’s sole focus is the development and restart of its 100% owned flagship asset, the Bunker Hill mine (the “Bunker Hill
Mine” or the “Mine”) in Idaho, USA. The Mine remains the largest single producing mine by tonnage in the Silver Valley
region of northwest Idaho, producing over 165 million ounces of silver and 5 million tons of base metals between 1885 and 1981. The Bunker
Hill Mine is located within Operable Unit 2 of the Bunker Hill Superfund site (EPA National Priorities Listing IDD048340921), where cleanup
activities have been completed.
The
Company was incorporated for the initial purpose of engaging in mineral exploration activities at the Mine. The Company has moved into
the development stage concurrent with (i) purchasing the Mine and a process plant, (ii) completing successive technical and economic
studies, including a Prefeasibility Study, (iii) delineating mineral reserves, and (iv) conducting the program of activities outlined
above.
Recent
Developments
In
March 2023, the Company amended the exercise price and expiry date of 10,416,667 warrants previously issued in a private placement to
Teck Resources (“Teck”) on May 13, 2022 in consideration for the Company’s acquisition of the Pend Oreille processing
plant. The warrant entitled the holder to purchase one share of common stock of the Company at an exercise price of C$0.37 per Warrant
at any time on or prior to May 12, 2025. The Company amended the exercise price from C$0.37 to C$0.11 per Warrant and the expiry date
from May 12, 2025, to March 31, 2023. In March 2023, Teck exercised all 10,416,667 warrants at an exercise price of C$0.11, for aggregate
gross proceeds of 837,460 (C$1,145,834) to the Company.
In
March 2023, the Company closed a brokered private placement of special warrants (the “March 2023 Offering”), issuing 51,633,727
special warrants of the Company (“March 2023 Special Warrants”) at C$0.12 per March 2023 Special Warrant for $4,536,020 (C$6,196,047),
of which $3,661,822 was received in cash and $874,198 was applied towards settlement of accounts payable, accrued liabilities and promissory
notes. Each March 2023 Unit consists of one share of common stock of the Company (each, a “Unit Share”) and one common stock
purchase warrant of the Company (each, a “Warrant”). Each whole Warrant entitles the holder thereof to acquire one share
of common stock of the Company (a “Warrant Share”, and together with the Unit Shares, the “Underlying Shares”)
at an exercise price of C$0.15 per Warrant Share until March 27, 2026, subject to adjustment in certain events. The Special Warrants
issued on March 27, 2023 were converted to 51,633,727 shares of common stock and common stock purchase warrants on July 24, 2023.
In
June 2023, the Company closed the upsized and improved $67,000,000 project finance package with Sprott, consisting of a $46,000,000
stream and a $21,000,000 new debt facility. The newly proposed $46,000,000 stream (the “Stream”) was envisaged to have
the same economic terms as the previously proposed $37,000,000 stream, with a $9,000,000 increase in gross proceeds received by the
Company, resulting in a lower cost of capital for the Company. The Company also announced a new $21,000,000 new debt facility (the
“Debt Facility”), available for draw at the Company’s election for two years. As a result, total funding
commitments from Sprott was envisaged to increase to $96,000,000 including the RCD royalty convertible debenture (the
“RCD”), the $6,000,000 convertible debenture (the “CD1”), the $15,000,000 convertible debenture (the “CD2”), Stream and debt facility (together, the
“Project Financing Package”). A $5,000,000 loan facility with Sprott that closed in December 2022 (the
“Bridge Loan”) was repaid from the proceeds of the Stream. The parties also agreed to extend the maturities of the CD1 and CD2 to March 31, 2026, when the full $6 million and $15
million, respectively, will become due.
In
July, the Company appointed Paul Smith to its Board of Directors.
Building
on the successful refinancing efforts, Bunker Hill announced the receipt of final listing approval from the TSX Venture Exchange (the “TSX-V”). The common stock of the Company (the “Common Shares”) began trading on the
TSX-V on September 8, 2023, under the symbol “BNKR”. The Company’s Common Shares were delisted from the Canadian Stock
Exchange (the “CSE Delisting”) at the close of business on September 7, 2023.
In
November, the company appointed Gerbrand van Heerden as its new CFO, replacing David Wiens who resigned to pursue another opportunity.
In November, the Company won the ESG Developer / Explorer
of the year award at the ‘Resourcing Tomorrow investment conference’ recognizing the importance of the Company’s ESG
strategy which is critical to enabling the restart of sustainable, profitable, and long-term mining operations within the Bunker Hill
Superfund Site.
During the course of 2023, the Wardner Operating
Yard, the base for Bunker Hill’s future mining operations, underwent a significant transformation. This included the removal
of the old, prefabricated portal and its replacement with upsized steel arch sets. This enlarged Russell Portal supports the planned
1800tpd operation with additional upside capacity of 2500tpd. Whilst this work was underway, procurement of a of the ventilation and air
system was completed, which will be installed before the end of 2024.
Engineering of the main Process Plant is
advancing on track including deep pier ground support to commence as part of site preparation for the construction of the Process Plant. All main civil, structural and mechanical outputs are on track. Long-lead
procurement orders have already been issued for the pre-engineered metal building, ore silo, conveyors,
ball mill starter motor, thickeners tanks and inching drive. Refurbishment of the Pend Oreille mill equipment, the source of the
majority of mill components, was well underway at year end.
During the 2023 a
Subsidiary of Teck Resources Limited (“Teck”) exercised its option for a minimum 5-year, 100% offtake of Bunker
Hill’s zinc and lead concentrates at its smelter in Trail, BC, ensuring a long-term, sustainable revenue source.
Company
History
In
early 2020, a new management team comprised of former executives from Barrick Gold Corp. assumed leadership of the Company. Since that
time, the Company conducted multiple exploration campaigns, economic studies and mineral resource estimates, and advanced
the rehabilitation and development of the Mine. In December 2021, it announced a project finance package with Sprott Private Resource
Streaming & Royalty Corp. (“Sprott”), an amended Settlement Agreement with the U.S. Environmental Protection Agency (the
“EPA”), and the purchase of the Bunker Hill Mine, setting the stage for a restart of the Mine.
Lease
and Purchase of the Bunker Hill Mine
The
Company purchased the Bunker Hill Mine in January 2022, as described below.
Prior
to purchasing the Mine, the Company had entered into a series of agreements with Placer Mining Corporation (“Placer Mining”),
the prior owner, for the lease and option to purchase the Mine. The first of these agreements was dated August 28, 2017, with
subsequent amendments and/or extensions announced on November 1, 2019, July 7, 2020, and November 20, 2020.
Under
the terms of the November 20, 2020 amended agreement (the “Amended Agreement”), a purchase price of $7,700,000 was agreed,
with $5,700,000 payable in cash (with an aggregate of $300,000 to be credited toward the purchase price of the Mine as having been previously
paid by the Company) and $2,000,000 in shares of common stock of the Company. The Company agreed to make an advance payment of $2,000,000,
credited toward the purchase price of the Mine, which had the effect of decreasing the remaining amount to an aggregate of $3,400,000 payable in cash and $2,000,000 in common stock of the Company.
The
Amended Agreement also required payments pursuant to an agreement with the EPA whereby for so long as the Company leases, owns and/or
occupies the Mine, the Company would make payments to the EPA on behalf of Placer Mining in satisfaction of the EPA’s claim for
historical water treatment cost recovery in accordance with the Settlement Agreement reached with the EPA in 2018. Immediately prior
to the purchase of the Mine, the Company’s liability to the EPA totaled $11,000,000.
The
Company completed the purchase of the Bunker Hill Mine on January 7, 2022. The terms of the purchase price were modified to $5,400,000
in cash, from $3,400,000 of cash and $2,000,000 of common stock of the Company. Concurrent with the purchase of the Mine, the Company
assumed incremental liabilities of $8,000,000 to the EPA, consistent with the terms of the amended Settlement Agreement with the EPA
that was executed in December 2021 (see “EPA 2018 Settlement Agreement & 2021 Amended Settlement Agreement” section below).
EPA
2018 Settlement Agreement & 2021 Amended Settlement Agreement
Bunker
Hill entered into a Settlement Agreement and Order of Consent with the EPA on May 15, 2018. This agreement limits the Company’s
exposure to the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) liability for past environmental
damage to the mine site and surrounding area to obligations that include:
In
December 2021, the Company entered into an amended Settlement Agreement
(the “Amendment”) between the Company, Idaho Department of Environmental Quality, U.S. Department of Justice (the “DOJ”)
and the EPA modifying the payment schedule and terms for recovery of historical environmental response costs at Bunker Hill Mine
incurred by the EPA. With the purchase of the mine, the remaining payments of the EPA cost recovery liability were assumed
by the Company, resulting in a total of $19,000,000 liability to the Company, an increase of $8,000,000. The new payment schedule included
a $2,000,000 payment to the EPA within 30 days of execution of this amendment, which was made.
The
remaining $17,000,000 will be paid on the following dates:
Date Amount
The
changes in payment terms and schedule were contingent upon the Company securing financial assurance in the form of performance bonds
or letters of credit deemed acceptable to the EPA totaling $17,000,000, corresponding to the Company’s cost recovery obligations
to be paid in 2024 through 2029 as outlined above. The amount of the bonds or letters of credit will decrease over time as individual payments are made.
In June 2022, the Company was successful in obtaining financial assurance. Specifically, a $9,999,000 payment bond
and a $7,001,000 letter of credit were secured by $2,475,000 and $7,001,000 of cash deposits as of September 30, 2022 and provided to
the EPA. Once the financial assurance was in place, the restructuring of the payment stream under the Amendment occurred with the entire
$17,000,000 liability being recognized as long-term in nature.
In
October 2022, the Company reported that it had secured a new payment bond to replace the $7,001,000
letter of credit, in two stages. Initially, the letter of credit was reduced to $2,000,001 as a result of a new $5,000,000 payment bond
obtained through an insurance company. The collateral for the new payment bond is comprised of a $2,000,000 letter of credit and land
pledged by third parties, with whom the Company has entered into a financing cooperation agreement that contemplates a monthly fee of
$20,000 (payable in cash or common stock of the Company, at the Company’s election). The new payment bond increased to $7,001,000 (from $5,000,000) on June 2023 due to the advancement of the multi-metals stream from Sprott
Private Resource Streaming & Royalty Corp.
Project
Finance Package with Sprott Private Resource Streaming & Royalty Corp.
On
December 20, 2021, the Company executed a non-binding term sheet outlining a $50,000,000 project finance package with Sprott Private
Resource Streaming and Royalty Corp. (“Royalty”). The term sheet consisted of an $8,000,000
royalty convertible debenture (the “RCD”), a $5,000,000 convertible debenture (the “CD1”), and a multi-metals
stream of up to $37,000,000 (the “Stream”). The CD1 was subsequently increased to $6,000,000, increasing the project financing
package to $51,000,000.
On
June 17, 2022, the Company consummated the $15,000,000 convertible debenture (the “CD2”). As a result, total potential
funding from Sprott was increased to $66,000,000 including the RCD, CD1, CD2 and the Stream (together, the “Project
Financing Package”).
The
Company closed the $8,000,000 RCD on January 7, 2022. The RCD bears interest at an annual rate of 9.0%, payable in cash or common stock
at the Company’s option, until such time that Sprott elects to convert a royalty, with such conversion option expiring at the earlier
of advancement of the Stream or July 7, 2023 (subsequently amended as described below). In the event of conversion, the RCD will cease
to exist and the Company will grant a royalty for 1.85% of life-of-mine gross revenue from mining claims considered to be historically
worked, contiguous to current accessible underground development, and covered by the Company’s 2021 geophysical survey (the
“Sprott Royalty”). A 1.35% rate will apply to claims outside of these areas. The RCD was initially secured by a share pledge
of the Company’s operating subsidiary, Silver Valley, until a full security package was put in place concurrent with the consummation
of the CD1. In the event of non-conversion, the principal of the RCD will be repayable in cash.
The
Company closed the $6,000,000 CD1 on January 28, 2022, which was increased from the previously announced $5,000,000. The CD1 bears interest
at an annual rate of 7.5%, payable in cash or common stock at the Company’s option, and matures on July 7, 2023 (subsequently amended,
as described below). The CD1 is secured by a pledge of the Company’s properties and assets. Until the closing of the Stream, the
CD1 was to be convertible into shares of Company common stock at a price of C$0.30 per share, subject to stock exchange approval (subsequently
amended, as described below). Alternatively, Sprott may elect to retire the CD1 with the cash proceeds from the Stream. The Company may
elect to repay the CD1 early; if Sprott elects not to exercise its conversion option at such time, a minimum of 12 months of interest would
apply.
Concurrent with the funding of the CD2, the Company and Sprott
agreed to a number of amendments to the terms of the RCD, including an amendment of the maturity date from July 7, 2023, to March 31,
2025. The parties also agreed to a Royalty Put Option such that in the event the RCD is converted into a royalty as described above, the
holder of the royalty will be entitled to resell the royalty to the Company for $8,000,000 upon default under the CD1 or CD2 until such
time that the CD1 and CD2 are paid in full.
Furthermore,
concurrent with the funding of the CD2 in June 2022, the Company and Sprott agreed to a number of amendments to the terms of the CD1,
including that the maturity date would be amended from July 7, 2023, to March 31, 2025, and that the CD1 would remain outstanding
until the new maturity date regardless of whether the Stream is advanced, unless the Company elects to exercise its option of early
repayment. The Company determined that amendments to the terms should not be treated as an extinguishment of CD1, but as a debt
modification.
The
Company closed the $15,000,000 CD2 on June 17, 2022. The CD2 bears interest at an annual rate of 10.5%, payable in cash or common stock
at the Company’s option, and matures on March 31, 2025. The CD2 is secured by a pledge of the Company’s properties and assets. Concurrent
with the funding of the CD2 in June 2022, the Company and Sprott agreed that the minimum quantity of metal delivered under the Stream,
if advanced, will increase by 10% relative to the amounts noted above.
On
December 6, 2022, the Company closed a new $5,000,000 loan facility with Sprott (the “Bridge Loan”). The Bridge Loan, which
was primarily utilized to pay outstanding water treatment payables to the EPA, is secured by the same security package in place
with respect to the RCD, CD1, and CD2. The Bridge Loan bears interest at a rate of 10.5% per annum and matures at the earlier of (i)
the advance of the Stream, or (ii) June 30, 2024. In addition, the minimum quantity of metal delivered under the Stream, if advanced,
would increase by 5% relative to amounts previously announced.
On June 23, 2023, the Company
closed the upsized and improved $67,000,000 project finance package with Sprott, consisting of a $46,000,000 stream and a $21,000,000
new debt facility, as outlined above. The Bridge Loan was repaid from the proceeds of the Stream. The parties also agreed to extend the
maturities of the CD1 and CD2 to March 31, 2026, when the full $6 million and $15 million, respectively, will become due.
Process
Plant
On
January 25, 2022, the Company announced that it had entered into a non-binding Memorandum of Understanding (“MOU”) with Teck
Resources Limited (“Teck”) for the purchase of a comprehensive package of equipment and parts inventory from its Pend Oreille
site (the “Process Plant”) in eastern Washington State. The package
comprises substantially all processing equipment including complete crushing, grinding and flotation circuits
suitable for a planned ~1,500 ton-per-day operation at Bunker Hill, and nearly 10,000 components and parts for mill,
assay lab, conveyer, field instruments, and electrical spares. The Company paid a $500,000 non-refundable deposit in January 2022.
On
March 31, 2022, the Company announced that it had reached an agreement to satisfy the remaining purchase price
for the Process Plant by way of an equity issuance of the Company. Teck will receive 10,416,667 units of the Company (the “Teck
Units”) at a deemed issue price of C$0.30 per unit. Each Teck Unit consists of one share of Company common stock and one common
stock purchase warrant (the “Teck Warrants”). Each whole Teck Warrant entitles the holder to acquire one share of Company
common stock at a price of C$0.37 per share for a period of three years. The equity issuance and purchase of the Process Plant occurred
on May 13, 2022.
Business
Operations
The
Mine is a zinc-lead-silver mine. When in production, the Company intends to mill mineral resources on-site to produce both zinc and
lead-silver concentrates which will then be shipped to a Teck’s Trail smelter for processing as per the underlying off-take
agreement.
Infrastructure
The
Mine includes all mining rights and claims, surface rights, fee parcels, mineral interests, easements, existing infrastructure at Milo
Gulch, and the majority of machinery and buildings at the Kellogg Tunnel portal level, as well as all equipment and infrastructure anywhere
underground at the Bunker Hill Mine Complex. It also includes all current and historic data relating to the Bunker Hill Mine Complex,
such as drill logs, reports, maps, and similar information located at the Mine site or any other location. For further detail, please
refer to the “Project Infrastructure” section in Item 2 below.
Government
Regulation and Approval
Exploration
and development activities, and any future mining operations, are subject to extensive laws and regulations governing the protection
of the environment, waste disposal, worker safety, mine construction, and protection of endangered and protected species. The Company
has made, and expects to make in the future, significant expenditures to comply with such laws and regulations. Future changes in applicable
laws, regulations and permits or changes in their enforcement or regulatory interpretation could have an adverse impact on the Company’s
financial condition or results of operations.
It
may be necessary to obtain the following environmental permits or approved plans prior to commencement of mine operations:
● Air quality operating permit
If
this permit is required, there can be no assurance that the Company will be able to obtain it in a timely manner or at all. For
further detail, please refer to the “Environmental Studies and Permitting” section of the “Technical Report Summary”
in Item 2 below.
Property
Description
The
Company has mineral rights to approximately 440 patented mining claims covering over 5700 acres. Of these claims, 35 include surface
ownership of approximately 259 acres. It also has certain parcels of fee property which include mineral and surface rights but not patented
mining claims. Mining claims and fee properties are located in Townships 47, 48 North, Range 2 East, Townships 47, 48 North, Range 3
East, Boise Meridian, Shoshone County, Idaho.
Patented
mining claims in the State of Idaho do not require permits for underground mining activities to commence on private lands. Other permits
associated with underground mining may be required, such as water discharge and site disturbance permits. The water discharge is being
handled by the EPA at the existing CTP. The Company expects to be responsible for water treatment in the future and obtain an
appropriate discharge permit.
For
further detail, please refer to the “Property Description and Ownership” section of the “Technical Report Summary”
in Item 2 below.
Competition
The
Company competes with other mining and exploration companies in connection with the acquisition of mining claims and leases on zinc and
other base and precious metals prospects as well as in connection with the recruitment and retention of qualified employees. Many of
these companies are much larger than the Company, have greater financial resources and have been in the mining business for much longer
than it has. As such, these competitors may be in a better position through size, finances and experience to acquire suitable exploration
and development properties. The Company may not be able to compete against these companies in acquiring new properties and/or qualified
people to work on its current project, or any other properties that may be acquired in the future.
Given
the size of the world market for base precious metals such as silver, lead and zinc, relative to the number of individual producers and
consumers, it is believed that no single company has sufficient market influence to significantly affect the price or supply of these
metals in the world market.
Employees
The
Company has twenty employees as of December 31, 2023. The balance of the Company’s operations is contracted for as consultants.
Reports
to Security Holders
The
Company files reports with the SEC under section 15d of the Securities Exchange Act of 1934 (the “Exchange Act”). The reports
will be filed electronically. All copies of any materials filed with the SEC may be read at the SEC’s Public Reference Room at
100 F Street, NE, Room 1580, Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling
the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that will contain copies of the reports that are filed electronically.
The address for the SEC Internet site is http://www.sec.gov.
ITEM
1A. RISK FACTORS
Our
business activities and the value of our securities are subject to significant hazards and risks, including those described below. If
any of such events should occur, our business, financial condition, liquidity, and/or results of operations could be materially harmed,
and holders and purchasers of our securities could lose part or all of their investments. Our risk factors are grouped into the following
categories:
● General Risk Factors;
● Risks Related to Mining and Exploration; and
● Risks Related to the Company’s Common Stock.
General Risk Factors
A
lead concentrate offtake agreement with Teck Resources may not be reached, which could result in less favorable commercial terms for
the sale of concentrates envisaged to be produced by the Mine and could also impact the Company’s ability to secure
offtake financing. Regardless of actions taken by Teck, there can be no assurance that the Company will be able to secure or close offtake
financing, which could have an adverse effect on the Company’s financial position and a negative impact the Company’s ability
to secure additional funding from Sprott or an alternative capital provider.
The
Company may not be able to execute a lead concentrate offtake agreement for the sale of lead concentrates to Teck Resources at its Trail
smelter, as contemplated with Teck’s option to acquire 100% of lead concentrate produced in the first five years at the Bunker
Hill Mine. If such an agreement cannot be reached, the Company may not be able to sell its lead concentrate to Teck, which could result
in difficulties securing alternative commercial arrangements for the sale of concentrate, less favorable commercial terms in the event
that alternative commercial arrangements can be secured, and/or higher transportation and other costs. In addition, the Company may not
be able to secure or close offtake financing, regardless of whether an agreement is reached with Teck; the terms of any offtake financing
might not be favorable to the Company; and/or the Company may incur substantial fees and costs related to such financing. The Company’s
inability to secure or close offtake financing, or arrange a suitable alternative, may have an adverse effect on the Company’s
operations and financial position.
The
Bunker Hill Mine restart is expected to take place in 2024, with first concentrate production targeted for the fourth quarter of 2024.
Changes to this timeline, or other factors impacting the restart project budget, could increase the Company’s required capital
needs through the completion of the project, which would adversely affect the Company’s ability to secure additional funding, thereby
adversely affecting its financial condition.
The
Bunker Hill Mine restart is expected to take place in 2024, with first concentrate production targeted for the fourth quarter of 2024.
However, the estimated timing of Bunker Hill Mine restart is subject to change based on factors beyond the Company’s control, including
but not limited to supply chain dynamics. In addition, the Company’s pre-production budget estimates are subject to change based
on factors beyond its control, including but not limited to cost inflation and supply chain dynamics. An increase in the Company’s
pre-production budget estimates could have a materially adverse impact on its ability to secure additional financing. This could have
a material adverse effect on its financial condition, results of operations, or prospects. Sales of substantial amounts of securities
may have a highly dilutive effect on the Company’s ownership or share structure. Sales of a large number of shares of Company common
stock in the public markets, or the potential for such sales, could decrease the trading price of the common stock and could impair the
Company’s ability to raise capital through future sales of common stock. The Company has not yet commenced commercial production
at any of its properties and, therefore, has not generated positive cash flows to date and has no reasonable prospects of doing so unless
successful commercial production can be achieved at the Mine. The Company expects to continue to incur negative investing and operating
cash flows until such time as it enters into successful commercial production. This will require the Company to deploy its working capital
to fund such negative cash flow and to possibly seek additional sources of financing. There is no assurance that any such financing sources
will be available or sufficient to meet the Company’s requirements, or if available, upon terms acceptable to the Company. There
is no assurance that the Company will be able to continue to raise equity capital or to secure additional debt financing, or that the
Company will not continue to incur losses.
Payment
bonds securing $17,000,000 due by the Company to the EPA for cost recovery may not be renewable or may only be renewable on terms that
are unfavorable to the Company, which would adversely affect its financial condition or cause a default under the revised settlement
agreement with the EPA and Sprott.
In
2022, the Company secured financial assurance in the form of payment bonds in accordance with the revised settlement agreement with the
EPA, in relation to $17,000,000 of payments due to the EPA for cost recovery between 2024 and 2029. These bonds are renewed annually,
and as of December 31, 2023, require $6,476,000 of collateral in the form of letters of credit. To the extent that the parties providing
the payment bonds demand additional collateral beyond the current requirements, or other unfavorable terms or conditions, the Company
may not be able to renew the payment bonds on favorable conditions, or at all. This could have a materially adverse impact on the Company,
including a potential default under the revised settlement agreement with the EPA.
The
Company has a limited operating history on which to base an evaluation of its business and prospects.
Since
its inception, the Company has had no revenue from operations. The Company has no history of producing products from the Bunker Hill
property. The Mine is a historic, past producing mine with very little recent exploration work. Advancing the Mine through the development
stage will require significant capital and time, and successful commercial production from the Mine will be subject to completing the
requisite studies, permitting and re-commissioning of the Mine, constructing a processing plant, and completing other related works and
infrastructure. As a result, the Company is subject to all of the risks associated with developing and establishing new mining operations
and business enterprises, including:
The
costs, timing, and complexities of exploration, development, and construction activities may be increased by the location of the Company’s
properties and demand by other mineral exploration and mining companies. It is common in exploration programs to experience unexpected
problems and delays during drill programs and, if commenced, development, construction, and mine start-up. In addition, the Company’s
management and workforce will need to be expanded, and sufficient housing and other support systems for its workforce will have to be
established. This could result in delays in the commencement of mineral production and increased costs of production. Accordingly, the
Company’s activities may not result in profitable mining operations, and it may not succeed in establishing mining operations or
profitably producing metals at any of its current or future properties, including the Mine.
The
Company has a history of losses and expects to continue to incur losses in the future.
The
Company has incurred losses since inception, has had negative cash flow from operating activities, and expects to continue to incur losses
in the future. The Company has incurred the following losses from operations during each of the following periods:
The
Company expects to continue to incur losses unless and until such time as the Mine enters into commercial production and generates sufficient
revenues to fund continuing operations. The Company recognizes that if it is unable to generate significant revenues from mining operations
and dispositions of its properties, the Company will not be able to earn profits or continue operations. At this early stage of its operation,
the Company also expects to face the risks, uncertainties, expenses, and difficulties frequently encountered by smaller reporting companies.
The Company cannot be sure that it will be successful in addressing these risks and uncertainties and its failure to do so could have
a materially adverse effect on its financial condition.
Risks
Related to Mining and Exploration
The
Company is in the development stage.
The
nature of mineral exploration and production activities involves a high degree of risk and the possibility of uninsured losses.
Exploration
for and the production of minerals is highly speculative and involves much greater risk than many other businesses. Most exploration
programs do not result in the discovery of mineralization, and any mineralization discovered may not be of sufficient quantity or quality
to be profitably mined. The Company’s operations are, and any future development or mining operations the Company may conduct will
be, subject to all of the operating hazards and risks normally incidental to exploring for and development of mineral properties, including,
but not limited to:
● economically insufficient mineralized material;
● fluctuation in production costs that make mining uneconomical;
● labor disputes;
● unanticipated variations in grade and other geologic problems;
● environmental hazards;
● water conditions;
● difficult surface or underground conditions;
● industrial accidents;
● metallurgic and other processing problems;
● mechanical and equipment performance problems;
● unusual or unexpected rock formations; and
● personal injury, fire, flooding, cave-ins and landslides.
Any
of these risks can materially and adversely affect, among other things, the development of properties, production quantities and rates,
costs and expenditures, potential revenues, and production dates. If the Company determines that capitalized costs associated with any
of its mineral interests are not likely to be recovered, the Company would incur a write-down of its investment in these interests. All
these factors may result in losses in relation to amounts spent that are not recoverable, or that result in additional expenses.
Commodity
price volatility could have dramatic effects on the results of operations and the Company’s ability to execute its business plan.
The
price of commodities varies on a daily basis. The Company’s future revenues, if any, will likely be derived from the extraction
and sale of base and precious metals. The price of those commodities has fluctuated widely, particularly in recent years, and is affected
by numerous factors beyond the Company’s control, including economic and political trends, expectations of inflation, currency
exchange fluctuations, interest rates, global and regional consumptive patterns, speculative activities and increased production due
to new extraction developments and improved extraction and production methods. The effect of these factors on the price of base and precious
metals, and therefore the economic viability of the Company’s business, could negatively affect its ability to secure financing
or its results of operations.
The
Company’s development and production plans, and cost estimates, in the Technical Report Summary may vary and/or not be achieved.
There
is no certainty that the results in the Technical Report Summary will be realized. The decision to implement the Mine restart scenario
to be included in the Technical Report Summary was not be based on a feasibility study of mineral reserves demonstrating economic and
technical viability, and therefore there is increased risk that the Technical Report Summary results will not be realized. If the Company
is unable to achieve the results in the Technical Report Summary, it may have a material negative impact on the Company, and its capital
investment to implement the restart scenario may be lost.
Costs
charged to the Company by the Idaho Department of Environmental Quality (“IDEQ”) for treatment of wastewater fluctuate a
great deal and are not within the Company’s control.
The
Company is billed annually for water treatment activities performed by the IDEQ for the EPA. The water treatment costs that Bunker Hill
is billed for are partially related to the EPA’s direct cost of treating the water emanating from the Bunker Hill Mine, which are
comprised of lime and flocculant usage, electricity consumption, maintenance and repair, labor and some overhead. Rate of discharge of
effluent from the Bunker Hill Mine is largely dependent on the level of precipitation within a given year and how close in the calendar
year the Company is to the spring run-off. Increases in water infiltrations and gravity flows within the mine generally increase after
winter and result in a peak discharge rate in May. Increases in gravity flow and consequently the rate of water discharged by the mine
have a highly robust correlation with metals concentrations and consequently metal loads of effluent.
Hydraulic
loads (quantities of water per unit of time) and metal loads (quantities of metals per unit of volume of effluent per unit of time) are
the two main determinants of cost of water treatment by the EPA in the relationship with the Bunker Hill Mine because greater metal loads
consume more lime, more flocculent and more electricity to remove the increased levels of metals and make the water clean. The scale
of the treatment plant is determined by how much total water can be processed (hydraulic load) at any point in time. This determines
how much labor is required to operate the plant and generally determines the amount of overhead required to run the IDEQ business.
The
EPA has completed significant upgrades to the water treatment capabilities of the CTP and is now capable of producing treated water than
can meet a much higher discharge standard (which Bunker Hill has been satisfying since May 2023). While it was understood that improved
performance capability would increase the cost of operating the plant, it was unclear to the EPA, and consequently to Bunker Hill, how
much the costs would increase by.
These
elements described above, and others, impact the direct costs of water treatment. A significant portion of the total amount invoiced
by the EPA each year is indirect cost that is determined as a percentage of the direct cost. Each year the indirect costs percentage
changes within each region of the EPA. Bunker Hill has no ability to impact the percentage of indirect cost that is set by the EPA regional
office. Bunker Hill also has no advanced notice of what the percentage of indirect cost will be until it receives its invoice in June
of the year following the billing period. The Company remains unable to estimate EPA billings to a high degree of accuracy.
Estimates
of mineral reserves and resources are subject to evaluation uncertainties that could result in project failure.
The
Company’s exploration and future mining operations, if any, are and would be faced with risks associated with being able to accurately
predict the quantity and quality of mineral resources/reserves within the earth using statistical sampling techniques. Estimates of any
mineral resource/reserve on the Mine would be made using samples obtained from appropriately placed trenches, test pits, underground
workings, and designed drilling. There is an inherent variability of assays between check and duplicate samples taken adjacent
to each other and between sampling points that cannot be reasonably eliminated. Additionally, there also may be unknown geologic details
that have not been identified or correctly appreciated at the current level of accumulated knowledge about the Mine. This could result
in uncertainties that cannot be reasonably eliminated from the process of estimating mineral resources/reserves. If these estimates were
to prove to be unreliable, the Company could implement an exploitation plan that may not lead to commercially viable operations in the
future.
Any
material changes in mineral resource/reserve estimates and grades of mineralization will affect the economic viability of placing a property
into production and a property’s return on capital.
As
the Company has not commenced actual production, mineral resource estimates may require adjustments or downward revisions. In addition,
the grade of ore ultimately mined, if any, may differ from that indicated by future feasibility studies and drill results. Minerals recovered
in small-scale tests may not be duplicated in large-scale tests under on-site conditions or in production scale.
The
Company’s exploration activities may not be commercially successful, which could lead the Company to abandon its plans to develop
the Mine and its investments in exploration.
The
Company’s long-term success depends on its ability to identify mineral deposits on the Mine and other properties the Company may
acquire, if any, that the Company can then develop into commercially viable mining operations. Mineral exploration is highly speculative
in nature, involves many risks, and is frequently non-productive. These risks include unusual or unexpected geologic formations, and
the inability to obtain suitable or adequate machinery, equipment, or labor. The success of commodity exploration is determined in part
by the following factors:
● the identification of potential mineralization based on surficial analysis;
● availability of government-granted exploration permits;
● the quality of management and its geological and technical expertise; and
● the capital available for exploration and development work.
Substantial