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Item 7. Management’s Discussion and Analysis

2023-04-17 compared with 2022-03-31 · 245 added, 329 removed, 10 unchanged (98% of the section changed)

1 unchanged sentence

NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS

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

which are basically statements about the future.

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

predict the future.

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

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

that a statement is a forward-looking statement.

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

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

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

Numerous factors and future events could cause the company to

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

operations to fail to produce revenues, income or profits.

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

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

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

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

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

of the Agreement are as follows:

November 1, 2017;

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

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

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

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

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

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

The default arose as a result of missed

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

As per the Lease

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

default by making the outstanding payment.

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

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

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

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

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

November 1, 2019, the Amended Agreement became effective.

The key terms of the Amended Agreement are as follows:

lease period was extended for an additional period of nine months to August 1, 2020, with the option to extend for a further 6 months

based upon payment of a one-time $60,000 extension fee;

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

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

in Common Shares.

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

The Amended Agreement provides for the

elimination of all royalty payments that were to be paid to the mine owner.

Upon signing the amended agreement, the Company paid

a one-time, non-refundable cash payment of $300,000 to the mine owner.

This payment will be applied to the purchase price upon execution

of the purchase option.

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

care and maintenance payment.

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

Under the terms of the amendment:

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

purchase price was reduced to $7,700,000, with $5,700,000 in cash (with an aggregate of $300,000 to be credited toward the purchase

price of the Mine as having been previously paid by the Company and an aggregate of $5,400,000 payable in cash outstanding) and $2,000,000

in Common Shares.

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

last equity raise before the option is exercised;

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

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

and when the Company elects to exercise its purchase right.

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

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

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

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

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

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

With the execution of the EPA settlement agreement amendment

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

Hill Mine from Placer Mining Corp.

and a definitive agreement was signed by both parties.

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

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

Purchase of the mine consists of over 400 patented mining

claims and 5,800 acres of private land.

Closing of the transaction occurred on January

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

shareholders,

and satisfaction of other closing conditions.

See Subsequent Events.

Certain statements in this report, including statements in the following

discussion, are what are known as “forward looking statements”, which are basically statements about the future.

reason, these statements involve risk and uncertainty since no one can accurately predict the future.

Words such as “plans,”

“intends,” “will,” “hopes,” “seeks,” “anticipates,” “expects “and

the like often identify such forward looking statements, but are not the only indication that a statement is a forward-looking statement.

Such forward looking statements include statements concerning the Company’s plans and objectives with respect to the present and

future operations of the Company, and statements which express or imply that such present and future operations will or may produce revenues,

income or profits.

Numerous factors and future events could cause the Company to change such plans and objectives or fail to successfully

implement such plans or achieve such objectives, or cause such present and future operations to fail to produce revenues, income or profits.

Therefore, the reader is advised that the following discussion should be considered in light of the discussion of risks and other factors

contained in this report and in the Company’s other filings with the SEC.

No statements contained in the following discussion should

be construed as a guarantee or assurance of future performance or future results.

Company’s sole focus is the development and restart of its 100% owned flagship asset, the Bunker Hill mine (the “Mine”)

in Idaho, USA.

The Mine remains the largest single producing mine by tonnage in the Silver Valley region of northwest Idaho, producing

over 165 million ounces of silver and 5 million tons of base metals between 1885 and 1981.

The Bunker Hill Mine is located within Operable

Unit 2 of the Bunker Hill Superfund site (EPA National Priorities Listing IDD048340921), where cleanup activities have been completed.

Company purchased the Bunker Hill Mine on January 7, 2022 for $5,400,000 in cash.

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.

the most recent of these agreements, the Company was required to make payments pursuant to an agreement with the U.S.

Environmental Protection

Agency (“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.

Concurrent with the purchase of the Mine, the Company assumed incremental liabilities of $8,000,000

to the EPA, consistent with the terms of the amended Settlement Agreement with the EPA that was executed in December 2021 (see “EPA

2018 Settlement Agreement & 2021 Amended Settlement Agreement” in the “Our Business” section above).

early 2020, a new management team comprised of former executives from Barrick Gold Corp.

assumed leadership of the Company.

time, the Company conducted multiple exploration campaigns, published multiple economic studies and Mineral Resource Estimates, and advanced

the rehabilitation and development of the Mine.

In December 2021, it announced a project finance package with Sprott Private Resource

Streaming & Royalty Corp., an amended Settlement Agreement with the EPA, and the purchase of the Bunker Hill Mine, setting the stage

for a rapid restart of the Mine.

January 2022, with the closing of the purchase of the Bunker Hill Mine, the funding of the $8,000,000 Royalty Convertible Debenture and

$6,000,000 Series Convertible Debenture, and the announcement of an MOU for the purchase of the Pend Oreille process plant from a subsidiary

of Teck Resources Limited, the Company embarked on a program of activities with the goal of achieving a restart of the Mine.

Key milestones

and achievements from January 2022 onwards have included the closing of the purchase of the Pend Oreille process plant, the demobilization

of the process plant to the Bunker Hill site, the completion of demolition activities at the Pend Oreille site, a Prefeasibility Study

envisaging the restart of the Mine, and the completion of the primary portion of the ramp decline connecting the 5 and 6 Levels of the

Bunker Hill Mine.

of Operations

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

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

and the fiscal year ended June 30, 2020.

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

dollars, which is the Company’s

functional currency.

Comparison of the year ended December 31,

2021 and the six months ended December 31, 2020

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

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

2020 - $9,454,396).

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

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

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

of operations.

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

of operations.

Loss and Comprehensive Loss

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

2020 - $2,164,454).

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

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

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

Special note should be made of the fact that the

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

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

Comparison of the six months ended December

31, 2020 and the year ended June 30, 2020

During the six months ended December 31, 2020

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

During the six months ended December 31, 2020,

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

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

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

Net Loss and Comprehensive Loss

The Company had a net loss and comprehensive

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

the year ended June 30, 2020.

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

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

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

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

Special note should be made of the fact that the

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

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

of operation and financial condition of the Company for the years ended December 31, 2021 and 2022.

Unless otherwise stated, all figures

herein are expressed in U.S.

dollars, which is the Company’s functional currency.

of the year ended December 31, 2022 and the year ended December 31, 2021

the year ended December 31, 2022, the Company generated no revenue (year ended December 31, 2021 - $nil).

the year ended December 31, 2022, the Company reported total operating expenses of $16,487,161 as compared to total operating expenses

of $18,752,504 for the year ended December 31, 2021.

decrease in operating expenses was impacted by a shift in focus by the company from exploration related activities prior to the purchase

of the Mine and process plant (purchased in January 2022 and June 2022 respectively) in 2021, to development related activities in 2022.

For financial accounting purposes, the Company reported all direct exploration expenses under the exploration expense line item in consolidated

statements of income (loss) and comprehensive income (loss) for the year ended December 31, 2021, which totalled $13,530,819.

purchase of the Mine in early January 2022 and concurrent shift to development related activities to advance mine restart efforts, the

Company reported exploration expenses of $nil for the year ended December 31, 2022, and reported $7,827,656 of mine preparation expenses

associated with these development activities.

This excludes costs capitalized to property, plant and equipment during the year ended

December 31, 2022.

increase in consulting fees and wages ( $5,477,765 for the

year ended December 31, 2022 compared to $1,533,954 for the year ended December 31, 2021) reflects (i) 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, and (ii) an increase in employees concurrent with a ramp-up in

development activities through 2022.

the release of the prefeasibility study dated September 30, 2022, the Company determined that the costs of the mine after this point

constituted mine development (capitalized to non-current assets) instead of mine preparation costs (expense) given the existence of

probable mineral reserves and an economic study incorporating them.

Certain indirect expenses may be reported as operation and

administration expense or consulting expense on the consolidated statements of income and comprehensive income.

Net Income and Comprehensive Income

The Company had net income of $898,591 for the year ended December

31, 2022 (net loss of $6,402,277 for the year ended December 31, 2021).

In addition to the decrease in operating expenses (as

described above), net income in the year ended December 31, 2022 was positively impacted by a gain on EPA settlement of $8,614,103 (year

ended December 31, 2021:

$nil) resulting from the reclassification of $17,000,000 of current liabilities to non-current liabilities, and

a $3,395,938 increase in the gain due to change in derivative liability ($15,696,391 for the year ended December 31, 2022 compared to

$12,300,453 for the year ended December 31, 2021) driven by a proportionally greater decline in the Company’s share price in 2022

relative to 2021.

This was partially offset by impacts from the $29,000,000 of convertible debenture financings that were entered into

during the year ended December 31, 2022, including an increase in interest expense of $3,279,819 ($3,382,559 for the year ended December

31, 2022 compared to $102,740 for the year ended December 31, 2021), an increase in debenture finance costs of $1,230,540 (year ended

December 31, 2021:

$nil) and an increase in the loss on fair value of convertible debentures of $1,140,537 (year ended December 31, 2021:

$nil) and increase in finance costs $945,507 (year ended December 31, 2021:

had comprehensive income of $1,152,466 for the year ended December 31, 2022 (comprehensive loss of $6,402,277 for the year ended

December 31, 2021).

Comprehensive income for the year ended December 31, 2022 is inclusive of a $253,875 gain on change in fair

value on own credit risk ($nil for the year ended December 31, 2021) relating to the convertible debentures entered into during the

year ended December 31, 2022.

and Capital Resources

At December 31, 2021, the Company had total assets

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

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

at December 31, 2020.

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

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

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

As of December 31, 2021, the Company had negative

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

This increase is primarily

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

In December 2021, the Company executed a non-binding

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

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

production in mid-2023.

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

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

In January 2022, subject to settlement of definitive documentation

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

which was increased from $5,000,000.

Subject to SRSR internal approvals, further technical

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

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

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

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

There can be no assurance that the Stream will close

as anticipated.

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

In December 2021, in conjunction with its intention

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

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

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

Upon the purchase of the Bunker

Hill mine complex, the remaining payments of the EPA cost recovery liability would be assumed by the Company, resulting in a total of

$19,000,000 liability to the Company, an increase of $8,000,000.

The new payment schedule includes a $2,000,000 payment to the EPA within

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

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

following dates:

November 1, 2024

November 1, 2025

November 1, 2026

November 1, 2027

November 1, 2028

November 1, 2029

plus accrued interest

The resumption of payments in 2024 were agreed

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

obligations from free cash flow.

In addition to the cost recovery payments outlined

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

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

On March 22, 2022, the Company reported that

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

effective date of the Amended Settlement Agreement.

The changes in payment terms and schedule, are

contingent upon the Company securing Financial Assurance in the form of performance bonds or letters of credit deemed acceptable to the

EPA totaling $17,000,000.

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

as outlined above.

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

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

If the Company fails to post the Final Financial

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

(see Note 6 to the consolidated financial statements).

the approval of the transaction by Placer Mining Corp.

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

Bunker Hill Mine closed on January 7, 2022.

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

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

Concurrently,

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

The Royalty Convertible

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

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

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

of the Pend Oreille Process Plant at Bunker Hill.

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

two financings and the purchase of the Bunker Hill Mine.

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

(collectively, the

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

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

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

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

in certain events.

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

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

(i) the third business

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

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

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

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

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

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

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

common share purchase warrant, a “Warrant”).

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

for a period of 36 months following the Closing Date.

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

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

In the event that a receipt for the Qualification Prospectus

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

(EST) on the date that is 60

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

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

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

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

See Note 16 to the consolidated financial statements

for further information.

In support of plans to rapidly restart the Mine,

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

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

facility of $13,000,000.

The Company has incurred losses since inception

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

Additionally,

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

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

Additionally, the Company

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

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

In order to continue to

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

its financial obligations over the next twelve months.

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

a going concern.

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

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

operations when they come due.

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

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

cannot continue in existence.

Events occurring subsequent to December 31, 2021

as disclosed above in the Liquidity and Capital Resources section.

In addition, the Company had the following subsequent events.

On January 7, 2022, the Company closed the purchase

of the Bunker Hill Mine.

See Note 6 Mining Interests.

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

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

The EPA obligation

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

The restructuring of the EPA Settlement payment stream under the

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

On March 22, 2022, the Company reported

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

from the effective date of the Amended Settlement Agreement.

On January 31, 2022, the Company entered into

a non-binding Memorandum of Understanding (“MOU”) with Teck Resources Limited (“Teck”) for the purchase of a

comprehensive package of equipment and parts inventory from its Pend Oreille site (the “Pend Oreille Process Plant”) in eastern

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

The package comprises substantially all processing equipment

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

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

and electrical spares.

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

an all-cash $2,750,000 purchase

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

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

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

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

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

Closing of the transaction remains subject to certain conditions,

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

On March 3, 2022, the Company closed the purchase

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

Critical accounting estimates

The preparation of the interim condensed consolidated

financial statements in conformity with U.S.

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

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

reporting period.

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

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

Actual outcomes can differ from these

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

in the financial statements are:

Share-based payments

determines costs for share-based payments using

market-based valuation techniques.

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

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

Assumptions are made and judgment

used in applying valuation techniques.

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

expected dividend yield.

These consolidated financial statements have been prepared on a going concern basis.

The Company has incurred losses

since inception resulting in an accumulated deficit of $71,592,559 and further losses are anticipated in the development of its business.

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 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 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

As described above, during year ended December 31, 2022, the Company closed

on three convertible debentures totaling $29,000,000, a loan facility of $5,000,000, and equity financings (net of issuance costs) totaling

The proceeds of these financings were primarily used to purchase the Bunker Hill Mine and the processing plant, the satisfaction

of short-term obligations to the EPA (including 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 December 31, 2022, the Company’s balance sheet reflects that

the Company had:

(i) total current assets of $7,741,052, compared to total current assets of $3,622,548 at December 31, 2021 – an

increase of $4,118,504;

and (ii) total assets of $32,929,892, compared to total assets of $4,071,796 at December 31, 2021 – an increase

of $28,858,096.

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 purchase of, and costs capitalized to, the Bunker Hill Mine and process plant.

Liabilities and Total Liabilities

of December 31, 2022, the Company’s balance sheets reflects that the Company had total current liabilities of $10,155,582 and total

liabilities of $59,106,835, compared to total current liabilities of $22,795,277 and total liabilities of $38,314,164 as of December

The decrease in 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, one loan facility and movement of the EPA cost recovery liability from current to long term, offset by the decrease in the

long-term derivative warrant liability and promissory note.

Capital and Shareholders’ Deficit

As of December 31, 2022,

the Company had a working capital deficit of $2,414,530 and a shareholders’ deficiency of $26,176,943 compared to a working capital

deficit of $19,172,729 and a shareholders’ deficiency of $34,242,368 as of December 31, 2021.

The working capital deficit decreased

during the year ended December 31, 2022 primarily due to funding from debt and equity financings, and the reclassification of cost recovery

liabilities from current to long-term.

The shareholders’ deficiency decreased primarily due to proceeds from equity financing in

the second quarter of 2022, and comprehensive net income in 2022.

During the year ended December

31, 2022, unrestricted cash increased by $222,042 as a result of cash provided from the closing of the convertible debentures, loan facility

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

plant, partial repayment of the outstanding promissory note, advancement of mine restart activities, and funding of working capital requirements.

In addition to the above, restricted cash increased $6,476,000 during the year end December 31, 2022.

the year ended December 31, 2022, $22,498,307 was used in operating activities, primarily due to the securing of the Company’s

financial assurance obligations with the EPA, payments made to the EPA in satisfaction of 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 $11,372,153

for the year ended December 31, 2021.

the year ended December 31, 2022, cash of $11,174,672 was used in investing activities primarily 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 year ended December 31,

the year ended December 31, 2022, cash of $40,371,021 was provided by financing activities primarily due to proceeds from the three convertible

debentures, one loan facility and the equity financings, partially offset by cash used for repayment of a promissory note, compared with

cash of $8,384,248 provided by financing activities in the year ended December 31, 2021.

occurring subsequent to December 31, 2022, as disclosed above in the Liquidity and Capital Resources section.

In addition, the Company

had the following subsequent events.

January 10, 2023, the Company issued 6,377,272 common shares in connection with its election to satisfy interest payments under the outstanding

convertible debentures for the three months ending December 31, 2022.

March 31, 2023, the Company issued 8,464,288 common shares in connection with its election to satisfy interest payments under the outstanding

convertible debentures for the three months ending March 31, 2023.

Feb 28, 2023, the Company reported that it had temporarily paused discretionary projects and procurement activities until the completion

of its financing initiatives.

Primarily due to the inability to procure certain long-lead items that were planned to be ordered by February

2023, and longer estimated delivery times thereof, the Company now expects the Bunker Hill Mine restart to be achieved in 2024.

project capital expenditures are not expected to be materially impacted given the Company’s ability to reschedule discretionary

expenditures and manage a modest fixed cost base.

Warrant Amendment

March 15, 2023, the Company amended the exercise price of 10,416,667 common stock purchase warrants of the Company (the “Warrants”)

and the expiry date of the warrants to March 31, 2023.

The Warrants comprise units of the Company issued to Teck Resources Limited (“Teck”)

on a private placement basis on May 13, 2022, in consideration for the Company’s acquisition of the Pend Oreille process plant.

Each Warrant entitles the holder thereof to purchase one share of common stock of the Company (each, a “Warrant Share”) at

an exercise price of C$0.37 per Warrant Share at any time on or prior to May 12, 2025.

The Company amended the exercise price of the

Warrants from C$0.37 to C$0.11 per Warrant Share (the “Amended Exercise Price”) and amend the expiry date from May 12, 2025,

to March 31, 2023.

Following the amendment of the terms of the warrants, Teck exercised all 10,416,667 warrants at an exercise price

of C$0.11, for aggregate gross proceeds of approximately C$1,145,834 to the Company.

Offering Termination and Private Placement

February 15, 2023, the Company reported that it intended to terminate its previously announced prospectus offering of Common Shares following

its determination that effectiveness of a registration statement on Form S-1 would not be achievable in a time frame consistent with

its capital requirements.

Concurrently, the Company announced that it had entered into an agreement with a syndicate of agents in connection

with a proposed private placement of up to $9,000,000 of special warrants of the Company (the “Special Warrants”).

March 28, 2023, the Company announced the closing of its private placement of the Special Warrants by issuing 51,633,727 Special Warrants

at a price of C$0.12 per Special Warrant, for aggregate gross proceeds of C$6,196,047.

Each Unit consists of one share of common stock

of the Company (each, a “Unit Share”) and one common stock purchase warrant of the Company (each, a “Warrant”).

Each whole Warrant entitles the holder thereof to acquire one share of common stock of the Company (a “Warrant Share”, and

together with the Unit Shares, the “Underlying Shares”) at an exercise price of $0.15 per Warrant Share until March 27, 2026.

In consideration for their services in connection with the Offering, a cash commission in the amount of $211,461 is payable to the

The Agents were also issued 2,070,258 compensation options (the “Compensation Options”).

Each Compensation Option

is exercisable to acquire one unit of the Company (a “Compensation Unit”) at the Issue Price for a period of 36 months from

March 27, 2023, subject to adjustment in certain events.

Each Compensation Unit consists of one share of common stock of the Company

and one common stock purchase warrant of the Company (an “Agents’ Compensation Warrant”) Each Agents’ Compensation

Warrant entitles the holder thereof to acquire one share of common stock of the Company (an “Agents’ Compensation Warrant

Share”) at a price of C$0.15 per Agents’ Compensation Warrant Share until March 27, 2026.

accounting estimates

preparation of the interim condensed consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates

and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the financial statements

and reported amounts of expenses during the reporting period.

Estimates and judgments are continuously evaluated and are based on management’s

experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

outcomes can differ from these estimates.

The key sources of estimation uncertainty that have a significant risk of causing material

adjustment to the amounts recognized in the financial statements are:

determines costs for share-based payments using market-based valuation techniques.

The fair value of the share awards and warrant liabilities

are determined at the date of grant using generally accepted valuation techniques and for warrant liabilities at each balance sheets date

Assumptions are made and judgment used in applying valuation techniques.

These assumptions and judgments include estimating

the future volatility of the stock price and expected dividend yield.

Such judgments and assumptions are inherently uncertain.

Changes in these assumptions affect the fair value

Warrants and accrued liabilities

Estimating the fair value of derivative warrant

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

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

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

The Company has to make estimates to accrue for

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

These accruals are made based on trends, history and knowledge

of activities.

in these assumptions affect the fair value estimates.

and accrued liabilities

the fair value of derivative warrant liability requires determining the most appropriate valuation model, which is dependent on the terms

and conditions of the issuance.

This estimate also requires determining the most appropriate inputs to the valuation model including

the expected life of the warrants and conversion feature derivative liability, volatility and dividend yield and making assumptions about

Company has to make estimates to accrue for certain expenditures due to delay in receipt of third-party vendor invoices.

These accruals

are made based on trends, history and knowledge of activities.

Actual results may be different.

The Company makes monthly estimates of its water

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

Using the actual costs in the annual invoice, the Company

will then reassess its estimate for future periods.

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

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

Company makes monthly estimates of its water treatment costs, with a true-up to the annual invoice received from the IDEQ.

actual costs in the annual invoice, the Company will then reassess its estimate for future periods.

Given the nature, complexity and

variability of the various actual cost items included in the invoice, the Company has used the most recent invoice as its estimate of

the water treatment costs for future periods.

Sheet Arrangements

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What changed 10-K

Item 7. Management’s Discussion and Analysis