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Item 1. Financial Statements

2022-08-15 compared with 2022-05-16 · 744 added, 602 removed, 362 unchanged (79% of the section changed)

Financial Statements

Condensed interim consolidated financial statements

of Bunker Hill Mining Corp., (“Bunker Hill”, the “Company”, or the “Registrant”) a.

Nevada corporation,

included herein were prepared, without audit, pursuant to rules and regulations of the Securities and Exchange Commission.

Because certain

information and notes normally included in financial statements prepared in accordance with accounting principles generally accepted

in the United States of America (“U.S.”) were condensed or omitted pursuant to such rules and regulations, these financial

statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s

Form 10-K for the year ended December 31, 2021, and all amendments thereto.

condensed interim consolidated financial statements of Bunker Hill Mining Corp., (“Bunker Hill”, the “Company”,

or the “Registrant”) a Nevada corporation, included herein were prepared, without audit, pursuant to rules and regulations

of the Securities and Exchange Commission.

Because certain information and notes normally included in financial statements prepared in

accordance with accounting principles generally accepted in the United States of America (“U.S.”) were condensed or omitted

pursuant to such rules and regulations, these financial statements should be read in conjunction with the audited consolidated financial

statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2021, and all amendments thereto.

Hill Mining Corp.

2 unchanged sentences

Current assets

Restricted Cash (note 6)

Accounts receivable

Prepaid expenses

Short-term deposit (notes 3 and 14)

Prepaid expenses (note 6)

Short-term deposit (note 3)

Prepaid mine deposit and acquisition costs (note 5)

2 unchanged sentences

Non-current assets

Spare parts inventory

Equipment (note 3)

1 unchanged sentence

Bunker Hill Mine and mining interests (note 5)

Process plant (note 3)

EQUITY AND LIABILITIES

Current liabilities

Accounts payable (note 13)

Accrued liabilities (note 12)

EPA/IDEQ water treatment payable (note 6)

Interest payable (note 6)

Accounts payable

Accrued liabilities

EPA water treatment payable (note 6)

Interest payable (notes 6 and 7)

DSU liability (note 12)

4 unchanged sentences

Non-current liabilities

Convertible debentures (note 7)

Derivatives of convertible debenture (note 7)

Series 1 convertible debenture (note 7)

Series 2 convertible debenture (note 7)

Royalty convertible debenture (note 7)

EPA cost recovery liability - long-term, net of discount (note 6)

Derivative warrant liability (notes 8 and 9)

Derivative warrant liability (note 9)

Total liabilities

Shareholders’ Deficiency

Preferred shares, $ 0.000001

par value, 10,000,000 preferred

shares authorized;

Preferred shares, $ 0.000001 par value, 10,000,000 preferred shares authorized;

preferred shares issued and outstanding (note 9)

Common shares, $ 0.000001

par value, 750,000,000 common shares

164,435,442 and 143,117,068

common shares issued and outstanding, respectively (note 9)

Subscriptions received (note 14)

Common shares, $ 0.000001 par value, 1,500,000,000 common shares authorized;

217,640,683 and 164,435,442 common shares issued and outstanding, respectively (note 9)

Additional paid-in-capital (note 9)

Accumulated other comprehensive income (note 7)

Deficit accumulated during the exploration stage

7 unchanged sentences

Hill Mining Corp.

Interim Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)

in United States Dollars)

Interim Consolidated Statements of Income and Comprehensive Income

(Expressed in United States Dollars)

Three Months Ended

Six Months Ended

Operating expenses

5 unchanged sentences

( 5,295,557 )

( 9,466,536 )

( 9,919,531 )

Other income or gain (expense or loss)

Change in derivative liability

Gain on foreign exchange

Loss on FV of debenture derivative

Gain (loss) on foreign exchange

Gain on FV of debentures

Gain on EPA settlement

Interest expense

Debenture finance costs (note 7)

( 1,117,607 )

Debenture finance costs

( 1,099,051 )

( 1,166,485 )

Finance costs

Loss on debt settlement

Net (loss) income and comprehensive (loss)

income for the period

Net income for the period

Other comprehensive income, net of tax:

Gain on change in FV on own credit risk

Other comprehensive income

Comprehensive income

Dilutive effect of convertible debentures

Dilutive effect of warrant

$ ( 175,816 )

Net (loss) income per common share – basic

Net (loss) income per common share – fully diluted

$ ( 520,066 )

Diluted net income (loss) and comprehensive income (loss) for the period

$ ( 130,760 )

Net income per common share – basic

Net income per common share – fully diluted

Weighted average common shares – basic

6 unchanged sentences

Net income (loss) for the period

$ ( 2,880,886 )

Adjustments to reconcile net loss to net cash used in operating activities:

Stock-based compensation (note 10)

Stock-based compensation

Depreciation expense

2 unchanged sentences

( 15,712,168 )

Imputed interest expense on lease liability (note 8)

Units issued for services

Imputed interest expense on lease liability

Finance costs

Foreign exchange loss (gain)

2 unchanged sentences

Amortization of EPA discount

Loss on fair value of convertible debt derivatives

Imputed interest expense on convertible debentures

Gain on fair value of convertible debt derivatives

( 1,739,987 )

Gain on EPA debt extinguishment

( 8,614,103 )

Changes in operating assets and liabilities:

Restricted cash

( 9,476,000 )

Accounts receivable

Deposit on plant demobilization

( 1,000,000 )

Prepaid finance costs

2 unchanged sentences

Accrued liabilities

Accrued EPA/IDEQ water treatment

Accrued EPA water treatment

EPA cost recovery payable

( 2,000,000 )

Interest payable – EPA

Interest payable

3 unchanged sentences

Investing activities

Deposit on plant

Purchase of spare inventory

Land purchase

1 unchanged sentence

( 5,524,322 )

Purchase of Process plant

( 1,289,477 )

Purchase of machinery and equipment

4 unchanged sentences

Proceeds from issuance of shares, net of issue costs

Proceeds from subscriptions received

Repayment of promissory note

( 1,000,000 )

Lease payments

1 unchanged sentence

Net change in cash

( 1,191,272 )

Cash, beginning of period

2 unchanged sentences

Non-cash activities

Units issued to settle accrued liabilities

Units issued to settle accounts

payable and accrued liabilities

Shares issued to settle interest payable

Mill purchase for shares and warrants

Units issued to settle DSU/RSU/Bonuses

accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.

2 unchanged sentences

in United States Dollars)

subscriptions

Stock subscriptions

Accumulated other

comprehensive

Balance, December 31, 2021

9 unchanged sentences

$ ( 35,202,278 )

Balance, December 31, 2020

Stock-based compensation

Compensation options

Shares issued for interest payable

Shares issued for RSUs vested

Non brokered shares issued for $0.30 CAD

Special warrant shares issued for $ 0.30 CAD

( 1,775,790 )

Contractor shares issued for $0.30 CAD

Shares issued for Mill purchase

Warrant valuation

( 6,246,848 )

Beginning Balance

( 6,246,848 )

Gain on fair value from change in credit risk

Net income for the period

Balance, June 30, 2022

$ ( 63,317,255 )

$ ( 19,447,575 )

Balance, December 31, 2020

$ ( 66,088,873 )

$ ( 31,537,597 )

Stock-based compensation

Shares issued at

issued for debt settlement at $ 0.45 per

Shares issued at $ 0.32 per share

Shares issued for debt settlement at $ 0.45 per share

Shares issued for RSUs vested

2 unchanged sentences

( 3,813,103 )

Net loss for the period

Net income for the period

Balance, March 31, 2021

1 unchanged sentence

$ ( 22,696,011 )

Ending Balance

Beginning balance, value

$ ( 60,251,064 )

$ ( 22,696,011 )

issued at C$ 0.40 ,

converted to US at $ 0.32

issued at C$ 0.57 ,

converted to US at $ 0.45

Stock-based compensation

Shares issued for RSUs vested

Net income for the period

Balance, June 30, 2021

$ ( 60,206,008 )

$ ( 22,370,235 )

Ending balance, value

$ ( 60,206,008 )

$ ( 22,370,235 )

accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.

Hill Mining Corp.

to the Condensed Interim Consolidated Financial Statements (Unaudited)

Months Ended March 31, 2022

Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)

and Six Months Ended June 30, 2022

in United States Dollars)

17 unchanged sentences

The Company has incurred losses

since inception resulting in an accumulated deficit of $ 75,372,036

and further losses are anticipated in the

development of its business.

Additionally, the Company owes a total of $ 17,497,236

to the Environmental Protection Agency

(“EPA”) (see Note 6) that is classified as current liability unless the Company can consummate financial assurances

that would reclassify $ 12,000,000

of this liability to long-term debt.

owes a total of $ 3,540,852 ,

net of discount, to the EPA that is classified as long-term debt.

The Company does not have sufficient cash to fund normal operations

and meet debt obligations for the next 12 months without deferring payment on certain current liabilities and/or raising additional funds.

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

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 condensed

interim consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

is considering various financing alternatives including, but not limited to, raising capital through the capital markets and debt financing.

These 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.

ability of the Company to emerge from the exploration stage is dependent upon, among other things, obtain additional financing to continue

operations, explore and develop the mineral properties and the discovery, development, and sale of reserves.

since inception resulting in an accumulated deficit of $ 63,317,255 and further losses are anticipated in the development of its business.

Additionally, the Company owes a total of $ 3,847,141 to the Environmental Protection Agency (“EPA”) (see Note 6) for water

treatment that is classified as current.

The Company also owes a total of $ 7,072,410 , net of discount, to the EPA that is classified

as long-term debt.

The Company does not have sufficient cash to fund normal operations and meet debt obligations for the next 12 months

without deferring payment on certain current liabilities and/or raising additional funds.

In order to continue to meet its fiscal obligations

in the current fiscal year and beyond, the Company must seek additional financing.

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 condensed interim consolidated financial statements do not include

any adjustments that might result from the outcome of this uncertainty.

is considering various financing alternatives including, but not limited to, raising capital through the capital markets, debt, and multi-metals stream

These unaudited condensed interim 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.

ability of the Company to emerge from the exploration stage is dependent upon, among other things, closing on the multi-metals

stream transaction (see note 7), obtaining additional financing to continue operations, exploring and developing the mineral

properties and the discovery, development, and sale of reserves.

Company’s operations could be significantly adversely affected by the effects of a widespread global outbreak of epidemics, pandemics,

8 unchanged sentences

Russia/Ukraine Crisis:

Company’s operations could be adversely affected by the effects of the escalating Russia/Ukraine crisis and the effects of sanctions

imposed against Russia or that country’s retributions against those sanctions, embargos or further-reaching impacts upon energy

prices, food prices and market disruptions.

The Company cannot accurately predict the impact the crisis will have on its operations and

the ability of contractors to meet their obligations with the Company, including uncertainties relating the severity of its effects,

the duration of the conflict, and the length and magnitude of energy bans, embargos and restrictions imposed by governments.

the crisis could adversely affect the economies and financial markets of the United States in general, resulting in an economic downturn

that could further affect the Company’s operations and ability to finance its operations.

Additionally, the Company cannot predict

changes in precious metals pricing or changes in commodities pricing which may alternately affect the Company either positively or negatively.

Company’s operations could be adversely affected by the effects of the Russia/Ukraine crisis and the effects of sanctions imposed

against Russia or that country’s retributions against those sanctions, embargos or further-reaching impacts upon energy prices,

food prices and market disruptions.

The Company cannot accurately predict the impact the crisis will have on its operations and the ability

of contractors to meet their obligations with the Company, including uncertainties relating the severity of its effects, the duration

of the conflict, and the length and magnitude of energy bans, embargos and restrictions imposed by governments.

In addition, the crisis

could adversely affect the economies and financial markets of the United States in general, resulting in an economic downturn that could

further affect the Company’s operations and ability to finance its operations.

Additionally, the Company cannot predict changes

in precious metals pricing or changes in commodities pricing which may alternately affect the Company either positively or negatively.

Bunker Hill Mining Corp.

Notes to the Condensed Interim Consolidated

Financial Statements (Unaudited)

Three and Six Months Ended June 30, 2022

(Expressed in United States Dollars)

Basis of Presentation

accompanying unaudited condensed interim consolidated financial statements of the Company have been prepared in accordance with accounting

principles generally accepted in the United States of America and the rules and regulations of the United States Securities and Exchange

Commission for interim financial information.

Accordingly, they do not include all the information and footnotes necessary for a comprehensive

presentation of financial position, results of operations, shareholders’ deficiency, or cash flows.

It is management’s opinion,

however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial

statement presentation.

The unaudited condensed interim consolidated financial statements should be read in conjunction with the Company’s

Annual Report on Form 10-K, which contains the annual audited consolidated financial statements and notes thereto, together with the

Management’s Discussion and Analysis, for the year ended December 31, 2021.

The interim results for the period ended March 31,

2022, are not necessarily indicative of the results for the full fiscal year.

The unaudited interim condensed consolidated financial

statements are presented in United States dollars, which is the Company’s functional currency.

Hill Mining Corp.

to the Condensed Interim Consolidated Financial Statements (Unaudited)

Months Ended March 31, 2022

in United States Dollars)

accompanying unaudited condensed interim consolidated financial statements of the Company have been prepared in accordance with

accounting principles generally accepted in the United States of America and the rules and regulations of the United States

Securities and Exchange Commission for interim financial information.

Accordingly, they do not include all the information and

footnotes necessary for a comprehensive presentation of financial position, results of operations, shareholders’ deficiency,

or cash flows.

It is management’s opinion, however, that all material adjustments (consisting of normal recurring adjustments)

have been made which are necessary for a fair financial statement presentation.

The unaudited condensed interim consolidated

financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K, which contains the annual

audited consolidated financial statements and notes thereto, together with the Management’s Discussion and Analysis, for the

year ended December 31, 2021.

The financial results for the three and six months ended June 30, 2022 are not necessarily

indicative of the results for the full fiscal year.

The unaudited interim condensed consolidated financial statements are presented

in United States dollars, which is the Company’s functional currency.

Plant & Equipment

consists of the following:

2 unchanged sentences

Equipment, net

total depreciation expense during the three months ended March 31, 2022 and March 31, 2021 was $ 54,015

and $ 29,830 ,

respectively.

Pend Oreille Process Plant

On January 25, 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 Mill”).

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 outlined a purchase price under two scenarios, at Teck’s

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 was paid by the Company in January 2022.

On March 31, 2022, the Company reached an agreement

with a subsidiary of Teck to satisfy the remaining purchase price for the Pend Oreille Mill by way of an equity issuance of the Company.

Teck will receive 10,416,667 units of the Company (the “Teck Units”) at a deemed issue price of C$ 0.30 per unit.

Unit consists of one common share of the Company and one common share purchase warrant (the “Teck Warrants”).

Teck Warrant entitles the holder to acquire one common share at a price of C$ 0.37 per common share for a period of three years.

The equity issuance

occurred on May 13, 2022.

total depreciation expense during the three and six months ended June 30, 2022 was $ 38,692 and $ 77,091 , respectively.

Compared to the

three and six months ended June 30, 2021 was $ 34,566 and $ 64,396 , respectively.

Plant Purchase from Teck Resources Limited

January 25, 2022, the Company entered into a non-binding Memorandum of Understanding (“MOU”) with a subsidiary of Teck

Resources Limited (“Teck”) for the purchase of a comprehensive package of equipment and parts inventory from its Pend

Oreille site (the “Pend Oreille Mill”).

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 the Bunker Hill site, and total inventory of nearly 10,000

components and parts for mill, assay lab, conveyer, field instruments, and electrical spares.

The Company paid a

$500,000 non-refundable deposit in January

March 31, 2022, the Company reached an agreement to satisfy the remaining purchase price by way of an equity

issuance of the Company.

Teck received 10,416,667 units of the Company (the “Teck Units”) at a deemed issue price of C$ 0.30

Each Teck Unit consists of one common share of the Company and one common share purchase warrant (the “Teck Warrants”).

Each whole Teck Warrant entitles the holder to acquire one common share at a price of C$ 0.37 per common share for a period of three years.

The equity issuance and purchase of the mill occurred on May 13, 2022.

purchase of the mill has been valued at:

consideration given, comprised of $ 500,000 nonrefundable deposit remitted on January 7,

2022 and $ 231,000 sales tax remitted on May 13, 2022, a total of $ 731,000 cash remitted.

Hill Mining Corp.

Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)

and Six Months Ended June 30, 2022

in United States Dollars)

of common shares issued on May 13, 2022 at the market price of that day, a value of $ 1,970,264 .

value of the warrants issued together with the inputs, as determined by a binomial model,

resulted in a fair value of $ 1,273,032 .

a result, the total value of the mill purchase was determined to be $ 3,974,296 .

The process plant was purchased in an assembled state

in its current location, including major processing systems, significant components, and a large inventory of spare parts.

intends to disassemble and transport it to the Bunker Hill site, reassembling it as an integral part of the Company’s future operations.

The Company determined that the transaction should be accounted for as an asset acquisition, with the process plant representing a single

asset with the exception of the inventory of spare parts, which has been separated out and appears on the balance sheet as a current asset

in accordance with a preliminary purchase price allocation.

As the plant is demobilized, transported and reassembled, installation and

other costs associated with these activities will be captured and capitalized as components of the asset.

June 30, 2022, the asset consists of the following:

of Plant Asset Consists

June 30, 2022

Sales tax paid

Value of shares issued

Value of warrants issued

Total plant & inventory purchased

Site preparation costs

Demobilization

Less spare parts inventory

Pend Oreille plant asset, net

Additionally,

at June 30, 2022, the Company has paid a refundable deposit of $ 1,000,000

to Teck as security while demobilization activities are ongoing.

This is classified as a short-term deposit on the balance

Right-of-Use Asset

3 unchanged sentences

Right-of-use asset, net

total depreciation expense during the three months ended March 31, 2022 and March 31, 2021 was $ 24,442 and $ 26,595 , respectively.

total depreciation expense during the three and six months ended June 30, 2022 was $ 24,442 and $ 52,353 , respectively.

Compared to the

three and six months ended June 30, 2021 was $ 26,594 and $ 53,189 , respectively.

Mining Interests

Hill Mine Complex

The Company purchased the Bunker Hill Mine

(the “Mine”) in January 2022, as described below.

Prior to purchasing the Mine, the Company had

entered into a series of agreements with Placer Mining Corporation (“Placer Mining”), the prior owner,

for the lease and option to purchase the Mine.

The first of these agreements was announced on August 28, 2017, with subsequent

amendments and/or extensions announced on November 1, 2019, July 7, 2020, and November 20, 2020.

Under the terms of the November 20, 2020 amended

agreement (the “Amended Agreement”), a purchase price of $ 7,700,000 was agreed, with $ 5,700,000 payable in cash (with

an aggregate of $ 300,000 to be credited toward the purchase price of the Mine as having been previously paid by the Company) and $ 2,000,000

in Common Shares of the Company.

The Company agreed to make an advance payment of $ 2,000,000 , credited towards the purchase price of the

Mine, which 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.

Hill Mining Corp.

to the Condensed Interim Consolidated Financial Statements (Unaudited)

Months Ended March 31, 2022

in United States Dollars)

The Amended Agreement also required payments

pursuant to an agreement with the EPA whereby for so long as the Company leases,

owns and/or occupies the Mine, the Company would make payments to the EPA on behalf of Placer Mining in satisfaction of the EPA’s

claim for historical water treatment cost recovery in accordance with the Settlement Agreement reached with the EPA in 2018.

prior to the purchase of the Mine, the Company’s liability to EPA in this regard totaled $ 11,000,000 .

The Company completed the purchase of the Mine

on January 7, 2022.

Company purchased the Bunker Hill Mine (the “Mine”) in January 2022, as described below.

to purchasing the Mine, the Company had entered into a series of agreements with Placer Mining Corporation (“Placer Mining”),

the prior owner, for the lease and option to purchase the Mine.

The first of these agreements was announced on August 28, 2017, with

subsequent amendments and/or extensions announced on November 1, 2019, July 7, 2020, and November 20, 2020.

Bunker Hill Mining Corp.

Notes to the Condensed Interim Consolidated

Financial Statements (Unaudited)

Three and Six Months Ended June 30, 2022

(Expressed in United States Dollars)

the terms of the November 20, 2020 amended agreement (the “Amended Agreement”), a purchase price of $ 7,700,000 was agreed,

with $ 5,700,000 payable in cash (with an aggregate of $ 300,000 to be credited toward the purchase price of the Mine as having been previously

paid by the Company) and $ 2,000,000 in Common Shares of the Company.

The Company agreed to make an advance payment of $ 2,000,000 , credited

towards the purchase price of the Mine, which 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.

amended Agreement also required payments pursuant to an agreement with the EPA whereby for so long as the Company leases, owns and/or

occupies the Mine, the Company would make payments to the EPA on behalf of Placer Mining in satisfaction of the EPA’s claim for

historical water treatment cost recovery in accordance with the Settlement Agreement reached with the EPA in 2018.

Immediately prior

to the purchase of the Mine, the Company’s liability to EPA in this regard totaled $ 11,000,000 .

Company completed the purchase of the Mine on January 7, 2022.

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

in cash, from $ 3,400,000

in cash (previously $ 3,400,000

of cash and $ 2,000,000

3 unchanged sentences

“EPA Settlement Agreement” section below).

The $ 5,400,000 contract cash paid at purchase

was the $ 7,700,000 less the $ 2,000,000 deposit and $ 300,000 credit given by the seller for prior years’ maintenance payments.

carrying cost of the Mine is comprised of the following:

$ 5,400,000 contract cash paid at purchase was the $ 7,700,000 less the $ 2,000,000 deposit and $ 300,000 credit given by the seller for

prior years’ maintenance payments.

The carrying cost of the Mine is comprised of the following:

of Mining Interests

5 unchanged sentences

Total carrying cost of mine

has determined the purchase to be an acquisition of a single asset.

has determined the purchase to be an acquisition of a single asset as guided by ASU 805-10.

March 3, 2022, the Company purchased a 225-acre surface land parcel for $ 202,000 which includes the surface rights to portions of 24

patented mining claims, for which the Company already owns the mineral rights.

Environmental Protection Agency Agreement and Water Treatment Liabilities

Cost Recovery Payables

a part of the lease of the Mine, the Company was required to make payments pursuant to an agreement with the Environmental Protection Agency (the “EPA”) whereby for so long

as the Company leases, owns and/or occupies the Mine, the Company was required to make payments to the EPA on behalf of Placer Mining in satisfaction

of the EPA’s claim for cost recovery related to historical treatment costs paid by the EPA from 1995 to 2017.

These payments, if

all are made, will total $ 20,000,000 .

The agreement called for payments starting with $ 1,000,000 30 days after a fully ratified agreement

was signed (which payment was made) followed by $ 2,000,000 on November 1, 2018, and $ 3,000,000 on each of the next five anniversaries

with a final $ 2,000,000 payment on November 1, 2024.

The November 1, 2018, November 1, 2019, November 1, 2020, and November 1, 2021,

payments were not made.

As a result, a total of $ 11,000,000 was outstanding as of December 31, 2021, accounted for within current liabilities.

As the purchase of the Bunker Hill Mine (which would trigger the immediate recognition of the remaining liabilities due through November

1, 2024) had not yet taken place, the remaining $ 8,000,000 cost recovery liabilities were not recognized on the Company’s balance

sheet as of December 31, 2021.

Hill Mining Corp.

to the Condensed Interim Consolidated Financial Statements (Unaudited)

Months Ended March 31, 2022

Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)

and Six Months Ended June 30, 2022

in United States Dollars)

March 3, 2022, the Company purchased a 225-acre surface land parcel for $ 202,000

which includes the surface rights to portions of 24 patented mining claims, for which the Company already owns the mineral rights.

Environmental Protection Agency Agreement

a part of the lease of the Mine, the Company was required to make payments pursuant to an agreement with the EPA whereby

for so long as the Company leases, owns and/or occupies the Mine, the Company will make payments to the EPA on behalf of Placer Mining

in satisfaction of the EPA’s claim for cost recovery.

These payments, if all are made, will total $ 20,000,000 .

The agreement called

for payments starting with $ 1,000,000 30 days after a fully ratified agreement was signed (which payment was made) followed by $2,000,000

on November 1, 2018, and $3,000,000 on each of the next five anniversaries with a final $2,000,000 payment on November 1, 2024.

1, 2018, December 1, 2018, June 1, 2019, November 1, 2019, November 1, 2020, and November 1, 2021, payments were not made, and the Company

engaged in discussions with the EPA in an effort to reschedule these payments in ways that enable the sustainable operation of the Mine

as a viable long-term business .

EPA liability schedule in effect at March 31, 2022 was:

Of Environmental Protection Agency Agreement Liability

November 1, 2021

(aggregate amounts from 2018, 2019, 2020 and 2021)

November 1, 2022

November 1, 2023

November 1, 2024

plus accrued interest

Interest is accrued at EPA superfund interest

rates, which was 0.10 % and 2.22 % for the quarters ended March 31, 2022 and 2021, respectively.

Interest expense for those periods was

$ 5,028 and $ 47,982 , respectively.

At March 31, 2022 interest of $ 311,530 is included in interest payable on the condensed consolidated

balance sheet.

2021, the Company engaged in discussions with the EPA in an effort to reschedule these payments in ways that enable the sustainable operation

of the Mine as a viable long-term business.

December 19, 2021, the Company entered into an amended Settlement Agreement between the Company, Idaho Department of Environmental Quality,

3 unchanged sentences

The Amended Settlement modified the payment schedule and

payment terms for recovery of historical environmental response costs at Mine by the EPA.

payment terms for recovery of the aforementioned historical environmental response costs.

Pursuant to the terms of the Amended Settlement,

the Company paid $ 2,000,000 to the EPA on January 7, 2022.

Pursuant to the terms of the Amended Settlement, an additional $ 17,000,000

will be paid by the Company to the EPA on the following dates:

upon purchase of the Bunker Hill Mine and the satisfaction of financial assurance commitments (as described below), the $ 19,000,000 of

cost recovery liabilities will be paid by the Company to the EPA on the following dates:

of Amended Settlement Environmental Protection Agency Agreement

Within 30 days of Settlement Agreement

November 1, 2024

5 unchanged sentences

$ 2,000,000 plus accrued interest

Amended Settlement included additional payment for outstanding water treatment costs (described below) that have been incurred over the

period from 2018 through 2020.

This $ 2,900,000 payment was to be made within 90 days of execution of the Amended Settlement.

addition to the changes in payment terms and schedule, the Amended Settlement included a commitment by the Company to secure $ 17,000,000

of financial assurance in the form of performance bonds or letters of credit deemed acceptable to the EPA.

The financial assurance can

be drawn on by the EPA in the event of non-performance by the Company of its payment obligations under the Amended Settlement (the “Financial

The amount of the bonds will decrease over time as individual payments are made.

If the Company does not post the

Financial Assurance within 90 days of execution of the Amended Settlement, it must issue an irrevocable letter of credit for $ 9,000,000 .

The EPA may draw on this letter of credit after an additional 90 days if the Company is unable to either put the Financial Assurance

in place or make payment for the full $ 17,000,000 of remaining historical cost recovery sums.

In the event neither occurs, the terms

of the initial Settlement Agreement will be reinstated.

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

At March 31, 2022, the terms of the initial Settlement Agreement were still in place.

Company completed the purchase of the Mine on January 7, 2022 (see note 5).

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

in cash, from $3,400,000 of cash and $2,000,000 of Common Shares.

The purchase price of the mine totaled $7,342,638 was capitalized,

after taking into effect the deposits previously made, the credits given and closing costs.

Additionally, a total of $442,147 of legal

costs were capitalized .

Concurrent with the purchase

of the Mine, the Company assumed the balance of the EPA

liability totaling $17,000,000 (after the payment of the $2,000,000 on January 7, 2022), an increase of $8,000,000 of which $3,000,000

is current liability and $5,000,000 is long-term in nature.

The long-term portion was discounted at an interest rate of 16.5% to arrive

at a net present value of $3,402,425 after discount.

During the quarter ended March 31, 2022, $138,427 of the discount was amortized

to interest expense.

31, 2022, the total EPA cost recovery liability was $ 17,000,000 , less $ 1,457,147 discount on the long-term portion, or $ 15,540,853 .

current portion of the EPA cost recovery liability at March 31, 2022 was $ 12,000,000 as detailed below:

Of Environmental Cost Recover Liability

EPA cost recovery payable at December 31, 2021

Payment as part of mine purchase on January 7, 2022

( 2,000,000 )

Assumed with mine purchase – current portion

EPA cost recovery at March 31, 2022

balance of the NPV of the long-term portion of the EPA cost recovery payable at March 31, 2022 was $ 3,540,853

detailed below:

Of Net Present Vale of Environmental Protection Agency Agreement

Long-term portion of NPV of EPA cost recovery payable at purchase of mine on January 7, 2022

Accretion of NPV discount during the quarter

Long-term portion of NPV of EPA cost recovery payable at March 31, 2022

addition to these payments, the Company makes a monthly accrual of $ 165,000 to cover the Idaho Department of Environmental Quality (“IDEQ”)

(formerly performed and invoiced by the EPA) estimated costs of treating water at the water treatment facility.

The Company also pays

an agreed-upon monthly amount of $ 140,000 , with a true-up to be recorded and paid by the Company once the actual annual costs are determined

balance of EPA/IDEQ water treatment liability at March 31, 2022 was $ 5,185,706 as detailed below:

Of EPA/IDEQ Water Treatment Liability

EPA/IDEQ water treatment liability at December 31, 2021

Payments during the quarter

Accruals during the quarter

EPA/IDEQ water treatment liability at March 31, 2022

Hill Mining Corp.

to the Condensed Interim Consolidated Financial Statements (Unaudited)

Months Ended March 31, 2022

in United States Dollars)

of financial assurance in the form of performance bonds or letters of credit deemed acceptable to the EPA within 180 days from the effective

date of the Amended Settlement Agreement.

Once put in place, the financial assurance can be drawn on by the EPA in the event of non-performance

by the Company of its payment obligations under the Amended Settlement (the “Financial Assurance”).

The amount of the bonds

will decrease over time as individual payments are made.

Company completed the purchase of the Mine (see note 5) and made the initial $ 2,000,000 cost recovery payment on January 7, 2022.

with the purchase of the Mine, the Company assumed the balance of the EPA liability totaling $ 17,000,000 , an increase of $ 8,000,000 .

of March 31, 2022, the financial assurance had not yet been secured, and as such the

Company accounted for the $17,000,000 liabilities according to the previous payment schedule, resulting in $12,000,000 classified as

a current liability and $5,000,000 as a long-term liability.

The long-term portion was discounted at an interest rate of 16.5% to

arrive at a net present value of $3,402,425 after discount.

the quarter ended June 30, 2022, the Company was successful in obtaining the final financial assurance.

Specifically, a $ 9,999,000

payment bond and a $ 7,001,000

letter of credit were secured and provided to the EPA.

This milestone provides for the Company to recognize the effects of the

change in terms of the EPA liability as outlined in the December 19, 2021 agreement.

Once the financial assurance was put into

place, the restructuring of the payment stream under the Amendment occurred with the entire $ 17,000,000

liability being recognized as long-term in nature.

The aforementioned payment bond is secured by a $2,475,000 letter of credit.

and $ 7,001,000

letters of credit are secured by $9,476,000 of cash deposits under an agreement with a commercial bank.

These cash deposits comprise

the $ 9,476,000

of restricted cash shown within current assets as of June 30, 2022.

ASC 470-50, Debt Modifications and Extinguishments, the Company performed a comparison of NPV’s of the pre-settlement Cost

Recovery obligation to the post-settlement schedule of Cost Recovery obligation to determine this was an extinguishment of debt.

Company recorded a gain on extinguishment of debt totaling $ 8,614,103 .

The old debt, including any discount, was written off and the new payment stream of the amended $ 17,000,000

table, including the new discount of $ 9,927,590

using the effective interest rate of 19.95% was recorded to result in a net liability of $ 7,072,410 ,

which is due long-term.

Bunker Hill Mining Corp.

Notes to the Condensed Interim Consolidated

Financial Statements (Unaudited)

Three and Six Months Ended June 30, 2022

(Expressed in United States Dollars)

Treatment Charges – EPA

to the cost recovery liabilities outlined above, the Company is responsible for the payment of ongoing water treatment charges.

Water treatment charges incurred through December 31, 2021 are payable to the EPA, and charges thereafter are payable to the Idaho

Department of Environmental Quality (“IDEQ”) given a handover of responsibilities for the Central Treatment Plant from

the EPA to the IDEQ as of that date.

The Company previously estimated a balance due to the EPA of $ 5,110,706

for ongoing water treatment through December 31, 2021.

During the six months ended June 30, 2022, the Company received an invoice

from the EPA for water treatment through October 2021.

As a result, the Company reversed its previous accruals for this period and

adjusted its estimated charges for November and December 2021.

Through recent discussions with the EPA, the Company has confirmed

that payments to the IDEQ for water treatment charges cannot be netted against invoices payable to the EPA.

After taking this into

account, the additional invoice received from the EPA, and a $ 1,000,000

payment made in April 2022, the Company has estimated water treatment payables to the EPA of $ 3,847,141

as of June 30, 2022 which is reflected in current liabilities.

Treatment Charges – IDEQ

water treatment charges beginning January 2022, the Company makes a monthly accrual of $ 80,000 to cover the IDEQ’s estimated costs

of treating water at the water treatment facility.

The Company also pays an agreed-upon monthly amount of $ 140,000 , with a true-up to

be recorded and paid by the Company once the actual annual costs are determined each year.

At June 30, 2022, the Company has accrued

$ 480,000 for water treatment costs to IDEQ and has prepaid $ 840,000 leaving a net prepaid of $ 360,000 which is included in prepaids on

the unaudited condensed interim consolidated balance sheet.

Promissory Note Payable and Convertible Debentures

September 22, 2021, the Company issued a non-convertible promissory note in the amount of $ 2,500,000 bearing

interest of 15 % per

annum and payable at maturity.

The promissory note matured on March

however, the note holder agreed to

accept $ 500,000 payment,

which the Company paid, by April 15, 2022, and the remaining principal and interest was deferred to June 20, 2022.

Interest expense

for the three months ended March 31, 2022 and 2021 was $ 92,466 and

respectively.

At March 31, 2022 interest of $ 195,205 is

included in interest payable on the condensed consolidated balance sheet.

Project Finance Package

December 20, 2021, the Company executed a non-binding term sheet outlining a $ 50,000,000 project finance package with Sprott

Private Resource Streaming and Royalty Corp.

non-binding term sheet with SRSR outlined a $ 50,000,000

project financing package that the Company expects

to fulfill the majority of its funding requirements to restart the Mine.

The financing package consisted of an $ 8,000,000

royalty convertible debenture (the “RCD”),

a $ 5,000,000

September 22, 2021, the Company issued a non-convertible promissory note in the amount of $ 2,500,000 bearing interest of 15 % per annum

and payable at maturity.

The promissory note was scheduled to mature on March 15, 2022 ;

however, the note holder agreed to accept $ 500,000

payment, which the Company paid, by April 15, 2022, and the remaining principal and interest was deferred to June 20, 2022.

the revised maturity of June 20, 2022, the note holder agreed to accept a further $ 500,000 payment by June 30, 2022, which the Company

paid, and the remaining principal and interest was deferred to November 30, 2022.

The Company purchased a land parcel for approximately

$ 202,000 on March 3, 2022, which may be used as security for the promissory note.

At June 30, 2022, the Company owes $ 1,500,000 in promissory

notes payable and is included in current liabilities on the condensed consolidated balance sheet.

Interest expense for the six months

ended June 30, 2022 and 2021 was $ 167,877 and $ nil , respectively.

At June 30, 2022 interest of $ 270,616 is included in interest payable

on the condensed consolidated balance sheet.

Finance Package with Sprott Private Resource Streaming & Royalty Corp.

December 20, 2021, the Company executed a non-binding term sheet outlining a $ 50,000,000 project finance package with Sprott Private

Resource Streaming and Royalty Corp.

non-binding term sheet with SRSR outlined a $ 50,000,000 project financing package that the Company expects to fulfill the majority of

its funding requirements to restart the Mine.

The term sheet consisted of an $ 8,000,000 royalty convertible debenture (the “RCD”),

a $ 5,000,000 convertible debenture (the “CD1”), and a multi-metals stream of up to $ 37,000,000 (the “Stream”).

The CD1 was subsequently increased to $ 6,000,000, increasing the project financing package to $51,000,000 .

June 17, 2022, the Company consummated a new $ 15,000,000

convertible debenture (the “CD2”).

and a multi-metals stream of up to $ 37,000,000

(the “Stream”, together with the

RCD and the CD, the “Project Financing Package”).

Total finance costs for legal fees associated with the

two convertible debentures was $ 795,100 ,

of which $ 67,435

associated with the derivative portions

of the financing was recognized as a period expense and $ 727,665

was allocated to the CD and RCD pro-ratably

based on their fair value on the issuance date, with $ 300,579 and $ 427,086 allocated, respectively.

$8,000,000 Royalty Convertible Debenture

Company closed the $ 8,000,000

on January 7, 2022.

The RCD bears interest at an annual rate of 9.0 % ,

payable in cash or Common Shares at the Company’s option, until such time that SRSR elects to convert a royalty, with such conversion

option expiring at the earlier of advancement of the Stream or 18 months.

In the event of conversion, the RCD will cease to exist

and the Company will grant a royalty for 1.85 %

of life-of-mine gross revenue from mining claims

considered to be historically worked, contiguous to current accessible underground development, and covered by the Company’s 2021

ground geophysical survey (the “SRSR Royalty”).

As a result, total potential funding from SRSR was further increased to $ 66,000,000

including the RCD, CD1, CD2 and the Stream (together, the “Project Financing Package”).

Royalty Convertible Debenture (RCD)

Company closed the $ 8,000,000 RCD on January 7, 2022.

The RCD bears interest at an annual rate of 9.0 %, payable in cash or Common Shares

at the Company’s option, until such time that SRSR elects to convert a royalty, with such conversion option expiring at the earlier

of advancement of the Stream or July 7, 2023 (subsequently amended as described below).

In the event of conversion, the RCD will cease

to exist and the Company will grant a royalty for 1.85 % of life-of-mine gross revenue from mining claims considered to be historically

worked, contiguous to current accessible underground development, and covered by the Company’s 2021 ground geophysical survey (the

“SRSR Royalty”).

A 1.35% rate will apply to claims outside of these areas.

secured by a share pledge of the Company’s operating subsidiary, Silver Valley, until a full security package was put in

place concurrent with the consummation of the CD.

In the event of non-conversion, the principal of the RCD will be repayable

$6,000,000 Convertible Debenture

Company closed the $ 6,000,000

on January 28, 2022, which was increased from the previously-announced $ 5,000,000 .

The Convertible Debenture bears interest at an annual rate of 7.5 % ,

payable in cash or shares at the Company’s option, and matures on July

The CD is secured by a pledge

of the Company’s properties and assets.

Until the closing of the Stream, the CD is convertible into Common Shares at

a price of C$ 0.30

per Common Share, subject to stock exchange approval.

Alternatively, SRSR may elect to retire the CD with the cash proceeds from the Stream.

The Company may elect to repay the CD

if SRSR elects not to exercise its conversion option at such time, a minimum of 12 months of interest would apply.

The RCD was initially secured by a share pledge

of the Company’s operating subsidiary, Silver Valley, until a full security package was put in place concurrent with the consummation

In the event of non-conversion, the principal of the RCD will be repayable in cash.

Hill Mining Corp.

to the Condensed Interim Consolidated Financial Statements (Unaudited)

Months Ended March 31, 2022

Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)

and Six Months Ended June 30, 2022

in United States Dollars)

The Company determined that the conversion

features in both the RCD and CD were not closely related to their respective debt components, and should be considered as derivatives

under ASC 815.

As such, these derivative components were bifurcated, accounted for and valued separately under the framework prescribed

The fair value of the derivative components in the RCD included the utilization of payable metal production estimates from

the Company’s Preliminary Economic Assessment published in November 2022, and a Monte Carlo Simulation approach that included simulating

the future prices of metals, and application of an appropriate project discount rate, as well as key inputs included in the table below.

The value of the conversion feature in the CD was determined with the binomial model which involves the modelling of stock prices over

the applicable term to evaluate the payouts under ‘hold’, ‘convert’, and ‘prepay’ decisions and select

the decision that would maximize the fair value from a market participant’s perspective.

The derivative components will be fair

valued at each reporting period, with changes in fair value recorded as a gain or loss in the statement of profit or loss.

debt components of the RCD and CD were initially measured by first valuing the derivative components as described above, and are accounted

for separately as financial liabilities that will be subsequently measured at amortized cost.

with the funding of the CD2 in June 2022, the Company and SRSR agreed to a number of amendments to the terms of the RCD, including

an amendment of the maturity

date from July 7, 2023 to March 31, 2025 .

The parties also agreed to enter into a Royalty Put Option such that in the event

the RCD is converted into a royalty as described above, the holder of the royalty will be entitled to resell the royalty to the

Company for $ 8,000,000

upon default under the CD1 or CD2 until such time that the CD1 and CD2 are paid in full.

The Company determined that the amendments in the terms of the RCD should not be treated as an extinguishment of

the RCD, and have therefore been accounted for as modifications.

Series 1 Convertible Debenture (CD1))

Company closed the $ 6,000,000 CD1 on January 28, 2022, which was increased from the previously-announced $ 5,000,000 .

The CD1 bears interest

at an annual rate of 7.5 %, payable in cash or shares at the Company’s option, and matures on July 7, 2023 (subsequently amended,

as described below).

The CD1 is secured by a pledge of the Company’s properties and assets.

Until the closing of the Stream, the

CD1 was to be convertible into Common Shares at a price of C$ 0.30 per Common Share, subject to stock exchange approval (subsequently

amended, as described below).

Alternatively, SRSR may elect to retire the CD1 with the cash proceeds from the Stream.

The Company may

elect to repay the CD1 early;

if SRSR elects not to exercise its conversion option at such time, a minimum of 12 months of interest would

with the funding of the CD2 in June 2022, the Company and SRSR agreed to a number of amendments to the terms of the CD1, including that

date would be amended from July 7, 2023 to March 31, 2025 ,

and that the CD1 would remain outstanding until the new maturity date regardless of whether the Stream is advanced, unless the Company

elects to exercise its option of early repayment.

The Company determined that the amendments in the terms of the RCD should not

be treated as an extinguishment of the CD1, and have therefore been accounted for as modifications.

Series 2 Convertible Debenture (CD2)

Company closed the $ 15,000,000 CD2 on June 17, 2022.

The CD2 bears interest at an annual rate of 10.5 %, payable in cash or shares at

the Company’s option, and matures on March 31, 2025 .

The CD2 is secured by a pledge of the Company’s properties and assets.

The repayment terms include 3 quarterly payments of $ 2,000,000 each beginning June 30, 2024 and $ 9,000,000 on the maturity date.

light of the Series 2 Convertible Debenture financing, the previously permitted additional senior secured indebtedness of up to $ 15 million

for project finance has been removed.

The Company determined that in accordance with ASC

815, each debenture will be valued and carried as a single instrument, with the periodic changes to fair value accounted through earnings,

profit and loss.

with the approach above, the following table summarizes the key valuation inputs:

1 unchanged sentence

Reference (2)(4) (5)

Valuation date

Maturity date

Interest rate

Stock price (US$)

Expected equity volatility

Credit spread

Risk-free rate

Risk-adjusted rate

CD1 note (1)(3)

4 unchanged sentences

RCD note (stream advanced) scenario

RCD note (stream not advanced scenario)

RCD note (stream advanced) scenario

CD carries a Discount for Lack of Marketability (“DLOM”) of 5.0 %.

3 unchanged sentences

probabilities for the stream being advanced and the stream not being advanced is 55 % and 45 %, respectively.

resulting fair values of the CD and RCD at the issuance

dates, and as of March 31, 2022 were as follows:

Bunker Hill Mining Corp.

Notes to the Condensed Interim Consolidated

Financial Statements (Unaudited)

Three and Six Months Ended June 30, 2022

(Expressed in United States Dollars)

resulting fair values of the CD1, RCD, and CD2 at the issuance dates, March 31, 2022, and as of June 30, 2022 were as follows:

of Fair Value Derivative Liability

Instrument Description

Valuation Date

Component, Net of Finance Costs

January 28, 2022

January 7,2022

Instrument Description

Valuation Date

of the Debt Component

Interest at Effective Rates(1)

March 31, 2022

Issuance date

March 31, 2022

effect rates for the CD and RCD are 21.357 %

and 17.795 %,

respectively.

Accretion of $181,099 and $287,017 was recognized as interest expense for the CD and RCD, respectively.

Company performs quarterly testing of the covenants in the RCD and CD.

The RCD and CD contain a covenant that the Company must

maintain positive working capital at each quarterly filing date, as determined by the financial statements filed on such date.

As the Company would not have been in compliance with this covenant as of May 16, 2022 with respect to its working capital position

as of March 31, 2022, it has obtained a waiver of this covenant from the holders of the RCD and CD until the next filing date, which

is August 15, 2022.

The Company intends to ensure compliance with this covenant for future filing dates through the advance of

the Stream or other long-term financing.

A minimum 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 of availability of the Stream

have been satisfied.

If the Company draws the maximum funding of $ 37,000,000 , the Stream would apply to 10% of payable metals sold until

a minimum quantity of metal is delivered consisting of, individually, 55 million pounds of zinc, 35 million pounds of lead, and 1 million

ounces of silver.

Thereafter, the Stream would apply to 2% of payable metals sold.

If the Company elects to draw less than $37,000,000

under the Stream, the percentage and quantities of payable metals streamed will adjust pro-rata.

The delivery price of streamed metals

will be 20% of the applicable spot price.

The Company may buy back 50% of the Stream Amount at a 1.40x multiple of the Stream Amount

between the second and third anniversary of the date of funding, and at a 1.65x multiple of the Stream Amount between the third and fourth

anniversary of the date of funding.

The Company will be permitted to incur additional indebtedness of $ 15,000,000 and a cost over-run

facility of $ 13,000,000 from other financing counterparties.

June 30, 2022

The total gain on fair value of debentures recognized

during the three and six months ended June 30, 2022 was $ 1,813,456 and $ 1,739,987 , respectively.

The portion of changes in fair value

that is attributable to changes in the Company’s credit risk is accounted for within other comprehensive income.

During the three

and six months ended June 30, 2022, the Company recognized $ 371,255 within other comprehensive income.

Company performs quarterly testing of the covenants in the RCD, CD1 and CD2, and was in compliance with all such covenants as of June

minimum 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 of availability of the Stream have been satisfied including confirmation of full project

funding by an independent engineer appointed by SRSR.

If the Company draws the maximum funding of $ 37,000,000 , the Stream would apply

to 10% of payable metals sold until a minimum quantity of metal is delivered consisting of, individually, 55 million pounds of zinc,

35 million pounds of lead, and 1 million ounces of silver (subsequently amended, as described below).

Thereafter, the Stream would apply

to 2% of payable metals sold.

If the Company elects to draw less than $37,000,000 under the Stream, the percentage and quantities of

payable metals streamed will adjust pro-rata.

The delivery price of streamed metals will be 20% of the applicable spot price.

may buy back 50% of the Stream Amount at a 1.40x multiple of the Stream Amount between the second and third anniversary of the date of

funding, and at a 1.65x multiple of the Stream Amount between the third and fourth anniversary of the date of funding.

As of June 30,

2022, the Stream had not been advanced.

with the funding of the CD2 in June 2022, the Company and SRSR agreed that the minimum quantity of metal delivered under the Stream,

if advanced, will increase by 10 % relative to the amounts noted above.

Lease Liability

Company has an operating lease for office space that expires in 2022.

Below is a summary of the Company’s lease liability as of

March 31, 2022:

Company had an operating lease for office space that expired in May 2022.

Below is a summary of the Company’s lease liability

as of June 30, 2022:

Schedule of Operating Lease Liability

7 unchanged sentences

Foreign exchange loss

Balance, March 31, 2022

addition to the minimum monthly lease payments of C$ 13,504 , the Company is required to make additional monthly payments amounting to

C$ 12,505 for certain variable costs.

The schedule below represents the Company’s obligations under the lease agreement in Canadian

Schedule of Lease Obligations

Less than 1 year

Additional rent

monthly rental expenses are offset by rental income obtained through a series of short-term subleases held by the Company.

Hill Mining Corp.

to the Condensed Interim Consolidated Financial Statements (Unaudited)

Months Ended March 31, 2022

in United States Dollars)

Balance, June 30, 2022

Bunker Hill Mining Corp.

Notes to the Condensed Interim Consolidated

Financial Statements (Unaudited)

Three and Six Months Ended June 30, 2022

(Expressed in United States Dollars)

Capital Stock, Warrants and Stock Options

total authorized capital is as follows:

common shares with a par value of $ 0.000001 per common share;

increase to 1,500,000,000 common shares, as approved in the July 29, 2002 annual meeting of shareholders, with a par value of $ 0.000001

per common share;

preferred shares with a par value of $ 0.000001 per preferred share

1 unchanged sentence

February 2021, the Company closed a non-brokered private placement of units of the Company (the “February 2021 Offering”),

issuing 19,576,360 units of the Company (“February 2021 Units”) at C$ 0.40 per February 2021 Unit for gross proceeds of $ 6,168,069

issuing 19,576,360

units of the Company (“February 2021 Units”)

per February 2021 Unit for gross proceeds of

(C$ 7,830,544 ).

Each February 2021 Unit consisted of one common share of the Company and one common share purchase warrant of the Company

(each, “February 2021 Warrant”), which entitles the holder to acquire a common share of the Company at C$ 0.60 per common

share for a period of five years .

In connection with the February 2021 Offering, the Company incurred share issuance costs of $ 154,630

and issued 351,000 compensation options (the “February 2021 Compensation Options”).

Each February 2021 Compensation Option

is exercisable into one February 2021 Unit at an exercise price of C$ 0.40 for a period of three years.

Each February 2021 Unit consisted of one common

share of the Company and one common share purchase warrant of the Company (each, “February 2021 Warrant”), which entitles

the holder to acquire a common share of the Company at C$ 0.60

per common share for a period of five

In connection with the February 2021 Offering,

the Company incurred share issuance costs of $ 154,630

and issued 351,000

compensation options (the “February 2021

Compensation Options”).

Each February 2021 Compensation Option is exercisable into one February 2021 Unit at an exercise price

for a period of three years.

Company also issued 417,720 February 2021 Units to settle $ 132,000 of accrued liabilities at a deemed price of $ 0.45 based on the fair

1 unchanged sentence

As a result, the Company recorded a loss on debt settlement of $ 56,146 .

April 2022, the Company closed a private placement of 37,849,325 Special Warrants and a non-brokered private placement of 1,471,664

units of the Company for aggregate gross proceeds of approximately C$ 11,796,297 .

Related parties, including management, directors, and consultants,

participated in the Special Warrant private placement for a total of 4,809,160 shares (included in the total above).

Special Warrants were issued at a price of C$ 0.30 per special warrant.

Each Special Warrant shall be automatically exercisable (without

payment of any further consideration and subject to customary anti-dilution adjustments) into one unit of the Company (a “Brokered

Unit”) on the date that is the earlier of:

(i) the date that is three (3) business days following the date on which the Company

has obtained both (A) a receipt from the Canadian security commission in each of the each of the provinces of Canada which the purchasers

and Agents (as defined herein) are residents where the Special Warrants are sold (the “Qualifying Jurisdictions”) for a (final)

short-form prospectus qualifying the distribution of the common stock of the Company (“Common Shares”) and common stock purchase

warrants of the Company (the “Warrants”) issuable upon exercise of the Special Warrants (the “Qualification Prospectus”);

and (B) notification that the registration statement, under U.S.

securities laws, of the Company filed with the United States Securities

and Exchange Commission (the “SEC”) has been declared effective by the SEC (the “Registration Statement”);

(ii) the date that is six months following April 1, 2022 (the “Closing ‎Date”).

Each unit consists of one common share

and one warrant.

Each warrant entitles the holder to acquire one common share for C$ 0.37 until April 1, 2025.

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

Hill Mining Corp.

Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)

and Six Months Ended June 30, 2022

in United States Dollars)

May 31, 2022 the Company announced that it had received a receipt from the Ontario Securities Commission for its final short-form Canadian

prospectus qualifying the distribution of the common stock of the Company and common stock purchase warrants of the Company issuable

upon exercise of the special warrants of the Company that were issued on April 1, 2022.

The Company also announced that it received notice

from the United States Securities and Exchange Commission that its Form S-1 has been declared effective as of May 27, 2022.

of obtaining the receipt for the Canadian prospectus and the declaration of effectiveness for the Form S-1, each unexercised Special

Warrant was automatically exercised into one Common Share and one Warrant without further action on the part of the holders.

non-brokered 1,471,664 units were issued at a price of C$ 0.30 per unit.

Each unit consists of one common share and one warrant.

warrant entitles the holder to acquire one warrant share for C$ 0.37 until April 1, 2025.

connection with the special warrants offering, the agents earned a cash commission in the amount of C$ 563,968 and compensation options

exercisable to acquire an aggregate of 1,879,892 units of the Company at C$ 0.30 a unit until April 1, 2024.

Each compensation unit consists

of one common share and one warrant.

Each warrant entitles the holder to acquire one warrant share for C$ 0.37 until April 1, 2024.

April 2022, the Company issued 1,315,856 common shares in connection with its election to satisfy interest payments under the outstanding

convertible debentures for the three months ended March 31, 2022.

May 2022, the Company issued 10,416,667 units to Teck Resources Limited in consideration towards the purchase of the Pend Oreille Processing

Plant at C$ 0.245 per unit.

Each unit consists of one common share and one warrant.

Each warrant entitles the holder to acquire one warrant

share for $ 0.37 until May 13, 2025.

June 2022, the Company issued 1,218,000 units to contractors for bonuses accrued during the three months ended March 31, 2022.

consists of one common share and one warrant.

Each warrant entitles the holder to acquire one warrant share for C$ 0.37 until April 1,

each financing, the Company has accounted for the warrants in accordance with ASC Topic 815.

The warrants are considered derivative instruments

as they were issued in a currency other than the Company’s functional currency of the U.S.

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.

change in fair value of the warrant is recorded in the condensed interim consolidated statements of income (loss)

and comprehensive income (loss) as a gain or loss and is estimated using the Binomial model.

warrant liabilities issued with private placements in June 2019, August 2019, August 2020, and February 2021

were revalued as at March 31, 2022 and December 31, 2021 using the Binomial model and the following assumptions:

The warrants are considered derivative

instruments as they were issued in a currency other than the Company’s functional currency of the U.S.

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 is recorded in the unaudited condensed interim consolidated statements of

income and comprehensive income as a gain or loss and is estimated using the Binomial model.

warrant liabilities as a result of the June 2019, August 2019, August 2020, February 2021, April 2022 special warrants, April 2022 non-brokered,

May 2022 Teck purchase, and June 2022 contractor private placements were revalued as at June 30, 2022 and December 31, 2021 using the

Binomial model and the following assumptions:

Schedule of Estimated Using the Binomial Model to Determine the Fair Value of Warrant Liabilities

April 2022 special warrants issuance

June 30, 2022

December 31, 2021

Expected life

Risk free interest rate

Dividend yield

Change in derivative liability

April 2022 non-brokered issuance

June 30, 2022

December 31, 2021

Expected life

Risk free interest rate

Dividend yield

Change in derivative liability

Bunker Hill Mining Corp.

Notes to the Condensed Interim Consolidated

Financial Statements (Unaudited)

Three and Six Months Ended June 30, 2022

(Expressed in United States Dollars)

May 2022 Teck issuance

June 30, 2022

December 31, 2021

Expected life

Risk free interest rate

Dividend yield

Change in derivative liability

June 2022 issuance

June 30, 2022

December 31, 2021

Expected life

Risk free interest rate

Dividend yield

Change in derivative liability

February 2021 issuance

March 31, 2022

June 30, 2022

December 31, 2021

6 unchanged sentences

August 2020 issuance

March 31, 2022

June 30, 2022

December 31, 2021

5 unchanged sentences

$ ( 7,703,052 )

2019 issuance

March 31, 2022

June 2019 issuance (i)

June 30, 2022

December 31, 2021

5 unchanged sentences

$ ( 1,371,346 )

Hill Mining Corp.

to the Condensed Interim Consolidated Financial Statements (Unaudited)

Months Ended March 31, 2022

in United States Dollars)

During the six months ended December 31, 2020, the Company

amended the exercise price to C$ 0.59 per common share and extended the expiry date to December 31, 2025 for 11,660,000 warrants.

August 2019 issuance (ii)

December 31, 2020

June 30, 2022

December 31, 2021

5 unchanged sentences

$ ( 2,744,785 )

Outstanding warrants at March 31, 2021 and March

31, 2022 were as follows:

During the six months ended December 31, 2020, the Company

amended the exercise price to C$ 0.59 per common share and extended the expiry date to December 31, 2025 for 17,920,000 warrants.

terms of the remaining 2,752,900 warrants remain unchanged.

Bunker Hill Mining Corp.

Notes to the Condensed Interim Consolidated

Financial Statements (Unaudited)

Three and Six Months Ended June 30, 2022

(Expressed in United States Dollars)

Schedule of Warrant Activity

1 unchanged sentence

Balance, December 31, 2020

Balance, March 31, 2021

Balance, June 30, 2021

Balance, December 31, 2021

Balance, March 31, 2022

the three months ended March 31, 2022, 239,284 February 2020 broker warrants expired.

March 31, 2022, the following warrants were outstanding:

Balance, June 30, 2022

the six months ended June 30, 2022, 239,284 February 2020 broker warrants expired.

June 30, 2022, the following warrants were outstanding:

Schedule of Warrants Outstanding Exercise Price

3 unchanged sentences

February 16, 2026

Hill Mining Corp.

to the Condensed Interim Consolidated Financial Statements (Unaudited)

Months Ended March 31, 2022

in United States Dollars)

March 31, 2022, the following broker options were outstanding:

April 1, 2025

June 30, 2022, the following broker options were outstanding:

Schedule of Broker Options

exercise price

Issued - August 2020 Compensation Options

Balance, December 31, 2020

1 unchanged sentence

Balance, December 31, 2021

Balance, March 31, 2022

grant date fair value of the February 2021 Compensation Options were estimated at $ 68,078

using the Black-Scholes valuation model with the following underlying assumptions:

Issued – April 2022 Compensation Options

Balance, June 30, 2022

Bunker Hill Mining Corp.

Notes to the Condensed

Interim Consolidated Financial Statements (Unaudited)

Three and Six Months Ended June 30,

(Expressed in United States Dollars)

grant date fair value of the August 2020 and February 2021, and April 2022 Compensation Options were estimated at $ 521,993 , $ 68,078 and

$ 264,435 respectively, using the Black-Scholes valuation model with the following underlying assumptions:

Schedule of Estimated Using Black-Scholes Valuation Model for Fair Value of Broker Options

5 unchanged sentences

broker options

Fair value ($)

August 31, 2023 (i)

February 16, 2024 (ii)

April 1, 2024 (iii)

Exercisable into one August 2020 Unit

Exercisable into one February 2021 Unit

following table summarizes the stock option activity during the three months ended March 31, 2022:

Exercisable into one April 2022 Unit

following table summarizes the stock option activity during the six months ended June 30, 2022:

Schedule of Stock Options

3 unchanged sentences

Balance, December 31, 2021

Balance, March 31, 2022

February 19, 2021, 1,037,977

stock options were issued

to an officer of the Company, of which 273,271

stock options vested immediately

and the balance of 764,706

stock options vested on

December 31, 2021.

These options have a 5 -year

life and are exercisable at C$ 0.335

per common share.

date fair value of the options was estimated at $ 204,213 .

The vesting of these options resulted in stock-based compensation of $ 54,735 for the quarter ended March 31, 2022 and $ 204,213

for the year ended December

31, 2021, which are included in operation and administration expenses on the consolidated statements of income (loss) and comprehensive

income (loss).

Hill Mining Corp.

to the Condensed Interim Consolidated Financial Statements (Unaudited)

Months Ended March 31, 2022

in United States Dollars)

Expired May 01, 2022

Balance, June 30, 2022

(i) On February 19,

2021, 1,037,977 stock options were issued to an officer of the Company, of which 273,271 stock options vested immediately and the balance

of 764,706 stock options vested on December 31, 2021.

These options have a 5 -year life and are exercisable at C$ 0.335 per common share.

The grant date fair value of the options was estimated at $ 204,213 .

The vesting of these options resulted in stock-based compensation

of $ 204,213 for the year ended December 31, 2021, which is included in operation and administration expenses on the consolidated statements

of income (loss) and comprehensive income (loss).

fair value of these stock options was determined on the date of grant using the Black-Scholes valuation model, and using the following

3 unchanged sentences

Dividend yield

Weighted average life

following table reflects the actual stock options issued and outstanding as of March 31, 2022:

Schedule of Stock Option Issued and Outstanding

Bunker Hill Mining Corp.

Notes to the Condensed Interim Consolidated

Financial Statements (Unaudited)

Three and Six Months Ended June 30, 2022

(Expressed in United States Dollars)

following table reflects the actual stock options issued and outstanding as of June 30, 2022:

Weighted average

1 unchanged sentence

fair value ($)

Income per Share

dilutive securities include convertible loan payable, warrants, broker options, stock options, and unvested restricted share units (“RSU”).

Diluted income per share reflects the assumed exercise or conversion of all dilutive securities using the treasury stock method.

of Income Per Share

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Net income (loss) and comprehensive income (loss) for the period

Basic income (loss) per share

Weighted average number of common shares - basic

Net income (loss) per share – basic

Net income (loss) and comprehensive income (loss) for the period

Dilutive effect of convertible debentures

Dilutive effect of warrants on net income

Diluted net income (loss) and comprehensive income (loss) for the period

Diluted income (loss) per share

Weighted average number of common shares - basic

Diluted effect:

Warrants, broker options, and stock options, convertible debentures, and RSUs

Weighted average number of common shares - fully diluted

Net income (loss) per share - fully diluted

Hill Mining Corp.

Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)

and Six Months Ended June 30, 2022

in United States Dollars)

Restricted Share Units

1 unchanged sentence

key employees, and consultants.

following table summarizes the RSU activity during the three months ended March 31, 2022:

following table summarizes the RSU activity during the six months ended June 30, 2022:

Schedule of Restricted Share Units

2 unchanged sentences

Unvested as at December 31, 2021

Unvested as at March 31, 2022

On April 14, 2020, the Company granted 400,000

RSUs to a certain officer of the Company.

RSUs vest in one fourth increments upon each anniversary of the grant date.

The vesting of these RSUs resulted in stock-based compensation

for the three months ended March 31, 2022 and

2021, respectively, which is included in operation and administration expenses on the condensed interim consolidated statements

of income (loss) and comprehensive income (loss).

Hill Mining Corp.

to the Condensed Interim Consolidated Financial Statements (Unaudited)

Months Ended March 31, 2022

in United States Dollars)

On April 20, 2020, the Company granted 200,000

RSUs to a certain director of the Company.

RSUs vest in one fourth increments upon each anniversary of the grant date.

The vesting of these RSUs resulted in stock-based compensation

for the three months ended March 31, 2022 and

2021, respectively, which is included in operation and administration expenses on the condensed interim consolidated statements

of income (loss) and comprehensive income (loss).

On November 16, 2020, the Company granted 168,000

RSUs to certain directors of the Company.

RSUs vest in one fourth increments upon each anniversary of the grant date.

The vesting of these RSUs resulted in stock-based compensation

for the three months ended March 31, 2022 and

2021, respectively, which is included in operation and administration expenses on the condensed interim consolidated statements

of income (loss) and comprehensive income (loss).

On December 6, 2020, the Company granted 220,990

RSUs to a consultant of the Company.

vest in one sixth increments per month.

The vesting of these RSUs resulted in stock-based compensation of $nil and $ 49,112

for the three months ended March 31, 2022 and

2021, respectively, which is included in operation and administration expenses on the condensed interim consolidated statements

of income (loss) and comprehensive income (loss).

Unvested as at June 30, 2022

On April 14, 2020, the Company granted 400,000 RSUs to a certain officer of the Company.

The RSUs vest in one fourth increments upon

each anniversary of the grant date.

The vesting of these RSUs resulted in stock-based compensation of $ 22,663 and $ 43,161 for the six

months ended June 30, 2022 and 2021, respectively, which is included in operation and administration expenses on the condensed interim

consolidated statements of income and comprehensive income.

On April 20, 2020, the Company granted 200,000 RSUs to a certain director of the Company.

The RSUs vest in one fourth increments upon

each anniversary of the grant date.

The vesting of these RSUs resulted in stock-based compensation of $ 7,834 and $ 14,934 for the six

months ended June 30, 2022 and 2021, respectively, which is included in operation and administration expenses on the condensed interim

consolidated statements of income (loss) and comprehensive income (loss).

On November 16, 2020, the Company granted 168,000 RSUs to certain directors of the Company.

The RSUs vest in one fourth increments upon

each anniversary of the grant date.

The vesting of these RSUs resulted in stock-based compensation of $ 8,362 and $ 16,081 for the six

months ended June 30, 2022 and 2021, respectively, which is included in operation and administration expenses on the condensed interim

consolidated statements of income (loss) and comprehensive income (loss).

On December 6, 2020, the Company granted 220,990 RSUs to a consultant of the Company.

The RSUs vest in one sixth increments per month.

The vesting of these RSUs resulted in stock-based compensation of $ nil and $ 58,740 for the six months ended June 30, 2022 and 2021, respectively,

which is included in operation and administration expenses on the condensed interim consolidated statements of income (loss) and comprehensive

income (loss).

On January 1, 2021, the Company granted 735,383 RSUs to a consultant of the Company.

4 unchanged sentences

The vesting of these RSUs

resulted in stock-based compensation of $ nil and $ 212,878 for the three months ended March 31, 2022 and 2021, respectively.

resulted in stock-based compensation of $ nil and $ 265,101 for the six months ended June 30, 2022 and 2021, respectively.

On July 1, 2021, the Company granted 17,823 RSUs to a consultant of the Company, vesting immediately.

The vesting of these RSUs resulted

in stock-based compensation of $ nil for the three months ended March 31, 2022 and 2021, respectively.

in stock-based compensation of $ nil for the six months ended June 30, 2022 and 2021, respectively.

Hill Mining Corp.

Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)

and Six Months Ended June 30, 2022

in United States Dollars)

On August 5, 2021, the Company granted 595,228 RSUs to consultants of the Company, vesting immediately.

The vesting of these RSUs resulted

in stock-based compensation of $ nil for the three months ended March 31, 2022 and 2021, respectively.

On January 10, 2022, the Company granted 500,000

RSUs to a consultant of the Company, vesting

The vesting of these RSUs resulted in stock-based compensation of $ 122,249

for the three months ended March 31, 2022, which

is included in operation and administration expenses on the condensed interim consolidated statements of income (loss)

and comprehensive income (loss).

in stock-based compensation of $ nil for the six months ended June 30, 2022 and 2021, respectively.

On January 10, 2022, the Company granted 500,000 RSUs to a consultant of the Company, vesting immediately.

The vesting of these RSUs

resulted in stock-based compensation of $ 122,249 for the six months ended June 30, 2022, which is included in operation and administration

expenses on the condensed interim consolidated statements of income (loss) and comprehensive income (loss).

On April 29, 2022, the Company granted 76,750 RSUs to certain consultants of the Company, vesting immediately.

The vesting of these RSUs

resulted in stock-based compensation of $ 16,800 for the six months ended June 30, 2022, which is included in operation and administration

expenses on the condensed interim consolidated statements of income (loss) and comprehensive income (loss).

On June 30, 2022, the Company granted 15,000 RSUs to a consultant of the Company, vesting immediately.

The vesting of these RSUs resulted

in stock-based compensation of $ 2,328 for the six months ended June 30, 2022, which is included in operation and administration expenses

on the condensed interim consolidated statements of income (loss) and comprehensive income (loss).

Deferred Share Units

4 unchanged sentences

of the Company’s common share on the date of redemption in exchange for cash.

Hill Mining Corp.

to the Condensed Interim Consolidated Financial Statements (Unaudited)

Months Ended March 31, 2022

in United States Dollars)

following table summarizes the DSU activity during the three months ended March 31, 2022 and 2021:

following table summarizes the DSU activity during the six months ended June 30, 2022 and 2021:

Schedule of Deferred Share Units

1 unchanged sentence

Unvested as at December 31, 2021

Unvested as at March 31, 2022

April 21, 2020, the Company granted 7,500,000

The DSUs vest in one

fourth increments upon each anniversary of the grant date and expire in 5

During the three

months ended March 31, 2022, and 2021 the Company recognized $ 199,921

and $ 85,535 ,

respectively, recovery of stock-based compensation related to the DSUs, which is included in operation and administration expenses

on the condensed interim consolidated statements of income (loss) and comprehensive income (loss).

The fair value

at March 31, 2022 was $ 1,331,488 .

On March 31, 2022, the Board approved the early vesting of 625,000 DSUs for one of the Company’s Directors

Vested (ii)(iii)

( 3,125,000 )

Unvested as at June 30, 2022

April 21, 2020, the Company granted 7,500,000 DSUs.

The DSUs vest in one fourth increments

upon each anniversary of the grant date and expire in 5 years.

During the six months ended

June 30, 2022, and 2021 the Company recognized $ 507,398 and $ 139,721 , respectively, recovery

of stock-based compensation related to the DSUs, which is included in operation and administration

expenses on the condensed interim consolidated statements of income (loss) and comprehensive

income (loss).

Upon redemption of the 2,500,000 DSUs (see (iii)) the fair value of the remaining

DSU liability at June 30, 2022 was $ 635,993 .

March 31, 2022, the Board approved the early vesting of 625,000 DSUs for one of the Company’s

the three months ended June 30, 2022, the director redeemed 2,500,000 DSUs for C$ 750,000 ,

and elected to use net proceeds to subscribe for 375,000 units in the Company’s April

2022 special warrant issuance at C$ 0.30 per unit, with the balance of the redeemed amount

payable in cash after applicable withholding tax deductions.

Hill Mining Corp.

Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)

and Six Months Ended June 30, 2022

in United States Dollars)

Commitments and Contingencies

1 unchanged sentence

and IDEQ, one for historical water treatment cost-recovery to the EPA, and the other for ongoing water treatment.

Water treatment costs incurred through December 2021 are payable to the EPA, and water treatment costs incurred thereafter are payable

The IDEQ (formerly the EPA) invoices the Company on an annual basis for the actual water treatment costs, which

may exceed the recognized estimated costs significantly.

When the Company receives the water treatment invoices, it records any liability

for actual costs over and above any estimates made and adjusts future estimates as required based on these actual invoices received.

The Company is required to pay for the actual costs regardless of the periodic required estimated accruals and payments made each year.

As at March 31, 2022 and December 31, 2021, $ 5,185,709

and $ 5,110,706 ,

respectively, is payable to the EPA and IDEQ, which has been included in accounts payable and accrued liabilities.

of these amounts relate to the EPA, given that they primarily relate to costs incurred through December 2021.

Company pays a lease under a lease agreement which

expires in May 2022 .

Monthly rental expenses

are approximately C$ 26,000

and are offset by rental income obtained through

short-term subleases held by the Company.

Hill Mining Corp.

to the Condensed Interim Consolidated Financial Statements (Unaudited)

Months Ended March 31, 2022

in United States Dollars)

Water treatment costs

incurred through December 2021 are payable to the EPA, and water treatment costs incurred thereafter are payable to the IDEQ.

(formerly the EPA) invoices the Company on an annual basis for the actual water treatment costs, which may exceed the recognized estimated

costs significantly.

When the Company receives the water treatment invoices, it records any liability for actual costs over and above

any estimates made and adjusts future estimates as required based on these actual invoices received.

The Company is required to pay for

the actual costs regardless of the periodic required estimated accruals and payments made each year.

July 28, 2021, a lawsuit was filed in the US District Court for the District of Idaho brought by Crescent Mining, LLC (“Crescent”).

16 unchanged sentences

nuisance and negligence claims.

Crescent later filed it amended complaint on April 1, 2022.

Crescent later filed an amended complaint on April 1, 2022.

Placer Mining Corp.

1 unchanged sentence

Corp are named as co-defendants.

Bunker Hill and Placer have until May 20, 2022 to respond to the amended filing.

The Company believes

Crescent Mining LLC’s lawsuit against Placer Mining Corp.

is without merit and intends to defend Placer Mining Corp.

pursuant to the Company’s indemnification of Placer Mining Corp in the Sale and Purchase agreement executed between the companies

for Bunker Hill Mine on December 15, 2021.

October 26, 2021, the Company asserted claims against Crescent in a separate lawsuit.

Bunker Hill Mining Corporation v.

Technologies Inc.

et al, Case No.

2:21-cv-209-REP, filed in the same court on May 14, 2021.

The Company has subsequently executed a

tolling agreement with Venzee in exchange for dropping its lawsuit.

The Company originally filed this lawsuit on May 14, 2021

against other parties but has since filed an amended complaint to include its claims against Crescent.

Bunker Hill responded to the amended filing, refuting and denying all allegations made in the complaint

except those that are assertions of fact as a matter of public record.

The Company believes the lawsuit against Placer Mining Corp.

without merit and intends to defend Placer Mining Corp.

vigorously pursuant to the Company’s indemnification of Placer Mining Corp

in the Sale and Purchase agreement executed between the companies for the Mine on December 15, 2021.

The court is in the process of ruling

with respect to the timeline for next steps in the legal process.

Related party transactions

2 unchanged sentences

Schedule of Related Party Transactions

March 31, 2022

March 31, 2021

Consulting Fees and Salaries

March 31, 2022 and March 31, 2021, $ 825,776 and $ 171,223 , respectively is owed to key management personnel with all amounts included

in accounts payable and accrued liabilities.

April 1, 2022, the Company announced that it had closed the private placement of 37,849,325

Special Warrants, and concurrent non-brokered

private placement of 1,471,644

units of the Company (the “Non-Brokered

Units”) for aggregate gross proceeds of approximately $ 11,796,297

(the “Offering”).

Of this amount,

$ 1,775,790 was received prior to the end of the quarter and is included in Subscriptions received in the equity section of the balance

to the Offering, the Company issued 37,849,325 Special Warrants at a price of $ 0.30 per Special Warrant.

Each Special Warrant is automatically

exercisable (without payment of any further consideration and subject to customary anti-dilution adjustments) into one unit of the Company

(a “Brokered Unit”) on the date that is the earlier of:

(i) the date that is three business days following the date on which

the Company has obtained both (A) a receipt from the Canadian security commission in each of the each of the provinces of Canada in which

the purchasers of the Special Warrants were sold for a (final) short-form Prospectus qualifying the distribution of the common stock

of the Company (“Common Shares”) and common stock purchase warrants of the Company (the “Warrants”) issuable

upon exercise of the Special Warrants (the “Final Qualification Prospectus”);

and (B) notification that the registration

statement, of which this Prospectus is a part, has been declared effective by the SEC (the “Registration Statement”);

(ii) October 1, 2022.

Brokered Unit consists of one Common Share and one Warrant.

Each whole Warrant will entitle the holder to acquire one Common Share (a

“Warrant Share”) for C$ 0.37 until April 1, 2025.

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.

addition, pursuant to the Offering, the Company issued 1,471,644 Non-Brokered Units at a price of $ 0.30 per Non-Brokered Units.

Non-Brokered Unit consists of one Common Share and one Warrant.

Each whole Warrant will entitle the holder to acquire one Warrant Share

for C$ 0.37 until April 1, 2025.

parties, including management, directors and officers purchased 4,537,160

of Non-Brokered Units for a total of $ 1,361,148

of gross cash proceeds to the Company.

May 13, 2022, the Company issued 10,416,667

units of the Company to Teck Resources

Limited at an issue price of C$ 0.30

per unit, or C$ 3,125,000

(US$ 2,500,000 ),

which together with the $ 500,000

cash payment made in January 2022, satisfies the purchase price

of $ 3,000,000

and applicable sales tax for the Pend Oreille Mill.

consists of one common share and one common share purchase warrant.

Each whole warrant entitles the holder to acquire one common share

at a price of C$ 0.37

for a period of three years.

Consulting fees

June 30, 2022 and June 30, 2021, $ 1,049,304 and $ 69,835 , respectively is owed to key management personnel with all amounts included in

accounts payable and accrued liabilities.

Subsequent Events

July 2022, the Company issued 1,975,482 common shares in connection with its election to satisfy interest payments under the outstanding

convertible debentures for the three months ending June 30, 2022.

July 29, 2022, the Company held its Annual General Meeting during which all director nominations and other proposals were approved.

included the re-appointment of Dr.

Mark Cruise, whose initial appointment was announced on June 30, 2022, replacing Mr.

Wayne Parsons.

The following notable proposals were approved:

(i) an increase in the authorized common share capital of the Company to 1,500,000,000

common shares, (ii) authorization for a share consolidation of up to 50:1 if enacted within the following two years, and (iii) an increase

in the maximum RSUs issuable under the Company’s Restricted Share Unit plan.

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-Q

Item 1. Financial Statements