What changed in this filing

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Item 1. Financial Statements

2023-08-14 compared with 2023-05-12 · 609 added, 421 removed, 464 unchanged (69% of the section changed)

7 unchanged sentences

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

statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2022, and all amendments thereto.

statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2022.

Hill Mining Corp.

16 unchanged sentences

Accrued liabilities

Current portion of lease liability (note 8)

Interest payable (note 7)

1 unchanged sentence

Deferred share units liability (note 10)

Derivative special warrant liability (note 8)

Promissory notes payable (note 7)

1 unchanged sentence

Non-current liabilities

Bridge loan (note 7)

Series 1 convertible debenture (note 7)

Series 2 convertible debenture (note 7)

Stream obligation (note 7)

Royalty convertible debenture (note 7)

Environment protection agency cost recovery liability, net of discount (note 6)

Derivative warrant liability (note 9)

Environmental protection agency cost recovery liability, net of discount (note 6)

Deferred tax liability (note 12)

Derivative warrant liabilities (note 8)

Total liabilities

5 unchanged sentences

Additional paid-in-capital (note 8)

Special warrants (note 9)

Accumulated other comprehensive income

8 unchanged sentences

Hill Mining Corp.

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

Interim Consolidated Statements of (Loss) Income and Comprehensive Income

in United States Dollars)

Three Months Ended

Six Months Ended

Operating expenses

2 unchanged sentences

Legal and accounting

Consulting and wages

Loss from operations

1 unchanged sentence

( 3,979,862 )

( 5,522,461 )

( 9,466,536 )

Other income or gain (expense or loss)

Change in derivative liability (note 9)

Gain on FV of convertible debentures (note 7)

Gain on modification of warrants (note 9)

Gain on foreign exchange

Loss on FV of debenture derivative

Interest income

Change in derivative liabilities (note 8)

( 13,246,561 )

( 9,019,987 )

Gain (loss) on foreign exchange

(Loss) gain on FV of debentures (note 7)

( 1,884,232 )

Gain on EPA settlement

Gain on debt settlement (note 5)

Gain on warrant settlement

Interest expense (note 7)

( 1,388,420 )

Financing costs (note 9)

( 2,713,049 )

( 1,117,607 )

Debenture finance costs

( 1,099,051 )

( 1,166,485 )

Finance costs (note 7, 8)

( 1,100,881 )

Loss on debt modification (note 7)

Loss on debt settlement (note 7)

Net income (loss) for the period

(Loss) income for the period pre tax

$ ( 13,349,041 )

Other comprehensive income (loss), net of tax

Gain on change in FV on own credit risk (note 7)

Other comprehensive income (loss)

Comprehensive income (loss)

$ ( 11,557,894 )

Deferred tax expense (note 12)

( 3,508,741 )

Net (loss) income for the period

$ ( 16,857,782 )

$ ( 15,066,635 )

Other comprehensive (loss) income, net of tax:

(loss) gain on change in FV on own credit risk

Other comprehensive income

Comprehensive (loss) income

$ ( 17,231,197 )

$ ( 14,633,038 )

Dilutive effect of convertible debentures

Dilutive effect of derivative warrant liabilities

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

$ ( 17,231,197 )

$ ( 14,633,038 )

Net income (loss) per common share – basic

7 unchanged sentences

Operating activities

Net income (loss) for the period

Net (loss) income for the period

$ ( 15,066,635 )

4 unchanged sentences

( 11,223,219 )

( 3,454,008 )

Gain on warrant extinguishment

Deferred tax expense (note 12)

Gain on warrant settlement

Units issued for services

3 unchanged sentences

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

Loss on debt modification

Loss on debt settlement

Amortization of EPA discount

(Gain) loss on fair value of derivatives

loss (gain) on fair value of debentures

( 1,739,987 )

Imputed interest expense on convertible debentures

Amortization of non-current liabilities

Gain on debt settlement

( 7,117,420 )

Gain on EPA debt settlement

( 8,614,103 )

Changes in operating assets and liabilities:

Accounts receivable and prepaid expenses

Prepaid finance costs

Accounts payable

1 unchanged sentence

Accrued EPA/IDEQ water treatment

Prepaid finance costs

Deposit on plant demobilization

( 1,000,000 )

EPA cost recovery payable

5 unchanged sentences

Investing activities

Deposit on plant

Land purchase

Bunker Hill mine purchase

Additions to Bunker Hill Mine and mining interests

( 5,524,322 )

Land purchase

Process plant

Mine improvements

Purchase of machinery and equipment

( 3,155,362 )

( 1,289,477 )

Purchase of equipment

Purchase of spare parts inventory

Net cash used in investing activities

( 3,729,493 )

( 7,518,361 )

Financing activities

Proceeds from stream obligation

Transaction costs stream obligation

Proceeds from convertible debentures

Proceeds from issuance of shares, net of issue costs

Proceeds from issuance of special warrants

1 unchanged sentence

Proceeds from promissory note

Proceeds from subscriptions received

Repayment of bridge loan

( 5,000,000 )

Repayment of promissory notes

( 1,000,000 )

Lease payments

1 unchanged sentence

Net change in cash

Cash, beginning of period

Cash, end of period

Cash and restricted cash, beginning of period

Cash and restricted cash, end of period

Supplemental disclosures

Cash interest paid

Non-cash activities

Accounts payable, accrued liabilities, and promissory notes settled with

special warrants issuance

Accounts payable, accrued liabilities, and promissory notes settled with special warrants issuance

Mill purchase for shares and warrants

Units issued to settle DSU/RSU/Bonuses

Interest payable settled with common shares

Reconciliation from Cash Flow Statement to Balance

Cash and restricted cash

end of period

Reconciliation from Cash Flow Statement to Balance Sheet:

Cash and restricted cash end of period

Less restricted cash

10 unchanged sentences

Stock-based compensation

Stock subscription received for units

Compensation options

Shares issued for interest payable

Shares issued for RSUs vested

Shares issued for warrant exercise

Special warrants

Gain on fair value from change in credit risk

Net income for the period

Balance, March 31, 2023

Shares issued for interest payable

Net income (loss) for the period

( 15,066,635 )

Balance, December 31, 2021

Balance, June 30, 2023

$ ( 86,659,194 )

$ ( 36,432,624 )

balance value

Balance, December 31, 2021

$ ( 72,491,150 )

1 unchanged sentence

Stock-based compensation

Compensation options

Shares issued for interest payable

Shares issued for RSUs vested

Non brokered shares issued for $ 0.30 CAD

Stock subscription received for units

Net loss for the period

( 2,880,886 )

Special warrant shares issued for $ 0.30 CAD

( 1,775,790 )

Net income (loss)

Contractor shares issued for $ 0.30 CAD

Shares issued for Mill purchase

Warrant valuation

( 6,246,848 )

Balance, March 31, 2022

Net income (loss) for the period

Net income (loss)

Balance, June 30, 2022

$ ( 63,317,255 )

$ ( 19,447,576 )

balance value

$ ( 63,317,255 )

3 unchanged sentences

to the Condensed Interim Consolidated Financial Statements (Unaudited)

Months Ended March 31, 2023

and Six Months Ended June 30, 2023

in United States Dollars)

Nature and Continuance of Operations and Going Concern

Nature and Continuance of Operations

Hill Mining Corp.

10 unchanged sentences

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

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

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

It continues to work at developing its project

with a view towards putting it into production.

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

The Company has incurred

losses since inception resulting in an accumulated deficit of $ 69,801,410

as at March 31, 2023 and further losses are anticipated in the development of its business.

The Company does not have sufficient

cash to fund normal operations and meet debt obligations for the next 12 months without deferring payment on certain current

liabilities and/or raising additional funds.

In order to continue to meet its fiscal obligations in the current fiscal year and

beyond, the Company must seek additional financing.

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

going concern.

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

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

normal business operations when they come due.

The accompanying condensed interim consolidated financial statements do not include

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

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

on the multi-metals stream transaction (see note 7).

These unaudited interim consolidated financial statements do not include any adjustments

relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might

be necessary in the event the Company cannot continue in existence.

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.

Significant Accounting Policies :

11 unchanged sentences

Management’s Discussion and Analysis, for the year ended December 31, 2022.

The interim results for the period ended March 31,

The interim results for the period ended June 30, 2023,

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

The unaudited interim condensed consolidated financial

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

The unaudited interim condensed consolidated financial statements

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

preparation of financial statements in conformity with accounting principles generally accepted in the United States requires

management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes for

items such as mineral reserves, useful lives and depreciation methods, potential impairment of long-lived assets, deferred income

taxes, settlement pricing of commodity sales, fair value of stock based compensation, accrued liabilities, estimation of asset

retirement obligations and reclamation liabilities, convertible debentures, and warrants.

Estimates are based on historical experience and various other assumptions that

the Company believes to be reasonable.

Actual results could differ from those estimates.

items such as mineral reserves, useful lives and depreciation methods, potential impairment of long-lived assets, sale of mineral

properties for the accounting of the conversion of the royalty convertible debenture (the “RCD”), deferred income taxes,

settlement pricing of commodity sales, fair value of stock based compensation, accrued liabilities, estimation of asset retirement

obligations and reclamation liabilities, convertible debentures, stream obligation, and warrants.

Estimates are based on historical

experience and various other assumptions that the Company believes to be reasonable.

Actual results could differ from those

Accounts receivable and prepaid expenses

receivable and prepaid expenses consists of the following:

Schedule of Accounts receivable and prepaid expenses

of Accounts receivable and prepaid expenses

Prepaid expenses and deposits

6 unchanged sentences

Equipment, net

total depreciation expense relating to equipment during the three months ended March 31, 2023 and March 31, 2022 was $ 44,692

and $ 54,015 ,

respectively.

Process Plant Purchase from Teck Resources Limited

On May 13, 2022, the Company completed purchase of

a comprehensive package of equipment and parts inventory from Teck Resources Limited (“Teck”).

total depreciation expense relating to equipment during the three and six months ended June 30, 2023, was $ 31,732 and $ 76,424 , respectively.

Compared to the three and six months ended June 30, 2022, was $ 38,692 and $ 77,091 , respectively.

On May 13, 2022, the Company completed the purchase of a package of equipment

and parts inventory from Teck Resources Limited’s (“Teck”) Pend Oreille operation.

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.

The purchase of the mill has been valued at:

Cash 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.

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

Fair value of the warrants issued together with the inputs, as determined by a binomial model, resulted in a fair value of $ 1,273,032 .

As a result, the total value of the mill at the time of purchase was determined to be $ 3,974,296 , including $ 341,004 of spare parts inventory.

The 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

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 non-current asset in accordance with a preliminary purchase price allocation.

is demobilized, transported and reassembled, installation and other costs associated with these activities will be captured and

capitalized as components of the asset.

all the mineral processing equipment 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 components and parts for the 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 at the time of purchase was determined to be $ 3,974,296 , including $ 341,004 of spare parts

process plant was purchased in an assembled state, 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 non-current asset in accordance with the purchase price

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.

plant consists of the following:

1 unchanged sentence

Plant purchase price less inventory

Ball mill purchase

Demobilization

Site preparation costs

Pend 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 March 31, 2023, the Company had not made the final payment of $ 475,000 .

Process Plant

On June 30, 2023, the Company made the final payment of $ 545,626 to D’Angelo International LLC to complete the purchase of a ball mill for a total $ 745,626 (inclusive of two previously paid deposits of $ 100,000 from the Company to D’Angelo International LLC).

The ball mill is capable of delivering the 1,800 ton per day

mine plan envisaged in the Company’s Prefeasibility Study, and subject to future detailed engineering and mine planning, the mill

could also potentially support a throughput increase.

asset consists of the following:

2 unchanged sentences

Right-of-use asset, net

total depreciation expense during the three months ended March 31, 2023 and March 31, 2022 was $ 6,384

(relating to an expired lease), respectively.

total depreciation expense during the three and six months ended June 30, 2023, was $ 6,385 and $ 12,769 , respectively.

Compared to the

three and six months ended June 30, 2022, was $ 24,442 and $ 52,353 , (relating to an expired lease) respectively.

Bunker Hill Mine and Mining Interests

Hill Mine Complex

Hill Mine Purchase

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

9 unchanged sentences

of $ 3,400,000 payable in cash and $ 2,000,000 in Common Shares of the Company.

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

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

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

Immediately prior

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

The Amended Agreement also required payments pursuant to an agreement with

the Environmental Protection Agency (“EPA”) whereby for so long as the Company leases, owns and/or occupies the Mine, the

Company would make payments to the EPA on behalf of Placer Mining in satisfaction of the EPA’s claim for historical water treatment

cost recovery as per the Settlement Agreement reached with the EPA in 2018.

Immediately prior to the purchase of the Mine, the Company’s

liability to EPA in this regard totaled $11,000,000.

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

7 unchanged sentences

purchase of the mine has been valued on January 7, 2022:

Contract purchase price of $ 7,700,000 less $ 300,000 credit by seller for prior maintenance payments.

Net present value of water treatment cost recovery liability assumed of $ 6,402,425 .

Capitalized legal and closing costs of $ 444,785 .

As a result, the total

value of the mine at the time of purchase was determined to be $ 14,247,210 .

The carrying cost of the Mine is comprised of the

purchase price of $ 7,700,000 less $ 300,000 credit by seller for prior maintenance payments.

present value of water treatment cost recovery liability assumed of $ 6,402,425 .

legal and closing costs of $ 444,785 .

a result, the total value of the mine at the time of purchase was determined to be $ 14,247,210 .

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 “EPA Settlement Agreement” section below).

Management has determined the purchase to be an acquisition

of a single asset.

Capitalized Development

Commencing on October 1, 2022, the Company capitalizes

mine development.

Through June 30, 2023, a total of $ 1,517,526 had been capitalized.

of Mineral Properties

June 23, 2023, as consideration for the extinguishment of the RCD, as described in note 7, the Company granted a royalty for 1.85 % of life-of-mine

gross revenue (the “Royalty”) 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.

transaction is treated as a sale of mineral interest to Sprott.

The portion of the mineral interest sold was determined based on an

analysis of discounted life-of-mine royalty payments relative to discounted future cash flows generated from the mine net of capital

and operating costs, applied to the carrying value of the Bunker Hill Mine as of June 23, 2023 before consideration of the sale of

mineral properties.

This analysis utilized a discount rate of 13% and long-term metal prices of $1.09/lb, $0.98/lb and $25.51/oz for

zinc, lead and silver respectively, consistent with assumptions utilized in the valuation of the RCD at

extinguishment.

The Company has recognized a gain of $ 6,980,932 in

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

carrying cost of the Mine is comprised of the following:

of Mining Interests

Bunker Hill Mine and Mining interests

Bunker Hill Mine purchase

Capitalized development

Pend Oreille plant asset, net

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

purchase and leases

Sale of mineral properties (royalty)

( 1,973,840 )

Bunker Hill mine

purchase and lease

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.

During the three months ended March 31, 2023, the Company entered into

a lease agreement with C & E Tree Farm LLC for the lease of a land parcel overlaying a portion of the Company’s existing mineral

claims package.

The Company is committed to making monthly payments of $ 10,000 through February 2026.

The Company has the option to purchase

the land parcel through March 1, 2026, for $ 3,129,500 less 50% of the payments made through the date of purchase.

the six months ended June 30, 2023, the Company entered into a lease agreement with C & E Tree Farm LLC for the lease of a land parcel

overlaying a portion of the Company’s existing mineral claims package.

The Company is committed to making monthly payments of $ 10,000

through February 2026.

The Company has the option to purchase the land parcel through March 1, 2026, for $ 3,129,500 less 50% of the payments

made through the date of purchase.

Environmental Protection Agency and Water Treatment Liabilities (“EPA”)

Historical Cost Recovery Payables - EPA

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

Cost Recovery Payables - EPA

a part of the lease of the Mine with Placer Mining 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, it 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

1 unchanged sentence

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

30 days after an agreement was signed (which payment was made) followed by $ 2,000,000

on November 1, 2018, and $ 3,000,000

1 unchanged sentence

payment on November 1, 2024.

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

1, 2021, payments were not made.

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

As the purchase

of the Bunker Hill Mine (which would trigger the immediate recognition of the remaining liabilities due through November 1, 2024) had

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

sheets as of December 31, 2021.

Through 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.

The November 1, 2018, November 1, 2019, November 1, 2020, and November 1, 2021, payments were not made.

As a result, a total of $ 11,000,000

was outstanding as of December 31, 2021, accounted for within current liabilities.

As the purchase of the Bunker Hill Mine (which

would trigger the immediate recognition of the remaining liabilities due through November 1, 2024) had not yet taken place, the

remaining $ 8,000,000

cost recovery liabilities were not recognized on the Company’s consolidated balance sheets as of December 31, 2021.

Prior to the purchase of the Mine, 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.

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

3 unchanged sentences

The Amended Settlement modified the payment schedule and

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

payment terms for recovery of the historical environmental 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:

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

8 unchanged sentences

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.

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

Company completed the purchase of the Mine (see note 5) and made the initial $ 2,000,000

cost recovery payment on January 7, 2022.

with the purchase of the Mine, the

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

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 ).

During the year ended 2022, the financial assurance was put into place, enabling the restructuring

of the payment stream under the Amendment Settlement with the entire $ 17,000,000 liability being recognized as long-term in nature.

of March 31, 2023 (unchanged from December 31, 2022), the Company had two payment bonds of $ 9,999,000 and $ 5,000,000 , and

a $ 2,001,000 letter of credit, in place to secure this liability.

The collateral for the payment bonds is comprised of two letters of credit of $ 4,475,000 in aggregate, as well as 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).

The letters of credit of $ 6,476,000 in aggregate are secured by cash deposits under an agreement with a commercial bank, which comprise

the $ 6,476,000 of restricted cash shown within current assets as of March 31, 2023 .

Company recorded discount amortization expense of $ 374,306 on the discounted liability, bringing the net liability to

$ 8,315,772 (inclusive of interest payable of $ 156,343 ).

Water Treatment Charges – IDEQ

to the cost recovery liabilities outlined above, the

Company is responsible for the payment of ongoing water treatment charges.

Water treatment charges incurred through December 31,

2021 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.

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

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

The amount of the bonds

will decrease over time as individual payments are made.

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

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

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 ).

the year ended 2022, the financial assurance was put into place, enabling the restructuring of the payment under the Amendment

Settlement with the entire $ 17,000,000 liability being recognized as long-term.

As of June 30, 2023 (unchanged from December

31, 2022), the Company had two payment bonds of $ 9,999,000 and $ 5,000,000 , and a $ 2,001,000 letter of credit, in place to secure this

The collateral for the payment bonds is comprised of two letters of credit of $ 4,475,000 in aggregate, as well as 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).

The letters of credit of $ 6,476,000 in aggregate

are secured by cash deposits under an agreement with a commercial bank, which comprise the $ 6,476,000 of restricted cash shown within

current assets as of June 30, 2023.

Company recorded accretion expense on the liability of $ 396,663

and $ 770,969

for the three and six months ended June 30, 2023, respectively, bringing the net liability to $ 8,712,435

(previously accrued interest of $ 154,743 )

as of June 30, 2023.

Treatment Charges – Idaho Department of Environmental Quality

to the cost recovery liability 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”) following a handover of responsibilities for the Central Treatment Plant from the EPA to the

IDEQ as of that date.

Company currently makes monthly payments of $ 100,000 to the IDEQ as instalments toward the cost of treating water at the Central Treatment

3 unchanged sentences

cost of water treatment.

As of March 31, 2023 a prepaid expense of $ 30,000 (December 31, 2022:

$ 170,729 ) represents the difference between the estimated cost of water

treatment and net payments made by the Company to the IDEQ to date.

This balance has been recognized on the consolidated balance sheets

as accounts receivable and prepaid expenses.

As of June 30, 2023, a prepaid expense of $ 60,000 (December 31, 2022:

$ 170,729 ) represents the difference between

the estimated cost of water treatment and net payments made by the Company to the IDEQ to date.

This balance has been recognized on the

condensed interim balance sheets as accounts receivable and prepaid expenses.

Promissory Notes Payable and Convertible Debentures

Promissory Notes

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

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

bearing interest of 15 %

1 unchanged sentence

The Company purchased a land parcel for approximately $ 202,000

on March 3, 2022, which may be used as security

for the promissory note.

The promissory note was originally scheduled to mature on March 15, 2022, however was extended multiple times and is currently due on

June 15, 2023 .

Principal payments of $ 1,000,000 in aggregate were made in the year ended December 31, 2022.

March 31, 2023, the Company owes $ 1,500,000 in

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

expense for the three months ended March 31, 2023 and 2022 was $ 55,479 and

respectively.

At March 31, 2023 financing costs of $ 439,521 ($ 384,041

at December 31, 2022) is included in interest payable on the condensed consolidated balance sheet.

The effective interest rate of the promissory note is 15 % .

On February 21, 2023, the Company issued a non-convertible

promissory note to a related party in the amount of $ 120,000 , and a separate non-convertible promissory note in the amount of $ 120,000

to another party.

Each promissory note bore fixed interest of $ 18,000 per annum, payable at maturity, which was the earlier of one year

or the receipt of an equity or debt financing.

Both promissory notes, including interest, were settled on March 27, 2023.

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

The promissory note was originally scheduled to mature on

March 15, 2022, however, was extended multiple times and is currently due on December

Principal payments of $ 1,000,000

in aggregate were made in the year ended December 31, 2022.

Principal payment of $ 504,315

was made during the 6 months ended June 30, 2023.

The Company incurred a one-time penalty of 10 %

of the outstanding principal on June 30, 2023, of $ 99,569

which is included in loss on modification of debt in the condensed interim consolidated statements of income.

February 21, 2023, the Company issued a non-convertible promissory note to a related party of $ 120,000 , and a separate

non-convertible promissory note of $ 120,000 to another party.

Each promissory note bore fixed interest of $ 18,000 per annum,

payable at maturity, which was the earlier of one year or the receipt of an equity or debt financing.

Both promissory notes, including

interest, were settled on March 27, 2023.

June 2023, the Company issued a non-convertible promissory note in the amount of $ 150,000 .

The promissory note bore fixed interest of

$ 15,000 per annum, payable at maturity, which was the earlier of one year or the receipt of an equity or debt financing.

The promissory

note, including interest, was settled in June 2023.

June 30, 2023, the Company owes $ 1,095,253 in promissory notes payable, which is included in current liabilities on the condensed interim

consolidated balance sheets.

Interest expense for the three and six months ended June 30, 2023, was $ 54,931 and $ 110,411 respectively.

Compared to the three and six months ended June 30, 2022, was $ 92,466 and $ 167,877 respectively.

At June 30, 2023 financing costs of

$ 3,151 ($ 384,041 at December 31, 2022) is included in interest payable on the condensed interim balance sheet.

The effective interest

rate of the promissory note is 15 %.

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.

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

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

1 unchanged sentence

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”).

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

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

2 unchanged sentences

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

On May 23, 2023, the Company announced an upsized

and improved $ 67,000,000 project finance package with SRSR, consisting of a $ 46,000,000 stream and a $ 21,000,000 new debt facility.

newly proposed $ 46,000,000 stream (the “Stream”) was envisaged to have the same economic terms as the previously proposed

$ 37,000,000 stream, with a $ 9,000,000 increase in gross proceeds received by the Company, resulting in a lower cost of capital for the

The Company also announced a new $ 21,000,000 new debt facility (the “Debt Facility”), available for draw at the Company’s

election for two years.

As a result, total funding commitments from SRSR was envisaged to increase to $ 96,000,000 including the RCD, CD1,

CD2, Stream and debt facility (together, the “Project Financing Package”).

The Bridge Loan, as previously envisaged, was to

be repaid from the proceeds of the Stream.

The parties also agreed to extend the maturities of the CD1 and CD2 to March 31, 2026, when

the full $ 6 million and $ 15 million, respectively, will become due.

On June 23, 2023, the Project Financing

Package and related transactions closed, consistent with the Company’s announcement of May 23, 2023.

The Company incurred

of financing costs on the condensed interim consolidated statements of (loss) income and comprehensive income relating to the

modification of CD1, CD2, the extinguishment of RCD and the closing of the $ 21,000,000

debt facility.

Royalty Convertible Debenture

19 unchanged sentences

for as a modification.

On June 23, 2023, the funding date of the Stream, the RCD was repaid by

the Company granting a royalty for 1.85% of life-of-mine gross revenue (the “Royalty”) from mining claims historically worked

as described above.

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

The Company recorded a gain on sale of mineral properties

of $6,980,932 in the condensed interim consolidated statements of income (loss).

Additionally, on settlement of the RCD, $347,499 of previously

deferred to other comprehensive income was recognized in the net income (loss on FV of convertible debentures) on the condensed interim

consolidated statement of income (loss).

The Royalty Put Option permits SRSR Streaming to resell the royalty to the Company for $8 million

upon default under the Series 1 Convertible Debentures or Series 2 Convertible Debentures until such time that they are repaid in full.

The Company has accounted for the Royalty as a sale of mineral properties (refer to Note 5 for further detail).

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.

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 initially had a maturity date of the earlier of July 7, 2023

(subsequently amended, as described below) or the closing of the $ 37,000,000 stream that was announced on December 20, 2021.

is secured by a pledge of the Company’s properties and assets, and is convertible into Common Shares at a price of C$ 0.30

per Common Share at SRSR’s election at any time through the maturity date.

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 apply.

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 or SRSR elects to exercise its share conversion option.

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.

with the funding of the Stream in June 2023, the Company and SRSR agreed to amend the maturity date of CD1 from March 31, 2025, to March

31, 2026, and that CD1 would remain outstanding until the new maturity date unless the company elects to exercise its option of early

The Company determined that the amendments to the terms of the CD1 should not be treated as an extinguishment of the CD1 and

have therefore been accounted for as a modification.

Series 2 Convertible Debenture (CD2)

1 unchanged sentence

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 Company’s option, and matured on March 31, 2025.

The CD2 is secured by a pledge of the Company’s properties and assets, and is convertible into Common Shares at a price of C$ 0.29 per Common Share at SRSR’s election at any time

through the maturity date.

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.

with the funding of the Stream in June 2023, the Company and SRSR agreed to amend the maturity date of the CD2 from 3 quarterly

payments of $ 2,000,000 each beginning June 30, 2024, and $ 9,000,000 on March 31, 2025, to payment in full on March 31, 2026, and

that the CD2 would remain outstanding until the new maturity date unless the company elects to exercise its option of early

repayment or SRSR elects to exercise its share conversion option.

The Company determined that the amendments to the terms of the CD2 should not be treated as an extinguishment of the CD2

and have therefore been accounted for as a modification.

Company determined that in accordance with ASC 815 derivatives and hedging, each debenture will be valued and carried as a single instrument,

9 unchanged sentences

adjusted rate

CD1 note(3) (2)(4)(5)(3)

RCD note (2)(4)(5)

CD2 note(3) (2)(4)(5)(3)

CD1 note(3) (2)(4)(5)(3)

RCD note (2)(4)(5)

CD2 note(3) (2)(4)(5)(3)

CD1 carried a Discount for Lack of Marketability (“DLOM”) of 5.0 % as of the issuance date and as of March 31, 2022.

CD2 carried a DLOM of 10.0 % as of the issuance date and June 30, 2022

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

as of the issuance date and as of June 30, 2023.

The CD2 carried a DLOM of 10.0 %

as of the issuance date and June 30, 2023

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

conversion price of the CD1 is $ 0.219 and CD2 is $ 0.226 as of June 30, 2023, and $ 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

6 unchanged sentences

This results in an implied probability of the RCD being converted to the royalty, in the event that the Stream

Based on this methodology, as of December 31, 2022, the implied probability of the RCD being converted to a 1.85 % royalty,

Based on this methodology, as of June 30, 2023 (pre-modification), the implied probability of the RCD being converted to a 1.85 % royalty,

in the event that the Stream is advanced, was 77 %.

2 unchanged sentences

There are immaterial differences in these inputs for the scenario where the Stream

As of March 31, 2023, these were 11.38 %, 4.85 %, and 22.18 % respectively for the Scenario where the Stream is advanced

resulting fair values of the CD1, RCD, and CD2 at March 31, 2023, and as of December 31, 2022, were as follows:

resulting fair values of the CD1, RCD, and CD2 at June 30, 2023, and as of December 31, 2022, were as follows:

of Fair Value Derivative Liability

Instrument Description

total gain on fair value of debentures recognized during the three months ended March 31, 2023 and March 31, 2022, was $ 1,689,701

total (loss) gain on fair value of debentures recognized during the three and six months ended June 30, 2023 was ($ 1,884,232 ) and

($ 194,531 ) , respectively,

The portion of changes in fair value that is attributable to changes in the Company’s credit risk is accounted

for within other comprehensive income.

During the three months ended March 31, 2023 and March 31, 2022, the Company recognized

respectively, within other comprehensive income.

Interest expense for the three months ended March 31, 2023 and 2022 was $ 676,849

and $ 1,813,456 and

$ 1,739,987 for

the three and six months ended June 30, 2022, respectively .

The portion of changes in fair value attributable to changes in the Company’s credit risk is accounted for within

other comprehensive (loss) income during the three and six months ended June 30, 2023 was ($ 373,415 ) and

$ 433,597, respectively.

Compared to the three and six months ended June 30, 2022 was $ 371,255 and

$ 371,255, respectively.

Interest expense for the three and six months ended June 30, 2023 was $ 670,562 and

$ 1,347,411, respectively.

Compared to the three and six months ended June 30, 2022 was $ 348,574 and

$ 588,738, respectively.

At June 30, 2023 interest of $ nil ($ 691,890 at

December 31, 2022) is included in interest payable on the consolidated balance sheets.

For the three and six months ended June 30,

2023 the Company recognized $ 18,803 and

$ 268,889 , respectively,

loss on debt settlement in the condensed interim consolidated statements of income (loss) and comprehensive income (loss) as a

result of settling interest by issuance of shares.

Compared to the three and six months ended June 30, 2022 was $ nil and

$ nil , respectively.

Company performs quarterly testing of the covenants in the CD1 and CD2 and was in compliance with all such covenants as of June 30, 2023.

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

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

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

RCD, CD1, and CD2.

Bridge Loan bears interest 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.

June 23, 2023 the Company repaid the outstanding principal and interest on the Bridge Loan recognizing a loss on extinguishment of

debt of $ 222,754

in the condensed interim consolidated statements of (loss) income.

At June 30, 2023 interest of $ nil

at December 31, 2022) is included in interest payable on the condensed interim balance sheets.

Interest expense for three and six months

ended June 30, 2023, was $ 168,166

and $ 346,550

respectively.

At March 31, 2023 interest of $ nil

at December 31, 2022) is included in interest payable on the consolidated balance sheets.

For the three months ended March 31, 2023,

and March 31, 2022, the Company recognized $ 250,086

respectively, loss on debt settlement in the condensed interim consolidated statements of income (loss) and comprehensive

income (loss) as a result of settling interest by issuance of shares.

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

$5,000,000 Bridge

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.

The 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 30, 2024 .

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 three months

ended March 31, 2023 and 2022 was $ 178,383 and $ nil respectively.

At March 31, 2023 interest of $ 131,250 ($ 53,985 at December 31, 2022)

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.

Compared to the three and six months ended June 30, 2022, was $ nil

respectively.

June 23, 2023, all conditions were met for the closing of the Stream, and $ 46,000,000

was advanced to the Company.

The Stream applies to 10% of all payable metals sold until a

minimum quantity of metal is delivered consisting of, individually, 63.5 million pounds of zinc, 40.4 million pounds of lead, and 1.2

million ounces of silver (subsequently amended, as described below).

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

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 March 31,

2023, the Stream had not been advanced .

Lease liability

Company has operating leases for a loader.

Below is a summary of the Company’s lease liability as of March 31, 2023:

Schedule of Operating Lease Liability

Balance, December 31, 2022

Interest expense

Lease payments

Balance, March 31, 2023

The Company may buy back 50% of the Stream

Amount at a 1.40x multiple of the Stream Amount between the second and third anniversary of the date of funding, and at a 1.65x

multiple of the Stream Amount between the third and fourth anniversary of the date of funding .

The Company incurred $ 824,156

of transactions costs directly related to the Stream which were capitalized against the initial recognition of the Stream of $ 45,175,844

on the condensed interim consolidated balance sheets.

The Company determined that in accordance with ASC 815 derivatives and hedging, the Stream does not meet the criteria

for treatment as a derivate instrument as the quantities of metal to be sold thereunder are not subject to a minimum quantity, and therefore

a notional amount is not determinable.

The Company has therefore determined that in accordance with ASC 470, the stream obligation should

be treated as a liability based on the indexed debt rules thereunder.

The initial recognition has been made at fair value based on cash

received, net of transaction costs, and the discount rate calibrated so that the future cash flows associated with the Stream, using forward

commodity prices, equal the cash received.

The measurement of the stream obligation is accounted for at amortized cost with accretion

at the discount rate.

Subsequent changes to the expected cash flows associated with the Stream will result in the adjustment of the carrying

value of the stream obligation using the same discount rate, with changes to the carrying value recognized in the condensed interim consolidated

statements of income.

The Company determined the effective interest rate of the Stream obligation

to be 11.6 % and recorded accretion expense on the liability of $ 85,000 for the three and six months ended June 30, 2023 ($ nil for the

three and six months 2022), bringing the liability to $ 45,260,844 as of June 30, 2023.

$21,000,000 Debt Facility

On June 23, 2023 the Company closed a $ 21,000,000

debt facility with SRSR which is available for draw at the Company’s election for a period of 2

As of June 23, 2023, and June 30, 2023, the company has not drawn on the facility.

Any amounts drawn will bear interest of 10 %

per annum, payable annually in cash or capitalized until three years from closing of the Debt Facility at the Company’s

election, and thereafter payable in cash only.

maturity date of any drawings under the Debt Facility will be June

For every $ 5

million or part thereof advanced under the Debt Facility, the Company will grant a new 0.5% life-of-mine gross revenue royalty, on

the same terms as the Royalty, to a maximum of 2.0% on the Primary Claims and 1.4% on the Secondary Claims.

The Company may buy back

50% of these royalties for $ 20

The Company determined that no recognition is required on the financial statements as of June 30, 2023.

Capital Stock, Warrants and Stock Options

4 unchanged sentences

and outstanding

March 2023, the Company amended the exercise price and expiry date of 10,416,667

warrants which were previously issued in a private placement to Teck Resources (“Teck”) on May 13, 2022 in consideration

for the Company’s acquisition of the Pend Oreille process plant.

The warrant entitled the holder thereof to purchase one share

of Common Share of the Company at an exercise price of C$ 0.37

per Warrant at any time on or prior to May 12, 2025.

The Company amended the exercise price of the warrants from C$ 0.37

per Warrant and the expiry date from May 12, 2025, to March

31, 2023 , resulting in a gain on modification of warrants of $ 214,714 .

In March 2023, Teck exercised all 10,416,667

warrants at an exercise price of C$ 0.11 ,

for aggregate gross proceeds of C$ 1,145,834

to the Company.

During the quarter the Company recognized a change in derivative liability of $ 400,152 relating to the Teck warrants

using the following assumptions:

March 2023, the Company amended the exercise price and expiry date of 10,416,667 warrants previously issued in a private placement

to Teck Resources (“Teck”) on May 13, 2022 in consideration for the Company’s acquisition of the Pend Oreille processing

The warrant entitled the holder to purchase one Common Share of the Company at an exercise price of C$ 0.37 per

Warrant at any time on or prior to May 12, 2025.

The Company amended the exercise price from C$ 0.37 to C$ 0.11 per Warrant

and the expiry date from May 12, 2025, to March 31, 2023 , resulting in a gain on modification of warrants of $ 214,714 .

In March 2023,

Teck exercised all 10,416,667 warrants at an exercise price of C$ 0.11 , for aggregate gross proceeds of C$ 1,145,834 to the Company.

the quarter the Company recognized a change in derivative liability of $ 400,152 relating to the Teck warrants using the following assumptions:

volatility of 120 %, stock price of C$ 0.11 , interest rate of 3.42 % to 4.06 %, and dividend yield of 0 %.

In March 2023, the Company closed a brokered

private placement of special warrants of the Company (the “March 2023 Offering”), issuing 51,633,727

special warrants of the Company (“March 2023 Special Warrants”) at C$ 0.12

per March 2023 Special Warrant for $ 4,536,020

(C$ 6,196,047 ),

of which $ 3,661,822 was received in cash and $ 874,198 was applied towards settlement of accounts payable, accrued liabilities and promissory notes.

March 2023, the Company closed a brokered private placement of special warrants (the “March 2023 Offering”),

issuing 51,633,727 special warrants of the Company (“March 2023 Special Warrants”) at C$ 0.12 per March 2023 Special Warrant

for $ 4,536,020 (C$ 6,196,047 ), of which $ 3,661,822 was received in cash and $ 874,198 was applied towards settlement of accounts payable,

accrued liabilities and promissory notes.

connection with the Offering, each March 2023 Special Warrant is automatically exercisable (without payment of any further consideration

15 unchanged sentences

Unit being comprised of 1.2 Unit Shares and 1.2 Warrants.

Notice of such effectiveness was received on July 11, 2023, eliminating the potential for issuance of the Penalty

connection with the March 2023 Offering, the Company incurred share issuance costs of $ 846,661 and issued 2,070,258 compensation options

2 unchanged sentences

into one Unit Share and one Warrant Share.

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

The warrants are considered derivative instruments

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

The estimated fair value of

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

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

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

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 as at March 31, 2023 and December 31, 2022:

Refer to note 15 subsequent events for details on the effectiveness of the registration statement and conversion into units.

The Special Warrants issued on March

27, 2023 were converted to 51,633,727

Common Shares and common stock purchase warrants in the third quarter of 2023.

As of June 30, 2023, the common shares and common

stock purchase warrants had not been issued.

The Company determined that in accordance with ASC 815 derivatives and hedging, each

Special Warrant will be valued and carried as a single instrument, with the periodic changes to fair value accounted through

earnings, profit and loss until the common shares and common stock purchase warrants are issued.

The fair value of the Special Warrant is determined through the valuation of the Unit Share based on the observed

price of the Company’s Common Shares, a Level 1 input, together with a valuation of the warrant component of the March 2023 Unit

using the Binomial model calibrated with inputs as shown in the table below.

Consistent with the approach above, the following table summarizes the

key valuation inputs as at applicable valuation dates:

of Estimated Fair Value of Special Warrant Liabilities

March 2023 special warrants

Expected life

Risk free interest rate

Dividend yield

Share price (C$)

Change in derivative liability

For prior financings, excluding the March 2023 Special Warrants, the Company has accounted for warrants in accordance

with ASC 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 marked to market at each financial reporting period.

The change in fair value of the warrant is recorded in the

condensed interim consolidated statements of income (loss) and comprehensive income (loss) as a gain or loss and is estimated using the

Binomial model.

fair value of the warrant liabilities related to the various tranches of outstanding warrants during the period were

estimated using the Binomial model to determine the fair value using the following assumptions as at June 30, 2023 and December 31,

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

5 unchanged sentences

Change in derivative liability

$ ( 1,231,441 )

April 2022 non-brokered issuance

16 unchanged sentences

Change in derivative liability

$ ( 653,416 )

August 2020 issuance

11 unchanged sentences

Change in derivative liability

$ ( 387,129 )

August 2019 issuance

4 unchanged sentences

Change in derivative liability

$ ( 594,970 )

warrants at March 31, 2023 and March 31, 2022 were as follows:

warrants at June 30, 2023 and June 30, 2022 were as follows:

Schedule of Warrant Activity

1 unchanged sentence

Balance, December 31, 2021

Balance, March 31, 2022

Balance, June 30, 2022

Balance, December 31, 2022

( 10,416,667 )

Balance, March 31, 2023

During the three months ended March 31, 2023, 10,416,667 May 2022 Teck

warrants were exercised.

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

March 31, 2023, the following warrants were outstanding:

Balance, June 30, 2023

the six months ended June 30, 2023, 10,416,667 May 2022 Teck warrants were exercised.

During the six months ended June 30, 2022, 239,284

February 2020 broker warrants expired.

June 30, 2023, the following warrants were outstanding:

Schedule of Warrants Outstanding Exercise Price

4 unchanged sentences

April 1, 2025

2023 Special Warrants

Company closed a private placement of the March 2023 Special Warrants on March 27, 2023, which will convert to Common Shares and common

stock purchase warrants in the third quarter of 2023 as described above.

As a result, as of March 31, 2023, the Common Shares and common

stock purchase warrants had not been issued.

In accordance with its accounting policies, the Company has determined the fair value of

the March 2023 Special Warrants as of March 31, 2023, through the valuation of the underlying Common Shares and common stock purchase

of March 31, 2023, there were 51,633,727 March 2023 Special Warrants outstanding ($nil as of December 31, 2022).

The fair value of the

underlying warrant liability related to the March 2023 Special Warrants was estimated using the Binomial model to determine the fair

value using the following assumptions as at March 31, 2023 and December 31, 2022:

of Estimated Fair Value of Special Warrant Liabilities

March 2023 special warrants issuance

Expected life

Risk free interest rate

Dividend yield

Share price (C$)

Change in derivative liability

March 31, 2023, the following broker options were outstanding:

June 30, 2023, the following broker options were outstanding:

of Compensation Options

4 unchanged sentences

Issued – March 2023 Compensation Options

Balance, March 31, 2023

grant date fair value of the March 2023 Compensation Options were estimated at $ 111,971 using the Black-Scholes valuation model with

the following underlying assumptions:

Balance, June 30, 2023

grant date fair value of the March 2023 Compensation Options were estimated at $ 111,971

using the Black-Scholes

valuation model with the following underlying assumptions:

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

8 unchanged sentences

March 27, 2026 (v)

Exercisable into one August 2020 Unit

Exercisable into one February 2021 Unit

Exercisable into one April 2022 Unit

Exercisable into one March 2023 Unit

following table summarizes the stock option activity during the three months ended March 31, 2023:

Schedule of Stock Options

into one August 2020 Unit

into one February 2021 Unit

into one April 2022 Unit

into one March 2023 Unit

following table summarizes the stock option activity during the six months ended June 30, 2023:

of Stock Options

exercise price

4 unchanged sentences

Balance, December 31, 2022

Balance, March 31, 2023

following table reflects the actual stock options issued and outstanding as of March 31, 2023:

Balance, June 30, 2023

following table reflects the actual stock options issued and outstanding as of June 30, 2023:

of Actual Stock Options Issued and Outstanding

1 unchanged sentence

fair value ($)

The vesting of stock options during the three and

six months ending June 30, 2023, resulted in stock based compensation expenses of $ 34,441 and $ 93,140 respectively ($ 66,384 and $ 168,994

for the three and six months ending June 30, 2022, respectively).

Restricted Share Units

1 unchanged sentence

key employees and consultants.

following table summarizes the RSU activity during the three months ended March 31, 2023:

following table summarizes the RSU activity during the six months ended June 30, 2023:

Schedule of Restricted Share Units

2 unchanged sentences

Unvested as at December 31, 2022

Unvested as at March 31, 2023 (ii)

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

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).

(ii) Includes

1,507,580 RSU’s which had vested as of March 31, 2023 but had not been converted to

Common Shares.

( 5,767,218 )

Unvested as at June 30,

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 six months ended June 30, 2022, which is included in operation and administration expenses on the condensed consolidated

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

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

(loss) income and comprehensive (loss) income.

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

(loss) income and comprehensive (loss) income.

June 1, 2023, the Company granted 4,067,637

RSUs to executives and employees of the Company, vested immediately.

The vesting of these RSUs resulted in stock-based compensation

for the six months ended June 30, 2023, which is included in operation and administration expenses on the consolidated statements of

(loss) income and comprehensive (loss) income.

On June 4, 2023, the

Company granted 42,000

RSUs to a consultant of the Company, vested immediately.

The vesting of these RSUs resulted in stock-based compensation of $ 7,825

for the six months ended June 30, 2023, which is included in operation and administration expenses on the consolidated statements of

(loss) income and comprehensive (loss) income.

The vesting of RSU’s during the three and six

months ending June 30, 2023, resulted in stock based compensation expense of $ 419,754 and $ 594,724 respectively ($ 15,922 and $ 38,859 for

the three and six months ending June 30, 2022, respectively).

Deferred Share Units

4 unchanged sentences

of the Company’s Common Share on the date of redemption in exchange for cash.

following table summarizes the DSU activity during the three months ended March 31, 2023 and 2022:

following table summarizes the DSU activity during the six months ended June 30, 2023 and 2022:

Schedule of Deferred Share Units

Unvested as at December 31, 2021

Unvested as at March 31, 2022

Unvested as at December 31 2022 and March 31, 2023

( 3,125,000 )

Unvested as at June 30, 2022

Unvested as at December 31, 2022

( 1,250,000 )

Unvested as at December 31 2022 and June 30, 2023

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

During the three months

ended June 30, 2022, the director redeemed 2,500,000 DSUs for C$ 750,000 , and elected to use net proceeds to subscribe for 375,000

units in the Company’s April 2022 special warrant issuance at C$ 0.30 per unit, with the balance of the redeemed amount payable

in cash after applicable withholding tax deductions.

April 21, 2023, 1,250,000 DSUs for one of the Company’s Directors vested.

The vesting of DSU’s during the three and six months ending June 30, 2023, resulted in stock based compensation expense of $ 486,602

and $ 287,324 , respectively (stock based recovery of $ 695,494 and $ 895,416 for the three and six months ending June 30, 2022, respectively).

Commitments and Contingencies

9 unchanged sentences

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”).

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

that such claims are facially deficient.

On March 2, 2022, Chief US District Court Judge, David C.

Nye granted in part and denied

in part the Company’s motion to dismiss.

The court granted the Company’s motion to dismiss Crescent’s Cost Recovery

claim under CERCLA Section 107(a), Declaratory Judgment, Tortious Interference, Trespass, Nuisance and Negligence claims.

were dismissed without prejudice.

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

for Crescent’s trespass,

nuisance and negligence claims.

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

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 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 that such claims are facially deficient.

On March 2, 2022, Chief US

District Court Judge, David C.

Nye granted in part and denied in part the Company’s motion to dismiss.

The court granted the

Company’s motion to dismiss Crescent’s Cost Recovery claim under CERCLA Section 107(a), Declaratory Judgment, Tortious

Interference, Trespass, Nuisance and Negligence claims.

These claims were dismissed without prejudice.

The court denied the motion

to dismiss filed by Placer Mining Corp.

for Crescent’s trespass, nuisance and negligence claims.

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.

During the three months ended March 31, 2023, the Company entered into

a lease agreement with C & E Tree Farm LLC for the lease of a land parcel overlaying a portion of the Company’s existing mineral

claims package.

The Company is committed to making monthly payments of $ 10,000 through February 2026.

and Bunker Hill Mining Corp are named as co-defendants.

The Company responded to the amended filing, refuting and denying all allegations made in the complaint except those

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

The Company believes the lawsuit against Placer Mining Corp.

without merit and intends to defend Placer Mining Corp.

vigorously pursuant to the

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

on December 15, 2021.

the six months ended June 30, 2023, the Company entered into a lease agreement with C & E Tree Farm LLC for the lease of a land

parcel overlaying a portion of the Company’s existing mineral claims package.

The Company is committed to making monthly payments

of $ 10,000 through February 2026.

Deferred tax liability

The Company incurred income tax

expense of $ 3.5 million for the three and six months ended June 30, 2023, and incurred no income tax expense for

the three and six months ended June 30, 2022.

The Company’s effective income tax rate for the first six months of 2023 was

- 30.29 % compared to 0.0 % for the first six months of 2022.

The effective tax rate during the first six months of 2023 rate differed

from the statutory rate primarily due to the income tax treatment of the Stream proceeds as deferred revenue compared to its

treatment as debt under U.S.

GAAP thereby resulting in a decrease of the existing valuation allowance against deferred tax assets

related to the utilization of $ 32.3 million of net operating losses not previously benefitted.

The Company maintains a valuation

allowance against net operating losses subject to Section 382 and other deferred tax assets.

The effective tax rate during the first

six months of 2022 rate differed from the statutory rate primarily due to changes in the valuation allowance established to offset

net deferred tax assets.

A valuation allowance is provided for deferred tax assets for which it is more likely than not that the related tax

benefits will not be realized.

The Company analyzes its deferred tax assets and, if it is determined that the Company will not realize

all or a portion of its deferred tax assets, it will record or increase a valuation allowance.

Conversely, if it is determined that the

Company will likely ultimately be able to realize all or a portion of the related benefits for which a valuation allowance

has been provided, all or a portion of the related valuation allowance will be reduced.

Related party transactions

2 unchanged sentences

Schedule of Related Party Transactions

March 31, 2023

March 31, 2022

Consulting Fees and Salaries

March 31, 2023 and March 31, 2022, $ 248,533 and $ 825,776 respectively is owed to key management personnel with all amounts included in

Consulting fees & wages

June 30, 2023 and June 30, 2022, $ 52,148 and $ 1,049,304 , respectively is owed to key management personnel with all amounts included in

accounts payable and accrued liabilities.

Subsequent Events

Conversion of March 2023 Special Warrants

24, 2023 , the “March 2023, Special Warrants” automatically converted into one share of common stock of the company

and one common stock purchase warrant of the company which entitles each warrant holder to acquire one share of common stock of

the Company at an exercise price of $ 0.15 per warrant share until March 27, 2026.

July 4, 2023, 6,735,354 RSU’s were granted to employees and executives of the Company.

The RSU awards vest in one-third increments

on March 31 of 2024, 2025 and 2026.

July 4, 2023, 1,611,826 DSU’s were granted to directors of the Company.

The DSU awards vest immediately.

July 6, 2023, 245,454

DSU’s were granted to a director of the

The DSU award vests on July 6, 2024 .

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

What changed 10-Q

Item 1. Financial Statements