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Item 7. Management’s Discussion and Analysis

2022-03-31 compared with 2020-09-18 · 333 added, 132 removed, 6 unchanged (99% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SPECIAL NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS

CERTAIN STATEMENTS IN THIS REPORT, INCLUDING STATEMENTS IN THE FOLLOWING DISCUSSION, ARE WHAT ARE KNOWN AS “FORWARD LOOKING STATEMENTS”, WHICH ARE BASICALLY STATEMENTS ABOUT THE FUTURE.

FOR THAT REASON, THESE STATEMENTS INVOLVE RISK AND UNCERTAINTY SINCE NO ONE CAN ACCURATELY PREDICT THE FUTURE.

WORDS SUCH AS “PLANS,” “INTENDS,” “WILL,” “HOPES,” “SEEKS,” “ANTICIPATES,” “EXPECTS “AND THE LIKE OFTEN IDENTIFY SUCH FORWARD LOOKING STATEMENTS, BUT ARE NOT THE ONLY INDICATION THAT A STATEMENT IS A FORWARD-LOOKING STATEMENT.

SUCH FORWARD LOOKING STATEMENTS INCLUDE STATEMENTS CONCERNING OUR PLANS AND OBJECTIVES WITH RESPECT TO THE PRESENT AND FUTURE OPERATIONS OF THE COMPANY, AND STATEMENTS WHICH EXPRESS OR IMPLY THAT SUCH PRESENT AND FUTURE OPERATIONS WILL OR MAY PRODUCE REVENUES, INCOME OR PROFITS.

NUMEROUS FACTORS AND FUTURE EVENTS COULD CAUSE THE COMPANY TO CHANGE SUCH PLANS AND OBJECTIVES OR FAIL TO SUCCESSFULLY IMPLEMENT SUCH PLANS OR ACHIEVE SUCH OBJECTIVES, OR CAUSE SUCH PRESENT AND FUTURE OPERATIONS TO FAIL TO PRODUCE REVENUES, INCOME OR PROFITS.

THEREFORE, THE READER IS ADVISED THAT THE FOLLOWING DISCUSSION SHOULD BE CONSIDERED IN LIGHT OF THE DISCUSSION OF RISKS AND OTHER FACTORS CONTAINED IN THIS REPORT ON FORM 10-K AND IN THE COMPANY’S OTHER FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.

NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS

statements in this report, including statements in the following discussion, are what are known as “forward looking statements”,

which are basically statements about the future.

For that reason, these statements involve risk and uncertainty since no one can accurately

predict the future.

Words such as “plans,” “intends,” “will,” “hopes,” “seeks,”

“anticipates,” “expects “and the like often identify such forward looking statements, but are not the only indication

that a statement is a forward-looking statement.

Such forward looking statements include statements concerning the company’s plans

and objectives with respect to the present and future operations of the company, and statements which express or imply that such present

and future operations will or may produce revenues, income or profits.

Numerous factors and future events could cause the company to

change such plans and objectives or fail to successfully implement such plans or achieve such objectives, or cause such present and future

operations to fail to produce revenues, income or profits.

Therefore, the reader is advised that the following discussion should be considered

in light of the discussion of risks and other factors contained in this report and in the company’s other filings with the sec.

No statements contained in the following discussion should be construed as a guarantee or assurance of future performance or future results.

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.

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

Highlights of the Agreement are as follows:

· Effective date:

August 28, 2017, the Company announced that it signed the Lease and Option Agreement for the lease and option to purchase the Mine in

The Lease and Option Agreement is between the Company and Placer Mining, the current owner of the Mine.

of the Agreement are as follows:

November 1, 2017;

· Initial lease term:

· The Company shall pay Placer Mining US$100,000 monthly mining lease payments, which shall be paid quarterly;

· The lease can be extended for another 12 months at any time by the Company by paying Placer Mining a US$600,000 bonus payment and by continuing to pay the monthly US$100,000 lease payments;

· The option to purchase is exercisable at the Company’s discretion;

· Purchase by the Company can be made at any time during lease period and any extension thereto.

On October 2, 2018, the Company announced that it was in default of its Lease with Option to Purchase Agreement with Placer Mining.

The default arose as a result of missed lease and operating cost payments, totaling $400,000, which were due at the end of September and on October 1, 2018.

As per the Agreement, the Company had 15 days, from the date notice of default was provided (September 28, 2018), to remediate the default by making the outstanding payment.

While Management worked with urgency to resolve this matter, Management was ultimately unsuccessful in remedying the default, resulting in the lease being terminated.

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

The following discussion and analysis provide information that is believed to be relevant to an assessment and understanding of the results of operation and financial condition of the Company for the fiscal year ended June 30, 2020, as compared to the fiscal year ended June 30, 2019.

Company shall pay Placer Mining US$100,000 monthly mining lease payments, which shall be paid quarterly;

lease can be extended for another 12 months at any time by the Company by paying Placer Mining a US$600,000 bonus payment and by

continuing to pay the monthly US$100,000 lease payments;

option to purchase is exercisable at the Company’s discretion;

by the Company can be made at any time during lease period and any extension thereto.

October 2, 2018, the Company announced that it was in default of the Lease and Option Agreement.

The default arose as a result of missed

lease and operating cost payments, totaling $400,000, which were due at the end of September and on October 1, 2018.

As per the Lease

and Option Agreement, the Company had 15 days, from the date the notice of default was provided (September 28, 2018), to remediate the

default by making the outstanding payment.

While management worked with urgency to resolve this matter, management was ultimately unsuccessful

in remedying the default, resulting in the Lease and Option Agreement being terminated.

November 13, 2018, the Company announced that it was successful in renewing the Lease and Option Agreement, effectively with the original

Lease and Option Agreement intact, except monthly payments were reduced to $60,000 per month for 12 months, with the accumulated reduction

in payments of $140,000 per month added to the purchase price of the Mine should the Company choose to exercise its option.

November 1, 2019, the Amended Agreement became effective.

The key terms of the Amended Agreement are as follows:

lease period was 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 one-time $60,000 extension fee;

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

purchase price is set at $11,000,000 for 100% of the marketable assets of the Mine to be paid with $6,200,000 in cash, and $4,800,000

in Common Shares.

The purchase price also includes the negotiable EPA costs of $20,000,000.

The Amended Agreement 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.

November 20, 2020, the Company signed a further amendment to the Amended Agreement.

Under the terms of the amendment:

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

purchase price was reduced to $7,700,000, with $5,700,000 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 an aggregate of $5,400,000 payable in cash outstanding) and $2,000,000

in Common Shares.

The reference price for the payment in Common Shares will be based on the Common Share price of the Company’s

last equity raise before the option is exercised;

Company’s contingent obligation to settle $1,787,300 of accrued payments due to Placer Mining has been waived;

Company is to make an advance payment of $2,000,000 (paid) to Placer Mining, which shall be credited toward the purchase price if

and when the Company elects to exercise its purchase right.

In the event that the Company irrevocably elects not to exercise its

purchase right, the advance payment of $2,000,000 will be repaid to the Company within twelve months from the date of such election.

This payment had the effect of decreasing the remaining amount payable to purchase the Mine to an aggregate of $3,400,000 payable

in cash and $2,000,000 in Common Shares of the Company.

On December 20, 2021, the Company announced its intention purchase of the

mine complex, which was consummated subsequent to the close of the period.

With the execution of the EPA settlement agreement amendment

and the expected receipt of $8,000,000 proceeds from the Royalty Convertible Debenture, the Company contracted to purchase the Bunker

Hill Mine from Placer Mining Corp.

and a definitive agreement was signed by both parties.

The terms of the purchase were modified to $5,400,000

in cash, from $3,400,000 of cash and $2,000,000 of common shares in the Company.

Purchase of the mine consists of over 400 patented mining

claims and 5,800 acres of private land.

Closing of the transaction occurred on January

7, 2022, concurrent with funding of the Royalty Convertible Debenture, approval of the transaction by Placer Mining Corp.

shareholders,

and satisfaction of other closing conditions.

See Subsequent Events.

of Operations

following discussion and analysis provide information that is believed to be relevant to an assessment and understanding of the results

of operation and financial condition of the Company for the year ended December 31, 2021, the six-month period ended December 31, 2020,

and the fiscal year ended June 30, 2020.

Unless otherwise stated, all figures herein are expressed in U.S.

dollars, which is the Company’s functional currency.

Comparison of the fiscal years ended June 30, 2020 and June 30, 2019

During the fiscal years ended June 30, 2020 and June 30, 2019, the Company generated no revenue.

During the fiscal year ended June 30, 2020, the Company reported total operating expenses of $10,099,815 as compared to $7,409,431 during the fiscal year ended June 30, 2019;

an increase of $2,690,384 or approximately 36%.

The increase in total operating expenses is primarily due to an increase in exploration expense by $2,239,185 ($7,951,423 in 2020 compared to $5,712,238 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.

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

Certain indirect expenses, which are related to the exploration activities, may be reported as operation and administration expense or consulting expense on the statement of operations, or in certain cases, these expenses may also be capitalized to the balance sheet if they relate to costs incurred to acquire mineral properties.

dollars, which is the Company’s

functional currency.

Comparison of the year ended December 31,

2021 and the six months ended December 31, 2020

the year ended December 31, 2021 the Company generated no revenue (six months ended December 31, 2020 - $nil).

the year ended December 31, 2021, the Company reported total operating expenses of $18,752,504 (six months ended December 31,

2020 - $9,454,396).

increase in total operating expenses is due to an increase in operation and administration expenses, exploration expenses, legal and

accounting expenses and consulting expenses when compared to the six-month period ended December 31, 2020.

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

of operations.

Certain indirect expenses may be reported as operation and administration expense or consulting expense on the statement

of operations.

Loss and Comprehensive Loss

Company had a net loss and comprehensive loss of $6,402,277 for the year ended December 31, 2021 (six months ended December 31,

2020 - $2,164,454).

The increase in net loss compared to the six-month period ended December 31, 2020 was a result of increased operating

expenses during the twelve-month period when compared to the six-month period.

Additionally, there was accretion and interest from debt and a loss on debt settlement during the year ended June 30, 2020.

Special note should be made of the fact that the

period ended December 31, 2021 was a twelve-month year, while the comparative transition period ended December 31, 2020 was a six-month

period, with variations in all categories of expense varying as a natural function of the differences in length of time periods.

Comparison of the six months ended December

31, 2020 and the year ended June 30, 2020

During the six months ended December 31, 2020

and June 30, 2020, the Company generated no revenue.

During the six months ended December 31, 2020,

the Company reported total operating expenses of $9,454,396 as compared to $10,793,823 during the year ended June 30, 2020.

in operation and admin expenses, legal and accounting expenses and consulting expenses for the six-month period was offset by a decrease

in exploration expenses and recognition of a gain on settlement of accounts payable.

Net Loss and Comprehensive Loss

The Company had a net loss and comprehensive loss of $30,627,783 for the fiscal year ended June 30, 2020, as compared to a net loss and comprehensive loss of $7,737,825 for the fiscal year ended June 30, 2019;

an increase of $22,889,958 or approximately 296%.

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).

Liquidity and Capital Resources

The Company does not have sufficient working capital needed to meet its current fiscal obligations when including commitments associated with the acquisition on the Bunker Hill Mine.

In order to continue to meet its fiscal obligations in the current fiscal year and beyond the next twelve months, the Company must seek additional financing.

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

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.

Contemporaneously, the Company agreed to issue 229,464 share purchase warrants, entitling the lender to acquire 229,464 common shares of the Company, at a price of C$8.50 per share, for two years.

Under the terms of the loan agreement, the lender 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 the Company at a price per share equal to C$8.50.

In the event that a notice of conversion would result in the lender holding 10% or more of the Company’s issued and outstanding shares, then, in the alternative, and under certain circumstances, the Company would be required to pay cash to the lender in an amount equal C$8.50 multiplied by the number of shares intended to be issued upon conversion.

Further, in the event that the lender holds more than 5% of the issued and outstanding shares of the Company subsequent to the exercise of any of its convertible securities held under this placement, it shall have the right to appoint one director to the board of the Company.

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.

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:

(i) $1,500,000, being the original principal amount (“Principal Amount”), the Principal Amount may be converted at a price per share equal to C$8.50;

(ii) 229,464 common shares may be acquired upon exercise of warrants at a price of C$8.50 per warrant for a period of two years from the date of issuance;

(iii) $500,000, being the additional principal amount (“Additional Amount”), the Additional Amount may be converted at a price per share equal to C$4.50;

and (iv) 116,714 common shares may be acquired upon exercise of warrants at a price of C$4.50 per warrant for a period of two years from the date issuance.

In the event that Hummingbird would acquire common shares in excess of 9.999% through the conversion of the Principal Amount or Additional Amount, including interest accruing thereon, or on exercise of the warrants as disclosed herein, the Company shall pay to Hummingbird a cash amount equal to the common shares exercised in excess of 9.999%, multiplied by the conversion price.

In August 2018, the Company closed a private placement, issuing 160,408 Units to Gemstone 102 Ltd.

(“Gemstone”) at a price of C$4.50 per Unit, for gross proceeds of C$721,834 ($549,333) and incurring financing costs of $25,750.

Each Unit entitles Gemstone to acquire one common share (“Unit Share”) and one common share purchase warrant (“Unit Warrant”), with each Unit Warrant entitling Gemstone to acquire one common share of the Company at a price of C$4.50 for a period of three years.

Prior to the issuance of the Units, Gemstone held 400,000 common shares of the Company and 200,000 warrants (“Prior Warrants”) exercisable at a price of C$20.00 per share.

Immediately prior to closing, the Prior Warrants were early terminated by mutual agreement of the Company and Gemstone.

Upon issuance of the 160,408 Units to Gemstone, Gemstone beneficially owns or exercises control or direction over 560,408 common shares of the Company.

Assuming exercise of the Unit Warrants, Gemstone would hold 720,816 of the outstanding common shares of the Company.

Gemstone’s participation in the Offering constitutes a "related party transaction"

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.

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.

In March 2019, Hummingbird agreed to extend the scheduled maturity date of the loan to June 30, 2020.

On June 27, 2019, the Company closed the first tranche ("First Tranche") of a non-brokered private placement, issuing 11,660,000 units ("June 2019 Unit") at a price of C$0.05 per June 2019 Unit for gross proceeds of C$583,000 ($436,608) and incurring financing costs of $19,640.

Each June 2019 Unit consists of one common share of the Company and one common share purchase warrant ("June 2019 Warrant").

Each whole June 2019 Warrant entitles the holder to acquire one common share at a price of C$0.25 per common share for a period of two years.

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 $16,067 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.

These warrants are considered derivative instruments as they were issued in a currency other than the Company’s functional currency of the US dollar.

The estimated fair value of warrants accounted for as liabilities was determined on the date of issue and marks to market at each financial reporting period.

The change in fair value of the warrant liability is recorded in the interim condensed consolidated statement of operations and comprehensive loss as a gain or loss and is estimated using the Binomial model.

Current Assets and Total Assets

As of June 30, 2020, 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.

Total Current Liabilities and Liabilities

As of June 30, 2020, the Company’s balance sheet reflects that the Company had total current liabilities of $13,073,363 and total liabilities of $31,949,872, compared to total current liabilities of $7,069,564 and total liabilities of $7,186,373 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.

During the fiscal year ended June 30, 2020 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.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

The Company had a net loss and comprehensive

loss of $2,164,454 for the six months ended December 31, 2020, as compared to a net loss and comprehensive loss of $31,321,791 for

the year ended June 30, 2020.

The change in net loss between the two periods was largely affected by the change in derivative

A gain related to the change in derivative liability for the six-month period ended December 31, 2020 was $10,503,941

compared to a loss related to the change in derivative liability for the year ended June 30, 2020 of $18,843,947, a total change of

$29,347,888 between the two comparative periods.

Special note should be made of the fact that the

transition period ended December 31, 2020 was a six-month period, while the comparative period ended June 30, 2020 was a twelve-month

year, with variations in all categories of expense varying as a natural function of the differences in length of time periods.

and Capital Resources

At December 31, 2021, the Company had total assets

of $4,071,796 and total liabilities of $38,314,164.

This compares to total assets of $6,709,016 and total liabilities of $38,246,613

at December 31, 2020.

The decrease in current assets is primarily related to a $3,082,598 net decrease in cash in 2021 which was the

result of an $11,372,153 cash use for operating activities, which was partially offset by the proceeds from the issuance of common

stock and warrants for net proceeds of $6,013,439 in February 2021 and $2,500,000 of proceeds from a promissory note in September 2021.

As of December 31, 2021, the Company had negative

working capital of $19,172,729 compared to negative working capital of $10,132,935 as of December 31, 2020.

This increase is primarily

the result of the $3,082,598 net decrease in cash and an increase in the amount due to the EPA of $5,945,280.

In December 2021, the Company executed a non-binding

term sheet with Sprott Resource Streaming and Royalty (“SRSR”) and other investors outlining a $50,000,000 project

finance package that the Company expects to fulfill the majority of its funding requirements to restart the mine and reach commercial

production in mid-2023.

The package consists of an $8,000,000 Royalty Convertible Debenture, a $5,000,000 Convertible Debenture, and

a multi-metals stream of up to $37,000,000 (the “Stream”).

In January 2022, subject to settlement of definitive documentation

with SRSR, the $8,000,000 was advanced under the Royalty Convertible Debenture and $6,000,000 was advanced under the Convertible Debenture,

which was increased from $5,000,000.

Subject to SRSR internal approvals, further technical

and other diligence (including confirmation of full project funding by an independent engineer appointed by SRSR), and satisfactory definitive

documentation, the Company expects to close the Stream concurrent with a formal construction decision being made by Q2 2022.

of $27,000,000 and a maximum of $37,000,000 (the “Stream Amount”) will be made available under the Stream, at the Company’s

option, once the conditions for availability of the Stream have been satisfied.

There can be no assurance that the Stream will close

as anticipated.

See Notes 8 and 16 to the consolidated financial statements for further information regarding this project finance package.

In December 2021, in conjunction with its intention

to purchase the Bunker Hill mine complex, the Company entered into an amended Settlement Agreement (the “Amendment”) between

the Company, Idaho Department of Environmental Quality, US Department of Justice and the EPA, modifying the payment schedule and payment

terms for recovery of historical environmental response costs at Bunker Hill Mine incurred by the EPA.

Upon the purchase of the Bunker

Hill mine complex, the remaining payments of the EPA cost recovery liability would be 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 includes a $2,000,000 payment to the EPA within

30 days of execution of this amendment, which was paid subsequent to December 31, 2021.

The remaining $17,000,000 will be paid on the

following dates:

November 1, 2024

November 1, 2025

November 1, 2026

November 1, 2027

November 1, 2028

November 1, 2029

plus accrued interest

The resumption of payments in 2024 were agreed

in order to allow the Company to generate sufficient revenue from mining activities at the Bunker Hill Mine to address remaining payment

obligations from free cash flow.

In addition to the cost recovery payments outlined

above, the Amendment includes an initial payment of $2,900,000 of outstanding water treatment costs that have been incurred over the

period from 2018 through 2021, to be made within 90 days of the execution of the Amendment.

On March 22, 2022, the Company reported that

in consultation with the EPA, it has committed to meet the $2,900,000 payment and Financial Assurance obligations by 180 days from the

effective date of the Amended Settlement Agreement.

The changes in payment terms and schedule, are

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.

These assurances correspond to the Company’s cost recovery obligations to be paid in 2024 through 2029

as outlined above.

Should the Company fail to make its scheduled payment, the EPA can draw against this financial assurance.

of the bonds or letters of credit will decrease over time as individual payments are made.

If the Company fails to post the Final Financial

Assurance within 180 days of the execution of the Amendment, the terms of the original agreement as described above will be reinstated

(see Note 6 to the consolidated financial statements).

the approval of the transaction by Placer Mining Corp.

shareholders and satisfaction of other closing conditions, the purchase of the

Bunker Hill Mine closed on January 7, 2022.

Mine assets were purchased for $7,700,000, with $300,000 of previous lease payments

and a deposit of $2,000,000 applied to the purchase, resulting in cash paid at closing of approximately $5,400,000.

Concurrently,

definitive documentation and all closing conditions were met for the $8,000,000 Royalty Convertible Debenture.

The Royalty Convertible

Debenture funded the purchase of the Bunker Hill Mine, the $2,000,000 payment to the EPA, and near-term working capital requirements.

In January 2022, the Company also closed the $6,000,000 Convertible Debenture, which will fund near-term working capital requirements,

mine development, and the advancement of its Prefeasibility Study, including engineering studies for the demobilization and construction

of the Pend Oreille Process Plant at Bunker Hill.

See Note 16 to the consolidated financial statements for further detail regarding these

two financings and the purchase of the Bunker Hill Mine.

March 9, 2022, the Company entered into an agreement with a syndicate of agents led by Echelon Wealth Partners Inc.

(collectively, the

“Agents”), which have agreed to act as agents for and on behalf of the Company, on a commercially reasonable “best

efforts” agency basis, without underwriter liability, in connection with a proposed private placement (the “Offering”)

of up to C$15,000,000 of special warrants of the Company (the “Special Warrants”) which will entitle the holders to receive

up to 50,000,000 units of the Company at a price of C$0.30 (the “Issue Price”) per Special Warrant, subject to adjustment

in certain events.

Special Warrant shall be exercisable, for no additional consideration and with no further action on the part of the holder thereof, into

one unit (each, a “Unit”) of the Company, subject to adjustment described below, on the earlier of:

(i) the third business

day after the date upon which both (A) a receipt for a (final) prospectus (the “Qualification Prospectus”) qualifying the

distribution of the Units issuable upon exercise of the Special Warrants has been issued by the applicable securities regulatory authorities

in the Canadian jurisdictions in which purchasers of the Special Warrants are resident (the “Canadian Jurisdictions”), and

(B) the registration statement (the “Registration Statement”) of the Company filed with the Securities and Exchange Commission

(the “SEC”) registering the Units issuable upon exercise of the Special Warrants has been declared effective by the SEC;

and (ii) the date that is six months following the Closing Date (as defined below).

Unit will consist of one common share of the Company (a “Common Share”) and one common share purchase warrant (each whole

common share purchase warrant, a “Warrant”).

Each Warrant will entitle the holder to acquire one Common Share for C$0.37

for a period of 36 months following the Closing Date.

The Warrants shall also be exercisable on a cashless basis in the event the Registration

Statement has not been made effective by the SEC prior to the date of exercise.

In the event that a receipt for the Qualification Prospectus

has not been obtained and the Registration Statement has not been deemed effective on or before 5:00 p.m.

(EST) on the date that is 60

days following the Closing Date, each unexercised Special Warrant will thereafter entitle the holder thereof to receive, upon the exercise

thereof, at no additional cost 1.1 Units (instead of one Unit).

financing is expected to close on March 31, 2022, after which public disclosure will be made as soon as practicable thereafter by means

of a news release and Form 8-K filed with the Securities and Exchange Commission.

See Note 16 to the consolidated financial statements

for further information.

In support of plans to rapidly restart the Mine,

the Company worked systematically through 2020 and 2021 to delineate mineral resources and conduct various technical studies.

this strategy may require securing additional financing, which may include additional indebtedness of $15,000,000 and a cost over-run

facility of $13,000,000.

The Company has incurred losses since inception

resulting in an accumulated deficit of $72,491,150 and further losses are anticipated in the development of its business.

Additionally,

as of December 31, 2021, the Company owes a total of $16,417,208 to the EPA that is classified as current liability unless the Company

can consummate financial assurances that would reclassify $11,000,000 of this liability to long-term debt.

Additionally, the Company

expects to close the Stream in 2022 in order to fulfill the majority of its remaining funding requirements to restart the mine and reach

commercial production, but there can be no assurance that this financing transaction will close as expected.

In order to continue to

meet its fiscal obligations in the current fiscal year and beyond, the Company must consummate these transactions as anticipated to meet

its financial obligations over the next twelve months.

This raises substantial doubt about the Company’s ability to continue as

a going concern.

Its ability to continue as a going concern is dependent upon the ability of the Company to generate profitable operations

in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business

operations when they come due.

The accompanying consolidated financial statements do not include any adjustments relating to the recoverability

and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company

cannot continue in existence.

Events occurring subsequent to December 31, 2021

as disclosed above in the Liquidity and Capital Resources section.

In addition, the Company had the following subsequent events.

On January 7, 2022, the Company closed the purchase

of the Bunker Hill Mine.

See Note 6 Mining Interests.

Mine assets were purchased for $7,700,000, with $300,000 of previous lease payments

and a deposit of $2,000,000 applied to the purchase, resulting in cash paid at closing of approximately $5,400,000.

The EPA obligation

of $19,000,000 was assumed by Bunker Hill as part of the acquisition.

The restructuring of the EPA Settlement payment stream under the

Amendment does not occur unless and until the Company puts the financial assurances in place.

On March 22, 2022, the Company reported

that in consultation with the EPA, it has committed to meet the approximately $2,900,000 and Financial Assurance obligations by 180 days

from the effective date of the Amended Settlement Agreement.

On January 31, 2022, the Company 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 “Pend Oreille Process Plant”) in eastern

Washington State, approximately 145 miles from the Bunker Hill Mine by road.

The package comprises substantially all processing equipment

of value located at the site, including complete crushing, grinding and flotation circuits suitable for a planned ~1,500 ton-per-day

operation at Bunker Hill, and total inventory of nearly 10,000 components and parts for mill, assay lab, conveyer, field instruments,

and electrical spares.

The MOU outlines a purchase price under two scenarios, at Teck’s option:

an all-cash $2,750,000 purchase

price, or a $3,000,000 purchase price comprised of cash and Bunker Hill shares.

Each option includes a $500,000 non-refundable deposit,

which has been paid by the Company subsequent to the end of the year.

On March 7, 2022, the Company announced the signing of an Asset

Purchase agreement for the purchase of the Pend Oreille Process Plant.

Closing of the transaction remains subject to certain conditions,

including payment of the remaining purchase price by May 15, 2022.

On March 3, 2022, the Company closed the purchase

of a 225-acre surface land parcel for a cash payment of approximately $200,000.

Critical accounting estimates

The preparation of the interim condensed consolidated

financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts

of assets, liabilities and contingent liabilities at the date of the financial statements and reported amounts of expenses during the

reporting period.

Estimates and judgments are continuously evaluated and are based on management’s experience and other factors,

including expectations of future events that are believed to be reasonable under the circumstances.

Actual outcomes can differ from these

The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the amounts recognized

in the financial statements are:

Share-based payments

determines costs for share-based payments using

market-based valuation techniques.

The fair value of the share awards and warrant liabilities are determined at the date of grant using

generally accepted valuation techniques and for warrant liabilities at each balance sheet date thereafter.

Assumptions are made and judgment

used in applying valuation techniques.

These assumptions and judgments include estimating the future volatility of the stock price and

expected dividend yield.

Such judgments and assumptions are inherently uncertain.

Changes in these assumptions affect the fair value

Warrants and accrued liabilities

Estimating the fair value of derivative warrant

liability requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the issuance.

This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the warrants

and conversion feature derivative liability, volatility and dividend yield and making assumptions about them.

The Company has to make estimates to accrue for

certain expenditures due to delay in receipt of third-party vendor invoices.

These accruals are made based on trends, history and knowledge

of activities.

Actual results may be different.

The Company makes monthly estimates of its water

treatment costs, with a true-up to the annual invoice received from the IDEQ.

Using the actual costs in the annual invoice, the Company

will then reassess its estimate for future periods.

Given the nature, complexity and variability of the various actual cost items included

in the invoice, the Company has used the most recent invoice as its estimate of the water treatment costs for future periods.

Sheet Arrangements

Company has no off-balance sheet arrangements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.

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

Item 7. Management’s Discussion and Analysis