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Item 2. Properties

2020-12-04 compared with 2020-11-24 · 76 added, 94 removed, 152 unchanged (53% of the section changed)

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The Bunker Hill Mine

The Bunker Hill Mine is one of the most well-known base metal and silver mines in American history.

Initial discovery and development of the Bunker Hill Mine property began in 1885, and from that time until the mine closed in 1981 it produced over 35.8 million tons of ore at an average mined grade of 8.76% lead, 4.52 ounces per ton silver, and 3.67% zinc, which represented 162Moz of Silver, 3.16M lbs.

of Lead and 1.35M lbs.

of Zinc (Bunker Limited Partnership, 1985).

Throughout the 95-year operating history of the mine, there were over 40 different orebodies discovered and mined, consisting of Lead-Silver-Zinc mineralization.

Although known for its significant Lead and Zinc production, 45-50% of the Net Smelter Value of its historical production came from its Silver.

The Bunker Hill Mine is one of the most storied base metal and silver mines in American history.

Throughout the long history of the mine, there were over 40 different orebodies discovered and mined, primarily consisting of Zinc-Lead-Silver mineralization.

The Bunker Hill and Sullivan Mining Company had a strong history of regular dividend payments to shareholders from the time the Company went public in 1905 until it was acquired in a hostile takeover by Gulf Resources in 1968.

When the mine first closed in 1981, it was estimated to still contain significant resources (Bunker Limited Partnership, 1985).

The Mine and Smelter Complex were closed in 1981 when Gulf Resources was not able to continue to comply with new regulatory structures brought on by the passage of environmental statutes and as then enforced by the EPA.

The Bunker Hill Lead Smelter, Electrolytic Zinc Plant and historic milling facilities were demolished about 25 years ago, and the area became part of the “National Priority List” for cleanup under EPA regulations, thereby pausing development of the Bunker Hill Mine for over 30 years.

The cleanup of the old smelter, zinc plant, and associated sites has now been completed and the Mine is now poised for development and an eventual return to production.

The Company has been in contact with government officials and other local stakeholders who have expressed strong support and cooperation for the Company in its efforts to return the mine to being a productive, modern and sustainable mining asset.

The majority of the cleanup of the old smelter, zinc plant, and associated sites has now been completed and the Mine is now poised for further development and an eventual return to production.

The Company has been in contact with government officials who have expressed strong support and cooperation for the Company efforts to return the mine to being a productive mining asset.

The Bunker Hill lode in Northern Idaho was discovered on September 9, 1885 by prospectors who had journeyed to Idaho as part of a gold rush in the nearby Murray District.

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In 1887 Simeon G.

Reed purchased the claims and mill and incorporated the Bunker Hill and Sullivan Mining and Concentrating Company (“Bunker Hill Mining Company”).

Reed purchased the claims and mill and incorporated the Bunker Hill and Sullivan Mining and Concentrating Company.

As the tonnage of ore in the mine increased, it became apparent that a mill of larger capacity was needed, and in 1891 a new mill of 400-ton capacity was built in the main valley below the confluence of Milo Creek with the South Fork of the Coeur d'Alene River.

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This tramway served to transport all mine ore until the two-mile long Kellogg Tunnel was completed in 1902.

Two men stand out in the early history of Bunker Hill Mining Company.

Two men stand out in the early history of the company.

They are Frederick W.

Bradley and Stanly A.

Bradley first became associated with Bunker Hill Mining Company as a young engineer in 1890.

In 1893 he was named general manager of the operation, and in 1897 he became Bunker Hill Mining Company's fourth president, a position he held until his death in 1933.

Bradley first became associated with the company as a young engineer in 1890.

In 1893 he was named general manager of the operation, and in 1897 he became the company's fourth president, a position he held until his death in 1933.

He brought to Kellogg another young California engineer, Stanly Easton, who became general manager in 1903 and succeeded Bradley as President.

Under the guidance of these two men Bunker Hill Mining Company grew from a small mining and concentrating venture to a large, integrated mining and smelting operation with a national presence.

On May 25, 1917, Bunker Hill Mining Company joined with the Hecla Mining Company in forming the Sullivan Mining Company, which purchased and operated the Star mine near Mullan, Idaho, approximately 15 miles to the east.

Under the guidance of these two men the Bunker Hill Company grew from a small mining and concentrating venture to a large, integrated mining and smelting operation with a national presence.

On May 25, 1917, Bunker Hill and Sullivan joined with the Hecla Mining Company in forming the Sullivan Mining Company, which purchased and operated the Star mine near Mullan, Idaho, approximately 15 miles to the east.

The ore from the Star mine had a relatively high zinc content and necessitated the construction of an electrolytic zinc plant which was the first plant constructed of this type.

The technological process that was devised for the plant was recognized as a significant new development in the metallurgical field and made possible the widespread use of zinc in such applications as galvanizing.

From its early days and through two major world wars the Bunker Hill Mining Company operated as an independent and well-known mining and smelting company and was listed on the New York Stock Exchange.

On June l, 1968, in one of the earliest leveraged buyouts, Bunker Hill Mining Company became a wholly owned subsidiary of Gulf Resources & Chemical Corp.

Growing public concern with the environment in the 1970s compelled Bunker Hill Mining Company to spend large sums on plant improvements in order to comply with newly enacted federal air and water pollution laws.

The Bunker Hill Mining Company also made major efforts to reclaim surrounding hillsides which had been denuded by the effects of decades of airborne smelter effluents and timbering for mining purposes.

Ultimately the costs of environmental compliance and the deep recession of 1981 with resulting declines in metal prices led to Gulf Resources' decision in August 1981 to close its Bunker Hill Mining Company operations and put the company up for sale.

From its early days and through two major world wars the Bunker Hill Company operated as an independent and well-known mining and smelting company and was listed on the New York Stock Exchange.

On June l, 1968, in one of the earliest leveraged buyouts, Bunker Hill became a wholly owned subsidiary of Gulf Resources & Chemical Corp.

Growing public concern with the environment in the 1970s compelled Bunker Hill to spend large sums on plant improvements in order to comply with newly enacted federal air and water pollution laws.

The Company also made major efforts to reclaim surrounding hillsides which had been denuded by the effects of decades of airborne smelter effluents and timbering for mining purposes.

In 1982 the company was sold to the Bunker Limited Partnership (“BLP”) whose principal owners were Harry Magnuson, Duane Hagadone, Jack Kendrick and Simplot Development Company (the Simplot company dropped out of the partnership in 1987).

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A number of other mines including the Sunshine, the Crescent, and the Coeur Mine have the potential to be re-started should silver prices rise sufficiently to justify reactivation.

The geology of the Silver Valley district occurs within the Precambrian meta-sedimentary rocks of the Belt-Purcell Supergroup, a Middle Proterozoic sedimentary basin occurring primarily in western Montana, Idaho and Southeastern British Columbia.

In the Coeur d’Alene region these comprise of a 21,000’ thick sequence of clastic, (argillites, siltites, and quartzites) and carbonate sedimentary rocks.

These rocks have been metamorphosed and strongly deformed by compressional tectonics during the Sevier Orogenic event of the cretaceous age.

Following this, later in the cretaceous age, the Bitterroot Lobe of the Idaho Batholith was emplaced to the south of the Coeur d’Alene district which was accompanied by dike emplacement.

The mining district lies within the west-central part of a regional tectonic lineament known as the Lewis and Clark line, a major fault system, consisting of numerous faults that display strike slip, normal and reverse movements over a protracted geological history.

The Bunker Hill deposit occur within the Revett and St Regis formations of the Ravalli Group, with the quartzites and siltites of the Middle Revett formation dominating.

Most significant, and the common host to the larger Bunker Hill ore bodies is the M2 Unit of the Middle Revett formation, which is the thickest and most continuous quartzite package in the formation.

The mine area lies on the north limb of an anticline fold in these rocks, which establishes a west-northwest to northeast trend for bedding planes.

With the axis of this anticline inclined southwesterly, the formations on the north limb dip steeply upright to the northwest or are overturned steeply to the south or southwest.

The structural features that dominate the broad framework in which the Bunker Hill mine is located are the Osburn Fault to the North, which has a right-lateral offset of several miles bringing the older Prichard formation rocks opposite the mine formations, the Alhambra Fault to the east, and the large Anticline to the west and south.

The structure of the Bunker Hill deposits is associated with this anticline and are hosted by the fold-generated fractures and brecciation in the quartzite beds created in the hinge and near-hinge limbs of the broad flexure.

Fold-associated elements include sphalerite-pyrite-siderite filled reverse shears, replacement mineralization of stratiform-like fabric composed of both sphalerite and galena, and principally sphalerite replacement as fine “crackle breccia” and irregular dense soaking.

The development of these various fabrics appears to be dependent on location relative to the hinge, lithology of the host unit, and the stratigraphic horizon in the Revett formation

The District is underlain by members of the Precambrian Belt Super Group.

The metasedimentary rocks are predominantly fine-grained quartzite, siltites and argillites.

The District is structurally complex with multiple folding and faulting events being evident.

The WNW-trending Osburn fault runs through the district and has about 15 miles of right lateral displacement.

Mineralized zones in the district are generally parallel to sub-parallel to the Osburn fault.

Numerous mines, including the Bunker Hill, are located south of the Osburn fault and occupy the steeply dipping to overturned north limb of a WNW-trending fold.

Mineralization

Mineralization is hosted by parallel mesothermal veins related to metamorphic/hydrothermal events that sourced metals from the Belt sediments.

This consists of wide veins with variable proportions of sphalerite, galena and tetrahedrite in either a quartz or siderite gangue.

The individual deposits that form the Bunker Hill Mine are numerous and relatively large with strike lengths up to 900 ft (274 m) with plunge lengths up to 3,000 ft (914 m) with many open at depth.

Wall rock alteration associated with veining consists of changes in carbonate mineralogy plus sulfidation and silicification.

Pyritization of wall rocks is locally strong.

Bleached halos resulting from destruction of hematite by hydrothermal fluids are also characteristic.

The mineralization is partly oxidized to a depth of approximately 1,800 ft (549 m).

There are three distinct types of mineralization at Bunker Hill:

The mineralization at Bunker Hill is hosted in localized, structurally controlled shear zones and strati-form zones of significant width.

The mineral bodies are grouped into three different types.

The NW trending Bluebird mineral zones are zinc rich and consist of sphalerite in excess of galena with variable amount of pyrite in a gangue of greyish quartz and minor siderite.

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The galena penetrated and partially replaced the previous minerals and filled remaining open spaces (Meyer, 1981).

Many of the deposits, and especially those of the bluebird system, may have originally comprised a parallel set of only four or five persistent fracture sets.

However, extremely complex post- mineralization shearing has segmented and displaced the deposits.

Mine and Mill Operations

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The milling facility and smelting complex have all been razed and remediation of these sites has been largely completed.

An existing water treatment plant which was originally built by the Bunker Hill Company remains in operation and is operated by the EPA through a local contractor.

An existing water treatment plant which was originally built by the Bunker Hill Company remains in operation and is operated by the United States Environmental Protection Agency (the “E.P.A.”) through a local contractor.

This plant has received numerous upgrades and capacity improvements in the last twenty-five years.

All mine water which is discharged from the Bunker Hill Mine has been treated by the EPA during the ownership of the mine by Placer Mining.

All mine water which is discharged from the Bunker Hill Mine has been treated by the E.P.A.

during the ownership of the mine by Placer Mining.

Index of Geologic and Mining Terms

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Rock composed of compacted volcanic ejected materials.

Completed Work and Future Development Plans

The Company has commenced a significant transformation since March 2020 following the appointments of Mr.

Richard Williams as Executive Chairman and Mr.

Sam Ash as CEO.

The former, based in Toronto and the latter, based in Kellogg at the mine site.

Concurrent to upgrading the company’s governance systems, this new leadership has prioritized investment in exploration and water management over exercising its right to purchase the mine, as the optimal value-creation path for this stage of its development.

The former is designed to maximize the economic value in the mine, whilst the latter improves its sustainability, with both informing the restart plans and the optimal time to exercise the asset purchase.

Digitization of Data

Led by the new CEO, the Company has undertaken an extensive due diligence program to assure itself of the viability of a restart of the Bunker Hill Mine.

This necessitated an extensive review, compilation and digitization of the records that were present primarily at the Bunker Hill Mine offices.

At those offices there are tens of thousands of pages of reports and records, including data from over 3500 Drill Holes, (representing 180,000m of drill core), which detail the operations of the mine and its supporting exploration efforts from its earliest days to the time of the shutdown in 1991 by BLP.

Having reviewed, compiled and digitized the data and built the first working digital model of the mine and its geology, the Company has satisfied itself that there is a large amount of remaining lead/silver/zinc mineralization in numerous zones within the Bunker Hill Mine, and that there exists significant high-grade silver potential throughout the mine, and at depth.

This has led the Company to prioritize the exploration of the silver potential contained within the Galena-Quartz or Hybrid Veins over the Zinc mineralization, and is represented by a strategy that is best characterized as a ‘Pivot to Silver’.

Concurrent to the digitization work, and since March 2020, the Company has been working systematically to bring a number of these zones into National Instrument 43-101 (“NI 43-101”) compliance through drilling and channel sampling of the open stopes.

This has been focused upon the mineralization that is closest to the existing infrastructure and above the current water-level, and is represents the first of two distinct phases of exploration:

Validation to NI 43-101 standards of up to 9Mt of primarily Zinc Ore contained within the UTZ, Quill and Newgard Ore Bodies.

This was conducted between April and July of 2020, involved over 9,000’ of drilling from Underground and extensive sampling from the many open stopes above the water-level.

These mineral zones will be the first to be NI 43-101 verified using recent exploration data and could provide the majority of the early feed upon mine start-up.

It is intended that the Company intends to file a NI 43-101 on SEDAR in the latter half of 2020 to detail the results of the exploration and development options.

Exploration of high-grade Lead-Silver Mineralization, in the upper levels of the mine and identified by the data review and digitization process.

The intends to include start with over 30,000’ of drilling from surface and underground, with the express purpose of affirming the silver potential within the mine as part of the resource development work started in Phase One.

Water Management Optimization

The EPA currently provides mine water treatment services for the Bunker Hill Mine to ensure compliance with existing discharge standards.

This is done via its management of the Central Water Treatment Plant, located adjacent and downstream to the mine.

Although it also treats other contaminated water collected from other sources in the vicinity, with respect to its service to Bunker Hill Mine, this facility treats all the water that exits the Kellogg Tunnel before it is discharged into the South Fork of the Coeur D’Alene River.

In partnership with the EPA, and concurrent to its exploration efforts the Company has started an extensive review of the current water management and treatment system and identified several optimization opportunities.

These will be studied and then developed further over FY 2021 to highlight ways to improve the efficiency of that system, and thereby improve the long-term sustainability of the mine to the significant benefit of all stakeholders.

These studies also extend to optimizing existing de-watering plans, designed to enable access to the lower parts of the mine.

Infrastructure Review

The Bunker Hill Mine main level is termed the nine level and is the largest level in the mine.

It is connected to the surface by the approximately 12,000 foot-long Kellogg Tunnel.

Completed Work and Future Plan of Operations

The Company has undertaken a due diligence program to assure itself of the viability of a restart of the Bunker Hill Mine.

This necessitated an extensive review of the records that were present primarily at the Bunker Hill Mine offices.

At those offices there are tens of thousands of pages of reports and records which detail the operations of the mine from its earliest days to the time of the shutdown in 1991 by BLP.

In addition to reports, there are several thousand historical maps of all scales and sizes as well as historical mineral diagrams which detail the mineral bodies that remained in the mine at the time of closure in January, 1991.

These reports are not compliant with Canada National Instrument 43-101 and cannot be used for the purposes of establishing reserves pursuant to that standard.

The Company has satisfied itself that there is a large amount of remaining zinc/lead/silver mineralization in numerous zones within the Bunker Hill Mine.

The Company is now developing a plan to bring a number of these zones into N.I.

43-101 compliance through new sampling and drilling programs.

The Company has identified several zones as having highest priority.

The Company has prioritized zones capable of providing production in the near term, these being the UTZ Zone, the Newgard Zone and the Quill Zone.

These three mineral zones will be the first to be N.I.

43-101 verified and will provide the majority of the early feed upon mine start-up.

The Bunker Hill Mine main level is termed the nine level and is the largest level in the mine and is connected to the surface by the approximately 12,000 foot-long Kellogg Tunnel.

Three major inclined shafts with associated hoists and hoistrooms are located on the nine level.

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However, the upper part of the mine from eight level up to the four level has been developed by past operators by a thorough-going rubber tire ramp system, which is judged to be about 65% complete.

The Company has repaired the first several thousand feet of the Russell Tunnel, which is a large rubber-tire capable tunnel with an entry point at the head of Milo Gulch.

This tunnel will provide early access to the UTZ Zone, and Quill and Newgard Zones, following ramp and access development.

The Company has already repaired the first several thousand feet of the Russell Tunnel, which is a large rubber tire capable tunnel with an entry point at the head of Milo Gulch.

This tunnel will provide early access to the UTZ Zone.

The Company has inspected a great deal of the ramp system between the eight level and the four level, and the ramps are in good shape with only minor repair and rehabilitation needed.

The Company has made development plans to provide interconnectivity of the ramp system from the Russell Tunnel at the four level down to the eight level, with further plans to extend the ramp down to the nine level.

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These are areas that intersect various faults passing through the KT at normal to oblique angles and create unstable ground.

The Company has determined that all of the track, as well as spikes, plates and ties holding the track will need to be replaced, and has started that process in support of the on-going exploration program.

The Company has also determined that all of the track, as well as spikes, plates and ties holding the track will need to be replaced.

Additionally, the water ditch that runs parallel to the track will need to be thoroughly cleaned out and new timber supports and boards that keep the water contained in its path will need to be installed.

All new water lines, compressed air lines and electric power feeds will also need to be installed.

The total cost estimate for this KT work is still in process at the time of the date of this report, but the time estimate for these repairs is approximately twelve months.

Development of Restart Options

Although subject to formal engineering studies and mine planning, it is anticipated that earliest production will come from the upper levels of the mine where company personnel have observed mining faces of mineralized material that are readily mineable, as they were left behind by past operators in a more or less fully developed state.

The Company is currently investigating options to process its ore locally at one of the underutilized facilities in the Silver Valley but is also examining other organic processing options.

This would involve the construction of its own crushing, milling and floatation facility to be located either underground within the mine or outside, close to the entrance to the KT.

It is anticipated the initial mill capacity will be 1500 tons per day, but designed to allow expansion when needed.

The Company has identified multiple tailings disposal sites underground within the mine, as well as to the west-northwest of where the mill will be located.

Initial reviews indicate that it would be feasible to mine ore from the UTZ, Newgard, and Quill zones at rates of approximately 1500 tons per day, which could see the Company would anticipate mining approximately 540,000 tons per year of material.

Although subject to formal studies it is judged that these ore zones contain sufficient mineral to supply the Company’s mining needs for a minimum of 8 years.

This would be extended with the exploration and development of other zones throughout the mine, and at depth.

These are highlighted within the 43-101 technical report filed on SEDAR by previous management on September 6, 2018.

These will be developed further over the next 12 months, informed by the exploration program and engineering studies.

Lease Management

In order to provide the company with the time to develop its understanding of the mine, its resources, its restart options and the optimal long-term water management solution, the Company seeks to ensure appropriate extension to its lease with Placer Mining Corporation.

As detailed below, and as a subsequent event to this time-period of this report, the Company successfully secured a lease extension to August 2022.

The total cost estimate for this KT work is still in process at the time of the date of this report, but the time estimate for these repairs is approximately eighteen months.

It is anticipated that earliest production will come from the upper levels of the mine where company personnel have observed mining faces of mineralized material that are readily mineable, as they were left behind by past operators in a more or less fully developed state.

The Company anticipates constructing its own milling facility near the mouth of the Kellogg Tunnel.

Initially the mill capacity will be 1500 tons per day, and the mill will be designed for ready expansion when needed.

The Company has identified multiple tailings disposal sites to the west-northwest of where the mill will be located.

As noted above, the EPA for several decades has provided mine water treatment services for the Bunker Hill Mine.

When the Company begins its lease of the mine, it is planned that the EPA will be providing water treatment services under contract with the Company and such services will continue for at least five years or more.

Although no firm agreement has yet been reached, recent discussions with the EPA also indicate that overflows from the mill or decant from the tailings facilities could also be treated at the water treatment plant under the same treatment contract.

If all of the mine water, mill outflows, and tailings discharges can be treated by the EPA treatment plant as currently contemplated, the Company will be initially relieved of the need to obtain a water discharge permit.

Upon initiating mine production from the UTZ, Newgard, and Quill zones at rates of approximately 1500 tons per day, the Company would anticipate mining approximately 540,000 tons per year of material.

The three aforementioned zones are believed to have sufficient mineral to supply the Company mining needs for approximately 8 years.

Once the repairs are completed to the Kellogg Tunnel, mineralized material haulage will be able to immediately occur out of this tunnel, which will enhance the production capabilities of the mine by several magnitudes.

Some mineralized material will continue to be transported by rubber-tired equipment directly out the Russel Tunnel, but the majority of mineralized material will be dropped down existing internal passes and be hauled out of the KT on rail.

By this time in the restart program the Company would expect to be in production at around 1500 tons per day, which is approximately the planned mill capacity.

If all items proceed as planned, the Company believes a steady state production of 1500 tons per day is achievable in approximately 36 months from the time of takeover of operations.

Additionally, once the KT repairs are completed, work on the repairs of the shafts and hoists can proceed with greater speed and the lower levels of the mine can be dewatered.

The shaft work and pumping should commence at about year two of mine operations.

Numerous other past-producing mineral bodies will begin to be revealed as the water levels are lowered and the mine is drained to the fullest.

Some of these mineral bodies are lead-silver rich zones such as the Emery, Shea, Veral and the “J”, while others will add more material containing zinc such as the Tallon, Rosco, or Tony, while still others are best described as polymetallic such as the New Landers or the Francis.

The Company geologists and engineering personnel have studied the past records thoroughly and conclude that very good exploration and discovery potential exists at depth on downward rakes of known structures.

Strata-bound zones such as the Newgard, Quill and Tallon await drilling to the west, while both the southeast and northwest limits of the main original Bunker Hill structure, in the heart of the Cate/Dull fault system, still remain viable as targets for future discovery of new mineral bodies or extensions of past mined structures.

Technical Report

On September 6, 2018, the Company filed on SEDAR a National Instrument 43-101 (“NI 43-101”) technical report on its Bunker Hill property.

The technical report included:

A 10-12 million ton Exploration Target comprised of the Quill/Newgard zones.

For comparison purposes, the historical resource estimate for the whole Bunker Hill property is 9.1 million tons grading 5.08% Zn, 2.35% Pb and 40 g/t Ag (or 1.29 ounces per ton);

Results of Independent Sampling showing grades for the Quill/Newgard zones (Levels 9 & 10) averaging 20% Zn, 14%

Pb and 247 g/t Ag (or 7.90 ounces per ton), which exceed average historic grades;

a Plan for a US$7.7 million Exploration Program to upgrade the historic resources to a NI 43-101 Indicated Resource.

Additionally, as noted, the Company currently has in its possession, and has had access to, numerous historical technical reports that were completed in the past by highly qualified parties.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K/A

Item 2. Properties