Item 1. Business
ITEM
1. BUSINESS
Our
Business
Bunker
Hill Mining Corp. was incorporated under the laws of Nevada in 2007 under its former name Lincoln Mining Corp. We have one wholly
owned subsidiary, Silver Valley Metals Corp. Our business address is 1009 McKinley Ave, Kellogg, ID 83837, USA. The telephone number
for our office is +1 604 417 7952. We maintain a corporate website at https://bunkerhillmining.com .
Overview
The
Company’s focus is the development and restart of its 100% owned flagship asset, the Bunker Hill mine (the “Bunker Hill
Mine” or the “Mine”) in Idaho, USA. The Mine remains the largest single producing mine by tonnage in the Silver
Valley region of northwest Idaho, historically 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 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
a Prefeasibility Study, (iii) delineating mineral reserves, and (iv) advancing the construction of the facilities. Subject to securing additional financing discussed in Item 7, “Subsequent Events” operations are planned
to commence in 2026.
2024
Developments
Project Development
During
the course of 2024 the Wardner operating yard, the base for Bunker Hill’s future mining operations, continued to undergo
significant change as new offices were installed and major earthworks were undertaken to create the footprint for the operating
set-up. Underground, rehabilitation continued to upgrade the historic infrastructure for modern active mining and as part of this a
400hp primary ventilation fan was installed – complete with automatic air doors – and major work was undertaken to
reinforce the decline as it goes through the Cate Fault area (the one major fault high in the Mine). In parallel with this activity,
the Underground (“UG”) team continued to build up its fleet of heavy mobile equipment.
In
the main Kellogg yard, construction of the Process Plant advanced significantly with the Plant building structurally complete by
year-end. Several remaining pieces of key equipment are still to be placed with the majority of the remaining work spanning
electrical and piping installation. The Filter Plant also got underway and at year-end had complete foundations and a fully erected
main Filter Feed Tank. During the quarter ended December 31, 2024 Avista Utilities installed the main power feed from the Kellogg
substation to the yard to ensure the electrical infrastructure is set-up for the significant power draw that will come with
restart. Throughout 2024 refurbishment of Pend Oreille and other used mill equipment advanced as did procurement such that both areas were essentially complete by year ended December 31, 2024.
Financial
Instruments in 2024
On
August 8, 2024, the Company and its subsidiary Silver Valley Metals Corp. (formerly American Zinc Corp.) (“Silver
Valley”) entered into a secured promissory note purchase agreement with Monetary Metals Bond III LLC (“Monetary
Metals”), a Delaware limited liability company established by Monetary Metals & Co., pursuant to which Monetary Metals
agreed to purchase, and Silver Valley agreed to issue and sell to Monetary Metals, a secured promissory note (the
“Note”) in a private placement. Pursuant to the Note, Monetary Metals agreed to loan to Silver Valley, in one or more
tranches, up to an aggregate principal amount of U.S. dollars equal to 1.2 million ounces of silver (the “Silver Loan”).
On August 8, 2024, the Company closed the first tranche of the Silver Loan in the principal amount of $16,422,039, being the number
of U.S. dollars equal to 609,805 ounces of silver. After deduction of financing costs and the first-year interest, the Company
received $13,225,005. The Silver Loan is for a term of three years, secured against the Company’s assets and repayable in
cash or silver ounces. The Silver Loan bears interest at the rate of 15% per annum, payable in cash or silver ounces on the last
day of each quarterly interest period. On September 25, 2024, the Company closed the second tranche Silver Loan in the principal
amount of $6,369,000, being the number of U.S. dollars equal to 200,000 ounces of silver. After deduction of financing costs and the
first-year interest the Company received $5,352,438. On November 6, 2024, the Company closed the third tranche Silver Loan in the
principal amount of $6,321,112, being the number of U.S. dollars equal to 198,777 ounces of silver. After deduction of financing costs
and the first-year interest the Company received $5,422,474. On November 8, 2024, the Company closed the fourth tranche Silver Loan
in the principal amount of $1,250,000, being the number of U.S. dollars equal to 39,620 ounces of silver. After deduction of financing
costs and the first-year interest the Company received $1,076,563. On December 30, 2024, the Company closed the fifth tranche Silver
Loan in the principal amount of $1,478,847, being the number of U.S. dollars equal to 50,198 ounces of silver. After deduction of
financing costs and the first-year interest the Company received $1,201,781.
A
series of related transactions also took place concurrently with closing
of the Silver Loan in August 2024 to amend certain terms of the existing financing package with Sprott Private Resource Streaming &
Royalty Corp. (“Sprott”). Firstly, the maturity dates of the series 1 convertible debentures and series 2 convertible debentures
(together, the “Debentures”) previously issued by the Company to Sprott were extended from March 31, 2026 to March 31, 2028
and March 31, 2029, respectively. Additionally, the termination date of the royalty put option (the “Royalty Put Option”)
previously granted by the Company to Sprott was amended from the later of the payment in full of the Debentures and the exercise of the
Royalty Put Option, to the later of the payment in full of the Debentures and March 31, 2029. The Company also amended certain terms of
the existing loan agreement (the “Sprott Loan”) dated as of June 23, 2023, by and among (i) the Company, (ii) Silver Valley,
and (iii) Sprott Private Resource Streaming and Royalty (US Collector), LP and Sprott Private Resources Streaming and Royalty Annex (US
Collector), LP (collectively, the “Sprott Lenders”) to extend the maturity date of the Sprott Loan from June 30, 2027 to June
30, 2030 and increase the interest payable from June 30, 2027 onwards from 10% to 15%.
As consideration for advancing the Silver
Loan, the Company agreed to issue to Monetary Metals, subject to prior TSXV approval, non-transferable bonus share purchase warrants
(the “Bonus Warrants”) in one or more tranches. The number of Bonus Warrants issued in each tranche will be equal to (a)
in connection with the first tranche, two times the number of ounces of silver advanced by Monetary Metals under the first tranche (the
“Base Warrants”) and a bonus ratchet of (i) 2.5% of the Base Warrants if at least 500,000 and up to 599,999 silver ounces
are advanced, (ii) 5.0% of the Base Warrants if up at least 600,000 and up to 699,999 silver ounces are advanced, (iii) 10.0% of the
Base Warrants if at least 700,000 and up to 799,999 silver ounces are advanced, and (iv) 15.0% of the Base Warrants if at least 800,000
silver ounces are advanced; and (b) in connection with any additional tranches, two times the number of ounces of silver advanced under
such tranche. In any event, the number of Bonus Warrants issuable to Monetary Metals is subject to a cap of 3,000,000 Bonus Warrants.
On
December 12, 2024, the Company drew $5,000,000 on the Sprott debt facility. As consideration for Sprott advancing the facility,
the Company granted a royalty for 0.5% of life-of-mine gross revenue from mining claims considered to be historically worked,
contiguous to current accessible underground development, and covered by the Company’s 2021 ground geophysical survey. A 0.35%
rate will apply to claims outside of these areas.
Project
Forecast Update (December 2024)
On
December 13, 2024, the Company announced that the Bunker Hill Mine restart project underwent a strategic review resulting in an
updated timeline and capital requirements. Pursuant to this review, the Company updated its forecast for a total restart expenditure
(excluding working capital) of $103 million, up from the previously forecasted $67 million and the $56 million in the 2022
Pre-Feasibility Study (the “PFS”), with the restart project anticipated to be delayed by up to four months. To provide
sufficient project financing for the ongoing development of the Bunker Hill Mine, the Company announced its intention to draw down
in tranches on the $21 million standby facility (the “Standby Facility”) provided by Sprott and finalize the ongoing
discussions with its strategic partners for potential offtake or similar financing for an additional $30 million.
On
December 19, 2024, the Company drew $5,000,000 on the Standby Facility. As consideration for Sprott advancing the facility, the Company
granted a royalty for 0.5% of life-of-mine gross revenue from mining claims considered to be historically worked, contiguous to current
accessible underground development, and covered by the Company’s 2021 ground geophysical survey. A 0.35% rate will apply to claims
outside of these areas.
Company
History
In
early 2020, a management team comprised of former executives from Barrick Gold Corp. assumed leadership of the Company. Since that
time, the Company conducted multiple exploration campaigns, economic studies and mineral resource estimates, and advanced the rehabilitation
and development of the Mine. In December 2021, it announced a project finance package with Sprott, an amended Settlement Agreement with the U.S. Environmental Protection Agency (the “EPA”),
and the purchase of the Bunker Hill Mine, setting the stage for a restart of the Mine.
5
Lease
and Purchase of the Bunker Hill Mine
Prior
to purchasing the Mine in January 2022, the Company had entered into a series of agreements with Placer Mining Corporation (“Placer
Mining”), the prior owner, for the lease and option to purchase the Mine. The first of these agreements was dated August 28,
2017, with subsequent amendments and/or extensions announced on November 1, 2019, July 7, 2020, and November 20, 2020.
Under
the terms of the November 20, 2020 amended agreement (the “Amended Agreement”), a purchase price of $7,700,000 was agreed,
with $5,700,000 payable in cash (with an aggregate of $300,000 to be credited toward the purchase price of the Mine as having been previously
paid by the Company) and $2,000,000 in shares of common stock of the Company. The Company agreed to make an advance payment of $2,000,000,
credited toward the purchase price of the Mine, which had the effect of decreasing the remaining amount to an aggregate of $3,400,000
payable in cash and $2,000,000 in common stock of the Company.
The
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 the EPA totaled $11,000,000.
The
Company completed the purchase of the Bunker Hill 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 stock of the Company. Concurrent with the purchase of the Mine, the Company
assumed incremental liabilities of $8,000,000 to the EPA, consistent with the terms of the amended Settlement Agreement with the EPA
that was executed in December 2021 (see “EPA 2018 Settlement Agreement & 2021 Amended Settlement Agreement” section below).
EPA
2018 Settlement Agreement & 2021 Amended EPA Settlement Agreement
Bunker
Hill entered into a Settlement Agreement and Order of Consent with the EPA on May 15, 2018. This agreement limits the Company’s
exposure to the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) liability for past environmental
damage to the mine site and surrounding area to obligations that include:
●
Payment
of $20,000,000 for historical water treatment cost recovery for amounts paid by the EPA from 1995 to 2017
●
Payment
for water treatment services provided by the EPA at the Central Treatment Plant (“CTP”) in Kellogg, Idaho until such
time that Bunker Hill either purchases or leases the CTP or builds a separate EPA-approved water treatment facility
●
Conducting
a work program as described in the Ongoing Environmental Activities section of this study
In
December 2021, the Company entered into an amended Settlement Agreement (the “Amendment”) between the Company, Idaho Department
of Environmental Quality, U.S. Department of Justice (the “DOJ”) and the EPA modifying the payment schedule and terms for
recovery of historical environmental response costs at Bunker Hill Mine incurred by the EPA. With the purchase of the mine, the remaining
payments of the EPA cost recovery liability were assumed by the Company, resulting in a total of $19,000,000 liability to the Company,
an increase of $8,000,000. The new payment schedule included a $2,000,000 payment to the EPA within 30 days of execution of the amendment,
which was made.
6
Pursuant to the December 2021 Agreement, the
remaining $17,000,000 would be paid on the following dates:
Date
Amount
November
1, 2024
$ 3,000,000
November 1, 2025
$ 3,000,000
November
1, 2026
$ 3,000,000
November
1, 2027
$ 3,000,000
November
1, 2028
$ 3,000,000
November
1, 2029
$ 2,000,000
plus accrued interest
The
changes in payment terms and schedule were contingent upon the Company securing financial assurance in the form of performance bonds
or letters of credit deemed acceptable to the EPA totaling $17,000,000, corresponding to the Company’s cost recovery
obligations to be paid in 2024 through 2029 as outlined above. In June 2022, the Company was successful in obtaining financial
assurance. The amount of the bonds or letters of credit will decrease over time as individual payments are made.
In December 2024, the Company made
the second payment under the 2021 Amended Settlement Agreement in the amount of $3,000,000. As a result, the remainder of the
payment obligation is $14,000,000. As of December 31, 2024, the Company had two payment bonds of $9,999,000 and $4,001,000 in place
to secure this liability. As of January 20, 2025 the collateral for the payment bonds are comprised of $2,975,000 letter of credits
and land pledged by third parties, with whom the Company has entered into a financing cooperation agreement that contemplates a
monthly fee of $20,000 (payable in cash or common stock of the Company, at the Company’s election).
7
2023 Financings
In
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 Limited (“Teck”) on May 13, 2022 in consideration for the Company’s acquisition of the Pend
Oreille processing plant. The warrant entitled the holder to purchase one share of common stock 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. In March 2023, Teck exercised all 10,416,667 warrants at an
exercise price of C$0.11, for aggregate gross proceeds of $837,459 (C$1,145,834) to the Company.
In
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. Each March 2023 Unit consists of one share of common stock of the Company (each, a “Unit Share”) and one common stock
purchase warrant of the Company (each, a “Warrant”). Each whole Warrant entitles the holder thereof to acquire one share
of common stock of the Company (a “Warrant Share”, and together with the Unit Shares, the “Underlying Shares”)
at an exercise price of C$0.15 per Warrant Share until March 27, 2026, subject to adjustment in certain events. The Special Warrants
issued on March 27, 2023 were converted to 51,633,727 shares of common stock and common stock purchase warrants on July 24, 2023.
On June 23, 2023, the Company
closed the upsized and improved $67,000,000 project finance package with Sprott, consisting of a $46,000,000 stream and a $21,000,000
new debt facility. The Bridge Loan was repaid from the proceeds of the Stream. The parties also agreed to extend the maturities of the
CD1 and CD2 debentures to March 31, 2026, when the full $6 million and $15 million, respectively, will become due.
8
During 2023 a subsidiary of Teck exercised its option for a minimum 5-year, 100% offtake of Bunker Hill’s zinc and lead
concentrates at its smelter in Trail, British Columbia, ensuring a long-term, sustainable revenue source.
Process
Plant Purchase
On
May 13, 2022, the Company completed the purchase of a comprehensive package of equipment and parts inventory from Teck’s Pend Oreille
site (the “Process Plant”) in eastern Washington State. The package comprised substantially all processing equipment including
complete crushing, grinding and flotation circuits suitable for a planned ~1,500 ton-per-day operation at Bunker Hill, and nearly 10,000
components and parts for mill, assay lab, conveyer, field instruments, and electrical spares.
Business
Operations
The
Mine is a zinc-lead-silver mine. When in production, the Company intends to mill polymetallic mineralizaton on-site to produce
both zinc and lead-silver concentrates which will then be shipped to Teck’s Trail smelter for processing as per the underlying
off-take agreement.
Infrastructure
The
Mine includes all mining rights and claims, surface rights, fee parcels, mineral interests, easements, existing infrastructure at Milo
Gulch, and the majority of machinery and buildings at the Kellogg Tunnel portal level, as well as all equipment and infrastructure underground at the Bunker Hill Mine Complex. It also includes all current and historic data relating to the Bunker Hill Mine Complex,
such as drill logs, reports, maps, and similar information located at the Mine site or any other location. For further detail, please
refer to the “Project Infrastructure” section in Item 2 below.
Government
Regulation and Approval
Exploration
and development activities, and any future mining operations, are subject to extensive laws and regulations governing the protection
of the environment, waste disposal, worker safety, mine construction, and protection of endangered and protected species. The Company
has made, and expects to make in the future, significant expenditures to comply with such laws and regulations. Future changes in applicable
laws, regulations and permits or changes in their enforcement or regulatory interpretation could have an adverse impact on the Company’s
financial condition or results of operations.
It
will be necessary to obtain one additional operations permit, the air quality permit, from the IDEQ prior to commencement of mine operations. As the air quality permit is required for operations, there can be no
assurance that the Company will be able to obtain it in a timely manner or at all. For further detail, please refer to the
“Environmental Studies and Permitting” section of the “Technical Report Summary” in Item 2 below.
Property
Description
The
Company has mineral rights to 440 patented mining claims covering over 5,700 acres. Of these claims, 35 include surface
ownership of approximately 259 acres. It also has certain parcels of fee property which include mineral and surface rights but not patented
mining claims. Mining claims and fee properties are located in Townships 47, 48 North, Range 2 East, Townships 47, 48 North, Range 3
East, Boise Meridian, Shoshone County, Idaho.
9
Patented
mining claims in the State of Idaho do not require permits for underground mining activities to commence on private lands. Other permits
associated with underground mining may be required, such as water discharge and site disturbance permits. The water discharge is being
handled by the EPA at the existing CTP. The Company expects to be responsible for water treatment in the future and obtain an appropriate
discharge permit.
For
further detail, please refer to the “Property Description and Ownership” section of the “Technical Report Summary”
in Item 2 below.
Competition
The
Company competes with other mining and exploration companies in connection with the acquisition of mining claims and leases on zinc and
other base and precious metals prospects as well as in connection with the recruitment and retention of qualified employees. Many of
these companies are much larger than the Company, have greater financial resources and have been in the mining business for much longer
than it has. As such, these competitors may be in a better position through size, finances and experience to acquire suitable exploration
and development properties. The Company may not be able to compete against these companies in acquiring new properties and/or qualified
people to work on its current project, or any other properties that may be acquired in the future.
Given
the size of the world market for base precious metals such as silver, lead and zinc, relative to the number of individual producers and
consumers, it is believed that no single company has sufficient market influence to significantly affect the price or supply of these
metals in the world market.
Employees
The
Company had forty full time employees as of December 31, 2024. The balance of the Company’s operations is comprised of
contracted labor and consultants.
Available
Information
We make available, free of charge, on
or through our Internet website, at www.bunkerhillmining.com , our annual reports on Form 10-K, our quarterly reports on Form 10-Q and our current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange
Act. Our website and the information contained therein or connected thereto are not intended to be, and are not, incorporated into this
Annual Report.
Our reports and other information can
be inspected on the SEC’s website at www.sec.gov . The Company also files reports under Canadian regulatory requirements
on the System for Electronic Document Analysis and Retrieval (“SEDAR+”). The Company’s reports which are filed on SEDAR+
can be found under the Company’s SEDAR+ profile at www.sedarplus.ca .