Bunker Hill Mining Corp. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition or Plan of Operation The following management’s discussion and analysis of the consolidated financial results and condition of Bunker Hill Mining Corp. (collectively, “we,” “us,” “our,” “Bunker Hill” or the “Company”) for the three months ended March 31, 2026, has been prepared based on information available to us as of November 12, 2025. This discussion should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and notes thereto included herewith and the audited Consolidated Financial Statements of Bunker Hill for the year ended December 31, 2025, and the related notes thereto filed with our Annual Report on Form 10-K, which have been prepared in accordance with U.S. GAAP. This discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results, performance, or achievements may differ materially from those anticipated in these forward-looking statements as a result of many factors, including, but not limited to, those set forth elsewhere in this report. See “Cautionary Note Regarding Forward-Looking Statements.” 28 All currency amounts are expressed in U.S. dollars. Description of Business Corporate Information The Company was incorporated under the laws of the State of Nevada, U.S.A on February 20, 2007, under the name Lincoln Mining Corp. On February 11, 2010, the Company changed its name to Liberty Silver Corp and subsequently, on September 29, 2017, the Company changed its name to Bunker Hill Mining Corp. The Company’s registered office is located at 1802 N. Carson Street, Suite 212, Carson City Nevada 89701, and its Canadian office is located at 300-1055 West Hastings Street Vancouver, British Columbia, V6E 2E9, and its telephone number is 604.417.7952. The Company’s website is www.bunkerhillmining.com. Information appearing on the website is not incorporated by reference into this report. Overview and Outlook Our primary focus is the development and restart of our 100% owned Bunker Hill Mine (the “Bunker Hill Mine”) in Kellogg, Idaho, USA. The Bunker Hill Mine was the largest single producing mine by tonnage in the Silver Valley region of northwest Idaho, producing over 165 million ounces of silver and 5 million tons of base metals between 1885 and 1981. The Bunker Hill Mine is located within Operable Unit 2 of the Bunker Hill Superfund site (EPA National Priorities Listing IDD048340921), where cleanup activities have been completed. The Company was incorporated for the initial purpose of mineral exploration at the Bunker Hill 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 an early-stage analysis that assesses the viability of a potential mining project, providing a preliminary assessment of its economic and technical feasibility (“Prefeasibility Study”), (iii) delineating mineral reserves, and (iv) advancing the construction of the facilities for commissioning and operations in the first half of 2026, with nameplate 1,800 tons per day production expected in 2026. Current External Factors Impacting our Business In 2022, the United States Geological Survey included zinc as one of the primary metals at Bunker Hill along with lead and silver as a critical material that is essential to the U.S. economy and national security. Zinc uses include incorporation in metal products, rubber and medicines. About three-fourths of zinc used is consumed as metal, mainly as a coating to protect iron and steel from corrosion (galvanized metal), as alloying metal to make bronze and brass, as zinc-based die casting alloy, and as rolled zinc. Due to the dominance of China over certain critical materials production, including zinc, the U.S. government is taking certain actions to support the domestic critical materials supply chain, including tax incentives and federal loan programs specifically designed to support critical materials producers, and to strengthen the defense industrial base with respect to critical minerals. During 2025, we have monitored the many federal actions of President Trump and his Administration, including executive orders covering critical minerals and materials, including zinc. On January 20, 2025, President Trump issued the “Unleashing American Energy” Executive Order, which included (1) several urgent critical mineral directives, including the immediate review of all agency actions that potentially burden the development of domestic energy resources with particular attention to critical minerals; (2) directing the Secretary of Energy to ensure that critical mineral projects, including the processing of critical minerals, receive consideration for federal support; and (3) directing the Secretary of Defense to consider the needs of the U.S. in supplying and maintaining the national defense stockpile to provide a robust supply of critical minerals, which will create jobs and prosperity at home, strengthen supply chains for the U.S. and its allies, and reduce the global influence of malign and adversarial states. In March 2025, President Trump issued the “Immediate Measures to Increase American Mineral Production” Executive Order. In this Executive Order, President Trump directed the federal agencies, including the Export – Important Bank of the US (“EXIM”), to unlock the permitting, funding and issuance of off-take agreements for critical minerals. The Executive Order includes near-term actions to be determined and implemented by the federal agencies to mobilize capital for mineral producers and create off-take agreements for the strategic stockpiling of minerals critical to the United States’ defense, technology and energy. 29 Since early 2025, the Trump Administration has announced several potential and/or increased tariffs and other trade restrictions on the imports to the United States. These restrictions are in response to China’s export restrictions in critical minerals as well as other general trade negotiations with other nations. These tariffs and trade restrictions may have an impact on the Company’s ability to secure materials for construction or operations of our project, and could result in additional support by the U.S. government in creating a diversified secure U.S. supplies of critical metals, including the future production of the Bunker Hill Mine. In addition, the impacts of other external influences (such as the Russia/Ukraine war and conflicts in the Middle East, including the Israel war and Iran war) have further focused the U.S. government on the importance of implementing secure domestic supply chains, including for critical and base metal materials. The Company monitors and continues to pursue the participation in these initiatives as they are critical to the production of domestic defense and other technologies. Results of Operations The following discussion and analysis provides information that is believed to be relevant to an assessment and understanding of the results of operation and financial condition of the Company for the three months ended March 31, 2026, and March 31, 2025. Comparison of the three months ended March 31, 2026, and 2025 Revenue During the three months ended March 31, 2026, and 2025, respectively, we generated no revenue. Expenses During the three months ended March 31, 2026, and 2025, we reported total operating expenses of $3,983,505 and $2,909,374, respectively. The increase in total operating expenses was primarily due to the Company expanding as it prepares for commercial production. We anticipates expenses to continue to increase in future periods as the company expands its operations. Net Income and Comprehensive Income We had net income of $20,124,689 for the three months ending March 31, 2026, compared to a loss of $6,346,213 for the three months ended March 31, 2025. Net income for the three months ended March 31, 2026, was impacted by a gain on revaluation of warrant liabilities of $31,063,192 for the three months ended March 31, 2026, compared to a gain of $462,763 for the three months ended March 31, 2025. Income was offset by loss on the fair value of the silver loan of 4,905,892 for the three months ended March 31, 2026, compared to 6,068,932 for the three months ended March 31, 2025 and financing costs of $706,892 ($7,116 for the three months ended March 31, 2025) relating to an equity raise that occurred during the three months ended March 31, 2026. We had a comprehensive income of $21,134,755 and a comprehensive loss of $4,313,671 for the three months ended March 31, 2026, and March 31, 2025, respectively. Comprehensive income (loss) for the three months ending March 31, 2026, and March 31, 2025, is inclusive of $1,010,066 and $2,032,542 gain on change in fair value on own credit risk, respectively. Liquidity and Capital Resources Current Assets and Total Assets As of March 31, 2026, the Company had total current assets were $36,485,503, compared to total current assets of $23,296,106 at December 31, 2025 – an increase of $13,189,397; and total assets of $181,870,365, compared to total assets of $150,958,994 at December 31, 2025 – an increase of $30,911,371. During the three months ended March 31, 2026, our current and non-current assets increased due to warrant exercises and an equity financing that occurred partially offset by cash expenditures on the process plant, filter plant, paste plant, and mine development at the Bunker Hill Mine. 30 Current Liabilities and Total Liabilities As of March 31, 2026, our total current liabilities of $23,746,150 and total liabilities of $189,398,493, compared to total current liabilities of $16,838,089 and total liabilities of $207,030,036 at December 31, 2025. Total liabilities decreased due to change in derivative liabilities of $ 31,063,192 in the three months ended March 31, 2026, compared to $462,763 in the same period in 2025 which was driven by a decrease in Bunker Hill Mining Corp.’s stock, which is the key input into the valuation of the warrants. Which was partially offset by an increase in accounts payable and accrued liabilities due to timing of expenses and payments and the $3,895,826 increase in the fair value of the silver loan due to the change in inputs, including an increase in the silver price during the three months ended March 31, 2026. As of March 31, 2026, our total liabilities include $45,139,588 of warrants that are classified as a liability under US GAAP, as the instrument is exposed to foreign currency risks other than the changes in the value of the entity’s equity because the strike price of the warrants is denominated in C$ versus US$. Although classified as a liability, it does not represent a future cash outflow to the Company. The Company will settle any warrant exercises received with the issuance of our own shares together with the receipt of cash for those warrants exercised. Working Capital and Shareholders’ deficiency As of March 31, 2026, we had working capital of $12,739,353 and a shareholders’ deficiency of $7,528,128, compared to working capital of $6,458,017 and shareholders deficiency of $56,071,042, respectively, as of December 31, 2025. The improvement in working capital and shareholders deficiency from December 31, 2025 to March 31, 2026 is primarily the result of an equity financings from a brokered and non-brokered private placement, and a decrease in the derivatives warrant liability. We believe we have sufficient working capital to fund our planned operations for the next 12 months. Cash Flow During the three months ended March 31, 2026, we had a net cash increase of $11,071,668, primarily due to cash provided by financing activities, specifically proceeds from the issuance of shares of common stock, offset by cash used in operating and investing activities primarily related to expenditures on the process plant, filter plant, paste plant, and mine development at the Bunker Hill Mine. Subsequent Events Equity Transactions On April 1, 2026, the Company issued 72,115 shares of common stock in connection with its election to satisfy interest payments under the outstanding convertible debentures for the three months ended March 31, 2026. On April 10, 2026, the Company granted 163,674 RSU to certain directors, officers, and employees of the Company. The RSUs will vest in one-third increments on April 10, 2027, April 10, 2028, and April 10, 2029, with each RSU vesting into one share of common stock. On April 10, 2026, the Company granted Stock Options to purchase up to an aggregate of 12,402 Common Shares. The Options expire on April 10, 2031, and have an exercise price of C$5.60 per underlying Common Share based on the closing price of the Common Shares on the TSX on April 9, 2026. The Options will vest in one-third increments on April 10, 2027, April 10, 2028, and April 10, 2029. On May 6, 2026, the Company granted 10,564 RSU to certain director of the Company. The RSUs will vest in one-third increments on May 6, 2027, May 6, 2028, and May 6, 2029, with each RSU vesting into one share of common stock. New Director On May 6, 2026, the Company appointed Mark Child to its Board of Directors. Critical accounting estimates The preparation of the interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Estimates and judgments are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual outcomes can differ from these estimates. The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the amounts recognized in the financial statements are: Share-based payments Management determines costs for share-based payments using market-based valuation techniques. The fair value of the share awards and warrant liabilities are determined at the date of grant using generally accepted valuation techniques and for warrant liabilities at each balance sheets date thereafter. Assumptions are made and judgment used in applying valuation techniques. These assumptions and judgments include estimating the future volatility of the stock price and expected dividend yield. Such judgments and assumptions are inherently uncertain. Changes in these assumptions affect the fair value estimates. 31 Convertible Loans, Promissory Notes, Stream Obligation and Warrants Estimating the fair value of derivative warrant liability requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the issuance. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the warrants derivative liability, volatility and dividend yield and making assumptions about them. The fair value estimates of the convertible loans use inputs to the valuation model that include risk-free rates, equity value per share of common stock, USD-CAD exchange rates, expected equity volatility, discount for lack of marketability, credit spread. The stream obligation inputs used to determine the future cash flows and effective interest for the amortized cost calculation include futures prices of minerals and expected mineral production over the life of the mine. The fair value estimates of the silver loan use inputs to the valuation model that include risk-free rates, spot and futures prices of minerals, and expected volatility in minerals prices. The fair value estimates may differ from actual fair values and these differences may be significant and could have a material impact on the Company’s balance sheets and the consolidated statements of operations. Assets are reviewed for an indication of impairment at each reporting date. This determination requires significant judgment. Factors that could trigger an impairment review include, but are not limited to, significant negative industry or economic trends, interruptions in exploration activities or a significant drop in precious metal prices. Accrued liabilities The Company has to make estimates to accrue for certain expenditures due to delay in receipt of third-party vendor invoices. These accruals are made based on trends, history and knowledge of activities. Actual results may be different. The Company makes monthly estimates of its water treatment costs, with a true-up to the annual invoice received from the IDEQ. Using the actual costs in the annual invoice, the Company will then reassess its estimate for future periods. Given the nature, complexity and variability of the various actual cost items included in the invoice, the Company has used the most recent invoice as its estimate of the water treatment costs for future periods. Incremental Borrowing rate The Company estimates the incremental borrowing rate to determine the present value of future lease payments. Actual results may be different from estimates. Borrowing Cost Capitalization rate The Company makes estimates to determine the percentage of borrowing costs that are capitalized into property plant and equipment. Actual results may be different. Off-Balance Sheet Arrangements The Company has no off-balance sheet arrangements. Item 3. Quantitative and Qualitative Disclosures about Market Risk Not applicable.