What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-04-17 compared with 2022-03-31 · 1085 added, 1330 removed, 455 unchanged (84% of the section changed)

1 unchanged sentence

of Independent Registered Public Accounting Firm – MNP, LLP PCAOB ID:

Consolidated Balance Sheets, December 31, 2021 and 2020

Consolidated Statements of Operations for the years ended December 31, 2021 and 2020

Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020

Consolidated Statements of Changes in Stockholders’ Deficit for the years ended December 31, 2021 and 2020

Notes to the Consolidated Financial Statements

Balance Sheets, December 31, 2022 and 2021

Statements of Operations for the years ended December 31, 2022 and 2021

Statements of Cash Flows for the years ended December 31, 2022 and 2021

Statements of Changes in Stockholders’ Deficit for the years ended December 31, 2022 and 2021

to the Consolidated Financial Statements

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Board of Directors and Shareholders of Bunker Hill Mining Corp.

(formerly Liberty Silver Corp.)

on the Consolidated Financial Statements

1 unchanged sentence

(the Company) as at December 31, 2022 and 2021,

2020, and the related consolidated statements of loss and comprehensive loss, cash flows, and changes in shareholders’ deficiency

for the year ended December 31, 2021, six-month period ended December 31, 2020 and for the year ended June 30, 2020, and the related notes (collectively referred to as the consolidated financial statements).

and the related consolidated statements of income (loss) and comprehensive income (loss), cash flows, and changes in shareholders’

deficiency for each of the years in the two-year period ended December 31, 2022, and the related notes (collectively referred to as the

consolidated financial statements).

our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the

Company as at December 31, 2021 and 2020, and the results of its consolidated operations and its consolidated cash flows for the

year ended December 31, 2021, six-month period ended December 31, 2020 and for the year ended June 30, 2020, in conformity with accounting principles generally accepted in the United States of America.

Uncertainty Related to Going Concern – See also Critical Audit Matter section below

Company as at December 31, 2022 and 2021, and the results of its consolidated operations and its consolidated cash flows for each of

the years in the two-year period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States

Uncertainty Related to Going Concern

accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

in Note 1 to the consolidated financial statements, the Company has suffered an accumulated deficit and recurring net losses and does

not have sufficient working capital which raises substantial doubt about its ability to continue as a going concern.

plans in regard to these matters are also described in Note 1.

The consolidated financial statements do not include any adjustments

that might result from the outcome of this uncertainty.

discussed in Note 1 to the consolidated financial statements, the Company has suffered an accumulated deficit and recurring losses

from operations and does not have sufficient working capital which raises substantial doubt about its ability to continue as a going

Management’s plans in regard to these matters are also described in Note 1.

The consolidated financial

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

This matter is also described in

the “Critical Audit Matters” section of our report.

consolidated financial statements are the responsibility of the Company’s management.

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Audit Matter Description

Going Concern – see also

Material Uncertainty Related to Going Concern above

As described in

Note 1 of the consolidated financial statements, the Company has been incurring losses and does not have sufficient working capital

needed to meet its current obligations and commitments.

In order to continue as a going concern, the Company must seek additional

Significant assumptions

and judgements on cash flow projections were made by management in estimating future cash flows, which are subject to high degree

of uncertainty.

Refer to Note 1

Nature and Continuance of Operations and Going Concern.

We responded to

this matter by performing audit procedures in relation to the assessment of the ability of the Company to continue as a going concern.

Our audit work in relation to this included, but was not restricted to, the following:

● Evaluated the impact of the Company’s existing financial arrangements and conditions in relation to the ability to continue

as a going concern.

an understanding from management on the Company’s future plans on the operations including financing arrangements.

● Evaluated the assumptions and estimates on cashflow projections used in the forecast incorporating information established from our

understanding above and any materialized arrangements subsequent to the period end.

● Assessed the appropriateness of the related disclosures.

Completeness of Accounts Payables

and Accrued Liabilities

Company had significant exploration expenditures during the year ended December 31, 2021.

Invoices and reconciliation

from vendors are not received on a timely basis.

Estimates may be required to accrue for liabilities.

Due to the uncertainty

of completeness of accounts payable and accrued liabilities we consider this to be a critical audit matter.

Refer to Note 3

Significant Account Policies – Use of Estimates and Assumptions.

We responded to

this matter by performing audit procedures in relation to completeness of accounts payable and accrued liabilities.

Our audit work

in relation to this included, but was not restricted to, the following:

an understanding from management of the Company’s significant vendors.

Obtained confirmations from these vendors of payables

outstanding at year end and reconciled any discrepancies from these confirmations.

selective invoices and payments of expenditures subsequent to the year end to determine if they pertain to current year expenditures.

management’s assessment and estimates of accounts payable and accruals and assessed the reasonableness of assumptions made

in determining the accruals.

As described in Note 1 of the consolidated financial statements, the Company

has been incurring losses from operations and does not have sufficient working capital needed to meet its current obligations and commitments.

In order to continue as a going concern, the Company must seek additional financing.

Significant assumptions and judgements on cash flow projections were made

by management in estimating future cash flows, which are subject to high degree of uncertainty.

Refer to Note 1 Nature and Continuance of Operations and Going Concern.

This matter is also described in the “Material Uncertainty Related

to Going Concern” section of our report.

We responded to this matter by performing audit procedures in relation

to the assessment of the ability of the Company to continue as a going concern.

Our audit work in relation to this included, but was not

restricted to, the following:

Evaluated the impact of the Company’s existing financial arrangements

and conditions in relation to the ability to continue as a going concern.

Obtained an understanding from management on the Company’s future

plans on the operations including financing arrangements.

Evaluated the assumptions and estimates on cashflow projections used in

the forecast incorporating information established from our understanding above and any materialized arrangements subsequent to the period

Assessed the appropriateness of the related disclosures.

Audit Matter Description

Environmental

Protection Agency (EPA) Agreement and Accrual

Company signed an amended settlement agreement with the EPA to modify the terms to settle outstanding amounts under the original

agreement and payment amounts related to cost recovery and water treatment costs (the “EPA Costs”).

The effectiveness

of the amended settlement agreement is subject to the Company obtaining financial assurance within a certain period.

from the EPA are not received on a timely basis and estimates are required to accrue for liabilities.

to the uncertainty of completeness of the EPA accrual we consider this to be a critical audit matter.

to Note 3 Significant Account Policies – Use of Estimates and Assumptions, Note 6 Mining Interests and Note 13 Commitments

and contingencies.

responded to this matter by performing audit procedures in relation to accounting for the amended settlement agreement and completeness

of the EPA accrual.

Our audit work in relation to this included, but was not restricted to, the following:

and reviewed the amended settlement agreement with the EPA.

management’s assessment of the accounting treatment of the EPA Costs in relation to the amended settlement agreement and assessed

evidence obtained and the reasonableness of the assumptions made.

invoices received during the year to ensure the appropriateness of the amount of expenditures being recorded.

selective invoices and payments of expenditures subsequent to the year end to determine if they pertain to current year EPA Costs.

management’s estimate of the EPA accrual for ongoing EPA Costs and assessed the reasonableness of assumptions made in determining

the accrued amount, including additional fees that may be charged by the EPA.

the appropriateness of the related disclosures.

The Company had a warrant derivative liability

of $15,518,887 as at December 31, 2021 which was required to be fair valued at each period end.

The calculation of the fair value of the warrant

liability requires management to use an appropriate valuation model and assumptions on volatility rate and life of the warrants as

inputs into the model.

Due to the estimates and assumptions involved

in the determination of fair value we consider this to be a critical audit matter.

Refer to Note 3 Significant Accounting Policies

– Use of Estimates and Assumptions, Note 8 Promissory Notes Payable and Note 10 Capital Stock, Warrants and Stock

We responded to this matter by performing

audit procedures in relation to the derivative liability.

Our audit work in relation to this included, but was not restricted to,

the following:

● Obtained evidence of the issuance including financing documents, warrant certificates and the terms of the warrants.

the classification of the warrants issued.

the appropriateness of the model used by management, the mathematical accuracy of management’s valuation models and the

appropriateness of the assumptions, including volatility rate and life of the warrants, used in the models.

● Assessed the appropriateness of the related

of Series 1 & 2 Convertible Debentures and Royalty Convertible Debenture (CDs)

Company issued various convertible debentures that are complex in nature and are required to be fair valued on issuance and at each

reporting period.

calculation of the fair value of the CDs requires management to use an appropriate valuation model and incorporates estimates.

to the complexity of these CDs and the estimates and assumptions involved in the determination of fair value we consider this to

be a critical audit matter.

to Note 3 Significant Account Policies – Use of Estimates and Assumptions and Note 8 – Promissory Note Payable and Convertible

responded to this matter by performing audit procedures in relation to the accounting and valuation of the CDs.

Our audit work in

relation to this included, but was not restricted to, the following:

and reviewed the agreements for the CDs.

management’s analysis and assessment of the accounting of the CDs and their calculation of the fair value related to the instruments.

the accounting treatment of the CDs to ensure it follows the appropriate accounting guidance.

the reasonability of the model used to value the CDs and the appropriateness of the inputs used and recalculated the fair values.

a sensitivity analysis of the inputs.

the covenants involved to ensure compliance.

Chartered Professional Accountants

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have served as the Company’s auditor since 2014.

April 17, 2023

Hill Mining Corp.

1 unchanged sentence

in United States Dollars)

cash (note 7)

receivable and prepaid expenses (note 5)

mine deposit and acquisition costs (note 6)

finance costs

current assets

Accounts receivable

Prepaid expenses

Short-term deposit

Prepaid mine deposit and acquisition costs (note 6)

Prepaid finance costs

Total current assets

Non-current assets

Equipment (note 4)

Right-of-use assets (note 5)

parts inventory

Long-term deposit (note 5)

Mining interests (note 6)

EQUITY AND LIABILITIES

assets (note 6)

Hill Mine and Mining interests (note 7)

plant (note 5)

AND LIABILITIES

water treatment payable (note 8)

payable (notes 8 and 9)

warrant liability (note 11)

Deferred share units

liability (note 14)

notes payable (note 9)

Environment protection agency

cost recovery payable (note 8)

portion of lease liability (note 10)

current liabilities

Accounts payable (notes 6 and 15)

Accrued liabilities (notes 6 and 13)

EPA water treatment payable (note 6)

Interest payable (notes 6 and 8)

DSU liability (note 12)

Promissory notes payable (note 8)

EPA cost recovery payable (note 6)

Current portion of lease liability (note 9)

Total current liabilities

Non-current liabilities

Lease liability (note 9)

Derivative warrant liability (notes 8 and 10)

Total liabilities

Shareholders’ Deficiency

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

payable (note 9)

1 convertible debenture (note 9)

2 convertible debenture (note 9)

convertible debenture (note 9)

protection agency cost recovery liability net of discount (note 8)

warrant liability (note 11)

Shareholders’

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

Nil preferred shares issued and outstanding (note 11)

Common shares, $ 0.000001 par value, 750,000,000 common shares authorized;

164,435,442 and 143,117,068 common shares issued and outstanding, respectively (note 10)

Additional paid-in-capital (note 10)

Shares to be issued

Deficit accumulated during the exploration stage

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

229,501,661 and 164,435,826 common shares issued and outstanding,

respectively (note 11)

paid-in-capital (note 11)

other comprehensive income

( 71,592,559 )

( 72,491,150 )

Total shareholders’ deficiency

shareholders’ deficiency

( 26,176,943 )

( 34,242,368 )

Total shareholders’ deficiency and liabilities

shareholders’ deficiency and liabilities

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

Hill Mining Corp.

Statements of Loss and Comprehensive Loss

Statements of Income (loss) and Comprehensive Income (loss)

in United States Dollars)

Operating expenses

Operation and administration (notes 10, 11 and 12)

Legal and accounting

Consulting (note 15)

Gain on settlement of accounts payable (note 6)

( 1,787,300 )

Loss from operations

( 18,752,504 )

and administration (notes 11, 13 and 14)

and accounting

and wages (note 17)

from operations

( 16,487,161 )

( 18,752,504 )

Other income or gain (expense or loss)

Change in derivative liability (notes 8 and 10)

income or gain (expense or loss)

in derivative liability (note 11)

(loss) gain on foreign exchange

on fair value of convertible debentures (note 9)

( 1,140,537 )

Gain (loss) on foreign exchange

Accretion expense (notes 7 and 8)

Interest expense (notes 7 and 8)

Financing costs (note 8)

Loss on debt settlement (notes 8 and 10)

on EPA debt extinguishment (note 8)

expense (notes 8 and 9)

( 3,382,559 )

Loss on private placement (note 10)

Share issuance costs (note 10)

Loss on loan extinguishment (note 7)

Net loss and comprehensive

loss for the year

finance costs (note 9)

( 1,230,540 )

on debt settlement

income (loss) for the year

$ ( 6,402,277 )

comprehensive income (loss), net of tax

on change in FV on own credit risk (note 9)

comprehensive income (loss)

Comprehensive

income (loss)

( 6,402,277 )

Net loss per common share

- basic and fully diluted

Weighted average number of common shares

- basic and fully

Income (loss) per common share

income (loss) per common share – basic (note 12)

income (loss) per common share – fully diluted (note 12)

average number of common shares

average common shares – basic (note 12)

average common shares – fully diluted (note 12)

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

2 unchanged sentences

in United States Dollars)

Operating activities

Net loss for the year

Income (loss) for the year

$ ( 6,402,277 )

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

in derivative liability

( 15,696,391 )

( 12,300,453 )

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

Stock-based compensation

Depreciation expense

Change in fair value of warrant liability

issued for services

interest expense on lease liability

exchange loss (gain)

exchange loss (gain) on re-translation of lease

on debt settlement

of EPA discount

on fair value of convertible debt derivatives

on EPA debt extinguishment

( 8,614,103 )

in operating assets and liabilities:

mine acquisition costs

finance costs

expenses and deposits

( 1,133,124 )

Accretion expense

Financing costs

Loss on loan extinguishment

Imputed interest expense on lease liability (note 9)

Foreign exchange loss (gain) on re-translation of lease (Note 9)

Loss on debt settlement

Loss on private placement

Share issuance costs

Changes in operating assets and liabilities:

Accounts receivable

Prepaid mine acquisition costs

Prepaid finance costs

Prepaid expenses

Accounts payable

water treatment payable

( 4,458,707 )

Accrued liabilities

EPA water treatment payable

EPA cost recovery payable

Other liabilities

Interest payable

Net cash used in operating activities

cost recovery payable

( 2,000,000 )

payable – EPA

cash used in operating activities

( 22,498,307 )

( 11,372,153 )

Investing activities

Deposit on mining interest

of spare inventory

Hill mine purchase

( 5,524,322 )

Purchase of machinery and equipment

Net cash used in investing activities

( 1,157,059 )

Financing activities

Proceeds from issuance of common stock, net

Proceeds from warrants exercised

Shares to be issued

Lease payments

Proceeds from promissory note

Repayment of promissory note

and demobilization of Process plant

( 3,129,856 )

Net cash provided by financing activities

Net change in cash

of machinery and equipment

cash used in investing activities

( 11,174,672 )

Cash, beginning of year

Cash, end of year

Supplemental disclosures

Non-cash activities:

Common stock issued to settle accounts payable, accrued liabilities, interest payable, and promissory notes

Common stock issued to settle convertible loan

from convertible debentures

from bridge loan

from issuance of shares, net of issue costs

from promissory note

of promissory note

( 1,000,000 )

cash provided by financing activities

change in cash and restricted cash

( 3,082,598 )

beginning of year

and restricted cash, end of year

issued to settle accounts payable and accrued liabilities

issued to settle interest payable

purchase for shares and warrants

issued to settle DSU/RSU/Bonuses

Reconciliation from Cash Flow Statement to Balance Sheet:

Cash and restricted cash, end of year

Less restricted cash

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

2 unchanged sentences

in United States Dollars)

Balance, June 30, 2019

comprehensive

December 31, 2021

$ ( 72,491,150 )

$ ( 34,242,368 )

Stock-based compensation

Shares and units issued at $ 0.04 per share (i)

Units issued for debt settlement at $ 0.09 per share

Shares issued for debt settlement at $ 0.14 per share

issued for interest payable

issued for RSUs vested

brokered shares issued for C$ 0.30

warrant shares issued for C$ 0.30

shares issued for C$ 0.30

issued for Process plant purchase

( 6,246,848 )

on fair value from change in credit risk

income for the period

Shares issued at $0.32 per share(ii)

Shares issued for debt settlement at $ 0.42 per share (ii)

Finder’s units issued

Finder’s warrants issued

Warrants exercised at $ 0.18 per share (iii)

Warrant valuation

Shares to be issued

Net loss for the year

Shares issued at $0.32 per share(ii), shares

Shares issued for debt settlement at $0.45 per share

Shares issued for debt settlement at $0.45 per share, shares

December 31, 2022

$ ( 71,592,559 )

$ ( 26,176,943 )

Balance, June 30, 2020

December 31, 2020

$ ( 66,088,873 )

$ ( 31,537,597 )

Stock-based compensation

Units issued at $ 0.26 per unit (iv)

and Units issued

Units issued for debt settlement at $ 0.67 per unit

Units issued for debt settlement

Shares issued for debt settlement at $ 0.37 per share (v)

Warrant valuation

balance value

( 66,088,873 )

( 31,537,597 )

Net loss for the period

issued at $ 0.32 per share (ii)

issued for debt settlement at $ 0.45 per share (iii)

issued for RSUs vested

( 3,813,103 )

Balance, December 31, 2020

loss for the period

( 6,402,277 )

Stock-based compensation

Shares issued at $ 0.32 per share (vi)

Shares issued

Shares issued for debt settlement at $ 0.45 per share (vii)

issued for debt settlement

Shares issued for RSUs vested

Warrant valuation

income (loss)

( 6,402,277 )

Net loss for the year

December 31, 2021

$ ( 72,491,150 )

$ ( 34,242,368 )

Balance, December 31, 2021

balance value

$ ( 72,491,150 )

$ ( 34,242,368 )

and units issued at C$ 0.05 , converted to US at $ 0.04 (note 10)

issued at C$ 0.30 , converted to US at $ 0.24 (note 11)

issued upon warrants exercised at C$ 0.25 , converted to US at $ 0.18 (note 10)

issued at C$ 0.40 , converted to US at $ 0.32 (note 11)

issued at C$ 0.57 , converted to US at $ 0.45 (note 11)

issued at C$ 0.40 , converted to US at $ 0.32 (note 10)

issued at C$ 0.57 , converted to US at $ 0.45 (note 10)

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

1 unchanged sentence

to Consolidated Financial Statements

Ended December 31, 2021, Six Months Ended December 31, 2020 and Year Ended June 30, 2020

Ended December 31, 2022 and December 31, 2021

in United States Dollars)

10 unchanged sentences

Toronto, Ontario, Canada, M5C 1P1.

As of the date of this Form 10-K, the Company had one subsidiary, Silver Valley Metals Corp.

American Zinc Corp.), an Idaho corporation created to facilitate the work being conducted at the Bunker Hill Mine in Idaho.

Company was incorporated for the purpose of engaging in mineral exploration activities.

It continues to work at developing its project

with a view towards putting it into production.

As of the date of this Form 10-Q, the Company had one subsidiary, Silver Valley Metals Corp.

Valley”, formerly American Zinc Corp.), an Idaho corporation created to facilitate the work being conducted at the Bunker Hill

Mine in Kellogg, Idaho.

The Company was incorporated for the initial purpose

of engaging in mineral exploration activities at the Mine.

The Company has moved into the development stage concurrent with (i) purchasing

the Mine and a process plant, (ii) completing successive technical and economic studies, including a Prefeasibility Study, (iii) delineating

mineral reserves, and (iv) conducting the program of activities outlined above.

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

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, the Company owes a total of $ 16,417,208

to the EPA (see Note 6) 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.

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.

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

1 unchanged sentence

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 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, obtaining additional financing to

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

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 (see note 8).

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.

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

or other health crises, including the recent outbreak of respiratory illness caused by the novel coronavirus (“COVID-19”).

The Company cannot accurately predict the impact COVID-19 will have on its operations and the ability of others to meet their obligations

with the Company, including uncertainties relating to the ultimate geographic spread of the virus, the severity of the disease, the duration

of the outbreak, and the length of travel and quarantine restrictions imposed by governments of affected countries.

In addition, a significant

outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies

and financial markets of many countries, resulting in an economic downturn that could further affect the Company’s operations and

ability to finance its operations.

The Russia/Ukraine Crisis:

The 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.

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.

Although the pandemic has subsided significantly, the Company cannot accurately predict the impact a COVID-19 resurgence would have on

its operations and the ability of others to meet their obligations with the Company, including uncertainties relating to the ultimate

geographic spread of the virus, the severity of the disease, the duration of the outbreak, and the length of travel and quarantine restrictions

imposed by governments of affected countries.

In addition, a significant outbreak of contagious diseases in the human population could

result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in

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

Russia/Ukraine Crisis:

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.

Hill Mining Corp.

to Consolidated Financial Statements

Ended December 31, 2022 and December 31, 2021

in United States Dollars)

Basis of presentation

3 unchanged sentences

the Company’s functional currency.

February 2021, the Company changed its fiscal year from June 30 to December 31.

As a result, in addition to the full calendar year ended

December 31, 2021, the Company is reporting financial information for the transition period from July 1, 2020 to December 31, 2020, and

the preceding full fiscal year of July 1, 2019 to June 30, 2020.

Hill Mining Corp.

to Consolidated Financial Statements

Ended December 31, 2021, Six Months Ended December 31, 2020 and Year Ended June 30, 2020

in United States Dollars)

Significant accounting policies

8 unchanged sentences

rights, property and acquisition costs

Company has been in the exploration stage since its formation on February 20, 2007 and has not yet realized any revenues from its planned

It is primarily engaged in the acquisition and exploration of mining properties.

Company transitioned from the exploration stage to the development stage at the beginning of the fourth quarter of 2022.

has not yet realized any revenues from its planned operations.

Company capitalizes acquisition and option costs of mineral rights as intangible assets when there is sufficient evidence to support

28 unchanged sentences

their recoverability.

Hill Mining Corp.

to Consolidated Financial Statements

Ended December 31, 2022 and December 31, 2021

in United States Dollars)

lease right of use (“ROU”) assets represent the right to use the leased asset for the lease term and operating lease liabilities

4 unchanged sentences

Lease expense for minimum lease payments is amortized on a straight-line basis over

the lease term and is included in operation and administration expenses in the consolidated statements of loss and comprehensive loss.

Hill Mining Corp.

to Consolidated Financial Statements

Ended December 31, 2021, Six Months Ended December 31, 2020 and Year Ended June 30, 2020

in United States Dollars)

the lease term and is included in operation and administration expenses in the consolidated statements of Income (loss) and comprehensive Income (loss).

Company is required to make additional payments for certain variable costs.

9 unchanged sentences

When the Company determines that an impairment

analysis should be done, the analysis is performed using the rules of FASB ASC 930-360-35, Extractive Activities – Mining,

and 360-10-15-3 through 15-5, Impairment or Disposal of Long-Lived Assets.

analysis should be done, the analysis is performed using the rules of FASB ASC 930-360-35, Extractive Activities – Mining, and

360-10-15-3 through 15-5, Impairment or Disposal of Long-Lived Assets.

factors could impact the Company’s ability to achieve forecasted production schedules.

Additionally, commodity prices, capital

expenditure requirements and reclamation costs could differ from the assumptions the Company may use in cash flow models used to assess

The ability to achieve the estimated quantities of recoverable minerals from exploration stage mineral interests involves

further risks in addition to those factors applicable to mineral interests where proven and probable reserves have been identified, due

to the lower level of confidence that the identified mineralized material can ultimately be mined economically.

expenditure requirements and reclamation costs could differ from the assumptions the Company may use in future production cash flow

models when compared to factors used to assess impairment.

The ability to achieve the estimated quantities of recoverable minerals

from development stage mineral interests involves further risks in addition to those factors applicable to mineral interests where

proven and probable reserves have been identified, due to the lower level of confidence that the identified mineralized material can

ultimately be mined economically.

value of financial instruments

7 unchanged sentences

3 inputs to valuation methodology are unobservable and significant to the fair measurement.

carrying amounts reported in the consolidated balance sheets for cash, accounts receivable excluding HST, accounts payable, accrued liabilities,

interest payable, convertible loan payable, promissory notes payable, lease liability, and other liabilities, all of which qualify as

financial instruments, are a reasonable estimate of fair value because of the short period of time between the origination of such instruments

and their expected realization and current market rate of interest.

The Company measured its DSU liability at fair value on recurring

basis using level 1 inputs and derivative warrant liabilities at fair value on recurring basis using level 3 inputs.

The carrying amounts reported in the consolidated balance sheets for cash,

restricted cash, accounts receivable excluding HST, accounts payable, accrued liabilities, interest payable, promissory notes payable,

environmental protection agency water treatment payable, environmental protection agency cost recovery payable, and lease liability, all

of which qualify as financial instruments, are a reasonable estimate of fair value because of the short period of time between the origination

of such instruments and their expected realization and current market rate of interest.

The carrying amounts of convertible loans are

reported at estimated fair values as a result of the application of fair value models at each quarter end.

The Company measured its DSU

liability at fair value on recurring basis using level 1 inputs.

Derivative warrant liabilities and convertible debentures are measured

at fair value on recurring basis using level 3 inputs.

Environmental

10 unchanged sentences

determinable, are charged against earnings over the estimated remaining life of the related business operation, net of expected recoveries.

Hill Mining Corp.

to Consolidated Financial Statements

Ended December 31, 2022 and December 31, 2021

in United States Dollars)

Company accounts for income taxes in accordance with Accounting Standard Codification 740, Income Taxes (“FASB ASC 740”),

6 unchanged sentences

to be more likely than not that the deferred tax asset will not be realized.

Hill Mining Corp.

to Consolidated Financial Statements

Ended December 31, 2021, Six Months Ended December 31, 2020 and Year Ended June 30, 2020

in United States Dollars)

Company assesses the likelihood of the consolidated financial statements effect of a tax position that should be recognized when it is

11 unchanged sentences

interest and penalties, accounting in periods, disclosure and transition.

At December 31, 2021, December 31, 2020, and June 30, 2020,

the Company has not taken any tax positions that would require disclosure under FASB ASC 740.

and diluted net loss per share

Company computes net loss per share in accordance with FASB ASC 260, Earnings per Share (“FASB ASC 260”).

At December 31, 2022, December 31, 2021, the Company has not

taken any tax positions that would require disclosure under FASB ASC 740.

and diluted net income (loss) per share

Company computes net income (loss) per share in accordance with FASB ASC 260, Earnings per Share (“FASB ASC 260”).

Under the provisions

of FASB ASC 260, basic net loss per share is computed using the weighted average number of common shares outstanding during the period.

Diluted net loss per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding

of FASB ASC 260, basic net income (loss) per share is computed using the weighted average number of common shares outstanding during the period.

Diluted net income (loss) per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding

during the period.

Potential common shares consist of the incremental common shares issuable upon the exercise of stock options and warrants

Potential common shares consist of the incremental common shares issuable upon the exercise of stock options, RSU’s, warrants

and the conversion of convertible loan payable.

24 unchanged sentences

reporting date, with changes in fair value recognized as stock-based compensation in profit (loss).

Hill Mining Corp.

to Consolidated Financial Statements

Ended December 31, 2022 and December 31, 2021

in United States Dollars)

of estimates and assumptions

3 unchanged sentences

Actual results may differ from the amounts included in the consolidated financial statements.

Hill Mining Corp.

to Consolidated Financial Statements

Ended December 31, 2021, Six Months Ended December 31, 2020 and Year Ended June 30, 2020

in United States Dollars)

of significant judgment and estimates affecting the amounts recognized in the consolidated financial statements include:

2 unchanged sentences

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

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

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 Idaho Department of Environmental Quality (“IDEQ”).

the actual costs in the annual invoice, the Company then reassesses 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.

The Company makes monthly estimates of

its water treatment costs, with a true-up to the annual invoice received from the Idaho Department of Environmental Quality (“IDEQ”).

Using the actual costs in the annual invoice, the Company then reassesses 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.

loans, promissory notes and warrants

the fair value of derivative warrant liability and conversion feature derivative liability requires determining the most appropriate

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

inputs to the valuation model including the expected life of the warrants derivative liability, volatility and

dividend yield and making assumptions about them.

The assumptions and models used for estimating fair value of warrants and conversion

feature derivative liability are disclosed in notes 8 and 10.

The assumptions and models used for estimating fair value of warrants derivative liability are disclosed in Notes 9 and 11.

The fair value estimates of the convertible loans

use inputs to the valuation model that include risk-free rates, equity value per common share, USD-CAD exchange rates, spot and futures

prices of minerals, expected equity volatility, expected volatility in minerals prices, discount for lack of marketability, credit spread,

expected mineral production over the life of the mine, and project risk/estimation risk factors.

See Note 11 for full disclosures related

to the convertible loans and promissory notes.

fair value estimates may differ from actual fair values and these differences may be significant and could have a material impact on

7 unchanged sentences

Reclassifications

Certain reclassifications have been made to conform

prior year’s data to the current presentation.

The reclassifications have no effect on the results of reported operations or stockholders’

deficit or cash flows.

reclassifications have been made to conform prior year’s data to the current presentation.

The reclassifications have no effect

on the results of reported operations or stockholders’ deficit or cash flows.

Concentrations

of credit risk

Company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash.

The Company places

its cash with financial institutions of high credit worthiness.

At times, its cash equivalents with a particular financial institution

may exceed any applicable government insurance limits.

The Company’s management also routinely assesses the financial strength

and credit worthiness of any parties to which it extends funds and as such, it believes that any associated credit risk exposures are

Company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and restricted cash.

places its cash with financial institutions of high credit worthiness.

At times, its cash equivalents with a particular financial

institution may exceed any applicable government insurance limits.

The Company’s management also routinely assesses the

financial strength and credit worthiness of any parties to which it extends funds and as such, it believes that any associated

credit risk exposures are limited.

and uncertainties

Company operates in the mineralized material exploration industry that is subject to significant risks and uncertainties, including financial,

operational, and other risks associated with operating a mineralized material exploration business, including the potential risk of business

Company operates in the mineral resource exploration and mine development industry that is subject to significant risks and uncertainties,

including financial, operational, and other risks associated with operating a mineral resource exploration business, including the potential

risk of business failure.

Hill Mining Corp.

to Consolidated Financial Statements

Ended December 31, 2022 and December 31, 2021

in United States Dollars)

currency transactions

5 unchanged sentences

Company reviews the terms of its convertible loans and promissory notes payable to determine whether there are embedded derivatives,

including the embedded conversion option, that are required to be bifurcated and accounted for as individual derivative financial instruments.

In circumstances where the convertible debt or the promissory note contains embedded derivatives that are to be separated from the host

including the embedded options, that are required to be bifurcated and accounted for as individual derivative financial instruments.

In circumstances where the convertible loans or the promissory note contains embedded derivatives that are to be separated from the host

contracts, the total proceeds received are first allocated to the fair value of the derivative financial instruments determined using

4 unchanged sentences

(loss) using the effective interest method.

In circumstances where the convertible loans or the promissory note contains embedded derivatives that are not separated

from the host contracts, the fair values of the host contract and the derivative are valued together, with the change in fair value accounted

through earnings, profit and loss for each period reported.

debenture host contracts are subsequently recorded at amortized cost at each reporting date, using the effective interest method.

embedded derivatives are subsequently recorded at fair value at each reporting date, with changes in fair value recognized in profit

Company presents its embedded derivatives and related debenture host contracts as separate instruments on the consolidated balance sheets.

The Company applies ASC 480 distinguishing liabilities

from equity and ASC 815 derivatives and hedging in determining the appropriate accounting treatment for hybrid instruments.

options within the convertible loans are not bifurcated and measured at fair value at each period end.

Recent Accounting Pronouncements

Standards Updates Adopted

2020, the FASB issued ASU No.

2020 - 06 Debt with Conversion and Other Options (Subtopic 470 - 20 )

and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815 - 40 ):

Accounting for Convertible

Instruments and Contracts in an Entity’s Own Equity.

The update is to address issues identified as a result of the complexity associated

with applying generally accepted accounting principles for certain financial instruments with characteristics of liabilities and equity.

The update is effective for fiscal years beginning after December 15, 2023 for smaller reporting companies, including interim

periods within those fiscal years and with early adoption permitted.

The Company is assessing the impact from the adoption of this amendment.

Management does

not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect

on the accompanying financial statements.

Hill Mining Corp.

to Consolidated Financial Statements

Ended December 31, 2021, Six Months Ended December 31, 2020 and Year Ended June 30, 2020

Ended December 31, 2022 and December 31, 2021

in United States Dollars)

Accounts receivable and prepaid expenses

Accounts receivable and prepaid expenses consists

of the following:

Schedule of Accounts receivable and prepaid expenses

Prepaid expenses

Environment protection agency overpayment (note 8)

consists of the following:

1 unchanged sentence

Equipment, gross

Less accumulated depreciation

Equipment, net

total depreciation expense during the year ended December 31, 2021 was $ 133,526

(six months ended December 31, 2020 - $ 52,784

and the year ended June 30, 2020 - $ 17,577 ).

accumulated depreciation

total depreciation expense during the year ended December 31, 2022, was $ 162,290 (year ended December 31, 2021 - $ 133,526 ).

Plant Purchase from Teck Resources Limited

May 13, 2022, the Company completed purchase of a comprehensive package of equipment and parts inventory from Teck Resources Limited

The package comprises substantially all processing equipment of value located at the Pend Oreille mine 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.

purchase of the mill has been valued at:

consideration given, comprised of $ 500,000 non-refundable deposit remitted on January 7, 2022 and $ 231,000 sales tax remitted on May

13, 2022, a total of $ 731,000 cash remitted.

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 .

process plant was purchased in an assembled state in the seller’s location, and included major processing systems, significant

components, and a large inventory of spare parts.

The Company has disassembled and transported it to the Bunker Hill site, and will be

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 sheets 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.

Hill Mining Corp.

to Consolidated Financial Statements

Ended December 31, 2022 and December 31, 2021

in United States Dollars)

December 31, 2022, the asset consists of the following:

of Plant Asset Consists

of shares issued

of warrants issued

plant & inventory purchased

preparation costs

Demobilization

spare parts inventory

Oreille plant asset, net

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.

The first two payments were made as follows:

on September 15, 2022 as a non-refundable long-term deposit

on October 13, 2022, as a refundable long-term deposit

of December 31, 2022, the Company had not made the final payment of $ 475,000 .

Right-of-use asset

asset consists of the following:

Schedule of Right-of-use Asset

Less accumulated depreciation

Right-of-use asset, net

total depreciation expense during the year ended December 31, 2021 was $ 106,378 (six months ended December 31, 2020 - $ 54,024 and the

year ended June 30, 2020 - $ 106,378 ).

of Right-of-use Asset

accumulated depreciation

total depreciation expense during the year ended December 31, 2022 was $ 52,353 (year ended December 31, 2021 - $ 106,378 ).

Mining Interests

Hill Mine Complex

November 27, 2016, the Company entered into a non-binding letter of intent with Placer Mining Corp.

(“Placer Mining”), which

letter of intent was further amended on March 29, 2017, to acquire the Bunker Hill Mine in Idaho and its associated milling facility

located in Kellogg, Idaho, in the Coeur d’Alene Basin (as amended, the “Letter of Intent”).

Pursuant to the terms and

conditions of the Letter of Intent, the acquisition, which was subject to due diligence, would include all mining claims, surface rights,

fee parcels, mineral interests, existing infrastructure, machinery and buildings at the Kellogg Tunnel portal in Milo Gulch, or anywhere

underground at the Bunker Hill Mine Complex.

The acquisition would also include all current and historic data relating to the Bunker

Hill Mine Complex, such as drill logs, reports, maps, and similar information located at the mine site or any other location.

the year ended June 30, 2017, the Company made payments totaling $ 300,000 as part of this Letter of Intent.

These amounts were initially

capitalized and subsequently written off during fiscal 2018 and were included in exploration expenses.

August 28, 2017, the Company announced that it signed a definitive agreement (the “Agreement”) for the lease and option to

purchase the Bunker Hill Mine assets (the “Bunker Assets”).

Under the terms of the Agreement, the Company was required to

make a $ 1,000,000 bonus payment to Placer Mining no later than October 31, 2017, which payment was made, along with two additional $ 500,000

bonus payments in December 2017.

The 24-month lease commenced November 1, 2017.

During the term of the lease, the Company was to make

$ 100,000 monthly mining lease payments, paid quarterly.

Hill Mining Corp.

to Consolidated Financial Statements

Ended December 31, 2021, Six Months Ended December 31, 2020 and Year Ended June 30, 2020

in United States Dollars)

Company had an option to purchase the Bunker Assets at any time before the end of the lease and any extension for a purchase price of

$ 45,000,000 with purchase price payments to be made over a ten-year period to Placer Mining.

Under the terms of the agreement, there

is a 3 % net smelter return royalty (“NSR”) on sales during the lease and a 1.5 % NSR on the sales after the purchase option

is exercised, which post-acquisition NSR is capped at $ 60,000,000 .

October 2, 2018, the Company announced that it was in default of the 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 Agreement, the Company had

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

While management worked with urgency to resolve this matter, management was ultimately unsuccessful in remedying the default, resulting

in the Agreement being terminated.

November 13, 2018, the Company announced that it was successful in renewing the Agreement, effectively with the original 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 (“deferred payments”) being

November 1, 2019, the Agreement was amended (the “Amended Agreement”).

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 six

months based upon payment of a one-time $ 60,000 extension fee (extended) ;

Company will 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 Bunker Assets to be paid with $ 6,200,000 in cash, and $ 4,800,000 in common shares.

The purchase price also includes the negotiable United States Environmental Protection Agency (“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.

July 27, 2020, the Company extended the lease with Placer Mining for a further 18 months for a $ 150,000 extension fee.

This extension

expires on August 1, 2022 .

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

Under the terms of this 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 payable in cash (with an aggregate of $ 300,000 to be credited toward the

purchase price of the Bunker Assets 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 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.

the Company recorded a gain on settlement of accounts payable of $ 1,787,300 ;

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 Bunker Assets to an aggregate of $ 3,400,000

payable in cash and $ 2,000,000 in common shares of the Company.

As at December 31, 2021 and 2020, the Company

accrued for a total of $nil for each year (June 30, 2020 - $ 1,847,300 ), which was included in accounts payable.

These monthly payments

will be waived should the Company choose to exercise its option.

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.

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.

On November 20, 2020 the Company made 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 Consolidated Financial Statements

Ended December 31, 2021, Six Months Ended December 31, 2020 and Year Ended June 30, 2020

Ended December 31, 2022 and December 31, 2021

in United States Dollars)

of the Bunker Hill Mine:

December 2021, the Company announced its intention to purchase the mine complex, which was consummated subsequent to the close

of the period.

With the execution of the EPA settlement agreement amendment described below and the expected receipt of $ 8,000,000

proceeds from the Royalty Convertible Debenture,

the Company has contracted to purchase the Bunker Hill Mine from Placer Mining Corp.

and a definitive agreement has been signed by both

The terms of the purchase were modified to a purchase price of $ 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

in cash, from $ 3,400,000

of cash and $ 2,000,000

of common shares in the Company.

of the mine consists of over 400 patented mining claims and 5,800

acres of private land.

of the transaction occurred in January 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 Note 16, Subsequent Events.

Environmental

Amended Agreement also required 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 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 .

(See also Note 8 Environmental

Protection Agency Agreement).

addition to the payments to Placer Mining described above, and pursuant to an agreement with the EPA whereby for so long as Bunker leases,

owns and/or occupies the Bunker Hill Mine, the Company will make payments to the EPA on behalf of the current owner in satisfaction of

the EPA’s claim for cost recovery.

Prior to the completion of the sale, the Company accrued

$ 260,463 in acquisition costs during the year ended December 31, 2021.

Together with the $ 2,000,000 advance payment made in November 2020,

this comprises the balance of $ 2,260,463 for prepaid mine deposit and acquisition costs on the balance sheet as of December 31, 2021.

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 of cash and $ 2,000,000 of Common Shares.

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 also Note 8 Environmental protection Agency Agreement).

$ 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.

Management has determined the purchase to be an acquisition of a single asset as guided by ASU

805-10 Business Combinations.

carrying cost of the Mine is comprised of the following:

of Mining Interests

purchase price

Credit by seller for prior maintenance payments

present value of water treatment cost recovery liability assumed (note 8)

costs capitalized

acquisition costs - legal

cost of mine – January 7, 2022

mining costs – 2022

cost of mine - total

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

Cost Recovery Payables

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 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 calls for payments starting

with $ 1,000,000 30 days after a fully ratified agreement was signed followed by a payment schedule detailed below:

Schedule of Payments for Mining

Within 30 days of the effective date

November 1, 2018

November 1, 2019

November 1, 2020

November 1, 2021

November 1, 2022

November 1, 2023

November 1, 2024

total unpaid EPA cost recovery payments under the agreement was $ 11,000,000 at December 31, 2021 (December 31, 2020 - $ 8,000,000 and

June 30, 2020 - $ 5,000,000 , respectively).

addition to these cost recovery payments, the Company is to make semi-annual payments of $ 480,000

on June 1 and December 1 of each year, to cover

the EPA’s costs of operating and maintaining the water treatment facility that treats the water being discharged from the Bunker

The Company also has received invoices from the EPA for additional water treatment charges for the periods from December 2017

to May 2021, and has accrued costs for estimated water treatment costs through December 31, 2021.

A total of $ 5,110,706

was outstanding as at December 31, 2021 (December

31, 2020 - $ 3,136,050

and June 30, 2020 - $ 2,309,388 ,

respectively).

In December 2021, the Company entered into a Settlement Amendment, described below, under which a payment of $ 2,963,111

would be made toward

water treatment liabilities, representing the balance of liabilities owed for the 2020 and earlier invoices, net of payments made

through the end of September 2021.

In consultation with the EPA, the Company has committed to meet this obligation by 180 days from the

effective date of the Amended Settlement Agreement.

The unpaid EPA balance is subject to interest at the rate specified for interest

on investments of the EPA Hazardous Substance Superfund, which was 0.10 %

at December 31, 2021.

As at December 31, 2021, the interest accrued on the unpaid EPA balance was $ 306,502

(December 31, 2020 - $ 162,540

and June 30, 2020 - $ 89,180 ,

respectively).

the year ended December 31, 2021, the Company has accrued an estimate for additional water treatment charges based on an invoice received

covering the period of November 2019 to October 2020 and a further invoice covering the period of November 2020 to May 2021.

believes that the charges in this latter invoice, of approximately $ 165,000

per month, represent the best estimate of unbilled

charges for the period of June 2021 to December 2021, and has accrued for these charges accordingly.

Net of a total of $ 880,000

cash payments made to the EPA during the year,

the total accrual for EPA water treatment charges is $ 5,110,706

as of December 31, 2021, before consideration

of unpaid cost recovery payments.

The Company has included all unpaid and accrued EPA payments and accrued interest in accounts payable

and accrued liabilities, totaling $ 16,417,208

due to the EPA at December 31, 2021 (December

31, 2020 - $ 11,298,594

and June 30, 2020 - $ 7,915,235 ,

respectively).

For the year ended December 31, 2021, water treatment costs of $ 5,998,615 were recognized as part of exploration expense

(six months ended December 31, 2020 – $ 3,873,359 , year ended June 30, 2020 – $ 5,905,235 ).

Settlement Agreement Amendment:

December 2021, in conjunction with its intention to purchase the 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

With the purchase of the mine subsequent to the end of the period, 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:

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, 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 consolidated balance sheets as of December 31, 2021.

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

Mine as a viable long-term business.

Hill Mining Corp.

to Consolidated Financial Statements

Ended December 31, 2021, Six Months Ended December 31, 2020 and Year Ended June 30, 2020

Ended December 31, 2022 and December 31, 2021

in United States Dollars)

Schedule of Payments for Mining

November 1, 2024

November 1, 2025

November 1, 2026

November 1, 2027

November 1, 2028

November 1, 2029

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

US Department of Justice, and the EPA (the “Amended Settlement”).

Upon the effectivity of the Amended Settlement, the Company

would become fully compliant with its payment obligations to these parties.

The Amended Settlement modified the payment schedule and

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

Pursuant to the terms of the Amended Settlement,

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

30 days of Settlement Agreement

plus accrued interest

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.

addition to the cost recovery payments outlined above, the Amendment includes payment for outstanding water treatment costs that have

been incurred over the period from 2018 through October 2020.

This approximately $ 2,900,000

payment would 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 approximately $ 2,900,000 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.

The amount 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.

at December 31, 2021, the Company had not secured the interim financial assurance, and therefore the contingency had not been removed

or satisfied.

Further, as of the date of this filing, the financial assurance has not been secured, and as a result, the liability to

the EPA is accounted for with no effectivity of the Amendment, with the liabilities each reflected as current liabilities.

Subsequent Events.

Convertible loan payable

June 13, 2018, the Company entered into a loan and warrant agreement with Hummingbird Resources PLC (“Hummingbird”), an arm’s

length investor, for an unsecured convertible loan in the aggregate sum of $ 1,500,000 , bearing interest at 10 % per annum, maturing in

Contemporaneously, the Company agreed to issue 229,464 share purchase warrants, entitling the lender to acquire 229,464 common

shares of the Company, at a price of C$ 8.50 per common share, for two years .

Under the terms of the loan agreement, the lender may, at

any time prior to maturity, convert any or all of the principal amount of the loan and accrued interest thereon, into common shares of

the Company at a price per share equal to C$8.50.

In the event that a notice of conversion would result in the lender holding 10% or

more of the Company’s issued and outstanding shares, then, in the alternative, and under certain circumstances, the Company would

be required to pay cash to the lender in an amount equal to C$ 8.50 multiplied by the number of shares intended to be issued upon conversion.

Further, in the event that the lender holds more than 5% of the issued and outstanding shares of the Company subsequent to the exercise

of any of its convertible securities held under this placement, it shall have the right to appoint one director to the board of the Company.

Lastly, among other things, the loan agreement further provides that for as long as any amount is outstanding under the convertible loan,

the investor retains a right of first refusal on any Company financing or joint venture/strategic partnership/disposal of assets.

August 2018, the amount of the Hummingbird convertible loan payable was increased to $ 2,000,000 from its original $ 1,500,000 loan, net

of $ 45,824 of debt issue costs.

An additional 116,714 warrants with each warrant exercisable at C$ 4.50 were issued.

Under the terms of

the amended and restated loan agreement, Hummingbird may, at any time prior to maturity, convert any or all of the principal amount of

the loan and accrued interest thereon, into common shares of Bunker as follows:

(i) $ 1,500,000 , being the original principal amount (the

“Principal Amount”), may be converted at a price per share equal to C$ 8.50 ;

(ii) 229,464 common shares may be acquired upon

exercise of warrants at a price of C$ 8.50 per warrant for a period of two years from the date of issuance;

(iii) $ 500,000 , being the

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

and (iv) 116,714

common shares may be acquired upon exercise of warrants at a price of C$ 4.50 per warrant for a period of two years from the date issuance.

In the event that Hummingbird would acquire common shares in excess of 9.999% through the conversion of the Principal Amount or the Additional

Amount, including interest accruing thereon, or on exercise of the warrants as disclosed herein, the Company shall pay to Hummingbird

a cash amount equal to the common shares exercised in excess of 9.999%, multiplied by the conversion price.

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 within 180 days from the effective

date of the Amended Settlement.

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 7) and made the initial $ 2,000,000

cost recovery payment on January 7, 2022.

Concurrent 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 .

This was capitalized as $ 6,402,425 to the carrying value of the Bunker Hill Mine at time of purchase, comprised of

$ 3,000,000 of incremental current liabilities and $ 5,000,000 of non-current liabilities (discounted to $3,402,425).

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

The long-term portion was discounted at an interest rate of 16.5% to arrive at a net present value of $3,540,851 after discount ($3,402,425 as of the purchase of the mine plus $138,427 of accretion expense during the quarter

ended March 31, 2022.

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 Amendment Settlement.

Once the financial assurance was put into place, the

restructuring of the payment stream under the Amendment Settlement 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.

The $ 2,475,000

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 September 30, 2022.

the quarter ended December 31, 2022 the $ 7,001,000 letter of credit was 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).

As a result of the $ 3,000,000 net decrease

in the Company’s letter of credit requirements, the Company’s restricted cash balance (utilized as collateral for letters

of credit) decreased by $ 3,000,000 from $ 9,476,000 as of September 30, 2022 to $ 6,476,000 as of December 31, 2022.

ASC 470-50, Debt Modifications and Extinguishments, the Company performed a comparison of net present value 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.

During the year ended December 31, 2022, the Company recorded combined discount amortization expense of $ 712,713

on the discounted pre- and post-extinguishment

liability, and interest expense of $ 156,343 respectively, bringing the net liability to $ 7,941,466 .

As at December 31, 2022 interest of $ 24,587 ($ 306,501

at December 31, 2021) is included in interest payable

on the consolidated balance sheets.

Hill Mining Corp.

to Consolidated Financial Statements

Ended December 31, 2021, Six Months Ended December 31, 2020 and Year Ended June 30, 2020

Ended December 31, 2022 and December 31, 2021

in United States Dollars)

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

This was accounted

for as a loan extinguishment which resulted in the recording of a net loss on loan extinguishment of $ 1,195,880 .

June 2019, the Company settled $ 100,000 of the Additional Amount by issuing 2,660,000 common shares, which resulted in the recording

of a net loss on loan extinguishment of $ 8,193 .

February 2020, the Company settled $ 300,000 of the Additional Amount by issuing 696,428 common shares, which resulted in the recording

of a net loss on loan extinguishment of $ 9,407 .

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

October 2020, the Company settled the full amount of the outstanding loan by issuing 5,572,980 common shares at a deemed price of C$ 0.49

based on the fair value of the shares issued.

As a result, the Company recorded a gain on debt settlement of $ 23,376 on the consolidated

statements of loss and comprehensive loss.

Company has accounted for the conversion features and warrants in accordance with ASC Topic 815.

The conversion features and warrants

are considered derivative financial liabilities as they are convertible into common shares at a conversion price denominated in a currency

other than the Company’s functional currency of the U.S.

The estimated fair value of the conversion features and warrants

was determined on the date of issuance and marks to market at each financial reporting period.

As at December 31, 2020, the fair values

of the conversion feature and warrants were $nil (June 30, 2020 - $nil).

expense for the six months ended December 31, 2020 was $ nil (year ended June 30, 2020 - $ 146,266 ) based on an effective interest rate

of 16 % after the loan extension.

expense for the six months ended December 31, 2020 was $ 118,767 (year ended June 30, 2020 - $ 179,726 ).

As at December 31, 2020, the Company

has an outstanding interest payable of $ nil (June 30, 2020 - $ 381,233 ).

Schedule of Convertible Loan Outstanding Interest Payable

Balance, June 30, 2019

Accretion expense

Loss on loan extinguishment

Partial extinguishment

Balance, June 30, 2020

Loan extinguishment

( 1,600,000 )

Balance, December 31, 2020

Promissory notes payable

On November 13, 2019, the Company issued a promissory note in the amount of $ 300,000 .

The note was unsecured, bore interest of 1 % monthly,

and is due on demand after 90 days from issuance.

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

to the lender.

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

period of two years.

April 24, 2020, the Company extended the maturity date of the promissory note payable to August 1, 2020 .

In consideration, the Company

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

The warrants expire on November 13, 2021 .

This was accounted for as a loan modification.

the six months ended December 31, 2020, the Company repaid $ 110,658 of the promissory note and settled the remaining balance of $ 218,281

(C$ 288,000 ), which included interest payable of $ 28,939 , in full by issuing 822,857 August 2020 Units (as defined in note 10), recognizing

a loss on debt settlement of $ 335,467 .

Treatment Charges – EPA

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

treatment charges incurred through December 31, 2021 were 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 had estimated water treatment payables to the EPA of $ nil as of December 31, 2022 and $ 5,110,706 at

December 31, 2021, which is reflected in current liabilities.

Treatment Charges – IDEQ

the year ended December 31, 2022, the Company made net payments of $ 1,400,000

(12 monthly payments of $ 140,000

less $ 280,000

refund received in December 2022) to the IDEQ to estimate the cost of treating water at the Central Treatment Plant.

As of December

31, 2022, a prepaid expense of $ 170,729

represents the difference between the actual cost of water treatment through December 31, 2022 and net payments made by the Company

This balance has been recognized on the consolidated balance sheets as accounts receivable and prepaid

Promissory notes 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 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

The remaining principal and interest has been deferred to June 15, 2023.

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 December 31, 2022, the Company owes $ 1,500,000 in

promissory notes payable, which is included in current liabilities on the consolidated balance sheets.

Interest expense for the years

ended December 31, 2022 and 2021 was $ 281,301 and $ 102,740 respectively.

At December 31, 2022 interest of $ 384,041 ($ 102,740 at December

31, 2021) is included in interest payable on the consolidated balance sheets.

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”).

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

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.

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.

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 a modification as a result of the treatment the Company reported a gain of $ 607,261 in the loss on fair value of convertible debentures line

of the consolidated statements of income (loss) and comprehensive income (loss) for the year

ended December 31, 2022.

Hill Mining Corp.

to Consolidated Financial Statements

Ended December 31, 2021, Six Months Ended December 31, 2020 and Year Ended June 30, 2020

Ended December 31, 2022 and December 31, 2021

in United States Dollars)

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

The warrants are considered derivative financial liabilities

as they are convertible into common shares at a conversion price denominated in a currency other than the Company’s functional

currency of the US dollar.

The estimated fair value of the warrants was determined on the date of issuance and marks to market at each

financial reporting period.

Schedule of Fair Value of Derivative Warrant Liability Assumptions

November 2019 issuance

December 31, 2020

November 13, 2021

Expected life

Risk free interest rate

Dividend yield

Change in derivative liability

April 2020 issuance

December 31, 2020

November 13, 2021

Expected life

Risk free interest rate

Dividend yield

Change in derivative liability

expense for the year ended December 31, 2021 was $ nil compared to $ 51,522 for the six months ended December 31, 2020 and $ 155,001 for

the year ended June 30, 2020 based on an effective interest rate of 16 % after the loan extension.

expense for the year ended December 31, 2021 was $ nil compared to $ 5,600 for the six months ended December 31, 2020 and $ 22,700 for the

year ended June 30, 2020.

Schedule of Promissory Notes Outstanding Interest Payable

Balance, June 30, 2019

Proceeds on issuance

Warrant valuation

Accretion expense

Balance, June 30, 2020

Accretion expense

Debt settlement

Balance, December 31, 2020

On December 31, 2019, the Company issued a promissory note in the amount of $ 82,367 (C$ 107,000 ).

The note bore no interest and was due

This promissory note was repaid during the year ended June 30, 2020.

On January 29, 2020, the Company issued a promissory note in the amount of $ 75,727 (C$ 100,000 ).

The note bore no interest and was due

This promissory note was repaid during the year ended June 30, 2020.

On May 12, 2020, the Company issued a promissory note in the amount of $ 362,650 (C$ 500,000 ), net of $ 89,190 of debt issue costs.

note bore no interest and was due on demand after 90 days after the issue date.

This promissory note was repaid during the six months

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

the maturity 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 CD1 should not be treated as an extinguishment of the CD1, and have therefore been accounted

for as a modification as a result of the treatment the Company reported a gain of $ 179,046 in the loss on fair value of convertible debentures line

of the statement of operations for the year

ended December 31, 2022.

Accretion expense for the six months ended December 31, 2020 was $ 47,737 (year ended June 30, 2020 - $ 41,453 )

based on effective interest rate of 7 %.

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.

Company determined that in accordance with ASC 815 Derivatives and Hedging, 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 as at applicable valuation dates:

Schedule of Key Valuation Inputs

Interest rate

equity volatility

adjusted rate

CD1 carried a Discount for Lack of Marketability (“DLOM”) of 5.0 %

as of the issuance date and as of March 31, 2022.

The CD2 carried a DLOM of 10.0 % as of the issuance date and June

and RCD carry an instrument-specific spread of 7.23 %, CD2 carries an instrument-specific spread of 9.32 %

conversion price of the CD1 is $ 0.219

and CD2 is $ 0.212 as of December 31, 2022

project risk rate of 13.0 % was used for all scenarios of the RCD fair value computations

The valuation of the RCD is driven by the aggregation of (i) the present

value of future potential cash flow to the royalty holder, in the event that the RCD is converted to a royalty, utilizing an estimate

of future metal sales and Monte Carlo simulations of future metal prices, and (ii) the computation of the present value assuming no conversion

to the 1.85 % gross revenue royalty.

The valuation of (i) is compared to the valuation of (ii) for each simulation, with the higher value

used in the aggregation to arrive at the fair value of the RCD.

This results in an implied probability of the RCD being converted to the

royalty, in the event that the Stream is advanced.

Based on this methodology, as of December 31.

2022, the implied probability of the

RCD being converted to a 1.85 % royalty, in the event that the Stream is advanced, was 98 %.

Credit spread, Risk-free rate, and Risk-adjusted

rate shown for the RCD are applicable to the scenario where the Stream is not advanced.

There are immaterial differences in these inputs

for the scenario where the Stream is advanced.

As of December 31, 2022 these were 6.71 %, 4.36 %, and 17.55 % respectively for the Scenario

where the Stream is advanced

Hill Mining Corp.

to Consolidated Financial Statements

Ended December 31, 2021, Six Months Ended December 31, 2020 and Year Ended June 30, 2020

Ended December 31, 2022 and December 31, 2021

in United States Dollars)

On May 12, 2020, the Company issued a promissory note in the amount of $ 141,704 (C$ 200,000 ), net of $ 35,676 of debt issue costs.

note bore no interest and was due on demand after 90 days after the issue date.

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

settled the promissory note in full by issuing 714,285 common shares (see note 10).

As a result, the Company recorded a loss on debt

settlement of $ 291,203 on the consolidated statements of loss and comprehensive loss.

Accretion expense for the six months ended December

31, 2020 was $ 19,129 (year ended June 30, 2020 - $ 16,547 ) based on an effective interest rate of 8 %.

On June 30, 2020, the Company issued a promissory note in the amount of $ 75,000 , net of $ 15,000 of debt issue costs.

The note bore no

interest and was due on demand.

This promissory note was repaid in full during the six months ended December 31, 2020.

Financing cost

for the six months ended December 31, 2020 was $ nil (year ended June 30, 2020 - $ 15,000 ).

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

The note bore no interest

and was due on demand.

This promissory note was repaid in full during the six months ended December 31, 2020.

Financing cost for the

six months ended December 31, 2020 was $ nil (year ended June 30, 2020 - $ 15,000 ).

On July 13, 2020, the Company issued a promissory note in the amount of $ 1,200,000 , net of $ 360,000 debt issue costs.

The note bore no

interest and was due on August 31, 2020.

This promissory note was repaid in full during the six months ended December 31, 2020.

cost for the six months ended December 31, 2020 was $ 360,000 (year ended June 30, 2020 - $ nil ).

On 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 the earlier of March

however, the note holder agreed

to accept $ 500,000

payment by April 15, 2022, and the remaining

principal and interest was deferred to June 20, 2022.

See Note 16 Subsequent Events concerning a financing anticipated to close on March

The Company purchased a land parcel

for approximately $ 200,000

subsequent to December 31, 2021,

which may be used as security for the promissory note.

Interest expense for the year ended December 31, 2021 was $ 102,740 ,

which is reflected in Interest payable on the Company’s balance sheet at December 31, 2021.

Project Finance Package

December 20, 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

(collectively, the “Stream”).

to settlement of definitive documentation with SRSR, the $ 8,000,000

was advanced under the Royalty Convertible Debenture

in January 2022.

These proceeds funded the purchase of the Bunker Hill Mine and near-term working capital requirements, including a $ 2,000,000

payment to the EPA in January 2022.

Convertible Debenture will initially bear interest at an annual rate of 9.0 %,

payable in cash or shares at the Company’s option, until such time that SRSR elects to convert it into a Royalty, with such conversion

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

In the event of conversion, the Royalty Convertible Debenture

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.

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

Convertible Debenture will initially be secured by a share pledge of the Company’s operating subsidiary, until such time that a

full security package is put in place.

In the event of non-conversion, the principal of the Royalty Convertible Debenture will be repayable

to settlement of definitive documentation with SRSR and other investors, the $ 5,000,000

was increased to $ 6,000,000 ,

and was advanced under the Convertible Debenture, also in January 2022.

These proceeds will fund capital expenditures and working capital

requirements in Q1 2022.

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

payable in cash or shares at the Company’s option, and a maturity of 18 months from the closing of the Royalty Convertible Debenture.

Until the closing of the Stream, the Convertible Debenture is convertible into shares of the Company at a share price of CAD 0.30

Alternatively, SRSR may elect to retire

the Convertible Debenture with the cash proceeds of the Stream.

The Company may elect to re-pay the Convertible Debenture early;

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

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.

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 for availability of the Stream have been satisfied.

Assuming the maximum funding of $37,000,000

is drawn, 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.

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

resulting fair values of the CD1, RCD, and CD2 at the issuance dates, and as of December 31, 2022, were

of Fair Value Derivative Liability

Issuance date CD1 RCD, CD2

total loss on fair value of debentures recognized during the year ended December 31, 2022 and December 31, 2021, was $ 1,140,537

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 year ended December 31, 2022 and December 31, 2021, the Company recognized $ 253,875

respectively, within other comprehensive income.

Interest expense for the years ended December 31, 2022 and 2021 was $ 2,092,065 and $ nil respectively.

31, 2022 interest of $ 691,890 ($ nil at December 31, 2021) is included in interest payable on the consolidated balance sheets.

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

Loan Facility

December 6, 2022, the Company closed a new $ 5,000,000

loan facility with Sprott (the “Bridge Loan”).

The Bridge Loan is secured by the same security package that is in place

with respect to the RCD, CD1, and CD2.

Bridge Loan bears interest at a rate of 10.5% per annum and matures at the earlier of (i) the advance of the Stream, or (ii) June

In addition, the minimum quantity of metal delivered under the Stream, if advanced, would increase by 5 %

relative to amounts previously announced.

Interest expense for the years ended December 31, 2022 and 2021 was $ 70,404 and $ nil respectively.

At December 31,

2022 interest of $ 53,985 ($ nil at December 31, 2021) is included in interest payable on the consolidated balance sheets.

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 December 31, 2022, the Stream had not been advanced.

Hill Mining Corp.

to Consolidated Financial Statements

Ended December 31, 2021, Six Months Ended December 31, 2020 and Year Ended June 30, 2020

Ended December 31, 2022 and December 31, 2021

in United States Dollars)

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.

Royalty Convertible Debenture and Convertible Debenture closed subsequent to the end of the year.

See Note 16 Subsequent

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 .

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.

Other Interest

During the year ended December 31, 2022 and December

the Company recognized $ 72,304 and $ nil respectively of other interest expense.

Lease liability

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

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

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

1 unchanged sentence

Schedule of Operating Lease Liability

Balance, December 31, 2019

Interest expense

Lease payments

Foreign exchange gain

Balance, December 31, 2020

Interest expense

Lease payments

Foreign exchange loss

December 31, 2020

exchange loss

Balance, December

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.

exchange loss

December 31, 2022

Capital stock, warrants and stock options

total authorized capital is as follows:

1,500,000,000

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

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

July 19, 2019, the Company amended its articles of incorporation to change the total authorized capital and the par values, which have

been retrospectively applied in these consolidated financial statements.

Hill Mining Corp.

to Consolidated Financial Statements

Ended December 31, 2021, Six Months Ended December 31, 2020 and Year Ended June 30, 2020

in United States Dollars)

and outstanding

February 26, 2020, the Company closed a non-brokered private placement, issuing 2,991,073 common shares of the Company at C$ 0.56 per

common share for gross proceeds of C$ 1,675,000 ($ 1,256,854 ) and incurring financing costs of $ 95,763 , and issuing 239,284 broker warrants.

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

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

loan facility (see note 7).

May 12, 2020, the Company closed a non-brokered private placement, issuing 107,143 common shares of the Company at C$ 0.56 per common

share for gross proceeds of C$ 60,000 ($ 44,671 ).

August 14, 2020, the Company closed the first tranche of a brokered private placement of units of the Company (the “August 2020

Offering”), issuing 35,212,142 units of the Company (“August 2020 Units”) at C$ 0.35 per August 2020 Unit for gross

proceeds of $ 9,301,321 (C$ 12,324,250 ).

Each August 2020 Unit consisted of one common share of the Company and one common share purchase

warrant of the Company (each, an “August 2020 Warrant”), which entitles the holder to acquire a common share of the Company

at C$ 0.50 per common share until August 31, 2023.

In connection with the first tranche of the August 2020 Offering, the Company incurred

share issuance costs of $ 709,488 (C$ 849,978 ) and issued 2,112,729 compensation options (the “August 2020 Compensation Options”).

Each August 2020 Compensation Option is exercisable into one August 2020 Unit at an exercise price of C$ 0.35 until August 31, 2023.

August 25, 2020, the Company closed the second tranche of the August 2020 Offering, issuing 20,866,292 August 2020 Units at C$ 0.35 per

August 2020 Unit for gross proceeds of $ 5,510,736 (C$ 7,303,202 ).

In connection with the second tranche of the August 2020 Offering, the

Company incurred share issuance costs of $ 237,668 (C$ 314,512 ) and issued 1,127,178 August 2020 Compensation Options.

the August 2020 Offering, the fair value of warrants, which are treated as a liability and fair value accounted for, were greater than

gross proceeds.

As a result, a loss of $ 940,290 has been recognized in the consolidated statements of loss and $ 947,156 of total share

issue costs were also expensed.

Company also issued 2,205,714 August 2020 Units to settle $ 177,353 of accounts payable, $ 55,676 of accrued liabilities, $ 28,300 of interest

payable, and $ 344,185 of promissory notes payable at a deemed price of $ 0.67 based on the fair value of the units issued.

the Company recorded a loss on debt settlement of $ 899,237 .

October 9, 2020, the Company issued 5,572,980 common shares at a deemed price of C$ 0.49 based on the fair value of the common shares

issued to settle $ 1,600,000 of convertible loan payable and $ 500,000 of interest payable.

As a result, the Company recorded a gain on

debt settlement of $ 23,376 .

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

11 unchanged sentences

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

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 consolidated statement of operations and comprehensive loss as a gain or loss

and is estimated using the Binomial model.

fair value of the warrant liabilities related to the various tranches of warrants issued during the period were estimated using the Binomial

model to determine the fair value using the following assumptions on the day of issuance and as at December 31, 2021:

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 $ 9,384,622 (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).

Hill Mining Corp.

to Consolidated Financial Statements

Ended December 31, 2021, Six Months Ended December 31, 2020 and Year Ended June 30, 2020

Ended December 31, 2022 and December 31, 2021

in United States Dollars)

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

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.

In 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.

In April 2022, the Company issued 768,750 shares in

connection with the settlement of RSU’s.

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 C$ 0.37 until May 13, 2025.

June 2022, the Company issued 1,218,000 units to contractors for bonuses 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,

In June 2022, the Company issued 165,000 shares in

connection with the settlement of RSU’s.

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 ended June 30, 2022.

In September 2022, the Company issued 33,000 common

shares in connection with the settlement of RSU’s.

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 ended September 30, 2022.

November 2022, the Company issued 1,599,150 common shares in connection with settlement of RSU’s.

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

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 consolidated statement of operations and comprehensive

loss as a gain or loss in the change in derivative liability line

item and is estimated using the Binomial model.

Hill Mining Corp.

to Consolidated Financial Statements

Ended December 31, 2022 and December 31, 2021

in United States Dollars)

fair value of the warrant liabilities related to the various tranches of warrants issued during the period were estimated using the Binomial

model to determine the fair value using the following assumptions on the day of issuance and as at December 31, 2022 and December 31, 2021:

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

February 2021 issuance

February 9 and 16

December 31, 2021

Expected life

Risk free interest rate

Dividend yield

$ 0.27 and $ 0.29

Change in derivative liability

2022 special warrants issuance

free interest rate

in derivative liability

$ ( 3,541,128 )

2022 non-brokered issuance

free interest rate

in derivative liability

2022 Teck issuance

free interest rate

in derivative liability

$ ( 588,535 )

2022 issuance

free interest rate

in derivative liability

2021 issuance

free interest rate

in derivative liability

$ ( 2,147,756 )

warrant liabilities as a result of the August 2018, November 2018, June 2019, August 2019, and August 2020 private placements were revalued

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

August 2020 issuance

December 31, 2020

December 31, 2021

Expected life

Risk free interest rate

Dividend yield

Change in derivative liability

$ ( 7,703,052 )

August 2018 issuance

December 31, 2020

December 31, 2021

Expected life

Risk free interest rate

Dividend yield

Change in derivative liability

November 2018 issuance

December 31, 2020

December 31, 2021

Expected life

Risk free interest rate

Dividend yield

Change in derivative liability

June 2019 issuance (i)

December 31, 2020

December 31, 2021

Expected life

Risk free interest rate

Dividend yield

Change in derivative liability

2020 issuance

free interest rate

in derivative liability

$ ( 5,886,466 )

(i) 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.

Hill Mining Corp.

to Consolidated Financial Statements

Ended December 31, 2021, Six Months Ended December 31, 2020 and Year Ended June 30, 2020

Ended December 31, 2022 and December 31, 2021

in United States Dollars)

August 2019 issuance (ii)

December 31, 2020

December 31, 2021

Expected life

213 - 1,826 days

Risk free interest rate

Dividend yield

Change in derivative liability

2019 issuance (i)

free interest rate

in derivative liability

$ ( 1,341,756 )

(i) 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

31, 2025 for 11,660,000

2019 issuance (ii)

free interest rate

in derivative liability

$ ( 2,062,116 )

(ii) During the six

3 unchanged sentences

Schedule of Warrant Activity

exercise price

Balance, June 30, 2019

Exercised (i)

( 2,332,900 )

Balance, June 30, 2020

Balance, December 31, 2020

December 31, 2020

( 4,359,174 )

Balance, December 31, 2021

(i) During the year

ended June 30, 2020, 2,332,900 warrants were exercised at C$ 0.25 per warrant for gross proceeds of C$ 583,225 ($ 417,006 ).

In conjunction

with the exercise of warrants, the Company recognized a change in derivative liability of $ 871,710 .

(ii) During the six

months ended December 31, 2020, the Company amended the exercise price to C$ 0.59 per share and extended the expiry date to December 31,

2025 for 3,315,200 finder’s warrants.

As a result, the Company recognized stock-based compensation of $ 210,839 , which is included

in operation and administration expenses on the consolidated statements of loss and comprehensive loss.

December 31, 2021

December 31, 2022

the year ended December 31, 2022, 239,284 February 2020 broker warrants expired.

December 31, 2022, the following warrants were outstanding:

Schedule of Warrants Outstanding Exercise Price

February 26, 2022

August 31, 2023

December 31, 2025

February 9, 2026

February 16, 2026

the year ended December 31, 2021, 160,408 August 2018 warrants expired, 2,752,900 August 2019 warrants expired, 645,866 November 2018

warrants expired, 400,000 November 2019 warrants expired, and 400,000 April 2020 loan extension warrants expired.

Hill Mining Corp.

to Consolidated Financial Statements

Ended December 31, 2021, Six Months Ended December 31, 2020 and Year Ended June 30, 2020

Ended December 31, 2022 and December 31, 2021

in United States Dollars)

December 31, 2021, the following broker options were outstanding:

Schedule of Broker Options

exercise price

Balance, June 30, 2020

Issued - August 2020 Compensation Options

Balance, December 31, 2020

Issued – February 2021 Compensation Options

Balance, December 31, 2021

(i) The grant date

fair value of the August 2020 and February 2021 Compensation Options were estimated at $ 521,993 and $ 68,078 , respectively, using the

Black-Scholes valuation model with the following underlying assumptions:

December 31, 2022, the following compensation options were outstanding:

of Compensation Options

- August 2020 Compensation Options

December 31, 2020

– February 2021 Compensation Options

December 31, 2021

– April 2022 Compensation Options

December 31, 2022

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

interest rate

Dividend yield

free interest rate

February 2021

Schedule of Warrants Outstanding Broker Option Exercise Prices

broker options

Fair value ($)

August 31, 2023 (i)

February 16, 2024 (ii)

April 1, 2022

Schedule of Broker Exercise Prices

16, 2024 (ii)

1, 2024 (iii)

(i) Exercisable into

2 unchanged sentences

one February 2021 Unit

following table summarizes the stock option activity during the year ended December 31, 2021, the six months ended December 31, 2020

and the year ended June 30, 2020:

Schedule of Stock Options

exercise price

stock options

Balance, June 30, 2019

Granted (i)(ii)

Balance, June 30, 2020

Granted (iii)(iv)

Balance, December 31, 2020

Balance, December 31, 2021

(i) On October 24,

2019, 1,575,000 stock options were issued to directors and officers of the Company.

These options have a 5 -year life and are exercisable

at C$ 0.60 per share.

The grant date fair value of the stock options was estimated at $ 435,069 .

The vesting of these options resulted

in stock-based compensation of $ 50,909 for the year ended December 31, 2021, $ 74,949 for the six months ended December 31, 2020 and $ 309,211

for the year ended June 30, 2020, which is included in operation and administration expenses on the consolidated statements of loss and

comprehensive loss.

(iii) Exercisable into

one April 2022 Unit

Hill Mining Corp.

to Consolidated Financial Statements

Ended December 31, 2021, Six Months Ended December 31, 2020 and Year Ended June 30, 2020

Ended December 31, 2022 and December 31, 2021

in United States Dollars)

(ii) On April 20, 2020,

5,957,659 stock options were issued to certain directors of the Company.

Each stock option entitles the holder to acquire one common

share of the Company at an exercise price of C$ 0.55 .

The stock options vest in one fourth increments upon each anniversary of the grant

date and expire in 5 years.

The grant date fair value of the stock options was estimated at $ 1,536,764 .

The vesting of these options

results in stock-based compensation of $ 531,925 for the year ended December 31, 2021, $ 403,456 for the six months ended December 31,

2020 and $ 162,855 for the year ended June 30, 2020, which is included in operation and administration expenses on the consolidated statements

of loss and comprehensive loss.

(iii) On September 30,

2020, 200,000 stock options were issued to a consultant.

Each stock option entitles the holder to acquire one common share of the Company

at an exercise price of C$ 0.60 .

The stock options vest 50 % at 6 months and 50 % at 12 months from the grant date and expire in 3 years.

The grant date fair value of the options was estimated at $ 52,909 .

The vesting of these options resulted in stock-based compensation

of $ 32,651 for the year ended December 31, 2021, $ 20,259 for the six months ended December 31, 2020, and $ nil for the year ended June

30, 2020, which is included in operation and administration expenses on the consolidated statements of loss and comprehensive loss.

(iv) On October 30,

2020, 235,000 stock options were issued to a former director.

Each stock option entitles the holder to acquire one common share of the

Company at an exercise price of C$ 0.50 .

The stock options vested immediately and expire on December 31, 2022 .

The grant date fair value

of the options was estimated at $ 46,277 .

The vesting of these options resulted in stock-based compensation of $ 46,277 for the six months

ended December 31, 2020, which is included in operation and administration expenses on the consolidated statements of loss and comprehensive

February 19, 2021, 1,037,977

options were issued to an officer of the Company, of which 273,271

options vested immediately and the balance of 764,706

options vested on December 31, 2021.

These options have a 5 -year

life and are exercisable at C$ 0.335

common share.

following table summarizes the stock option activity during the years ended December 31, 2022 and 2021:

Schedule of Stock Options

December 31, 2020

December 31, 2021

November 25, 2022

December 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.

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

The vesting of these options resulted in stock-based

compensation of $ nil for the year ended December 31, 2022 ($ 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).

August 24, 2022, 300,000 stock options were issued to an employee of the Company, of which

150,000 vested immediately and the remaining balance of outstanding options to vest equally

over the next two anniversaries of the grant date.

These options have a 5 -year life and are

exercisable at C$ 0.15 per common share.

The grant fair value of the options was estimated

at $ 28,930 .

The vesting of these options resulted in stock-based compensation of $ 15,594

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).

for the year ended December 31, 2022, which is included in the operation and administration

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

November 23, 2022, 400,000 stock options were issued to an employee of the Company, of which 200,000 vested immediately and the remaining

balance of outstanding options to vest equally over the next two anniversaries of the grant date.

These options have a 5 -year life

and are exercisable at C$ 0.15 per common share.

The grant fair value of the options was estimated at $ 37,387 .

The vesting of these

options resulted in stock-based compensation of $ 20,191 for the year ended December 31, 2022, which is included in the operation

and administration expense of 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

1 unchanged sentence

Schedule of Estimated Using Black-Scholes Valuation Model for Fair value of Stock Options

Risk free interest rate

Dividend yield

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

Schedule of Stock Option Issued and Outstanding

Weighted average

of Actual Stock Options Issued and Outstanding

(exercisable)

fair value ($)

Hill Mining Corp.

to Consolidated Financial Statements

Ended December 31, 2021, Six Months Ended December 31, 2020 and Year Ended June 30, 2020

Ended December 31, 2022 and December 31, 2021

in United States Dollars)

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

Year ended December 31,

income (loss) for the period

( 6,402,277 )

income (loss) per share Weighted average number of common shares - basic

income (loss) per share – basic

income (loss) for the period

( 6,402,277 )

effect of convertible debentures

effect of warrants on net income

net income (loss) for the period

( 6,402,277 )

Diluted income (loss)

Weighted average

number of common shares - basic

Stock options and RSUs

average number of common shares - fully diluted

income (loss) per share - fully diluted

Restricted share units

1 unchanged sentence

key employees and consultants.

following table summarizes the RSU activity during the year ended December 31, 2021, the six months ended December 31, 2020, and the

year ended June 30, 2020:

following table summarizes the RSU activity during the year ended December 31, 2022:

Schedule of Restricted Share Units

Unvested as at June 30, 2019

Granted (i)(ii)

Unvested as at June 30, 2020

Granted (iii)(iv)

Unvested as at December 31, 2020

as at December 31, 2020

( 1,516,299 )

Unvested as at December 31, 2021

(i) 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 $ 71,829 for the year ended December 31, 2021, $ 55,135

for the six months ended December 31, 2020, and $ 23,073 for the year ended June 30, which is included in operation and administration

expenses on the consolidated statements of loss and comprehensive loss.

(ii) 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 $ 24,659 for the year ended December 31, 2021, $ 18,703

for the six months ended December 31, 2020, and $ 7,217 for the year ended June 30, 2020, which is included in operation and administration

expenses on the consolidated statements of loss and comprehensive loss.

(iii) 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 $ 30,510 for the year ended December 31, 2021, and

$ 3,998 for the six months ended December 31, 2020, which is included in operation and administration expenses on the consolidated statements

of loss and comprehensive loss.

(iv) 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 $ 58,740 for the year ended December 31, 2021, and $ 29,304 for the six months ended

December 31, 2020, which is included in operation and administration expenses on the consolidated statements of loss and comprehensive

January 1, 2021, the Company granted 735,383

RSUs to a consultant of the Company.

RSUs vested immediately with the remaining RSUs vesting in one twelfth increments per month.

During the year ended 2021, a total of 490,258

RSUs vested, and in July 2021, the consultant forfeited the remaining 245,125

unvested RSUs, resulting in a reversal of share-based compensation of $ 64,870 .

The vesting of these RSUs resulted in stock-based

compensation of $ 199,542

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

loss and comprehensive loss.

as at December 31, 2021

( 2,373,900 )

as at December 31, 2022

Hill Mining Corp.

to Consolidated Financial Statements

Ended December 31, 2021, Six Months Ended December 31, 2020 and Year Ended June 30, 2020

Ended December 31, 2022 and December 31, 2021

in United States Dollars)

(vi) 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 $ 4,026 for the year ended December 31, 2021, which is included in operation and administration expenses on the consolidated

statements of loss and comprehensive loss.

(vii) 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 $ 100,022 for the year ended December 31, 2021, which is included in operation and administration expenses on the consolidated

statements of loss and comprehensive loss.

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

245,128 RSUs vested immediately with the remaining

RSUs vesting in one twelfth increments per month.

During the year ended 2021, a total of 490,258 RSUs vested, and in July 2021, the consultant

forfeited the remaining 245,125 unvested RSUs, resulting in a reversal of share-based compensation of $ 64,870 .

The vesting of these RSUs

resulted in stock-based compensation of $ nil for the year ended December 31, 2022 and $ 199,542 for the year ended December 31, 2021,

which is included in operation and administration expenses on the consolidated statements of loss and comprehensive loss.

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

The vesting of these RSUs resulted

in stock-based compensation of $ nil for the year ended December 31, 2022 and $ 4,026 for the year ended December 31, 2021, which is included

in operation and administration expenses on the consolidated statements of loss and comprehensive loss.

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

The vesting of these RSUs resulted

in stock-based compensation of $ nil for the year ended December 31, 2022 and $ 100,022 for the year ended December 31, 2021, which is

included in operation and administration expenses on the consolidated statements of loss and comprehensive loss.

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

The vesting of these RSUs

resulted in stock-based compensation of $ 122,249 for the year ended December 31, 2022, which is included in operation and administration

expenses on the 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, vested immediately.

The vesting of these RSUs

resulted in stock-based compensation of $ 16,800 for the year ended December, 2022, which is included in operation and administration

expenses on the 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, vested immediately.

The vesting of these RSUs resulted

in stock-based compensation of $ 2,328 for the year ended December 31, 2022, which is included in operation and administration expenses

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

On September 29, 2022 the Company granted 33,000 RSUs to two consultants of the Company, vested immediately.

The vesting of these RSUs

resulted in stock-based compensation of $ 2,889 for the year ended December 31, 2022, which is included in operation and administration

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

On October 31, 2022 the Company granted 1,599,150 RSUs to two consultants of the Company, vested immediately.

The vesting of these RSUs

resulted in stock-based compensation of $ 111,304 for the year ended December 31, 2022, which is included in operation and administration

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

On November 17, 2022 the Company granted 4,396,741 RSUs to certain key management of the Company.

The RSUs vest in one third increments

upon each anniversary of the grant date.

The vesting of these RSUs resulted in stock-based compensation of $ 79,504 for the year ended

December 31, 2022, which is included in operation and administration expenses on the consolidated statements of loss and comprehensive

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 Consolidated Financial Statements

Ended December 31, 2022 and December 31, 2021

in United States Dollars)

following table summarizes the DSU activity during the years ended December 31, 2022 and 2021:

Schedule of Deferred Share Units

Unvested as at June 30, 2019

as at December 31, 2020

( 1,875,000 )

Unvested as at June 30, 2020 and December 31, 2020

as at December 31, 2021

( 3,125,000 )

Unvested as at December 31, 2021

(i) On 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 year ended December

31, 2021, the Company recognized $ 421,284 stock-based compensation related to the DSUs (six

months ended December 31, 2020 - $ 560,461 and the year ended June 30, 2020 - $ 549,664 ), which

is included in operation and administration expenses on the consolidated statements of loss

and comprehensive loss.

The fair value at December 31, 2021 was $ 1,531,409

Commitments and contingencies

stipulated by the agreements with Placer Mining as described in note 6, the Company is required to make a monthly payment of $ 60,000

for care and maintenance for the mine, up

to the date of acquisition.

stipulated in the agreement with the EPA and as described in Note 6, the Company is required to make two types of payments to

the EPA, one for cost-recovery, and the other for water treatment.

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 December 31, 2022

payable to the EPA has been included in accounts

payable and accrued liabilities (December 31, 2020 - $ 11,298,594

and June 30, 2021 – $ 7,915,235 ,

respectively).

An amended agreement has been signed

to modify the payment amounts and terms to settle amounts outstanding under the original agreement.

Company has entered into a lease agreement which expires in May 2022 .

Monthly rental expenses are approximately C$ 26,000 and are offset

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

Hill Mining Corp.

to Consolidated Financial Statements

Ended December 31, 2021, Six Months Ended December 31, 2020 and Year Ended June 30, 2020

in United States Dollars)

or about June 14, 2021, a lawsuit was filed in the US District Court for the District of Idaho brought by a purported personal representative

of the estate of a minority shareholder of Placer Mining.

The named defendants include Placer Mining, certain of Placer Mining’s

shareholders, the Company, and certain of the Company’s shareholders.

The lawsuit alleges that Placer Mining entered into a series

of transactions, including amendments to the Company’s lease with Placer Mining, in breach of an agreement dated August 31, 2018,

which allegedly restricted the sale of shares in Placer Mining by certain shareholders.

On August 13, 2021, the Company filed a motion

to dismiss the claim for lack of jurisdiction and standing.

On September 3, 2021, the plaintiff responded to the motion to dismiss and

agreed that Placer Mining should be dismissed for lack of jurisdiction.

The Company, as well as other named defendants, filed replies

in support of the motions to dismiss and argued that Placer Mining is an indispensable party and with dismissal of Placer Mining the

lawsuit should be dismissed.

The US District Court has not ruled on the motions to dismiss but the Company believes the motion to dismiss

will be granted and the lawsuit dismissed.

On July 28, 2021, a lawsuit was filed in the US

District Court for the District of Idaho brought by Crescent Mining, LLC (“Crescent”).

The named defendants include Placer

Mining, Robert Hopper Jr., and the Company.

The lawsuit alleges that Placer Mining and Robert Hopper Jr.

intentionally flooded the Crescent

Mine during the period from 1991 and 1994, and that the Company is jointly and severally liable with the other defendants for unspecified

past and future costs associated with the presence of acid mine drainage (“AMD”) in the Crescent Mine.

The plaintiff has

requested unspecified damages.

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.

On July 1, 2022 the Company granted 210,000 DSU’s, these DSU’s vest after 12 months of the issuance

During the year ended December 31, 2022, and 2021 the Company recognized recovery of $ 282,967 and expense of $ 421,284 , respectively,

in stock-based compensation related to the DSUs, which is included in operation and administration expenses on the consolidated statements

of income (loss) and comprehensive income (loss), as DSU’s were settled in cash during the year ended December 31, 2022.

redemption of the 2,500,000 DSUs (see (iii)) the fair value of the remaining DSU liability at December, 2022 was $ 573,742 .

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

the year ended December 31, 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.

The DSU’s were therefore all accelerated to vest.

Commitments and contingencies

stipulated in the agreement with the EPA and as described in Note 7, the Company is required to make two types of payments to the EPA

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 to the IDEQ.

(as done formerly by 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”).

The named defendants include Placer Mining, Robert Hopper Jr., and the Company.

The lawsuit alleges that Placer Mining and Robert Hopper

intentionally flooded the Crescent Mine during the period from 1991 and 1994, and that the Company is jointly and severally liable

with the other defendants for unspecified past and future costs associated with the presence of AMD in the Crescent Mine.

The plaintiff

has requested unspecified damages.

On September 20, 2021, the Company filed a motion to dismiss Crescent’s claims against it, contending

6 unchanged sentences

were dismissed without prejudice.

The court demined the motion to dismiss filed by Placer Mining Corp.

The court denied the motion to dismiss filed by Placer Mining Corp.

for Crescent’s trespass,

nuisance and negligence claims.

If Crescent seeks to amend its complaint, it must do so within 30 days of the court’s judgement

on March 2, 2022.

The Company believes Crescent Mining LLC’s lawsuit against Placer Mining Corp.

is 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 Bunker Hill Mine on December 15, 2021.

Company believes the claims in both lawsuits, as they relate to Bunker Hill, are without merit and intends to defend them vigorously.

at December 31, 2021, December 31, 2020, and June 30, 2020, the Company had no accrued interest and penalties related to uncertain tax

The income tax provision differs from the amount of income tax determined by applying the U.S.

federal tax rate of 21.0 %

(December 31, 2020 – 21.0%)

pretax loss from operations for the periods ended December 31, 2021 and December 31, 2020 and year ended June 30, 2020 due to the following:

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

Placer Mining Corp.

and Bunker Hill Mining

Corp are named as co-defendants.

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 Crescent’s lawsuit is without merit

and intends to vigorously defend itself, as well as Placer Mining Corp.

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.

Hill Mining Corp.

to Consolidated Financial Statements

Ended December 31, 2022 and December 31, 2021

in United States Dollars)

at December 31, 2022, and December 31, 2021, the Company had no accrued interest and penalties related to uncertain tax positions.

income tax provision differs from the amount of income tax determined by applying the U.S.

federal tax rate of 21.0 % (December 31, 2021

– 21.0 %) to pretax loss from operations for the periods ended December 31, 2022 and December 31, 2021:

Schedule of Income Tax Provision

(loss) before income taxes

Expected income tax recovery

$ ( 6,402,277 )

income tax recovery

( 1,344,478 )

Change in estimates in respect of prior periods

Change in tax rate

Change in fair value of derivative liability

State and local taxes, net of federal benefit

Share issuance costs

Stock based compensation

Loss on loan extinguishment

Change in valuation allowance

in estimates in respect of prior periods

in fair value of derivative liability

( 3,296,242 )

( 2,583,095 )

and local taxes, net of federal benefit

in valuation allowance

tax assets and the valuation account are as follows:

Schedule of Deferred Tax Assets

Deferred tax asset:

Net operating loss carry forwards

Mineral interest purchase option

Other deferred tax assets

Valuation allowance

( 17,886,174 )

operating loss carryforwards

interest purchase option

deferred tax assets

( 21,602,677 )

( 17,886,174 )

Unrealized foreign exchange loss

Hill Mining Corp.

to Consolidated Financial Statements

Ended December 31, 2021, Six Months Ended December 31, 2020 and Year Ended June 30, 2020

in United States Dollars)

Schedule of Components of Deferred Tax Assets and Liabilities

operating loss carryforwards

tax liabilities:

foreign exchange gain

deferred tax asset

Net operating loss carryforwards

Lease liabilities

Deferred tax liabilities:

Unrealized foreign exchange gain

Right of use assets and lease obligations

Net deferred tax asset

potential income tax benefit of these losses has been offset by a full valuation allowance.

of December 31, 2021, December 31, 2020 and June 30, 2020, the Company has an unused net operating loss carryforward balance of $ 26,356,908 ,

and $ 19,775,710 ,

of December 31, 2022 and December 31, 2021, the Company has an unused net operating loss carryforward balance of $ 40,227,950 , and $ 26,356,908 ,

respectively, that is available to offset future taxable income.

net operating loss carryforwards generated before 2018 expire between 2031 and 2037.

The losses generated in 2018 and later tax years

do not expire.

The net operating loss carryforwards generated before 2018 expire between

2031 and 2037.

The losses generated in 2018 and later tax years do not expire.

Company did not have any tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly

increase or decrease within the next 12 months.

tax years that remain subject to examination by major taxing jurisdictions are those for the year ended December 31, 2021, period

ended December 31, 2020 and years ended June 30, 2020, 2019, 2018, 2017, 2016, 2015, and 2014.

tax years that remain subject to examination by major taxing jurisdictions are those for the years ended December 31, 2022 and December

31, 2021 and years 2020, 2019, 2018, 2017, 2016, and 2015.

Hill Mining Corp.

to Consolidated Financial Statements

Ended December 31, 2022 and December 31, 2021

in United States Dollars)

Related party transactions

During the year ended December 31, 2021, John Ryan (Director and former CEO) billed $ nil (six months ended December 31, 2020 - $ 13,500 ,

year ended June 30, 2020 - $ 51,500 , respectively) for consulting services to the Company.

During the year ended December 31, 2021, Wayne Parsons (Director and former CFO) billed $ 120,127

(six months ended December 31, 2020 - $ 71,390 ,

year ended June 30, 2020 - $ 136,045 ,

respectively) for consulting services to the Company.

During the year ended December 31, 2021, Hugh Aird (former Director) billed $ nil (six months ended December 31, 2020 - $ 18,223 , year

ended June 30, 2020 - $ 9,774 , respectively) for consulting services to the Company.

During the year ended December 31, 2021, Richard Williams (Director and Executive Chairman) billed $ 179,605 (six

months ended December 31, 2020 - $ 78,201 ,

year ended June 30, 2020 - $ 134,927 ,

respectively) for consulting services to the Company.

Company’s key management personnel have the authority and responsibility for planning, directing and controlling the activities

of the Company and consists of the Company’s executive management team and management directors.

Schedule of Related Party Transactions

fees, wages and bonus

December 31, 2022 and December 31, 2021, $ 154,797 and $ 279,554 , respectively is owed to key management personnel with all amounts included

in accounts payable and accrued liabilities.

During the year ended December 31, 2022, Wayne Parsons (Director and former CFO) billed $ 147,287 (year ended December 31, 2021 - $ 120,127 )

for consulting services to the Company, in addition to 2,500,000 DSU’s which settled on June 30, 2022, at a value of $ 582,027 concurrent with his

departure from the Board of Directors.

During the year ended December 31, 2022, Richard Williams (Director and Executive Chairman) billed $ 372,084

(year ended December 31, 2021 - $ 179,605 )

for consulting services and bonus payment to the Company.

At December 31, 2022, $ 135,600

Williams (December 31, 2020 - $ 45,000

June 30, 2020 - $ 121,161 ,

respectively) with all amounts included in accounts payable and accrued liabilities.

the six months ended December 31, 2020, the Company issued 214,286 August 2020 Units at $ 0.67 to settle $ 56,925 of debt owed to Mr.

June 30, 2020, the Company issued a promissory note in the amount of $ 75,000 , net of $ 15,000 debt issue costs, to Mr.

The promissory

note has been repaid in full.

See Note 8(vii).

During the year ended December 31, 2021, the Company incurred $ 250,000 in payroll expense for Sam Ash (President and CEO) (six

months ended December 31, 2020 - $ 125,000 ,

year ended June 30, 2020 - $ 60,000 ,

respectively) for services to the Company.

At December 31, 2021, $ 62,500 is payable and included in accrued liabilities.

is owed to Richard Williams (December 31, 2021 - $ 108,719 )

for consulting services, with all amounts included in accounts payable and accrued liabilities.

the year ended December 31, 2022, 1,110,756 restricted share units (RSU’s) were issued to Richard Williams which will vest in one third

increments on March 31, 2023, March 31, 2024, and March 31, 2025.

The vesting of these RSU’s resulted in stock-based compensation

of $ 20,085 for the year ended December 31, 2022.

During the year ended December 31, 2022, the Company incurred $ 438,600

in payroll expense and bonus payment for Sam Ash (year ended December 31, 2021 - $ 250,000 )

for services to the Company.

At December 31, 2022, $ nil

(December 31, 2021 - $ 62,500 )

is payable and included in accrued liabilities.

the year ended December 31, 2022, 1,249,600 restricted share units (RSU’s) were issued to Sam Ash which will vest in one third

increments on March 31, 2023, March 31, 2024, and March 31, 2025.

The vesting of these RSU’s resulted in stock-based compensation

of $ 22,596 for the year ended December 31, 2022.

During the year ended December 31, 2022, Pam Saxton (Director) billed $ 36,133 (year ended December 31, 2021 - $ 37,669 ) for consulting

services to the Company.

During the year ended December 31, 2022, Cassandra Joseph (Director) billed $ 36,133 (year ended December 31, 2021 - $ 37,494 ) for consulting

services to the Company.

During the year ended December 31, 2022, Mark Cruise (Director) billed $ 15,774 (year ended December 31, 2021 - $0) for consulting services

to the Company.

On July 1, 2022, the Company issued 210,000 DSU’s to a Mark Cruise.

During the year ended December 31, 2022, the Company incurred $ 383,315

in payroll expense and bonus payment for David Wiens (CFO) (year ended December 31, 2021, $ 276,315 )

for services to the Company.

At December 31, 2022, $ 19,197

(year ended December 31, 2021 - $ 108,335 )

is payable, including reimbursable expenses, and included in accrued liabilities.

the year ended December 31, 2022, 1,018,193 restricted share units (RSU’s) were issued to David Wiens which will vest in one third

increments on March 31, 2023, March 31, 2024, and March 31, 2025.

The vesting of these RSU’s resulted in stock-based compensation

of $ 18,411 for the year ended December 31, 2022.

the year ended December 31, 2021, 1,037,977 stock options were issued to David Wiens, 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.

Hill Mining Corp.

to Consolidated Financial Statements

Ended December 31, 2021, Six Months Ended December 31, 2020 and Year Ended June 30, 2020

Ended December 31, 2022 and December 31, 2021

in United States Dollars)

the six months ended December 31, 2020, the Company issued 77,143 August 2020 Units at a deemed price of $ 0.67 to settle $ 20,000 of debt

During the year ended December 31, 2021, Pam Saxton (Director) billed $ 37,669

(six months ended December 31, 2020 - $ 7,000 ,

year ended June 30, 2020 - $nil) for consulting services to the Company.

During the year ended December 31, 2021, Cassandra Joseph (Director) billed $ 37,494 (six months ended December 31, 2020 - $ 11,290 , year

ended June 30, 2020 - $ nil ) for consulting services to the Company.

During the six months ended December 31, 2020, the Company issued 300,000 August 2020 Units at a deemed price of $ 0.67 to settle $ 77,696

(C$ 105,000 ) of debt owed to a shareholder of the Company.

(ix) During the year ended December 31, 2021,

the Company incurred $ 276,315 in payroll expense for David Wiens (CFO) (six months ended December 31, 2021, $nil, year ended June 30,

2020 - $nil) for services to the Company.

At December 31, 2021, $ 108,335 is payable, including reimbursable expenses, and included in accrued liabilities.

During the year ended December 31, 2021, 1,037,977

stock options were issued to Mr.

Wiens, 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.

Subsequent events

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.

Concurrently, definitive documentation and all closing conditions were met for the $ 8,000,000

Royalty Convertible Debenture.

The Royalty Convertible Debenture funds the purchase of the Bunker Hill Mine, a $ 2,000,000

payment to the EPA, and near-term

working capital requirements.

$ 8,000,000 Royalty Convertible Debenture will initially bear 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 to a royalty, with such conversion option expiring at the

earlier of advancement of the Stream or 18 months.

In the event of conversion, the Royalty Convertible Debenture 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.

rate will apply to claims outside of these areas.

The Royalty Convertible Debenture will initially be secured by a share pledge of

the Company’s operating subsidiary, Silver Valley, until such time that a full security package is put in place.

the event of non-conversion, the principal of the Royalty Convertible Debenture will be repayable in cash.

January 2022, the Company also closed the

$ 6,000,000 Convertible Debenture , which was increased from a previously-announced

$ 5,000,000 .

The Convertible Debenture funds 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.

The $ 6,000,000

Convertible Debenture will initially bear interest at an annual rate of 7.5 %,

payable in cash or shares at the Company’s option, and a maturity of 18 months from the closing of the Royalty Convertible Debenture.

Until the closing of the Stream, the Convertible Debenture 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 Convertible Debenture with the cash proceeds from the Stream.

The Company may elect to repay the Convertible

Debenture early;

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

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.

package comprises substantially all processing equipment of value located at the site, including complete crushing, grinding and flotation

circuits 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 .

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 , which is expected to close on March 31, 2022.

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).

Company has also granted to the Agents an option (the “Agents’ Option”) which shall allow the Agents to sell up to

an additional 15.0 % of the Special Warrants sold pursuant to the Offering at the Issue Price.

The Agent’s Option may be exercised

in whole or in part as determined by the Agents upon written notice to the Company at any time up to 48 hours prior to the Closing Date.

In consideration for their services, subject to the terms of the agreement with the Agents and adjustments in certain circumstances,

the Agents will receive a cash commission equal to 6.0 % of the gross proceeds of the Offering (including the Agents’ Option), and

shall be issued that number of compensation options (the “Compensation Options”) as is equal to 6.0 % of the number of Special

Warrants sold pursuant to the Offering (including the Agents’ Option).

Each Compensation Option shall be exercisable to acquire

one Unit at the Issue Price for a period of 24 months from the closing date of the Offering, subject to adjustment in certain 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.

February 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.

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.

of Prospectus Offering 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 C$ 9 million 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$ 6,196,047.26 .

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 C$ 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 C$ 211,461.38 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.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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What changed 10-K

Item 8. Financial Statements and Supplementary Data