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Item 7. Management’s Discussion and Analysis

2020-12-04 compared with 2020-11-24 · 32 added, 64 removed, 76 unchanged (56% of the section changed)

9 unchanged sentences

Background and Overview

On August 28, 2017, the Company announced that it signed a definitive agreement (the “Agreement”) for the lease and option to purchase of the Bunker Hill Mine in Idaho.

On August 28, 2017, the Company announced that it signed a definitive agreement (the “Agreement”) for the lease and option to purchase of the Bunker Hill Mine (the “Mine”) in Idaho.

The “Bunker Hill Lease with Option to Purchase” is between the Company and Placer Mining Corporation (“Placer Mining”), the current owner of the Mine.

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On November 13, 2018, the Company announced that it was successful in renewing the lease, effectively with the original Agreement intact, except that monthly payments are reduced to $60,000 per month for 12 months, with the accumulated reduction in payments of $140,000 per month (“deferred payments”) added to the purchase price of the mine should the Company choose to exercise its option.

On October 22, 2019, the Company signed a further amendment to the Agreement.

The key terms of this amended agreement are as follows:

· The lease period has been extended for an additional period of nine months to August 1, 2020, with the option to extend for a further 6 months based upon payment of a 1 time $60,000 extension fee.

· The Company will continue to make monthly care and maintenance payments to Placer Mining of $60,000 until exercising the option to purchase.

· The purchase price is set at $11 million for 100% of the marketable assets of Bunker Assets to be paid with $6,200,000 in cash, and $4,800,000 in shares.

The purchase price also includes the negotiable EPA costs of $20 million.

The amended lease provides for the elimination of all royalty payments that were to be paid to the mine owner.

Upon signing the amended agreement, the Company paid a one time, non-refundable cash payment of $300,000 to the mine owner.

This payment will be applied to the purchase price upon execution of the purchase option.

In the event the Company elects not to exercise the purchase option, the payment shall be treated as an additional care and maintenance payment.

Results of Operations

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During the fiscal years ended June 30, 2019 and June 30, 2018, the Company generated no revenue.

During the fiscal year ended June 30, 2020, the Company reported total operating expenses of $10,793,823 as compared to $8,113,926 during the fiscal year ended June 30, 2019;

an increase of $2,679,897 or approximately 33%.

The increase in total operating expenses is primarily due to an increase in exploration expense by $2,228,698 ($8,645,431 in 2020 compared to $6,416,733 in 2019) due to increased exploration activities this year

compared to last year.

The same is true for increases operating and administration (increased by $137,833, $1,327,059 in 2020 compared to $1,189,226 in 2019), legal and accounting (increased by $27,212, $268,181 in 2020 compared to $240,969 in 2019), and consulting (increased by $286,154, $553,152 in 2020 compared to $266,998 in 2019) due to increase corporate activities this year compared to last year.

During the fiscal year ended June 30, 2019, the Company reported total operating expenses of $ 8,113,926

as compared to $ 9,648,434

during the fiscal year ended June 30, 2018;

a decrease of $ 1,534,508

or approximately 16

The decrease in total operating expenses is primarily due to a decrease in operation and administration expense by $1,530,520 ($1,189,226 in 2019 compared to $2,719,746 in 2018), commensurate with decreased corporate activities this year compared to last year.

The same is true for decreases in consulting (decreased by $529,863, $266,998 in 2019 compared to $796,861 in 2018) and legal and accounting costs (decreased by $249,393, $240,969 in 2019 compared to $490,362 in 2018).

For financial accounting purposes, the Company reports all direct exploration expenses under the exploration expense line item of the statement of operations.

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Net Loss and Comprehensive Loss

The Company had a net loss and comprehensive loss of $31,321,791 for the fiscal year ended June 30, 2020, as compared to a net loss and comprehensive loss of $8,442,320 for the fiscal year ended June 30, 2019;

an increase of $22,879,471 or approximately 271%.

The increase in net loss and comprehensive loss was due to an increase in

operating expenses as outlined above, change in derivative liabilities, and loss on debt settlement.

It was partially offset by a decrease in accretion expense, interest expense, and loss on loan extinguishment.

Loss related to change in derivative liability increased by $20,736,435 (loss of $18,843,947 in 2020 compared to gain of $1,892,488 in 2019) as the fair values of the Company’s outstanding warrants increased mainly due to an increase in the Company’s share price (C$1.00 per share as at June 30, 2020 compared to C$0.06 as at June 30, 2019).

The Company had a net loss and comprehensive loss of $ 8,442,320

for the fiscal year ended June 30, 2019, as compared to a net loss and comprehensive loss of $ 5,716,606

for the fiscal year ended June 30, 2018;

an increase of $ 2,725,714

or approximately 48

The increase in net loss and comprehensive loss was due to a decrease in change in derivative liabilities, increase in accretion expense, interest expense and loss on loan extinguishment, offset by net decrease in total operating expenses as outlined above.

Liquidity and Capital Resources

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Management is considering various financing alternatives, specifically raising capital through the equity markets and debt financing.

In December 2017, the Company closed a private placement led by Red Cloud Klondike Strike Inc.

and including Haywood Securities Inc.

(collectively, the “Agents”) to raise gross proceeds of C$10,155,400 (the “Offering”).

Pursuant to the Offering, the Company issued 812,432 units (the "Units") at a price of CDN$12.50 per Unit.

Each Unit was comprised of one common share of the Company (a "Common Share") and one half of one transferable common share purchase warrant (a "Warrant"), each Warrant having a three-year life and entitling the holder thereof to acquire one Common Share at a price of C$20.00.

On June 13, 2018, the Company entered into a loan and warrant agreement with Hummingbird Resources PLC (“Hummingbird”), an arm’s length investor, for an unsecured convertible loan in the aggregate sum of $1,500,000, bearing interest at 10% per annum, maturing in one year.

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Lastly, among other things, the loan agreement further provides that for as long as any amount is outstanding under the convertible loan, the investor retains a right of first refusal on any Company financing or joint venture/strategic partnership/disposal of assets.

In August 2018, the amount of the Hummingbird convertible loan payable was increased to $2 million from its original $1.5 million loan, net of $45,824 of debt issue costs.

In August 2018, the amount of the Hummingbird convertible loan payable was increased to $2 million from its original $1.5 million loan, net of $45,824 of debt issue costs, of which $25,750 was incurred in the current period.

Under the terms of the Amended and Restated Loan Agreement, Hummingbird may, at any time prior to maturity, convert any or all of the principal amount of the loan and accrued interest thereon, into common shares of Bunker as follows:

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under Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions ("MI 61-101").

Given the urgent need to secure financing to meet the new lease obligations, the Company’s Board approved an equity private placement of Units to be sold at C$0.75 per Unit with each Unit consisting of one common share and one common share purchase warrant.

Given the urgent need to secure financing to meet the new lease obligations, Bunker’s Board approved an equity private placement of Units to be sold at C$0.75 per Unit with each Unit consisting of one common share and one common share purchase warrant.

On November 28, 2018, the Company closed on a total of 645,866 Units for gross proceeds of C$484,400 ($365,341) and incurring financing costs of $10,062, with each purchase warrant exercisable into a Common Share at C$1.00 per Common Share for a period of thirty-six months.

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As a part of the First Tranche, Hummingbird Resources PLC ("Hummingbird") has acquired 2,660,000 June 2019 Units for C$133,000 ($100,000) which was applied to reduction of the principal amount owing under the convertible loan facility.

On August 1, 2019, the Company closed the second and final tranche ("Tranche Two") of the non-brokered private placement, issuing 6,042,954 units ("August 2019 Units") at C$0.05 per August 2019 Unit for gross proceeds of C$302,148 ($228,202) and incurring financing costs of $36,468.

Each August 2019 Unit consists of one common share of the Company and one common share purchase warrant, which entitles the holder to acquire one common share at a price of C$0.25 per common share for a period of two years.

The Company also issued 16,962,846 August 2019 Units to settle $640,556 of debt at a deemed price of C$0.09 based on the fair value of the shares issued.

On August 23, 2019, the Company closed the first tranche (the "First Tranche") of the non-brokered private placement, issuing 27,966,002 common shares of the Company at C$0.05 per share for gross proceeds of C$1,398,300 ($1,049,974) and incurring financing costs of $28,847.

The Company also issued 2,033,998 common shares to settle $77,117 of debt at a deemed price of C$0.18 based on the fair value of the shares issued.

On August 30, 2019, the Company closed the second and final tranche (the "Second Tranche") of the non-brokered private placement, issuing 1,000,000 common shares at C$0.05 per share for gross proceeds of C$50,000 ($37,550).

On November 13, 2019, the Company issued a promissory note (“Samper Note”) in the amount of $300,000.

The note is unsecured, bears interest of 1% monthly, and is due on demand after 90 days from issuance.

In consideration for the loan, the Company issued 400,000 common share purchase warrants to the lender.

Each whole warrant entitles the lender to acquire one common share of the Company at a price of C$0.80 per share for a period of two years.

On February 26, 2020, the Company closed a non-brokered private placement, issuing 2,991,073 common shares of the Company at C$0.56 per share for gross proceeds of C$1,675,000 ($1,256,854) and incurring financing costs of $95,763

and 239,284 broker warrants.

Each broker warrant entitles the holder to acquire one common share at a price of C$0.70 per common share for a period of two years.

The Company also issued 696,428 common shares for $300,000 which was applied to reduce the principal amount owing under the convertible loan facility.

On April 24, 2020, the Company extended the maturity date of the Samper Note to August 1, 2020.

In consideration, the Company issued 400,000 common share purchase warrants to the lender at an exercise price of C$0.50.

The warrants expire on November 13, 2021.

On May 12, 2020, the Company closed a non-brokered private placement, issuing 107,143 common shares of the Company at C$0.56 per share for gross proceeds of C$60,000 ($44,671).

On May 12, 2020, the Company issued a promissory note in the amount of $362,650 (C$500,000).

The note bears no interest is due on demand after 90 days after the issue date.

Subsequent to June 30, 2020, C$288,000 was settled by shares and the remaining balance was repaid in full.

On May 12, 2020, the Company issued a promissory note in the amount of $141,704 (C$200,000).

The note bears no interest is due on demand after 90 days after the issue date.

The promissory note was settled in full subsequent to June 30, 2020.

In June 2020, Hummingbird agreed to extend the scheduled maturity date of the loan to July 31, 2020.

An extension of the loan is being negotiated and the loan has not been repaid.

On June 30, 2020, the Company issued a promissory note in the amount of $75,000 ($103,988).

The note bears no interest and is due on demand.

The promissory note was repaid in full subsequent to June 30, 2020.

On June 30, 2020, the Company issued a promissory note in the amount of $75,000 ($103,988) to a director of the Company.

The note bears no interest and is due on demand.

The promissory note was repaid in full subsequent to June 30, 2020.

During the year ended June 30, 2020, the Company issued 1,403,200 June 2019 Units and 1,912,000 August 2019 Units at a deemed price of C$0.05 as a compensation to a finder valued at C$165,760 ($125,180).

The Company has accounted for the warrant liability in accordance with ASC Topic 815.

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As of June 30, 2019, the Company’s balance sheet reflects that the Company had:

i) total current assets of $243,379, compared to total current assets of $106,100 at June 30, 2019 - an increase of $137,279 or approximately 129%;

and ii) total assets of $732,884, compared to total assets of $227,090 at June 30, 2019 – an increase of $505,794 or approximately 223%.

The increase in current assets was due to the increase in accounts receivable and prepaid expenses.

i) total current assets of $106,100, compared to total current assets of $1,410,584 at June 30, 2018 - a decrease of $1,304,484 or approximately 92%;

and ii) total assets of $227,090, compared to total assets of $1,507,837 at June 30, 2018 – a decrease of $1,280,747 or approximately 85%.

The decrease in current assets was due to the decrease in cash year-over-year, resulting from the Company’s net loss during the year.

Total Current Liabilities and Liabilities

As of June 30, 2020, the Company’s balance sheet reflects that the Company had total current liabilities of $15,098,294 and total liabilities of

$33,974,803, compared to total current liabilities of $8,320,791 and total liabilities of $8,437,600 at June 30, 2019.

These increases are reflective of increased Placer Mining and EPA accruals, promissory notes payable in the company, and changes in derivative warrant liability year-over-year.

As of June 30, 2019, the Company’s balance sheet reflects that the Company had total current liabilities of $ 8,320,791

and total liabilities of $ 8,437,600,

compared to total current liabilities of $ 1,587,980

and total liabilities of $ 2,270,883

at June 30, 2018.

These increases are reflective of increased Placer Mining and EPA

accruals and convertible debt in the company year-over-year.

During the fiscal year ended June 30, 2019 cash was primarily used to fund activities at the Bunker Hill Mine operations.

The Company reported a net increase in cash during the fiscal years ended June 30, 2020 as a result of operating activities and investing activities, offset by cash provided by financing activities.

The Company reported a net decrease in cash during the fiscal years ended June 30, 2019 as a result of operating activities offset by cash provided by financing activities.

Off-Balance Sheet Arrangements

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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 7. Management’s Discussion and Analysis