What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-04 compared with 2022-08-15 · 143 added, 130 removed, 240 unchanged (53% of the section changed)

25 unchanged sentences

As long as they are required, the operational practices implemented could have an adverse impact on our results.

The negative impact of COVID-19 remains uncertain, including on overall business and market conditions.

Although the pandemic has subsided significantly, the negative impact of COVID-19 remains uncertain, including on overall business and market conditions.

There is uncertainty related

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of $20,000,000 for historical water treatment cost recovery for amounts paid by the EPA from 1995 to 2017

of for water treatment services provided by the EPA at the Central Treatment Plant (“CTP”) in Kellogg, Idaho until such

for water treatment services provided by the EPA at the Central Treatment Plant (“CTP”) in Kellogg, Idaho until such

time that Bunker Hill either purchases or leases the CTP or builds a separate EPA-approved water treatment facility

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November 1, 2029 $

$2,000,000 plus accrued interest

2,000,000 plus accrued

resumption of payments in 2024 were agreed in order to allow the Company to generate sufficient revenue from mining activities at the

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Resource Streaming and Royalty Corp.

The 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.

The non-binding term sheet with SRSR outlined a 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”).

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”).

funding from SRSR was further increased to $66,000,000 including the RCD, CD1, CD2 and the Stream (together, the “Project Financing

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

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“SRSR Royalty”).

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

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

The RCD was initially secured by a share pledge

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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 parties also agreed to a Royalty Put Option such that in the

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

Company for $8,000,000 upon default under the CD1 or CD2 until such time that the CD1 and CD2 are paid in full.

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

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date regardless of whether the Stream is advanced, unless the Company elects to exercise its option of early repayment.

The Company determined

that amendments to the terms should not be treated as an extinguishment of CD1, but as a debt modification.

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

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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,

As of September

30, 2022, the Stream had not been advanced.

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

August 30, 2022, the Company entered into an agreement to purchase a ball mill from D’Angelo International LLC for $675,000.

purchase of the mill is to be made in three cash payments:

by September 15, 2022 as a non-refundable deposit (paid)

by October 15, 2022 (paid)

by December 15, 2022

September 30, 2022, the Company paid $100,000 towards the purchase as a non-refundable deposit.

of Operations

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

of operation and financial condition of the Company for the three and six months ended June 30, 2022 and June 30, 2021.

Unless otherwise

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

of operation and financial condition of the Company for the three and nine months ended September 30, 2022 and September 30, 2021.

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

dollars, which is the Company’s functional currency.

of the three and six months ended June 30, 2022 and 2021

the six months ended June 30, 2022 and 2021, respectively, the Company generated no revenue.

During the three and six months ended June 30, 2022,

the Company reported total operating expenses of $3,979,862 and $9,466,536, respectively.

Compared to the three and six months ended June

30, 2021, the Company reported total operating expenses of $5,295,557 and $9,919,531, respectively.

The decrease in total operating expenses is primarily

due to a decrease in exploration costs and operation and administration costs when compared to the three and six-month periods ended June

The Company was engaged in an active exploration campaign during the three and six-month periods ended June 30, 2021, whereas

the Company’s primary focus during the three and six-month periods ended June 30, 2022 was on advancing mine restart efforts, which

was accomplished with a lower level of expenditure.

The significant increase in consulting fees reflects

the engagement of numerous legal, accounting, engineering and other professional firms to assist the Company in consummating several complex

debt and equity financings, the purchases of the Mine, the EPA financial assurance requirements, fair value measurements of complex instruments,

and advancement of project activities.

These fees were somewhat offset by a decrease in operational and administration expenses.

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

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

Management determined that costs of the

mine in the most recent quarter constituted mine preparation costs rather than exploration costs, since it was not focused on

expanding the mineral resources, but was invested to execute on the tasks and projects required to get the mine into shape for

production activities.

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

the unaudited condensed interim consolidated statements of income and comprehensive income.

of the three and nine months ended September 30, 2022 and 2021

the nine months ended September 30, 2022 and 2021, respectively, the Company generated no revenue.

the three and nine months ended September 30, 2022, the Company reported total operating expenses of $3,824,948 and $13,291,484, respectively.

Compared to the three and nine months ended September 30, 2021, the Company reported total operating expenses of $2,464,945 and $12,384,474,

respectively.

increase in total operating expenses is primarily due to an increase in mine preparation legal and consulting fees when compared to the

three and nine-month periods ended September 30, 2021.

The Company was engaged in an active exploration campaign during the three and

nine-month periods ended September 30, 2021, whereas the Company’s primary focus during the three and nine-month periods ended

September 30, 2022 was on advancing mine restart efforts, including underground development and process plant demobilization activities.

significant increase in consulting fees reflects the engagement of numerous engineering, geological and other professional firms to assist

the Company in consummating several complex debt and equity financings, the purchases of the mine and processing plant, the EPA financial

assurance requirements, fair value measurements of complex instruments, and advancement of project activities.

These fees were somewhat

offset by a decrease in operational and administration expenses.

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

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

Management determined that costs of the mine in the

most recent quarter constituted mine preparation costs rather than exploration costs, since it was not focused on expanding the mineral

resources but was invested to execute on the tasks and projects required to get the mine into shape for production activities.

indirect expenses may be reported as operation and administration expense or consulting expense on the unaudited condensed interim consolidated

statements of income and comprehensive income.

and Capital Resources

These unaudited condensed interim consolidated financial

statements have been prepared on a going concern basis.

The Company has incurred losses 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 $7,072,410

net of discount to the EPA (see Note 6) 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

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.

Management is considering various financing

alternatives including, but not limited to, raising capital through the capital markets, debt and multi-metals stream financings.

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 stram

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

discovery, development, and sale of reserves.

unaudited condensed interim consolidated financial statements have been prepared on a going concern basis.

The Company has incurred losses

since inception resulting in an accumulated deficit of $59,626,902 and further losses are anticipated in the development of its business.

Additionally, the Company owes a total of $7,420,024 net of discount to the EPA (see Note 6) that is classified as long-term debt.

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

closing on the multi-metals stream transaction.

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.

and Equity Financings, EPA obligations, and Mine Purchase

As described above, during the six months ended June

30, 2022, the Company closed on three convertible debentures totaling $29,000,000 and equity financings (net of issuance costs) totaling

$7,769,745 and used the proceeds to purchase the Bunker Hill Mine, as well as satisfy short-term obligations to the EPA including satisfaction

of its financial assurance commitments, cost recovery and water treatment payments, advancement of mine restart activities and the funding

of working capital requirements.

described above, during the nine months ended September 30, 2022, the Company closed on three convertible debentures totaling $29,000,000

and equity financings (net of issuance costs) totaling $7,769,745 and used the proceeds to purchase the Bunker Hill Mine and the processing

plant, as well as satisfy short-term obligations to the EPA including satisfaction of its financial assurance commitments, cost recovery

and water treatment payments, advancement of mine restart activities and the funding of working capital requirements.

Assets and Total Assets

As of June 30, 2022, the Company’s balance sheet

reflects that the Company had:

i) total current assets of $16,858,234, compared to total current assets of $3,622,548 at December 31,

2021 – an increase of $13,235,686;

and ii) total assets of assets of $36,662,582, compared to total current assets of $4,071,796

at December 31, 2021 – an increase of $32,590,786.

The increase in current assets was primarily due to an increase in available

cash as a result of the proceeds from the convertible debentures and equity financings.

Total assets increased principally due to the

increase in cash from financings and the purchase of the Bunker Hill Mine.

Current Liabilities and Total Liabilities

As of June 30, 2022, the Company’s balance sheet

reflects that the Company had total current liabilities of $10,333,772 and total liabilities of $56,110,157, compared to total current

liabilities of $22,795,277 and total liabilities of $38,314,164 at December 31, 2021.

The decrease in the current liabilities is primarily

reflective of the EPA cost recovery liability being moved from current to long term liabilities.

Total liabilities increased as a result

of the closing of the three convertible debentures, offset by the decrease in the long-term derivative warrant liability, promissory note.

Working Capital and Shareholders’ Deficit

On June 30, 2022, the Company had working

capital of $6,524,462 and a shareholders’ deficit of $19,447,575 compared to negative working capital of $19,172,729 and a

shareholders’ deficit of $34,242,368 for the year ended December 31, 2021.

Working capital increased during the six months

ended June 30, 2022 primarily due to funding from debt and equity financings, and the reclassification of cost recovery liabilities

from current to long-term.

Shareholders’ equity increased due to net income of $12,054,781 and $9,173,895 for the three and

six month periods ended June 30, 2022, driven by decreases in the fair value of the derivative warrant liability.

the six months ended June 30, 2022, the Company had a net cash increase of $5,115,610, which represents cash provided from convertible

of September 30, 2022, the Company’s balance sheet reflects that the Company had:

i) total current assets of $11,787,942, compared

to total current assets of $3,622,548 at December 31, 2021 – an increase of $8,165,394;

and ii) total assets of $33,586,588, compared

to total assets of $4,071,796 at December 31, 2021 – an increase of $29,514,792.

The increase in current assets was primarily due

to an increase in restricted cash as a result of the proceeds from the convertible debentures and equity financings, and from increases

in prepaid expenses and deposits.

Total assets increased principally due to the increase in cash from financings and the purchase of

the Bunker Hill Mine, the process plant and inventory.

Liabilities and Total Liabilities

of September 30, 2022, the Company’s balance sheet reflects that the Company had total current liabilities of $11,439,038 and total

liabilities of $48,321,757, compared to total current liabilities of $22,795,277 and total liabilities of $38,314,164 at December 31,

The decrease in the current liabilities is primarily reflective of financing and assurance activities that moved the EPA cost recovery

liability from current to long term liabilities.

Total liabilities increased as a result of the closing of the three convertible debentures

and movement of the EPA cost recovery liability from current to long term, offset by the decrease in the long-term derivative warrant

liability, promissory note.

Capital and Shareholders’ Deficit

September 30, 2022, the Company had working capital of $384,904 and a shareholders’ deficiency of $14,735,169 compared to negative

working capital of $19,172,729 and a shareholders’ deficiency of $34,242,368 for the year ended December 31, 2021.

Working capital

increased during the nine months ended September 30, 2022 primarily due to funding from debt and equity financings, and the reclassification

of cost recovery liabilities from current to long-term.

Shareholders’ equity increased due to net income of $3,690,353 and $12,864,248

for the three and nine-month periods ended September 30, 2022, driven by decreases in the fair value of the derivative warrant liability.

the nine months ended September 30, 2022, the Company had a net cash decrease of $382,230, which represents cash provided from convertible

debentures and equity financings, with proceeds used to satisfy short-term obligations with the EPA, purchase of the Bunker Hill Mine

1 unchanged sentence

working capital requirements.

During the six months ended June 30, 2022, cash of

$23,070,946 was used in operating activities, primarily due to the usage of $9,476,000 to secure the Company’s financial assurance

obligations with the EPA, $3,000,000 of payments against EPA cost recovery and water treatment payables, funding of mine restart activities,

and other working capital requirements.

This compares with cash used in operating activities of $7,040,266 for the six months ended June

the quarter ended June 30, 2022, cash of $7,518,361 was used in investing activities for the purchase of the Bunker Hill Mine, a process

plant, equipment, and real estate, compared with $94,693 used for investing activities in the six months ended June 30, 2021

the six months ended June 30, 2022, cash of $35,704,917 was provided by financing activities by the three convertible debentures and

the equity financings, offset by cash used for lease payments, compared with cash of $5,943,687 provided by financing activities in the

six months ended June 30, 2021

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.

the nine months ended September 30, 2022, cash of $26,531,674 was used in operating activities, primarily due to the usage of $9,476,000

to secure the Company’s financial assurance obligations with the EPA, $3,000,000 of payments against EPA cost recovery and water

treatment payables, funding of mine restart activities, and other working capital requirements.

This compares with cash used in operating

activities of $9,372,253 for the nine months ended September 30, 2021.

the nine months ended September 30, 2022, cash of $9,555,473 was used in investing activities for the purchase of the Bunker Hill Mine,

a process plant, equipment, and real estate, compared with $94,693 used for investing activities in the nine months ended September 30,

the nine months ended September 30, 2022, cash of $35,704,917 was provided by financing activities by the three convertible debentures

and the equity financings, offset by cash used for lease payments and repayment of a promissory note, compared with cash of $8,411,534

provided by financing activities in the nine months ended September 30, 2021

October 2022, the Company issued 8,252,940 common shares in connection with its election to satisfy interest payments under the outstanding

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

October 2022, the Company reported that it has been successful in securing a new payment bond to secure a portion of its cost recovery

obligations to the US Environmental Protection Agency (the “US EPA”), resulting in a $3,000,000 improvement in liquidity.

As reported in the Company’s financial statements for the period ending September 30, 2022, the Company held restricted cash of

$9,476,000 as of September 30, 2022 which included $7,001,000 as collateral for a letter of credit to the US EPA.

This letter of credit

has been reduced to $2,000,001 as a result of a new $5,000,000 payment bond obtained through an insurance company.

The collateral for

the new payment bond is comprised of a $2,000,000 letter of credit and land pledged by third parties, with whom the company has entered

into a financing cooperation agreement that contemplates a monthly fee of $20,000 (payable in cash or common shares of the Company, at

the Company’s election).

new payment bond is scheduled to increase to $7,001,000 (from $5,000,000) upon the advance of the multi-metals Stream from Sprott Private

Resource Streaming & Royalty Corp.

(see the Company’s news release of December 20, 2021 for further detail), which would result

in a further $2,001,000 improvement in liquidity for the Company from the release of restricted cash.

October 2022, the Company reported that it awarded a new water management consulting services contract to MineWater LLC (“MineWater”)

for strategic environmental support at the Bunker Hill Mine through September 30, 2023.

Pursuant to the contract, the Company agreed

to pay MineWater $60,000 in cash and issue 1,599,150 Restricted Share Units, which were issued and vested immediately to common shares

of the Company that are subject to customary resale restrictions in Canada and the United States.

November 2022, the Company awarded 4,396,741 Restricted Share Units to certain executives in relation to an annual grant under its Long-Term

Incentive Plan.

The RSUs vest in one-third increments on March 31 of 2023, 2024, and 2025.

accounting estimates

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Financing Transactions

The Company has engaged in a series of complex financing

transactions, which involve the issuance of certain conversion features embedded in the debt, including options to receive interest payments

in the form of the Company’s shares and to purchase a gross revenue royalty in the Bunker Hill Mine.

These instruments require evaluation

to determine fair values of the debt and the embedded conversion features, which require complex calculations of many appropriate inputs

to the valuation model variables, including but not limited to the expected life of the debt instrument and conversion feature derivative

liability, volatility of the Company’s shares, effective discount rates, probabilities of operational assumptions as related to

an anticipated royalty revenue stream, the Company’s own credit risk and other inputs.

The Company has to make estimates of each

of these inputs in applying a valuation model to account for the derivative values, the presentation of these values, the periodic changes

to the fair values and the recognition of these changes.

Company has engaged in a series of complex financing transactions, which involve the issuance of certain conversion features embedded

in the debt, including options to receive interest payments in the form of the Company’s shares and to purchase a gross revenue

royalty in the Bunker Hill Mine.

These instruments require evaluation to determine fair values of the debt and the embedded conversion

features, which require complex calculations of many appropriate inputs to the valuation model variables, including but not limited to

the expected life of the debt instrument and conversion feature derivative liability, volatility of the Company’s shares, effective

discount rates, probabilities of operational assumptions as related to an anticipated royalty revenue stream, the Company’s own

credit risk and other inputs.

The Company has to make estimates of each of these inputs in applying a valuation model to account for

the derivative values, the presentation of these values, the periodic changes to the fair values and the recognition of these changes.

Sheet Arrangements

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis