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Registration No. 333-

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM S-1

 

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

 

BUNKER HILL MINING CORP.

(Exact name of registrant as specified in its charter)

 

nevada

(State or other jurisdiction of incorporation or organization)

 

1041   32-0196442

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

 

82 Richmond Street East

Toronto, Ontario, Canada M5C 1P1

Tel: (416) 477-7771

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

J.P. Galda

c/o J.P. Galda & Co.

40 E. Lancaster Avenue LTW 22

Ardmore, PA 19003

Tel: (215) 815-1534

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

Copies of Communications to:

 

J.P. Galda & Co.

Attn: J.P. Galda, Esq.

40 East Montgomery Avenue LTW 220

Ardmore, PA 19003

Tel: (215) 815-1534

Email: jpjalda@jpgaldaco.com

 

Brian Boonstra, Esq.

Edward Shaoul, Esq.

Davis Graham & Stubbs LLP

1550 Seventeenth Street, Suite 500

Denver, CO 80202

Tel: (303) 892-9400

Email: brian.boonstra@dgslaw.com

edward.shaoul@dgslaw.com

 

Approximate date of commencement of proposed sale of the securities to the public: From time to time commencing as soon as possible after the registration statement becomes effective.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

  Large accelerated filer   Accelerated filer  
  Non-accelerated filer   Smaller reporting company  
      Emerging growth company  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

 

 

 

 

 

 

The information in this prospectus is not complete and may be changed. The selling shareholders named herein may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Subject to Completion, Dated April 15, 2024

 

PRELIMINARY PROSPECTUS

 

PROSPECTUS

 

BUNKER HILL MINING CORP.

 

94,124,660 Shares of Common Stock

 

92,511,716 Shares of Common Stock Issuable upon Exercise of Warrants

 

This prospectus relates to the resale of shares of common stock of Bunker Hill Mining Corp. (“we,” “our” or the “Company”) and shares of our common stock issuable upon exercise of common stock purchase warrants held by the selling security holders named herein under “Selling Shareholders and Certain Beneficial Owners.” We will not receive any proceeds from the resale of our common stock, although we may receive proceeds from the exercise of the warrants. The selling shareholders may offer all or part of the shares of common stock for resale from time to time through public or private transactions, at either prevailing market prices or at privately negotiated prices. The Company is paying for all registration, listing and qualification fees, printing fees and legal fees.

 

Our common stock is quoted on the OTCQB under the ticker symbol “BHLL.” On April 12, 2024, the closing price of our common stock was US$0.097 per share.

 

We are a “smaller reporting company” as defined under the federal securities laws and, as such, may elect to comply with certain reduced public company reporting requirements. The purchase of the securities offered through this prospectus involves a high degree of risk. See section entitled “Risk Factors” starting on page 9.

 

NEITHER THE SECURITIES AND EXCHANGE COMMISSION (“SEC”) NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

Dated                , 2024

 

 

 

 

TABLE OF CONTENTS

 

  Page
PROSPECTUS SUMMARY 2
SUMMARY OF THE OFFERING 8
RISK FACTORS 9
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS 23
USE OF PROCEEDS 24
DESCRIPTION OF THE COMPANY’S BUSINESS 25
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 35
DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE 39
EXECUTIVE COMPENSATION 41
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 46
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 48
DESCRIPTION OF SECURITIES TO BE REGISTERED 49
PRINCIPAL ACCOUNTING FEES AND SERVICES 51
SELLING SHAREHOLDERS AND CERTAIN BENEFICIAL OWNERS 52
PLAN OF DISTRIBUTION 56
LEGAL PROCEEDINGS 58
INTERESTS OF NAMED EXPERTS AND COUNSEL 58
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT LIABILITIES 59
WHERE YOU CAN FIND ADDITIONAL INFORMATION 60
FINANCIAL STATEMENTS F-1

 

 

 

 

ABOUT THIS PROSPECTUS

 

This prospectus is part of a registration statement that we have filed with the Securities and Exchange Commission (the “SEC”) pursuant to which the selling shareholders named herein may, from time to time, offer and sell or otherwise dispose of the shares of our common stock covered by this prospectus. You should not assume that the information contained in this prospectus is accurate on any date subsequent to the date set forth on the front cover of this prospectus or that any information we have incorporated by reference is correct on any date subsequent to the date of the document incorporated by reference, even though this prospectus is delivered or shares of common stock are sold or otherwise disposed of on a later date. It is important for you to read and consider all information contained in this prospectus in making your investment decision. You should also read and consider the information in the documents to which we have referred you under “Where You Can Find Additional Information.”

 

We have not authorized anyone to give any information or to make any representation to you other than those contained in this prospectus. You must not rely upon any information or representation not contained in this prospectus. This prospectus does not constitute an offer to sell or the solicitation of an offer to buy any of our common stock other than the shares of our common stock covered hereby, nor does this prospectus constitute an offer to sell or the solicitation of an offer to buy any securities in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about, and to observe, any restrictions as to the offering and the distribution of this prospectus applicable to those jurisdictions.

 

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PROSPECTUS SUMMARY

 

This summary description about us and our business highlights selected information contained elsewhere in this prospectus To understand this offering fully, you should read carefully the entire prospectus, including “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” Unless the context indicates or suggests otherwise, references to “we,” “our,” “us,” the “Company,” or the “Registrant” refer to Bunker Hill Mining Corp., a Nevada corporation, and its subsidiaries. References to “$” refer to monetary amounts expressed in U.S. dollars. All references to “C$” refer to monetary amounts expressed in Canadian dollars.

 

Our Business

 

Overview

 

The Company’s sole 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, 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 engaging in mineral exploration activities at the Mine. The Company has moved into the development stage concurrent with (i) purchasing the Mine and a process plant, (ii) completing successive technical and economic studies, including a Prefeasibility Study, (iii) delineating mineral reserves, and (iv) conducting the program of activities outlined above.

 

Recent Developments

 

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 (“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 837,460 (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.

 

In June 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 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 Company. 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 Sprott was envisaged to increase to $96,000,000 including the RCD royalty convertible debenture (the “RCD”), the $6,000,000 convertible debenture (the “CD1”), the $15,000,000 convertible debenture (the “CD2”), Stream and debt facility (together, the “Project Financing Package”). A $5,000,000 loan facility with Sprott that closed in December 2022 (the “Bridge Loan”) was 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.

 

In July, the Company appointed Paul Smith to its Board of Directors.

 

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Building on the successful refinancing efforts, Bunker Hill announced the receipt of final listing approval from the TSX Venture Exchange (the “TSX-V”). The common stock of the Company began trading on the TSX-V on September 8, 2023, under the symbol “BNKR”. The Company’s common stock was delisted from the Canadian Stock Exchange (the “CSE Delisting”) at the close of business on September 7, 2023.

 

In November, the company appointed Gerbrand van Heerden as its new CFO, replacing David Wiens who resigned to pursue another opportunity.

 

In November, the Company won the ESG Developer / Explorer of the year award at the ‘Resourcing Tomorrow investment conference’ recognizing the importance of the Company’s ESG strategy which is critical to enabling the restart of sustainable, profitable, and long-term mining operations within the Bunker Hill Superfund Site.

 

During the course of 2023, the Wardner Operating Yard, the base for Bunker Hill’s future mining operations, underwent a significant transformation. This included the removal of the old, prefabricated portal and its replacement with upsized steel arch sets. This enlarged Russell Portal supports the planned 1800tpd operation with additional upside capacity of 2500tpd. Whilst this work was underway, procurement of a of the ventilation and air system was completed, which will be installed before the end of 2024.

 

Engineering of the main Process Plant is advancing on track including deep pier ground support to commence as part of site preparation for the construction of the Process Plant. All main civil, structural and mechanical outputs are on track. Long-lead procurement orders have already been issued for the pre-engineered metal building, ore silo, conveyors, ball mill starter motor, thickeners tanks and inching drive. Refurbishment of the Pend Oreille mill equipment, the source of the majority of mill components, was well underway at year end.

 

In May 2023, a subsidiary of Teck Resources Limited (“Teck”) exercised its option for a minimum 5-year, 100% offtake of Bunker Hill’s zinc and lead concentrates at its smelter in Trail, BC, ensuring a long-term, sustainable revenue source.

 

On March 13, 2024, the Company granted to executives and employees of the Company 9,047,953 restricted stock units, which vest in one-third increments on March 13, 2024, March 13, 2025 and March 13, 2026.

 

On April 1, 2024, the Company granted to directors of the Company 2,527,888 deferred share units, which vested immediately.

 

Company History

 

In early 2020, a new 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 Private Resource Streaming & Royalty Corp. (“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.

 

Lease and Purchase of the Bunker Hill Mine

 

The Company purchased the Bunker Hill Mine in January 2022, as described below.

 

Prior to purchasing the Mine, the Company had entered into a series of agreements with Placer Mining Corporation (“Placer Mining”), the prior owner, for the lease and option to purchase the Mine. The first of these agreements was 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.

 

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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 in this regard 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 Settlement Agreement

 

Bunker Hill entered into a Settlement Agreement and Order on 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 this amendment, which was made.

 

The remaining $17,000,000 will 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. The amount of the bonds or letters of credit will decrease over time as individual payments are made.

 

In June 2022, the Company was successful in obtaining financial assurance. Specifically, a $9,999,000 payment bond and a $7,001,000 letter of credit were secured by $2,475,000 and $7,001,000 of cash deposits as of September 30, 2022 and provided to the EPA. Once the financial assurance was in place, the restructuring of the payment stream under the Amendment occurred with the entire $17,000,000 liability being recognized as long-term in nature.

 

In October 2022, the Company reported that it had secured a new payment bond to replace the aforementioned $7,001,000 letter of credit, in two stages. Initially, the letter of credit was reduced to $2,000,001 as a result of a new $5,000,000 payment bond obtained through an insurance company. The collateral for the new payment bond is comprised of a $2,000,000 letter of credit and land pledged by third parties, with whom the Company has entered into a financing cooperation agreement that contemplates a monthly fee of $20,000 (payable in cash or common stock of the Company, at the Company’s election). The new payment bond increased to $7,001,000 (from $5,000,000) on June 2023 due to the advancement of the multi-metals stream from Sprott Private Resource Streaming & Royalty Corp.

 

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Project Finance Package with Sprott Private Resource Streaming & Royalty Corp.

 

On 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. (“Royalty”). The term sheet consisted of an $8,000,000 royalty convertible debenture (the “RCD”), a $5,000,000 convertible debenture (the “CD1”), and a multi-metals stream of up to $37,000,000 (the “Stream”). The CD1 was subsequently increased to $6,000,000, increasing the project financing package to $51,000,000.

 

On June 17, 2022, the Company consummated the $15,000,000 convertible debenture (the “CD2”). As a result, total potential funding from Sprott was increased to $66,000,000 including the RCD, CD1, CD2 and the Stream (together, the “Project Financing Package”).

 

The Company closed the $8,000,000 RCD on January 7, 2022. The RCD bears interest at an annual rate of 9.0%, payable in cash or common stock at the Company’s option, until such time that Sprott elects to convert a royalty, with such conversion option expiring at the earlier of advancement of the Stream or July 7, 2023 (subsequently amended as described below). In the event of conversion, the RCD will cease to exist and the Company will grant a royalty for 1.85% of life-of-mine gross revenue from mining claims considered to be historically worked, contiguous to current accessible underground development, and covered by the Company’s 2021 geophysical survey (the “Sprott Royalty”). A 1.35% rate will apply to claims outside of these areas. The RCD was initially secured by a share pledge of the Company’s operating subsidiary, Silver Valley, until a full security package was put in place concurrent with the consummation of the CD1. In the event of non-conversion, the principal of the RCD will be repayable in cash.

 

The 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 common stock 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 shares of Company common stock at a price of C$0.30 per share, subject to stock exchange approval (subsequently amended, as described below). Alternatively, Sprott may elect to retire the CD1 with the cash proceeds from the Stream. The Company may elect to repay the CD1 early; if Sprott elects not to exercise its conversion option at such time, a minimum of 12 months of interest would apply.

 

Concurrent with the funding of the CD2 in June 2022, the Company and Sprott agreed to a number of amendments to the terms of the RCD, including an amendment of the maturity date from July 7, 2023, to March 31, 2025. The parties also agreed to a Royalty Put Option such that in the event the RCD is converted into a royalty as described above, the holder of the royalty will be entitled to resell the royalty to the Company for $8,000,000 upon default under the CD1 or CD2 until such time that the CD1 and CD2 are paid in full.

 

Furthermore, concurrent with the funding of the CD2 in June 2022, the Company and Sprott 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 amendments to the terms should not be treated as an extinguishment of CD1, but as a debt modification.

 

The Company closed the $15,000,000 CD2 on June 17, 2022. The CD2 bears interest at an annual rate of 10.5%, payable in cash or common stock 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. Concurrent with the funding of the CD2 in June 2022, the Company and Sprott agreed that the minimum quantity of metal delivered under the Stream, if advanced, will increase by 10% relative to the amounts noted above.

 

On December 6, 2022, the Company closed a new $5,000,000 loan facility with Sprott (the “Bridge Loan”). The Bridge Loan, which was primarily utilized to pay outstanding water treatment payables to the EPA, is secured by the same security package 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.

 

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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, as outlined above. The Bridge Loan was 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.

 

Process Plant

 

On January 25, 2022, the Company announced that it had entered into a non-binding Memorandum of Understanding (“MOU”) with Teck Resources Limited (“Teck”) for the purchase of a comprehensive package of equipment and parts inventory from its Pend Oreille site (the “Process Plant”) in eastern Washington State. The package comprises 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. The Company paid a $500,000 non-refundable deposit in January 2022.

 

On March 31, 2022, the Company announced that it had reached an agreement to satisfy the remaining purchase price for the Process Plant by way of an equity issuance of the Company. Teck will receive 10,416,667 units of the Company (the “Teck Units”) at a deemed issue price of C$0.30 per unit. Each Teck Unit consists of one share of Company common stock and one common stock purchase warrant (the “Teck Warrants”). Each whole Teck Warrant entitles the holder to acquire one share of Company common stock at a price of C$0.37 per share for a period of three years. The equity issuance and purchase of the Process Plant occurred on May 13, 2022.

 

Business Operations

 

The Mine is a zinc-lead-silver mine. When in production, the Company intends to mill mineral resources on-site to produce both zinc and lead-silver concentrates which will then be shipped to a 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 anywhere 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 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 may be necessary to obtain the following environmental permit or approved plan prior to commencement of mine operations:

 

Air quality operating permit

 

If this permit is required, 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” below.

 

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Property Description

 

The Company has mineral rights to approximately 440 patented mining claims covering over 5700 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.

 

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” 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 has twenty employees as of December 31, 2023. The balance of the Company’s operations is contracted for as consultants.

 

Smaller Reporting Company Status

 

Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) defines a “smaller reporting company” as an issuer that is not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent that is not a smaller reporting company and that:

 

had a public float of less than $75,000,000 as of the last business day of its most recently completed second fiscal quarter, computed by multiplying the aggregate worldwide number of shares of its voting and non-voting common equity held by non-affiliates by the price at which the common equity was last sold, or the average of the bid and asked prices of common equity, in the principal market for the common equity; or

 

in the case of an initial registration statement under the United States Securities Act of 1933, as amended (the “Securities Act”), or Exchange Act for shares of its common equity, had a public float of less than $75,000,000 as of a date within 30 days of the date of the filing of the registration statement, computed by multiplying the aggregate worldwide number of such shares held by non-affiliates before the registration plus, in the case of a Securities Act registration statement, the number of such shares included in the registration statement by the estimated public offering price of the shares; or

 

in the case of an issuer whose public float as calculated under the first and second bulleted paragraph above of this definition was zero, had annual revenues of less than $50,000,000 during the most recently completed fiscal year for which audited financial statements are available.

 

As a smaller reporting company, we will not be required and may not include a Compensation Discussion and Analysis section in our proxy statements; we will provide only two years of financial statements; and we need not provide the table of selected financial data. We also will have other “scaled” disclosure requirements that are less comprehensive than issuers that are not smaller reporting companies which could make our common stock less attractive to potential investors, which could make it more difficult for our shareholders to sell their shares.

 

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SUMMARY OF THE OFFERING

 

Shares of our common stock offered by Selling Shareholders and Certain Beneficial Owners 186,636,376 shares of common stock, including:
     
  51,633,727 shares of common stock issuable upon exercise of the common stock purchase warrant component of the special warrants issued on March 27, 2023;
     
  37,849,325 shares of common stock issuable upon exercise of the common stock purchase warrant component of the special warrants issued on April 1, 2022;
     
 

20,833,334 shares of common stock issued to Teck Resource Limited on a private placement basis in May 2022 and upon the exercise of warrants issued in March 2023;

 

 

  48,255,431 shares of common stock issued to Sprott Private Resource Streaming & Royalty Corp.;
     
  7,678,172 shares of common stock issued pursuant to awards granted under the Company’s equity compensation plans;
     
  17,357,723 shares of common stock issued in other private placement transactions; and
     
  3,028,664 shares of common stock issuable upon exercise of the common stock purchase warrant component of warrants issued in other private placements.
     
     
Shares of our common stock outstanding before the offering   338,999,216 shares of common stock as of April 12, 2024 (not including shares issuable upon exercisable warrants).
     
Offering Price   Determined at the time of sale by the selling shareholders.
     
Use of proceeds   We will not receive any proceeds from the sale of shares by the selling shareholders, although we may receive proceeds from the exercise of common stock purchase warrants. Any such proceeds will we used for general working capital purposes.
     
TSX Venture Exchange (TSX-V) Trading Symbol   BNKR
     
OTCQB Trading Symbol   BHLL
     
Risk Factors   The shares of our common stock offered hereby involves a high degree of risk and should not be purchased by investors who cannot afford the loss of their entire investment. See “Risk Factors”.

 

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RISK FACTORS

 

You should carefully consider the risks described below together with all other information included in our public filings before making an investment decision with regard to our securities. The statements contained in or incorporated into this prospectus that are not historic facts are forward- looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward- looking statements. While the risks described below are the ones we believe are most important for you to consider, these risks are not the only ones that we face. If any of the following events described in these risk factors actually occurs, our business, financial condition or results of operations could be harmed. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.

 

Our business activities and the value of our securities are subject to significant hazards and risks, including those described below. If any of such events should occur, our business, financial condition, liquidity, and/or results of operations could be materially harmed, and holders and purchasers of our securities could lose part or all of their investments. Our risk factors are grouped into the following categories:

 

General Risk Factors;

 

Risks Related to Mining and Exploration;

 

Risks Related to the Company’s Common Stock; and

 

Risks Related to the Offering.

 

General Risk Factors

 

A lead concentrate offtake agreement with Teck Resources may not be reached, which could result in less favorable commercial terms for the sale of concentrates envisaged to be produced by the Mine and could also impact the Company’s ability to secure offtake financing. Regardless of actions taken by Teck, there can be no assurance that the Company will be able to secure or close offtake financing, which could have an adverse effect on the Company’s financial position and a negative impact the Company’s ability to secure additional funding from Sprott or an alternative capital provider.

 

The Company may not be able to execute a lead concentrate offtake agreement for the sale of lead concentrates to Teck Resources at its Trail smelter, as contemplated with Teck’s option to acquire 100% of lead concentrate produced in the first five years at the Bunker Hill Mine. If such an agreement cannot be reached, the Company may not be able to sell its lead concentrate to Teck, which could result in difficulties securing alternative commercial arrangements for the sale of concentrate, less favorable commercial terms in the event that alternative commercial arrangements can be secured, and/or higher transportation and other costs. In addition, the Company may not be able to secure or close offtake financing, regardless of whether an agreement is reached with Teck; the terms of any offtake financing might not be favorable to the Company; and/or the Company may incur substantial fees and costs related to such financing. The Company’s inability to secure or close offtake financing, or arrange a suitable alternative, may have an adverse effect on the Company’s operations and financial position.

 

The Bunker Hill Mine restart is expected to take place in 2024, with first concentrate production targeted for the fourth quarter of 2024. Changes to this timeline, or other factors impacting the restart project budget, could increase the Company’s required capital needs through the completion of the project, which would adversely affect the Company’s ability to secure additional funding, thereby adversely affecting its financial condition.

 

The Bunker Hill Mine restart is expected to take place in 2024, with first concentrate production targeted for the fourth quarter of 2024. However, the estimated timing of Bunker Hill Mine restart is subject to change based on factors beyond the Company’s control, including but not limited to supply chain dynamics. In addition, the Company’s pre-production budget estimates are subject to change based on factors beyond its control, including but not limited to cost inflation and supply chain dynamics. An increase in the Company’s pre-production budget estimates could have a materially adverse impact on its ability to secure additional financing. This could have a material adverse effect on its financial condition, results of operations, or prospects. Sales of substantial amounts of securities may have a highly dilutive effect on the Company’s ownership or share structure. Sales of a large number of shares of Company common stock in the public markets, or the potential for such sales, could decrease the trading price of the common stock and could impair the Company’s ability to raise capital through future sales of common stock. The Company has not yet commenced commercial production at any of its properties and, therefore, has not generated positive cash flows to date and has no reasonable prospects of doing so unless successful commercial production can be achieved at the Mine. The Company expects to continue to incur negative investing and operating cash flows until such time as it enters into successful commercial production. This will require the Company to deploy its working capital to fund such negative cash flow and to possibly seek additional sources of financing. There is no assurance that any such financing sources will be available or sufficient to meet the Company’s requirements, or if available, upon terms acceptable to the Company. There is no assurance that the Company will be able to continue to raise equity capital or to secure additional debt financing, or that the Company will not continue to incur losses.

 

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Payment bonds securing $17,000,000 due by the Company to the EPA for cost recovery may not be renewable or may only be renewable on terms that are unfavorable to the Company, which would adversely affect its financial condition or cause a default under the revised settlement agreement with the EPA and Sprott.

 

In 2022, the Company secured financial assurance in the form of payment bonds in accordance with the revised settlement agreement with the EPA, in relation to $17,000,000 of payments due to the EPA for cost recovery between 2024 and 2029. These bonds are renewed annually, and as of December 31, 2023, require $6,476,000 of collateral in the form of letters of credit. To the extent that the parties providing the payment bonds demand additional collateral beyond the current requirements, or other unfavorable terms or conditions, the Company may not be able to renew the payment bonds on favorable conditions, or at all. This could have a materially adverse impact on the Company, including a potential default under the revised settlement agreement with the EPA.

 

The Company has a limited operating history on which to base an evaluation of its business and prospects.

 

Since its inception, the Company has had no revenue from operations. The Company has no history of producing products from the Bunker Hill property. The Mine is a historic, past producing mine with very little recent exploration work. Advancing the Mine through the development stage will require significant capital and time, and successful commercial production from the Mine will be subject to completing the requisite studies, permitting and re-commissioning of the Mine, constructing a processing plant, and completing other related works and infrastructure. As a result, the Company is subject to all of the risks associated with developing and establishing new mining operations and business enterprises, including:

 

completion of studies to verify reserves and commercial viability, including the ability to find sufficient ore reserves to support a commercial mining operation;

 

the timing and cost, which can be considerable, of further exploration, preparing feasibility studies, and permitting and construction of infrastructure, mining and processing facilities;

 

the availability and costs of drill equipment, exploration personnel, skilled labor, and mining and processing equipment, if required;

 

the availability and cost of appropriate smelting and/or refining arrangements, if required;

 

compliance with stringent environmental and other governmental approval and permit requirements;

 

the availability of funds to finance exploration, development, and construction activities, as warranted;

 

potential opposition from non-governmental organizations, local groups or local inhabitants that may delay or prevent development activities;

 

potential increases in exploration, construction, and operating costs due to changes in the cost of fuel, power, materials, and supplies; and

 

potential shortages of mineral processing, construction, and other facilities related supplies.

 

The costs, timing, and complexities of exploration, development, and construction activities may be increased by the location of the Company’s properties and demand by other mineral exploration and mining companies. It is common in exploration programs to experience unexpected problems and delays during drill programs and, if commenced, development, construction, and mine start-up. In addition, the Company’s management and workforce will need to be expanded, and sufficient housing and other support systems for its workforce will have to be established. This could result in delays in the commencement of mineral production and increased costs of production. Accordingly, the Company’s activities may not result in profitable mining operations and it may not succeed in establishing mining operations or profitably producing metals at any of its current or future properties, including the Mine.

 

10

 

 

The Company has a history of losses and expects to continue to incur losses in the future.

 

The Company has incurred losses since inception, has had negative cash flow from operating activities, and expects to continue to incur losses in the future. The Company has incurred the following losses from operations during each of the following periods:

 

$11,600,574 for the year ended December 31, 2023;

 

$16,487,161 for the year ended December 31, 2022; and

 

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

 

The Company expects to continue to incur losses unless and until such time as the Mine enters into commercial production and generates sufficient revenues to fund continuing operations. The Company recognizes that if it is unable to generate significant revenues from mining operations and dispositions of its properties, the Company will not be able to earn profits or continue operations. At this early stage of its operation, the Company also expects to face the risks, uncertainties, expenses, and difficulties frequently encountered by smaller reporting companies. The Company cannot be sure that it will be successful in addressing these risks and uncertainties and its failure to do so could have a materially adverse effect on its financial condition.

 

Risks Related to Mining and Exploration

 

The Company is in the development stage.

 

The nature of mineral exploration and production activities involves a high degree of risk and the possibility of uninsured losses.

 

Exploration for and the production of minerals is highly speculative and involves much greater risk than many other businesses. Most exploration programs do not result in the discovery of mineralization, and any mineralization discovered may not be of sufficient quantity or quality to be profitably mined. The Company’s operations are, and any future development or mining operations the Company may conduct will be, subject to all of the operating hazards and risks normally incidental to exploring for and development of mineral properties, including, but not limited to:

 

economically insufficient mineralized material;

 

fluctuation in production costs that make mining uneconomical;

 

labor disputes;

 

unanticipated variations in grade and other geologic problems;

 

environmental hazards;

 

water conditions;

 

difficult surface or underground conditions;

 

industrial accidents;

 

metallurgic and other processing problems;

 

11

 

 

mechanical and equipment performance problems;

 

failure of dams, stockpiles, wastewater transportation systems, or impoundments;

 

unusual or unexpected rock formations; and

 

personal injury, fire, flooding, cave-ins and landslides.

 

Any of these risks can materially and adversely affect, among other things, the development of properties, production quantities and rates, costs and expenditures, potential revenues, and production dates. If the Company determines that capitalized costs associated with any of its mineral interests are not likely to be recovered, the Company would incur a write-down of its investment in these interests. All these factors may result in losses in relation to amounts spent that are not recoverable, or that result in additional expenses.

 

Commodity price volatility could have dramatic effects on the results of operations and the Company’s ability to execute its business plan.

 

The price of commodities varies on a daily basis. The Company’s future revenues, if any, will likely be derived from the extraction and sale of base and precious metals. The price of those commodities has fluctuated widely, particularly in recent years, and is affected by numerous factors beyond the Company’s control, including economic and political trends, expectations of inflation, currency exchange fluctuations, interest rates, global and regional consumptive patterns, speculative activities and increased production due to new extraction developments and improved extraction and production methods. The effect of these factors on the price of base and precious metals, and therefore the economic viability of the Company’s business, could negatively affect its ability to secure financing or its results of operations.

 

The Company’s development and production plans, and cost estimates, in the Technical Report Summary may vary and/or not be achieved.

 

There is no certainty that the results in the Technical Report Summary will be realized. The decision to implement the Mine restart scenario to be included in the Technical Report Summary was not be based on a feasibility study of mineral reserves demonstrating economic and technical viability, and therefore there is increased risk that the Technical Report Summary results will not be realized. If the Company is unable to achieve the results in the Technical Report Summary, it may have a material negative impact on the Company, and its capital investment to implement the restart scenario may be lost.

 

Costs charged to the Company by the Idaho Department of Environmental Quality (“IDEQ”) for treatment of wastewater fluctuate a great deal and are not within the Company’s control.

 

The Company is billed annually for water treatment activities performed by the IDEQ for the EPA. The water treatment costs that Bunker Hill is billed for are partially related to the EPA’s direct cost of treating the water emanating from the Bunker Hill Mine, which are comprised of lime and flocculant usage, electricity consumption, maintenance and repair, labor and some overhead. Rate of discharge of effluent from the Bunker Hill Mine is largely dependent on the level of precipitation within a given year and how close in the calendar year the Company is to the spring run-off. Increases in water infiltrations and gravity flows within the mine generally increase after winter and result in a peak discharge rate in May. Increases in gravity flow and consequently the rate of water discharged by the mine have a highly robust correlation with metals concentrations and consequently metal loads of effluent.

 

Hydraulic loads (quantities of water per unit of time) and metal loads (quantities of metals per unit of volume of effluent per unit of time) are the two main determinants of cost of water treatment by the EPA in the relationship with the Bunker Hill Mine because greater metal loads consume more lime, more flocculent and more electricity to remove the increased levels of metals and make the water clean. The scale of the treatment plant is determined by how much total water can be processed (hydraulic load) at any point in time. This determines how much labor is required to operate the plant and generally determines the amount of overhead required to run the IDEQ business.

 

The EPA has completed significant upgrades to the water treatment capabilities of the CTP and is now capable of producing treated water than can meet a much higher discharge standard (which Bunker Hill has been satisfying since May 2023). While it was understood that improved performance capability would increase the cost of operating the plant, it was unclear to the EPA, and consequently to Bunker Hill, how much the costs would increase by.

 

12

 

 

These elements described above, and others, impact the direct costs of water treatment. A significant portion of the total amount invoiced by the EPA each year is indirect cost that is determined as a percentage of the direct cost. Each year the indirect costs percentage changes within each region of the EPA. Bunker Hill has no ability to impact the percentage of indirect cost that is set by the EPA regional office. Bunker Hill also has no advanced notice of what the percentage of indirect cost will be until it receives its invoice in June of the year following the billing period. The Company remains unable to estimate EPA billings to a high degree of accuracy.

 

Estimates of mineral reserves and resources are subject to evaluation uncertainties that could result in project failure.

 

The Company’s exploration and future mining operations, if any, are and would be faced with risks associated with being able to accurately predict the quantity and quality of mineral resources/reserves within the earth using statistical sampling techniques. Estimates of any mineral resource/reserve on the Mine would be made using samples obtained from appropriately placed trenches, test pits, underground workings, and designed drilling. There is an inherent variability of assays between check and duplicate samples taken adjacent to each other and between sampling points that cannot be reasonably eliminated. Additionally, there also may be unknown geologic details that have not been identified or correctly appreciated at the current level of accumulated knowledge about the Mine. This could result in uncertainties that cannot be reasonably eliminated from the process of estimating mineral resources/reserves. If these estimates were to prove to be unreliable, the Company could implement an exploitation plan that may not lead to commercially viable operations in the future.

 

Any material changes in mineral resource/reserve estimates and grades of mineralization will affect the economic viability of placing a property into production and a property’s return on capital.

 

As the Company has not commenced actual production, mineral resource estimates may require adjustments or downward revisions. In addition, the grade of ore ultimately mined, if any, may differ from that indicated by future feasibility studies and drill results. Minerals recovered in small-scale tests may not be duplicated in large-scale tests under on-site conditions or in production scale.

 

The Company’s exploration activities may not be commercially successful, which could lead the Company to abandon its plans to develop the Mine and its investments in exploration.

 

The Company’s long-term success depends on its ability to identify mineral deposits on the Mine and other properties the Company may acquire, if any, that the Company can then develop into commercially viable mining operations. Mineral exploration is highly speculative in nature, involves many risks, and is frequently non-productive. These risks include unusual or unexpected geologic formations, and the inability to obtain suitable or adequate machinery, equipment, or labor. The success of commodity exploration is determined in part by the following factors:

 

the identification of potential mineralization based on surficial analysis;

 

availability of government-granted exploration permits;

 

the quality of management and its geological and technical expertise; and

 

the capital available for exploration and development work.

 

Substantial expenditures are required to establish proven and probable reserves through drilling and analysis, to develop metallurgical processes to extract metal, and to develop the mining and processing facilities and infrastructure at any site chosen for mining. Whether a mineral deposit will be commercially viable depends on a number of factors that include, without limitation, the particular attributes of the deposit, such as size, grade, and proximity to infrastructure; commodity prices, which can fluctuate widely; and government regulations, including, without limitation, regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals, and environmental protection. The Company may invest significant capital and resources in exploration activities and may abandon such investments if the Company is unable to identify commercially exploitable mineral reserves. The decision to abandon a project may have an adverse effect on the market value of the Company’s securities and the ability to raise future financing.

 

13

 

 

The Company is subject to significant governmental regulations that affect its operations and costs of conducting its business and may not be able to obtain all required permits and licenses to place its properties into production.

 

The Company’s current and future operations, including exploration and development of the Mine, do and will require permits from governmental authorities and will be governed by laws and regulations, including:

 

laws and regulations governing mineral concession acquisition, prospecting, development, mining, and production;

 

laws and regulations related to exports, taxes, and fees;

 

labor standards and regulations related to occupational health and mine safety; and

 

environmental standards and regulations related to waste disposal, toxic substances, land use reclamation, and environmental protection.

 

Specifically, it may be necessary to obtain the following environmental permit or approved plan prior to commencement of mine operations:

 

Air quality operating permit

 

If this permit is required, there can be no assurance that the Company will be able to obtain them in a timely manner or at all.

 

Companies engaged in exploration activities often experience increased costs and delays in production and other schedules as a result of the need to comply with applicable laws, regulations, and permits. Failure to comply with applicable laws, regulations, and permits may result in enforcement actions, including the forfeiture of mineral claims or other mineral tenures, orders issued by regulatory or judicial authorities requiring operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or costly remedial actions. The Company cannot predict if all permits that it may require for continued exploration, development, or construction of mining facilities and conduct of mining operations will be obtainable on reasonable terms, if at all. Costs related to applying for and obtaining permits and licenses may be prohibitive and could delay its planned exploration and development activities. The Company may be required to compensate those suffering loss or damage by reason of the mineral exploration or its mining activities, if any, and may have civil or criminal fines or penalties imposed for violations of, or its failure to comply with, such laws, regulations, and permits.

 

Existing and possible future laws, regulations, and permits governing operations and activities of exploration companies, or more stringent implementation of such laws, regulations and permits, could have a material adverse impact on the Company’s business and cause increases in capital expenditures or require abandonment or delays in exploration. The Mine is located in Northern Idaho and has numerous clearly defined regulations with respect to permitting mines, which could potentially impact the total time to market for the project.

 

The Company’s activities are subject to environmental laws and regulations that may increase its costs of doing business and restrict its operations.

 

Both mineral exploration and extraction require permits from various federal, state, and local governmental authorities and are governed by laws and regulations, including those with respect to prospecting, mine development, mineral production, transport, export, taxation, labor standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters. There can be no assurance that the Company will be able to obtain or maintain any of the permits required for the exploration of the mineral properties or for the construction and operation of the Mine at economically viable costs. If the Company cannot accomplish these objectives, its business could fail. The Company believes that it is in compliance with all material laws and regulations that currently apply to its activities but there can be no assurance that the Company can continue to remain in compliance. Current laws and regulations could be amended, and the Company might not be able to comply with them, as amended. Further, there can be no assurance that the Company will be able to obtain or maintain all permits necessary for its future operations, or that it will be able to obtain them on reasonable terms. To the extent such approvals are required and are not obtained, the Company may be delayed or prohibited from proceeding with planned exploration or development of the mineral properties.

 

14

 

 

The Company’s activities are subject to extensive laws and regulations governing environmental protection. The Company is also subject to various reclamation-related conditions. Although the Company closely follows and believes it is operating in compliance with all applicable environmental regulations, there can be no assurance that all future requirements will be obtainable on reasonable terms. Failure to comply may result in enforcement actions causing operations to cease or be curtailed and may include corrective measures requiring capital expenditures. Intense lobbying over environmental concerns by non-governmental organizations has caused some governments to cancel or restrict development of mining projects. Current publicized concern over climate change may lead to carbon taxes, requirements for carbon offset purchases or new regulation. The costs or likelihood of such potential issues to the Company cannot be estimated at this time.

 

The legal framework governing this area is constantly developing; therefore, the Company is unable to fully ascertain any future liability that may arise from the implementation of any new laws or regulations, although such laws and regulations are typically strict and may impose severe penalties (financial or otherwise). The proposed activities of the Company, as with any exploration company, may have an environmental impact that may result in unbudgeted delays, damage, loss and other costs and obligations, including, without limitation, rehabilitation and/or compensation. There is also a risk that the Company’s operations and financial position may be adversely affected by the actions of environmental groups or any other group or person opposed in general to the Company’s activities and, in particular, the proposed exploration and mining by the Company within the state of Idaho and the United States.

 

Environmental hazards unknown to the Company, which have been caused by previous or existing owners or operators of the Mine, may exist on the properties in which the Company holds an interest. Many of the properties in which the Company has ownership rights are located within the Coeur d’Alene Mining District, which is currently the site of a Federal Superfund cleanup project. It is possible that environmental cleanup or other environmental restoration procedures could remain to be completed or mandated by law, causing unpredictable and unexpected liabilities to arise.

 

Regulations and pending legislation governing issues involving climate change could result in increased operating costs, which could have a material adverse effect on the Company’s business.

 

A number of governments or governmental bodies have introduced or are contemplating legislative and/or regulatory changes in response to concerns about the potential impact of climate change. Legislation and increased regulation regarding climate change could impose significant costs on the Company, on its future joint venture partners, if any, and on its suppliers, including costs related to increased energy requirements, capital equipment, environmental monitoring and reporting, and other costs necessary to comply with such regulations. Any adopted future climate change regulations could also negatively impact the Company’s ability to compete with companies situated in areas not subject to such limitations. Given the emotional and political significance and uncertainty surrounding the impact of climate change and how it should be dealt with, the Company cannot predict how legislation and regulation will ultimately affect its financial condition, operating performance, and ability to compete. Furthermore, even without such regulation, increased awareness and any adverse publicity in the global marketplace about potential impacts on climate change by the Company or other companies in its industry could harm the Company’s reputation. The potential physical impacts of climate change on its operations are highly uncertain, could be particular to the geographic circumstances in areas in which the Company operates and may include changes in rainfall and storm patterns and intensities, water shortages, changing sea levels, and changing temperatures. These impacts may adversely impact the cost, production, and financial performance of the Company’s operations.

 

There are several governmental regulations that materially restrict mineral exploration. The Company will be subject to the federal regulations (environmental) and the laws of the State of Idaho as the Company carries out its exploration program. The Company may be required to obtain additional work permits, post bonds and perform remediation work for any physical disturbance to the land in order to comply with these laws. While the Company’s planned exploration program budgets for regulatory compliance, there is a risk that new regulations could increase its costs of doing business and prevent it from carrying out its exploration program.

 

15

 

 

Land reclamation requirements for the Company’s properties may be burdensome and expensive.

 

Although variable depending on location and the governing authority, land reclamation requirements are generally imposed on mineral exploration companies (as well as companies with mining operations) in order to minimize long-term effects of land disturbance.

 

Reclamation may include requirements to:

 

control dispersion of potentially deleterious effluents;

 

treat ground and surface water to drinking water standards; and

 

reasonably re-establish pre-disturbance landforms and vegetation.

 

To date, the Company has not been subject to reclamation or bonding obligations in connection with its past or potential future development activities. If these obligations were to occur in the future, or if the Company is required to carry out reclamation work, the Company must allocate financial resources that might otherwise be spent on further exploration and development programs.

 

Social and environmental activism may have an adverse effect on the reputation and financial condition of the Company or its relationship with the communities in which it operates.

 

There is an increasing level of public concern relating to the effects of mining on the nature landscape, in communities and on the environment. Certain non-governmental organizations, public interest groups and reporting organizations (“NGOs”) that oppose resource development can be vocal critics of the mining industry. In addition, there have been many instances in which local community groups have opposed resource extraction activities, which have resulted in disruption and delays to the relevant operation. While the Company seeks to operate in a socially responsible manner and believes it has good relationships with local communities in the regions in which it operates, NGOs or local community organizations could direct adverse publicity against and/or disrupt the operations of the Company in respect of one or more of its properties, regardless of its successful compliance with social and environmental best practices, due to political factors or activities of unrelated third parties on lands in which the Company has an interest or the Company’s operations specifically. Any such actions and the resulting media coverage could have an adverse effect on the reputation and financial condition of the Company or its relationships with the communities in which it operates, which could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

 

The mineral exploration and mining industry is highly competitive.

 

The mining industry is intensely competitive in all of its phases. As a result of this competition, some of which is with large established mining companies with substantial capabilities and with greater financial and technical resources than those of the Company, the Company may be unable to acquire additional properties or obtain financing on terms it considers acceptable. The Company also competes with other mining companies in the recruitment and retention of qualified managerial and technical employees. If the Company is unable to successfully compete for qualified employees, its exploration and development programs may be slowed down or suspended. The Company competes with other companies that produce its planned commercial products for capital. If the Company is unable to raise sufficient capital, its exploration and development programs may be jeopardized or it may not be able to acquire, develop, or operate additional mining projects.

 

The silver industry is highly competitive, and the Company is required to compete with other corporations and business entities, many of which have greater resources than it does. Such corporations and other business entities could outbid the Company for potential projects or produce minerals at lower costs, which would have a negative effect on the Company’s operations.

 

Metal prices are highly volatile. If a profitable market for its metals does not exist, the Company may have to cease operations.

 

Mineral prices have been highly volatile and are affected by numerous international economic and political factors over which the Company has no control. The Company’s long-term success is highly dependent upon the price of silver, as the economic feasibility of any ore body discovered on its current property, or on other properties the Company may acquire in the future, would, in large part, be determined by the prevailing market price of the minerals. If a profitable market does not exist, the Company may have to cease operations.

 

16

 

 

A shortage of equipment and supplies could adversely affect the Company’s ability to operate its business.

 

The Company is dependent on various supplies and equipment to carry out its mining exploration and, if warranted, development operations. Any shortage of such supplies, equipment, and parts could have a material adverse effect on the Company’s ability to carry out its operations and could therefore limit, or increase the cost of, production.

 

Joint ventures and other partnerships, including offtake arrangements, may expose the Company to risks.

 

The Company may enter into joint ventures, partnership arrangements, or offtake agreements with other parties in relation to the exploration, development, and production of the properties in which the Company has an interest. Any failure of such other companies to meet their obligations to the Company or to third parties, or any disputes with respect to the parties’ respective rights and obligations, could have a material adverse effect on the Company, the development and production at its properties, including the Mine, and on future joint ventures, if any, or their properties, and therefore could have a material adverse effect on its results of operations, financial performance, cash flows and the price of its common stock.

 

The Company may experience difficulty attracting and retaining qualified management to meet the needs of its anticipated growth, and the failure to manage its growth effectively could have a material adverse effect on its business and financial condition.

 

The success of the Company is currently largely dependent on the performance of its directors and officers. The loss of the services of any of these people could have a materially adverse effect on the Company’s business and prospects. There is no assurance the Company can maintain the services of its directors, officers or other qualified personnel required to operate its business. As the Company’s business activity grows, the Company will require additional key financial, administrative and mining personnel as well as additional operations staff. There can be no assurance that these efforts will be successful in attracting, training and retaining qualified personnel as competition for people with these skill sets increase. If the Company is not successful in attracting, training and retaining qualified personnel, the efficiency of its operations could be impaired, which could have an adverse impact on the Company’s operations and financial condition.

 

The Company is dependent on a relatively small number of key employees, including its Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”). The loss of any officer could have an adverse effect on the Company. The Company has no life insurance on any individual, and the Company may be unable to hire a suitable replacement for them on favorable terms, should that become necessary.

 

The Company may be subject to potential conflicts of interest with its directors and/or officers.

 

Certain directors and officers of the Company are or may become associated with other mining and/or mineral exploration and development companies, which may give rise to conflicts of interest. Directors who have a material interest in any person who is a party to a material contract or a proposed material contract with the Company are required, subject to certain exceptions, to disclose that interest and generally abstain from voting on any resolution to approve such a contract. In addition, directors and officers are required to act honestly and in good faith with a view to the best interests of the Company. Some of the directors and officers of the Company have either other full-time employment or other business or time restrictions placed on them and accordingly, the Company will not be the only business enterprise of these directors and officers. Further, any failure of the directors or officers of the Company to address these conflicts in an appropriate manner or to allocate opportunities that they become aware of to the Company could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

 

The Company’s results of operations could be affected by currency fluctuations.

 

The Company’s properties are currently all located in the U.S. and while most costs associated with these properties are paid in U.S. dollars, a significant amount of its administrative expenses are payable in Canadian dollars. There can be significant swings in the exchange rate between the U.S. dollar and the Canadian dollar. There are no plans at this time to hedge against any exchange rate fluctuations in currencies.

 

17

 

 

Title to the Company’s properties may be subject to other claims that could affect its property rights and claims.

 

There are risks that title to the Company’s properties may be challenged or impugned. The Mine is located in Northern Idaho and may be subject to prior unrecorded agreements or transfers and title may be affected by undetected defects.

 

The Company may be unable to secure surface access or purchase required surface rights.

 

Although the Company obtains the rights to some or all of the minerals in the ground subject to the mineral tenures that the Company acquires, or has the right to acquire, in some cases the Company may not acquire any rights to, or ownership of, the surface to the areas covered by such mineral tenures. In such cases, applicable mining laws usually provide for rights of access to the surface for the purpose of carrying on mining activities; however, the enforcement of such rights through the courts can be costly and time consuming. It is necessary to negotiate surface access or to purchase the surface rights if long-term access is required. There can be no guarantee that, despite having the right at law to access the surface and carry on mining activities, the Company will be able to negotiate satisfactory agreements with any such existing landowners/occupiers for such access or purchase of such surface rights, and therefore the Company may be unable to carry out planned mining activities. In addition, in circumstances where such access is denied, or no agreement can be reached, the Company may need to rely on the assistance of local officials or the courts in such jurisdiction, the outcomes of which cannot be predicted with any certainty. The Company’s inability to secure surface access or purchase required surface rights could materially and adversely affect its timing, cost, or overall ability to develop any mineral deposits the Company may locate.

 

The Company’s properties and operations may be subject to litigation or other claims.

 

From time to time the Company’s properties or operations may be subject to disputes that may result in litigation or other legal claims. The Company may be required to take countermeasures or defend against these claims, which will divert resources and management time from operations. The costs of these claims or adverse filings may have a material effect on the Company’s business and results of operations.

 

Mineral exploration and development is subject to extraordinary operating risks. The Company currently insures against these risks on a limited basis. In the event of a cave-in or similar occurrence, the Company’s liability may exceed its resources and insurance coverage, which would have an adverse impact on the Company.

 

Mineral exploration, development and production involve many risks. The Company’s operations will be subject to all the hazards and risks inherent in the exploration for mineral resources and, if the Company discovers a mineral resource in commercially exploitable quantity, its operations could be subject to all of the hazards and risks inherent in the development and production of resources, including liability for pollution, cave-ins or similar hazards against which the Company cannot insure or against which the Company may elect not to insure. Any such event could result in work stoppages and damage to property, including damage to the environment. As of the date hereof, the Company currently maintains commercial general liability insurance and umbrella liability insurance against these operating hazards, in connection with its exploration program. The payment of any liabilities that arise from any such occurrence that would not otherwise be covered under the current insurance policies would have a material adverse impact on the Company.

 

Mineral exploration and development are dependent on adequate infrastructure.

 

Exploration, development and processing activities depend, to one degree or another, on adequate infrastructure. Reliable roads, bridges, power sources and water supply are important elements of infrastructure, which affect access, capital and operating costs. The lack of availability of acceptable terms or the delay in the availability of any one or more of these items could prevent or delay exploration or development of the Company’s mineral properties. If adequate infrastructure is not available in a timely manner, there can be no assurance that the exploration or development of the Company’s mineral properties will be commenced or completed on a timely basis, if at all. Furthermore, unusual or infrequent weather phenomena, sabotage, government or other interference in the maintenance or provision of necessary infrastructure could adversely affect the Company’s operations.

 

Exploration operations depend on adequate infrastructure. In particular, reliable power sources, water supply, transportation and surface facilities are necessary to explore and develop mineral projects. Failure to adequately meet these infrastructure requirements or changes in the cost of such requirements could affect the Company’s ability to carry out exploration and future development operations and could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

 

18

 

 

The Company may purchase additional mining properties.

 

If the Company loses or abandons its interests in its mineral properties, there is no assurance that it will be able to acquire another mineral property of merit or that such an acquisition would be approved by the TSX-V, OTCQB or any other applicable securities exchange or marketplace. There is also no guarantee that the TSX-V, OTCQB or any other applicable securities exchange or marketplace will approve the acquisition of any additional properties by the Company, whether by way of an option or otherwise, should the Company wish to acquire any additional properties.

 

The Company’s operations are dependent on information technology systems that may be subject to network disruptions

 

The Company’s operations depend on information technology (“IT”) systems. These IT systems could be subject to network disruptions caused by a variety of sources, including computer viruses, security breaches and cyber-attacks, as well as disruptions resulting from incidents such as cable cuts, damage to physical plants, natural disasters, terrorism, fire, power loss, vandalism and theft. The Company’s operations also depend on the timely maintenance, upgrade and replacement of networks, equipment, IT systems and software, as well as pre-emptive expenses to mitigate the risks of failures. Any of these and other events could result in information system failures, delays and/or increase in capital expenses. The failure of information systems or a component of information systems could, depending on the nature of any such failure, adversely impact the Company’s reputation and results of operations.

 

Although to date the Company has not experienced any material losses relating to cyber-attacks or other information security breaches, there can be no assurance that the Company will not incur such losses in the future. The Company’s risk and exposure to these matters cannot be fully mitigated because of, among other things, the evolving nature of these threats. As a result, cyber security and the continued development and enhancement of controls, processes and practices designed to protect systems, computers, software, data and networks from attack, damage or unauthorized access remain a priority. As cyber threats continue to evolve, the Company may be required to expend additional resources to continue to modify or enhance protective measures or to investigate and remediate any security vulnerabilities.

 

The Company is a reporting issuer and reporting requirements under applicable securities laws may increase legal and financial compliance costs.

 

The Company is subject to reporting requirements under applicable securities law, the listing and other requirements of the TSX-V, the OTCQB, the SEC and other applicable securities rules and regulations. Compliance with these requirements can increase legal and financial compliance costs, make some activities more difficult, time-consuming or costly, and increase demand on existing systems and resources. Among other things, the Company is required to file annual, quarterly and current reports with respect to its business and results of operations and maintain effective disclosure controls and procedures and internal controls over financial reporting. In order to maintain and, if required, improve disclosure controls and procedures and internal controls over financial reporting to meet this standard, significant resources and management oversight is required. As a result, management’s attention may be diverted from other business concerns, which could harm the Company’s business and results of operations. The Company may need to hire additional employees to comply with these requirements in the future, which would increase its costs and expenses.

 

Risks Related to the Company’s Common Stock

 

The Company’s common stock price may be volatile and as a result, investors could lose all or part of their investment.

 

In addition to volatility associated with equity securities in general, the value of an investor’s investment could decline due to the impact of any of the following factors upon the market price of the Company’s common stock:

 

disappointing results from the Company’s exploration efforts;

 

decline in demand for its common stock;

 

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downward revisions in securities analysts’ estimates or changes in general market conditions;

 

technological innovations by competitors or in competing technologies;

 

investor perception of the Company’s industry or its prospects; and

 

general economic trends.

 

The Company’s common stock price on the TSX-V has experienced significant price and volume fluctuations. Stock markets in general have experienced extreme price and volume fluctuations, and the market prices of securities have been highly volatile. These fluctuations are often unrelated to operating performance and may adversely affect the market price of the common stock. As a result, an investor may be unable to sell any common stock such investor acquires at a desired price.

 

Potential future sales under Rule 144 may depress the market price for the Company’s common stock.

 

In general, under Rule 144, a person who has satisfied a minimum holding period of between 6 months and one-year and any other applicable requirements of Rule 144 may thereafter sell such shares publicly. A significant number of the Company’s currently issued and outstanding shares of common stock held by existing shareholders, including officers and directors and other principal shareholders, are currently eligible for resale pursuant to and in accordance with the provisions of Rule 144. The possible future sale of the Company’s common stock by its existing shareholders, pursuant to and in accordance with the provisions of Rule 144, may have a depressive effect on the price of its common stock in the over-the-counter market.

 

The Company’s common stock is currently deemed a “penny stock,” which may make it more difficult for investors to sell their shares of Company common stock.

 

The SEC has adopted regulations which generally define “penny stock” to be any equity security that has a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. The Company’s s securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000, exclusive of their principal residence, or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade its securities. The Company believes that the penny stock rules may discourage investor interest in and limit the marketability of its common stock.

 

The Company has never paid dividends on its common stock.

 

The Company has not paid dividends on its common stock to date and does not expect to pay dividends for the foreseeable future. The Company intends to retain its initial earnings, if any, to finance its operations. Any future dividends on common stock will depend upon the Company’s earnings, its then-existing financial requirements, and other factors, and will be at the discretion of the Company’s board of directors.

 

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FINRA has adopted sales practice requirements, which may also limit an investor’s ability to buy and sell the Company’s common stock.

 

In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy the Company’s common stock, which may limit an investor’s ability to buy and sell its stock and have an adverse effect on the market for the common stock.

 

Investors’ interests in the Company will be diluted and investors may suffer dilution in their net book value per share of common stock if the Company issues additional employee/director/consultant options or if the Company sells additional shares of common stock and/or warrants to finance its operations.

 

In order to further expand the Company’s operations and meet its objectives, any additional growth and/or expanded exploration activity will likely need to be financed through sale and issuance of additional common stock, including, but not limited to, raising funds to explore the Mine. Furthermore, to finance any acquisition activity, should that activity be properly approved, and depending on the outcome of its exploration programs, the Company likely will also need to issue additional common stock to finance future acquisitions, growth, and/or additional exploration programs of any or all of its projects or to acquire additional properties. The Company will also in the future grant some or all of its directors, officers, and key employees and/or consultants options to purchase common stock as non-cash incentives. The issuance of any equity securities could, and the issuance of any additional shares of common stock will, cause the Company’s existing shareholders to experience dilution of their ownership interests.

 

If the Company issues additional shares of common stock or decides to enter into joint ventures with other parties in order to raise financing through the sale of equity securities, investors’ interests in the Company will be diluted and investors may suffer dilution in their net book value per share, depending on the price at which such securities are sold.

 

The issuance of additional shares of common stock may negatively impact the trading price of the Company’s securities.

 

The Company has issued common stock in the past and will continue to issue common stock to finance its activities in the future. In addition, newly issued or outstanding options, warrants, and broker warrants to purchase shares of common stock may be exercised, resulting in the issuance of additional common stock. Any such issuance of additional common stock would result in dilution to the Company’s shareholders, and even the perception that such an issuance may occur could have a negative impact on the trading price of the common stock.

 

The Company’s common stock could be influenced by research and reports that industry or securities analysts may be published.

 

The trading market for the Company’s common stock could be influenced by research and reports that industry and/or securities analysts may publish about the Company, its business, the market or its competitors. The Company does not have any control over these analysts and cannot assure that such analysts will cover the Company or provide favorable coverage. If any of the analysts who may cover the Company’s business adversely change their recommendation regarding the Company’s stock, or provide more favorable relative recommendations about its competitors, the stock price would likely decline. If any analysts who may cover the Company’s business were to cease coverage or fail to regularly publish reports on the Company, it could lose visibility in the financial markets, which in turn could cause the stock price or trading volume to decline.

 

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The Company is subject to the continued listing or trading criteria of the TSX-V and the OTCQB, and its failure to satisfy these criteria may result in delisting or removal of trading of its common stock from the TSX-V and the OTCQB.

 

The Company’s common stock is currently listed for trading on the TSX-V and quoted on the OTCQB. In order to maintain the listing on the TSX-V and the quotation on the OTCQB or any other securities exchange or marketplace, the Company must maintain certain financial and share distribution targets, including maintaining a minimum number of public shareholders. In addition to objective standards, these exchanges or marketplaces may delist or cease to quote the securities of any issuer if, in the exchange’s opinion, the Company’s financial condition and/or operating results appear unsatisfactory; if it appears that the extent of public distribution or the aggregate market value of the security has become so reduced as to make continued listing inadvisable; if the Company sells or disposes of its principal operating assets or ceases to be an operating company; if the Company fails to comply with the listing requirements; or if any other event occurs or any condition exists which, in their opinion, makes continued listing on the exchange inadvisable.

 

If the TSX-V, the OTCQB or any other exchange or quotation service were to delist or cease to quote the Company’s common stock, investors may face material adverse consequences, including, but not limited to, a lack of trading market for the common stock, reduced liquidity, decreased analyst coverage, and/or an inability for the Company to obtain additional financing to fund its operations.

 

The Company faces risks related to compliance with corporate governance laws and financial reporting standards.

 

The Sarbanes-Oxley Act of 2002, as well as related new rules and regulations implemented by the SEC and the Public Company Accounting Oversight Board, require changes in the corporate governance practices and financial reporting standards for public companies. These laws, rules and regulations, including compliance with Section 404 of the Sarbanes-Oxley Act of 2002 relating to internal control over financial reporting, referred to as Section 404, materially increase the Company’s legal and financial compliance costs and make certain activities more time-consuming and burdensome.

 

Risks Related to the Offering

 

Resales of our common stock in the public market may cause the trading price to fall.

 

Resales of a substantial number of shares of our common stock could depress the trading price of our common stock. The resale by the selling stockholders of common stock or common stock issuable upon exercise of warrants could reduce the trading price of the stock and could result in resales of our common stock by our other current stockholders. If our stockholders sell substantial amounts of our common stock in the public market after the date hereof, the trading price of our common stock could fall.

 

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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

 

Except for statements of historical facts, this prospectus contains forward-looking statements involving risks and uncertainties. The words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan” or the negative of these terms and similar expressions or variations thereof are intended to forward looking statements. Such statements reflect the current view of the Registrant with respect to future events and are subject to risks, uncertainties, assumptions and other factors (including the risks contained in the section of this registration statement on Form S-1 entitled “Risk Factors”) relating to the Registrant’s industry, the Registrant’s operations and results of operations and any businesses that may be acquired by the Registrant. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned.

 

Although the Registrant believes that the expectations reflected in the forward-looking statements are reasonable, the Registrant cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, the Registrant does not intend to update any of the forward-looking statements to conform these statements to actual results. The following discussion should be read in conjunction with the Registrant’s financial statements and the related notes included in this registration statement on Form S-1.

 

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USE OF PROCEEDS

 

This prospectus relates to the sale or other disposition of shares of our common stock by the selling shareholders listed in the “Selling shareholders and Certain Beneficial Owners” section below, and their transferees. We will not receive any proceeds from any sale of our common stock by the selling shareholders. We will receive the exercise price of the warrants. Any proceeds received from exercise of warrants will be used for payment of general corporate and operating expenses.

 

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DESCRIPTION OF THE COMPANY’S BUSINESS

 

The Bunker Hill Mine

 

The Mine is one of the most well-known base metal and silver mines in American history. Initial discovery and development of the Mine property began in 1885, and from that time until the Mine closed in 1981 it produced over 35.8 million tons of ore at an average mined grade of 8.76% lead, 4.52 ounces per ton silver, and 3.67% zinc, which represented 162Moz of silver, 3.16M lbs. of lead and 1.35M lbs. of zinc (Bunker Limited Partnership, 1985). Throughout the 95-year operating history of the Mine, there were over 40 different lead-silver-zinc orebodies discovered and mined. Although known for its significant lead and zinc production, 45-50% of the Net Smelter Value of its historical production came from its silver. The Company and the Sullivan Mining Company had a strong history of regular dividend payments to shareholders from the time the Company went public in 1905 until it was acquired in a hostile takeover by Gulf Resources in 1968.

 

The Mine and Smelter Complex were closed in 1981 when Gulf Resources was not able to continue to comply with new regulatory structures brought on by the passage of environmental statutes and as then enforced by the EPA. At closure it was estimated to still contain significant mineral resources (Bunker Limited Partnership, 1985). The Bunker Hill Lead Smelter, Electrolytic Zinc Plant and historic milling facilities were demolished in or around 1986, and the area became part of the “National Priority List” for cleanup under EPA regulations. The cleanup of the smelter, zinc plant, and associated sites has been completed, and management believes the Mine is well positioned for development and an eventual return to production.

 

Property Map of Bunker Hill Mine Land Ownership

 

 

A more detailed description of the Mine can be found in the “Technical Report Summary” section of this report, including the current mineral resource estimate, mineral reserves, an economic summary, property description and ownership, geology and mineralization, environmental studies and permitting, metallurgical testing, mining method, recovery methods, and current exploration and development.

 

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Restart Project Activities

 

In early 2020, a new management team comprised of former executives from Barrick Gold Corp. assumed leadership of the Company. Since that time, the Company has conducted multiple exploration campaigns, published multiple economic studies and mineral resource estimates, and advanced the rehabilitation and development of the Mine. In December 2021, the Company announced a project finance package with Sprott Private Resource Streaming & Royalty Corp., an amended Settlement Agreement with the EPA, and the purchase of the Bunker Hill Mine, setting the stage for a restart of the Mine.

 

In January 2022, with the closing of the purchase of the Bunker Hill Mine, the funding of the $8,000,000 Royalty Convertible Debenture and $6,000,000 Series Convertible Debenture, and the announcement of an MOU for the purchase of the Pend Oreille process plant from a subsidiary of Teck Resources Limited, the Company embarked on a program of activities with the goal of achieving a restart of the Mine.

 

Technical Report Summary

 

The following summary is extracted from the S-K 1300 Technical Report Summary, Bunker Hill Mine Pre-Feasibility Study, Coeur D’Alene Mining District Shoshone County, Idaho, USA with a Report Date of April 14, 2023 and an Effective Date of August 29, 2022 (the “TRS”). The following information does not purport to be a complete summary of the Technical Report Summary, is subject to all the assumptions, qualifications and procedures set out in the Technical Report and is qualified in its entirety with reference to the full text of the Technical Report Summary. Each of the Qualified Persons of the Technical Report Summary is an independent qualified person under the definitions of Item 1300 of Regulation S-K (each a “Qualified Person,” and together the “Qualified Persons”) and have approved the summary of the Technical Report Summary below.

 

Summary

 

The Technical Report Summary describes the mining and processing operations at the Company’s 100% owned Bunker Hill Mine located near the town of Kellogg, Idaho.

 

The Technical Report Summary considers a processing approach at Bunker where lead (Pb), silver (Ag) and zinc (Zn) mineralization is mined underground. Mineralized material will be conventionally milled and then concentrated by flotation of lead and silver followed by flotation of zinc. Metal rich concentrates will then be sold to smelters in North America or overseas. Mill tailings will be deposited underground in the historic mining voids located throughout the project.

 

Economic and Life of Mine highlights of the Technical Report Summary are listed in Table 1-3 and Table 1-4. Table 1-1 lists the mineral resource estimate for the Bunker Hill Mine and Table 1-2 lists the mineral reserves for the Bunker Hill Mine. Mineral resources are not mineral reserves and do not have demonstrated economic viability. There is no certainty that all or any part of the mineral resources will be converted into mineral reserves.

 

Quality Assurance/Quality Control

 

BHMC internal controls were employed on the 5,067 samples collected during the data verification and drilling programs. Various laboratories were used in the analytical process and the results verified using industry accepted Quality Assurance and Quality Control procedures (QAQC). QAQC procedures included the submission of blanks and certified standard reference material with the submittal of samples. Blanks were analyzed in order to verify the accuracy of the sample preparation process. Certified standard reference material results were evaluated in order to assess the accuracy of the laboratory assaying procedure. Additionally, preparation duplicates were submitted in order to assess the accuracy of sample collection at the project site. Any failures from expected results were addressed and explained before being used for mineral resource estimates.

 

Risks and uncertainties exist in the quantification of the spatial distribution on mineralization. These risks are inherent in estimation of mineral resources. Samples themselves have uncertainty related to sampling collection errors and the homogeneity of the deposit. Wider spaced drilling has more uncertainty than closely spaced drilling. Capping of high-grade outliers was used to ensure that the mineral content of the deposit was not over stated. High grade outlier samples will tend to overestimate the metal content of the mineral deposit. The block model for the deposit was constructed using sufficient sized blocks to account for mining dilution and uncertainties related to the actual physical distribution of mineralization. Domains were utilized to minimize the estimation of mineralization into rock units that do not host mineralization. These underlying factors and risks were considered in the final conclusion of the mineral resource estimate.

 

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Mineral Resource Estimate

 

Geostatistics and estimates of mineralization were prepared by Resource Development Associates Inc. Industry accepted grade estimation techniques were used to develop global mineralization block models for the Newgard, Quill and UTZ zones. The mineral resource estimate considers underground mining and mill processing as a basis for reasonable prospects of eventual economic extraction. The total mineral resource estimate for the Bunker Hill Mine is listed in Table 1-1 at a cutoff grade of net smelter return (NSR) 70 $/ton. Mineral Resources are classified according to Item 1302(d)(1)(iii)(A) of Regulation S-K.

 

Table 1-1 Bunker Hill Mine Mineral Resource Estimate (Exclusive of Mineral Reserves), December 31, 2023 – Resource Development Associates Inc.

 

 

  (1) The mineral resource estimate was prepared by Resource Development Associates Inc.
  (2) Measured, Indicated and Inferred classifications are classified according to Item 1302(d)(1)(iii)(A) of Regulation S-K.
  (3) Mineral resources that are not mineral reserves do not have demonstrated economic viability.
  (4) Net smelter return (NSR) is defined as the return from sales of concentrates, expressed in US$/t (i.e., NSR = (Contained metal) * (Metallurgical recoveries) * (Metal Payability %) * (Metal prices) – (Treatment, refining, transport and other selling costs)). For the mineral resource estimate, NSR values were calculated using updated open-cycle metallurgical results including recoveries of 85.1%, 84.2% and 88.2% for Zn, Ag and Pb, respectively, and concentrate grades of 58% Zn in zinc concentrate, and 67% Pb and 12.13 oz/ton Ag in lead concentrate.
  (5) Mineral resources are estimated using a zinc price of $1.20 per pound, silver price of $20.00 per ounce, and lead price of $1.00 per pound.
  (6) Historic mining voids, stopes and development drifting have been depleted from the mineral resource estimate.
  (7) Totals may not add up due to rounding.
  (8) Mineral resources are reported exclusive of mineral reserves. The reserves disclosed in the report represent measured mineral resources and indicated resources that were evaluated with modifying factors related to underground mining.
  (9) The point of reference for mineral resources is in situ mineralization.

 

Mineral Reserves

 

Mineral reserves have been estimated for the Quill, Newgard and UTZ sections of the Project. Measured and indicated mineral resources were converted to probable mineral reserves for the Mine. Measured mineral resources were converted to probable mineral reserves because of uncertainties associated with modifying factors that were taken into account in the conversion from mineral resources to mineral reserves.

 

Measured and indicated mineral resources were converted to probable mineral reserves by evaluating operating cost, projected metal revenues and estimated stope shapes and geometries. The general widths, plunge and shape of the Quill and Newgard mineralization lends itself well to transverse (perpendicular to strike) long hole open stoping (LHOS) with fill utilizing rubber tire equipment. The UTZ deposit is more amenable to cut-and-fill (CF) methods due to its shape and geometry. Extraction of the planned mine shapes is assumed to be 100% of the NSR $80/ton plan. Breakeven NSR is $70/ton for LHOS and $75/ton for cut-and-fill stopes.

 

Mineral reserves were classified in accordance with Item 1302(e)(2) of Regulation S-K. The mineral reserve statement is presented in Table 1-2. Mineral reserves are estimated at an NSR value cutoff of $80/short ton at the reference point of saleable mill concentrates with an effective date of August 29, 2022.

 

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Table 1-2 Bunker Hill Mineral Reserve Estimate, December 31, 2023 – Minetech, USA, LLC

 

 

 

  (1) Planned dilution is zero grade waste included in the designed stope shapes and probable tonnages.
  (2) Unplanned dilution is 5% external dilution added at zero grade.
  (3) Mineral reserves stated are inclusive of all above mentioned dilutions and are factored for ore loss due to mining activities.
  (4) Net smelter return (NSR) is defined as the return from sales of concentrates, expressed in US$/t (i.e., NSR = (Contained metal) * (Metallurgical recoveries) * (Metal Payability %) * (Metal prices) – (Treatment, refining, transport and other selling costs)). For the mineral reserve estimate, NSR values were calculated using updated open-cycle metallurgical results including recoveries of 85.1%, 84.2% and 88.2% for Zn, Ag and Pb, respectively, and concentrate grades of 58% Zn in zinc concentrate, and 67% Pb and 12.13 oz/ton Ag in lead concentrate.
  (5) Mineral reserves are estimated using a zinc price of $1.20 per pound, silver price of $20.00 per ounce, and lead price of $1.00 per pound.
  (6) Historic mining voids, stopes and development drifting have been depleted from the mineral reserve estimate.
  (7) Totals may not add up due to rounding.

 

Economic Summary

 

The summary of the current projected financial performance of the Bunker Hill Mine is listed in Table 1-3. Sensitivities are summarized in Table 1-4.

 

Table 1-3 Bunker Hill Project Economic Summary

 

Year   Initial Capex    1    2    3    4    5    TOTAL    ANNUAL AVERAGE 
Metal Prices                                        
Zinc ($/lb)   1.5    1.4    1.3    1.25    1.25    1.25    1.29    1.29 
Lead ($/lb)   0.95    0.95    0.95    0.95    0.95    0.95    0.95    0.95 
Silver ($/oz)   22    22    22    21.5    21.5    21.5    21.7    21.7 
Mine plan                                        
Ore mined (kt)   77    652    655    655    655    665    3,360    657 
Zinc grade (%)   5.90%   5.60%   4.70%   5.70%   5.70%   5.90%   5.50%   5.50%
Lead grade (%)   2.10%   2.40%   2.70%   2.90%   2.40%   1.90%   2.50%   2.50%
Silver grade (oz/t)   0.5    0.7    1.3    1.4    1.2    0.8    1.1    1.1 
Zinc eq grade (%)   7.70%   8.00%   8.10%   9.40%   8.80%   8.20%   8.50%   8.50%
Production                                        
Zinc concentrate (t)   6,671    53,504    44,852    54,997    55,061    57,909    272,995    53,265 
Lead concentrate (t)   2,091    20,945    23,577    25,078    20,955    16,605    109,251    21,432 
Zn grade - Zn conc (%)   58.00%   58.00%   58.00%   58.00%   58.00%   58.00%   58.00%   58.00%

 

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Year   Initial Capex    1    2    3    4    5    TOTAL    ANNUAL AVERAGE 
Pb grade - Pb conc (%)   67.00%   67.00%   67.00%   67.00%   67.00%   67.00%   67.00%   67.00%
Ag grade - Pb conc (oz/t)   14.4    18.6    31.5    30.1    31    27.4    27.6    27.7 
Zn prod. - Zn conc (klbs)   7,738    62,065    52,029    63,796    63,871    67,174    316,674    61,787 
Pb prod. - Pb conc (klbs)   2,802    28,067    31,593    33,605    28,080    22,251    146,397    28,719 
Ag prod. - Pb conc (koz)   30    390    742    754    649    455    3,020    598 
Zinc eq produced (klbs)   9,954    87,233    87,679    102,310    96,375    91,909    475,460    93,101 
Cost metrics                                        
Mining ($/t)        35    38    37    35    41    37    37 
Processing ($/t)        21    21    21    21    21    21    21 
G&A ($/t)        9    9    9    9    6    9    9 
Opex - total ($/t)        65    68    67    65    69    67    67 
Sustaining capex ($/t)        18    22    19    41    8    21    21 
Cash costs: by-prod. ($/lb Zn payable)        0.61    0.42    0.36    0.45    0.64    0.5    0.5 
AISC: by-prod. ($/lb Zn payable)        0.82    0.74    0.59    0.95    0.73    0.77    0.77 
FCF & Valuation ($000’s)                                        
Zinc revenue        73,857    57,492    67,784    67,863    71,373    338,368    67,674 
Lead revenue        25,330    28,513    30,328    25,342    20,081    129,595    25,919 
Silver revenue        7,900    15,515    15,406    13,256    9,260    61,337    12,267 
Gross revenue        107,087    101,520    113,518    106,461    100,714    529,300    105,860 
TC - Zinc conc        -16,257    -11,138    -13,657    -13,673    -14,380    -69,105    -13,821 
TC - Lead conc        -3,698    -4,162    -4,428    -3,700    -2,932    -18,919    -3,784 
RC - Lead conc        -449    -882    -896    -771    -538    -3,535    -707 
Land freight        -2,193    -2,019    -2,360    -2,239    -2,192    -11,002    -2,200 
Net smelter return        84,491    83,319    92,178    86,079    80,672    426,739    85,348 
Mining costs        -22,828    -24,592    -23,971    -22,927    -27,454    -121,772    -24,354 
Processing costs        -13,766    -13,842    -13,842    -13,842    -14,053    -69,346    -13,869 
G&A costs        -6,050    -6,063    -6,063    -6,063    -4,257    -28,496    -5,699 
EBITDA        41,847    38,822    48,302    43,247    34,908    207,126    41,425 
Sustaining capex        -11,475    -14,127    -12,651    -26,982    -5,215    -70,450    -14,090 
Initial capex   -54,853                             -54,853    - 
Land & salvage value                            12,281    12,281    12,281 
Pre-tax free cash flow   -54,853    30,372    24,695    35,650    16,266    41,974    94,103    29,791 
Taxes   -511    -1,394    -1,382    -2,218    -1,155    -1,224    -7,884    -1,475 
Free cash flow   -55,364    28,978    23,313    33,432    15,111    40,750    86,219    28,317 
NPV (5%)   62,826                                    
NPV (8%)   51,813                                    
IRR (%)   36.00%                                   
Payback (years)   2.1                                   

 

 

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Table 1-4 Sensitivity Analysis

 

 

 

Property Description and Ownership

 

The Bunker Hill Mine is located in Shoshone County, Idaho with portions of the Mine located within the cities of Kellogg and Wardner, Idaho in northwestern USA. The Kellogg Tunnel, which is the main access to the Mine, is located at 47.53611°N latitude, 116.1381W longitude. The approximate elevation for the above cited coordinates is 2366 ft.

 

On December 15, 2021 BHMC signed a Purchase and Sale Agreement (PSA) with Placer Mining Corporation and both William and Shirley Pangburn to acquire full ownership of the subsequently listed mineral titles in addition to other surface rights and real property associated with land and structures of the Bunker Hill Mine.

 

On January 7, 2022, the Company closed the purchase of the Bunker Hill Mine. Mine assets were purchased for $7,700,000, with $300,000 of previous lease payments and a deposit of $2,000,000 applied to the purchase, resulting in cash paid at closing of approximately $5,400,000. The EPA obligation of $19,000,000 was assumed by Bunker Hill as part of the acquisition.

 

Geology and Mineralization

 

The Northern Idaho Panhandle Region in which the Bunker Hill Mine is located is underlain by the Middle Proterozoic-aged Belt-Purcell Supergroup of fine-grained, dominantly siliciclastic sedimentary rocks, which extends from western Montana (locally named the Belt Supergroup) to southern British Columbia (locally named the Purcell Supergroup) and is collectively over 23,000 feet in total stratigraphic thickness.

 

Mineralization at the Bunker Hill Mine is hosted almost exclusively in the Upper Revett formation of the Ravalli Group, a part of the Belt Supergroup of Middle Proterozoic-aged, fine-grained sediments. Geologic mapping and interpretation progressed by leaps and bounds following the recognition of a predictable stratigraphic section at the Bunker Hill Mine and enabled the measurement of specific offsets across major faults, discussed in the following section. From an exploration and mining perspective, there were two critical conclusions from this research: all significant mineralized shoots are hosted in quartzite units where they are cut by vein structures, and the location of the quartzite units can be projected up and down section, and across fault offsets, to target extensions and offsets of known mineralized shoots and veins.

 

Mineralization at Bunker Hill Mine falls in four categories, described below from oldest to youngest events:

 

Bluebird Veins (BB): W-NW striking, SW-dipping, variable ratio of sphalerite-pyrite-siderite mineralization. Thick, tabular cores with gradational margins bleeding out along bedding and fractures.

 

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Stringer/Disseminated Zones: Disseminated, fracture controlled and bedding controlled blebs and stringer mineralization associated with Bluebird structures, commonly as halos to vein-like bodies or as isolated areas where brecciated quartzite beds are intersected by the W-NW structure and fold fabrics.

 

Galena-Quartz Veins (GQ): E to NE striking, S to SE dipping, quartz-argentiferous galena +/-siderite-sphalerite-chalcopyrite-tetrahedrite veins, sinuous-planar with sharp margins, cross-cut Bluebird veins.

 

Hybrid Zones: Formed at intersections where GQ veins cut BB veins, with open space deposition of sulfides and quartz in the vein refraction in quartzite beds, and replacement of siderite in the BB vein structure by argentiferous galena from the GQ vein.

 

Environmental Studies and Permitting

 

Because the Mine is on patented mining claims (privately-owned land), only a limited number of permits are required for mining and milling operations. These relate to (1) air quality and emissions from crushing, milling and processing and (2) any refurbishment of surface buildings that may require construction permits.

 

The Bunker Hill Mine is located within the Bunker Hill Superfund site (EPA National Priorities Listing IDD048340921). Cleanup activities have been completed in Operable Unit 2 of the Bunker Hill Superfund Site where the Mine is located, though water treatment continues at the Central Treatment Plant (the “CTP”) located near Bunker Hill Mine. The CTP is owned by the EPA and is operated by its contractors.

 

BHMC entered into a Settlement Agreement and Order on Consent with the EPA and the DOJ on May 14, 2018. Section 9, Paragraph 33 of that agreement stipulates that BHMC must obtain a National Pollutant Discharge Elimination System (“NPDES”) permit for effluent discharged by Bunker Hill Mine by May 14, 2023. This obligation exists and the deadline will occur at a point in time where restart activities are planned to occur.

 

BHMC will initiate a voluntary Environmental, Social and Health Impact Assessment (“ESHIA”) for the activities described in the Technical Report Summary and for its business model as a whole. This study is projected for completion in 2024 and will conform to ISO, IFC and GRI standards.

 

Metallurgical Testing

 

Resource Development Inc. (Rdi) initiated metallurgical test work on three samples designated Newgard, Quill and Utz, with the primary objective of determining the process flowsheet and the metal recoveries and concentrate grades. Flotation testing was completed through locked-cycle testing, the results of which are displayed in Table 1-5.

 

Table 1-5 Summary of Locked-Cycle Flotation Test Results

 

 

The open-cycle and locked-cycle tests were completed at a primary grind of P80 270 mesh for rougher flotation. Rougher scavenger flotation was included in both the lead and zinc circuits to increase the amount of value sent to the cleaner stages. Regrind of the lead rougher concentrate with a pebble mill was completed to a particle size of approximately P80 400 mesh for cleaner flotation. No regrind was completed with the zinc rougher concentrate.

 

BHMC has contracted SGS Canada Inc (SGS) to conduct a metallurgical study to further evaluate and optimize metal recovery for the Bunker Hill Project. The primary objective of the test program is to complete metallurgical test work to improve met results over the Pre-feasibility Study (PFS) performed by Rdi for the Bunker Hill Project.

 

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Figure 1-1 Locked-Cycle Test Process Flowsheet

 

 

Mining Method

 

Long-hole stoping with fill (LHOS), cut-and-fill and possibly room-and-pillar mining with fill are the only methods viable for sustained operations today. LHOS is the preferred mining method with limited cut-and-fill mining at Bunker Hill Mine. Room-and-pillar mining is not in the current plan. Timbered ground support has been replaced with newer ground support technology of rock bolts, mesh, shotcrete and steel sets as required.

 

Beginning in October 2021 and completed in April 2022, BHMC conducted a geotechnical investigation of the underground conditions at the Bunker Hill Mine. Data collection involved a data analysis of rock quality designation (RQD) values logged with previous exploration drilling, geotechnical logging of recently drilled rock cores and an extensive investigation of pre-existing underground excavations and development. Ground conditions are generally good to excellent at Bunker Hill Mine and the rest of the mines in the Silver Valley. Bunker Hill Mine does not have a history of rock burst events that are frequent in the deeper mines to the east.

 

Recovery Methods

 

Bunker Hill plans to re-construct a crush-grind-flotation-concentration mill from the nearby Pend Oreille (PO) mine in northern Washington on the Bunker Hill Kellogg Mine Yard. The future structures to house the grind-flotation-concentration circuit, the secondary crushing circuit and concentrate storage facilities will need to be constructed.

 

The process consists of a primary and secondary ore crushing circuit, then a primary grinding circuit followed by two separate flotation circuits to recover lead, zinc, silver and gold into two separate concentrate products: a lead, silver, gold concentrate and a zinc concentrate. Approximately 648,000 short tons of ore will be processed a year at a rate of 1,800 short tons per day (stpd), or 79 short tons per hour (stph) at 95% availability.

 

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Figure 1-2 Bunker Hill Process Flowsheet

 

 

Current Exploration and Development

 

Bunker Hill has a rare exploration opportunity available at the Bunker Hill Mine and has embarked on a new path to fully maximize the potential. A treasure trove of geologic and production data has been organized and preserved in good condition in the mine office since the shutdown of major mine operations in the early 1980s. This data represents 70+ years of proper scientific data and sample collection, with high standards of accuracy and precision that were generally at or above industry standards at the time.

 

The Company saw the wealth of information that was available but not readily usable and embarked on a scanning and digitizing program. From this, the Company was able to build a three-dimensional (3D) digital model of the mine workings and 3D surfaces and solids of important geologic features. To add to this, all of the historic drill core lithology logs and assay data (>2900 holes) was entered into a database and imported with the other data into Maptek Vulcan 3D software.

 

In addition to both continued geologic digitization and the completed 2021 exploration drill program, the Company has performed a geophysical survey over the summer of 2021. The survey was conducted as a ground geophysical 3DIP survey through DIAS Geophysical Ltd out of Saskatoon, Saskatchewan.

 

Conclusions

 

The Pre-Feasibility level analyses demonstrates that the restart of the Bunker Hill Mine can reasonably be expected to generate a positive return on investment with an after-tax internal rate of return (IRR) of 36% based on the reserves presented. It is reasonable to expect the conversion of Inferred resources to Indicated resources and indicated resources to measured resources to continue. Inferred mineral resources are considered too geologically speculative to have economic considerations applied to them to be classified as a mineral reserve.

 

The Technical Report Summary is based on all available technical and scientific data available as of August 29, 2022. Mineral resources are considered by the QP to meet the reasonable prospects of eventual economic extraction due two main factors: (1) cut-off grades are based on scientific data and assumptions related to the project and (2) mineral resources are estimated only within blocks of mineralization that have been accessible in the past by mining operations as well as by using generally accepted mining and processing costs that are similar to many projects in Idaho.

 

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Recommendations

 

Continued analysis and interpretation of the geophysical survey results should aid to guide future exploration activities outside of historical mine working areas. Additional exploration drilling, with the advancement of underground mine development, is also advised due to the proximity of future development to under-explored areas of historical workings. Continued digitization and interpretation of historical mapping and research will aid to guide future underground and surface exploration activities.

 

Completion of issued for construction (IFC) level drawings for the mineral processing facilities is recommended.

 

Completion of IFC-level engineering drawings related to the paste backfill plant are recommended. Final tails product material generated from additional metallurgical testing will work to optimize binder compositions and have the potential to reduce backfill operating expenses or costs.

 

Additional geotechnical studies are recommended with the advancement of underground development. Continued geotechnical diamond drilling associated with future resource delineation and exploration drilling activities will provide a better sample set for rock strength testing and geotechnical logging. Future underground development will also allow for the investigation of previously mined areas and association of historical span allowances based on previous ground support methods.

 

Additional resource delineation and conversion drilling and mine block modeling should continue to increase the conversion of Inferred to Indicated Resources.

 

Table 1-6 Proposed Work Program to Advance Bunker Hill

 

Activity 

Amount

 

($ in millions)

 
Geophysical Interpretation and Additional Geophysics  $0.05 
Environmental Studies  $0.03 
Geotechnical Studies  $0.15 
Mill and Process Plant Engineering  $1.70 
Hydraulic Backfill and Tailing Placement Engineering  $0.50 
Total Recommended Budget  $2.43 

 

Project Infrastructure

 

The Bunker Hill complex is a mature mine with much of the underground infrastructure and development still in place. The mill, smelter and tailing impoundment have been removed, and these sites have been reclaimed. Part of the reclamation included surface water diversion structures, which are still in use and are maintained in good condition. The original Bunker Hill mine offices, car and maintenance shops, and change house are located near the Kellogg Tunnel (KT) portal and are in serviceable condition.

 

Bunker Hill is located in Kellogg, Idaho, along the Interstate 90 corridor on the west side of what is traditionally known as the Silver Valley. It is 60 miles from the Spokane, Washington airport to the west and 125 miles to the Missoula, Montana airport to the east. The Silver Valley of north Idaho is a desirable place to live and is home to an enthusiastic and talented underground mining work force.

 

Mine power requirements have been met and completed with the Avista Kellogg substation, located next to the Bunker Hill main offices supplying power to the Mine and other local consumers. There are two existing distribution lines now supplying the Mine from the Kellogg Avista substation. One feeds the surface mine facilities and the underground loads from the Kellogg side, and the other feeds the Wardner mine yard and facilities. The current three-phase 2.5 kilovolt (kV) mine distribution system on the Kellogg side has been upgraded to three-phase 13.2kV during the year ended December 31, 2023.

 

Mine discharge water now gravity drains out the nine-level through the Kellogg Tunnel via a ditch adjacent to the rail line to the portal. It is then routed to a water treatment plant constructed by the EPA and currently operated by the Idaho Department of Environmental Quality (IDEQ).

 

BHMC commissioned Patterson & Cooke North America to perform tradeoff studies for costing and operating the mine backfill and tailing placement facilities. Results from the tradeoff studies led to the location of the plant on surface, both adjacent to the mill and at Wardner. Tailings thickening will take place inside the mill/process facility building, with the underflow being pumped to the tailings filtration plant located adjacent to the mill/process building. Vacuum filtration will take the thickened tailings and produce a filter cake material, which will be deposited and stored in a load-out facility at the plant. A surface loader will transfer the filter cake tailings into overland haul trucks to deliver the material up to the Wardner side of operations along the return route from run-of-mine (ROM) ore haulage. Once delivered to the storage facility at Wardner, material will be loaded into the paste plant, combined with an ordinary cement binder, and subsequently pumped underground via a reticulated piping system.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

SPECIAL NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS

 

Certain statements in this report, including statements in the following discussion, are what are known as “forward looking statements,” which are basically statements about the future. For that reason, these statements involve risk and uncertainty since no one can accurately predict the future. Words such as “plans,” “intends,” “will,” “hopes,” “seeks,” “anticipates,” “expects” and the like often identify such forward looking statements, but are not the only indication that a statement is a forward-looking statement. Such forward looking statements include statements concerning the Company’s plans and objectives with respect to the present and future operations of the Company, and statements which express or imply that such present and future operations will or may produce revenues, income or profits. Numerous factors and future events could cause the Company to change such plans and objectives or fail to successfully implement such plans or achieve such objectives, or cause such present and future operations to fail to produce revenues, income or profits. Therefore, the reader is advised that the following discussion should be considered in light of the discussion of risks and other factors contained in this report and in the Company’s other filings with the SEC. No statements contained in the following discussion should be construed as a guarantee or assurance of future performance or future results.

 

Background and Overview

 

The Company’s sole 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, 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. Production is expected to commence in 2024.

 

Since early 2020, the Company has conducted multiple exploration campaigns, published multiple economic studies and mineral resource estimates, and advanced the rehabilitation and development of the Mine. In December 2021, the Company announced a project finance package with Sprott Private Resource Streaming & Royalty Corp., an amended Settlement Agreement with the EPA, and the purchase of the Bunker Hill Mine. In 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 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.

 

The Company has moved into the development stage concurrent with (i) purchasing the Mine and a process plant, (ii) completing successive technical and economic studies, including a Prefeasibility Study, (iii) delineating mineral reserves, and (iv) conducting the program of activities to restart the mine.

 

In June 2023, the Company closed an 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 Company believes that this project finance package will be sufficient to complete the development and construction activities to restart the Mine.

 

The Bunker Hill Mine restart is expected to take place in 2024, with first concentrate production targeted for the fourth quarter of 2024. However, the estimated timing of Bunker Hill Mine restart is subject to change based on factors beyond the Company’s control, including but not limited to supply chain dynamics.

 

Results of Operations

 

The following discussion and analysis provide information that is believed to be relevant to an assessment and understanding of the results of operation and financial condition of the Company for the years ended December 31, 2022 and 2023. Unless otherwise stated, all figures herein are expressed in U.S. dollars, which is the Company’s functional currency.

 

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Comparison of the year ended December 31, 2023 and the year ended December 31, 2022

 

Revenue

 

During the year ended December 31, 2023, the Company generated no revenue (year ended December 31, 2022 - $nil).

 

Expenses

 

During the year ended December 31, 2023, the Company reported total operating expenses of $11,600,574 as compared to total operating expenses of $16,487,161 for the year ended December 31, 2022.

 

The decrease in total operating expenses was primarily due to (i) a decrease in mine preparation expenses of $7,827,656 (ii) a decrease in consulting and wages expenses of $1,872,392 (iii) partially offset by an increase in operation and administration expenses of $4,112,443 in the year ended December 31, 2023 compared to the year ended December 31, 2022. Mine preparation expenses were $nil in the year ended December 31, 2023, primarily as a result of the Company determining that all costs directly attributed to the mine after September 30, 2022 (upon the release of the prefeasibility study) constituted mine development costs (capitalized to non-current assets) instead of mine preparation costs (expense) given the existence of probable mineral reserves and an economic study incorporating them. The decrease in consulting and wages expenses was impacted by a lower volume of transactions and a lower bonus accrual in the year ended December 31, 2023, as compared to the year ended December 31, 2022. Operation and administration expenses increased due to increased activities at site, such as maintenance.

 

Net Income and Comprehensive Income

 

The Company had net loss of $13,432,539 for the year ended December 31, 2023 (net income of $898,591 for the year ended December 31, 2022). The decrease in net income was due to a decrease in the gain recorded due to change in derivative liability of $13,336,366 (gain of $2,360,025 and gain of $15,696,391 for the year ended December 31, 2023, and 2022 respectively). The decrease in net income was further increased by a higher interest expense in the year ended December 31, 2023 ($7,124,527) compared to the year ended December 31, 2022 (3,382,559), due to the issuance of the Stream obligation in June 2023. The change in net loss was also impacted by a decrease of $1,462,230 gain on extinguishment in debt in the year ended December 31, 2023, compared to the year ended December 31, 2022. A gain of $7,151,873 was recognized in the year ended December 31, 2023, relating to the sale of mineral properties, compared with a $8,614,103 gain on EPA settlement in the year ended December 31, 2022. Net loss for the year ended December 31, 2023, included a loss on modification of debt of 3,228,525, mostly relating to the Stream, compared to $nil for the year ended December 31, 2022. Net loss for the year ended December 31, 2023, also included the initial recognition of a deferred tax liability and corresponding deferred tax expense relating to the closing of the stream transaction ($2,588,590 for the year ended December 31, 2023, compared to $nil for the year ended December 31, 2022).

 

The decrease in net income was offset by the inclusion of $1,107,093 of interest income for the year ended December 31, 2023, compared to $nil for the year ended December 31, 2022. Additionally, items offsetting the decrease in net income was the decrease in operating expenses, as described above, and the decrease in debenture financing costs of $1,230,540 ($nil for the year ended December 31, 2023, compared to $1,230,540 for the year ended December 31, 2022). The decrease in net income was further offset by an increase in the gain recorded due to change in convertible debentures of $2,814,313 (gain of $1,673,776 and loss of $1,140,537 for the year ended December 31, 2023, and 2022 respectively). The gain in fair value that occurred in 2023 was driven by a decline in the Company’s share price. The loss that occurred in 2022 was driven by the increase in likelihood of the RCD being converted into a Royalty.

 

The Company had comprehensive loss of $12,877,752 for the year ended December 31, 2023 (comprehensive income of $1,152,466 for the year ended December 31, 2022). Comprehensive loss for the year ended December 31, 2023, is inclusive of a $554,787 gain on change in fair value on own credit risk ($253,875 for the year ended December 31, 2022) relating to the convertible debentures outstanding into during the year ended December 31, 2023, due to the Company’s credit rating improving in the same period primarily due to the closing of the $46,000,000 Stream.

 

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Liquidity and Capital Resources

 

Current Assets and Total Assets

 

As of December 31, 2023, the Company had total current assets of $27,176,997, compared to total current assets of $7,741,052 at December 31, 2022 – an increase of $19,435,945; and total assets of $61,989,678, compared to total assets of $32,929,892 at December 31, 2022 – an increase of $29,059,786. The increase in current assets and total assets was primarily due to the closing of the $46,000,000 Stream, net of repayment of the $5,000,000 Bridge Loan, Promissory note and transaction related costs, the exercise of 10,416,667 warrants at an exercise price of C$0.11, for aggregate gross proceeds of $837,460 (C$1,145,834) and the closing of the March 2023 Offering for gross proceeds of $4,536,020 (C$6,196,047).

 

Current Liabilities and Total Liabilities

 

As of December 31, 2023, the Company had total current liabilities of $7,472,326 and total liabilities of $88,356,840, compared to total current liabilities of $10,155,582 and total liabilities of $59,106,835 at December 31, 2022. Current liabilities decreased primarily as a result of the repayment of the promissory note, and settlement of accounts payable and accrued liabilities from the proceeds of the Stream. Total liabilities increased primarily as a result of closing of the $46,000,000 Stream and recognition of deferred tax liability, partially offset by a decrease in the carrying values of convertible debenture 1, convertible debenture 2, warrants, and the settlement of royalty convertible debenture and the bridge loan.

 

Working Capital and Shareholders’ Deficit

 

As of December 31, 2023, the Company had a working capital balance of $19,704,671 and a shareholders’ deficiency of $26,367,162 compared to a working capital deficit of $2,414,530 and a shareholders’ deficiency of $26,176,943 as of December 31, 2022. The working capital balance increased during the year ended December 31, 2023, primarily due to cash received from closing of the $46,000,000 Stream (net of repayment of the $5,000,000 Bridge Loan and transaction related costs) and cash received from the closing of a brokered private placement of special warrants of the Company, partially offset by operating expenses and capital expenditures incurred during the period. The shareholders’ deficiency decreased due to proceeds received from the equity financing in the year ended December 31, 2023, partially offset by the net loss the same period.

 

Cash Flow

 

During the year ended December 31, 2023, the Company had a net cash increase of $19,394,491, primarily due to the closing of a brokered private placement of special warrants of the Company and proceeds received from the exercise of warrants and closing of the Stream agreement with Sprott. Cash expenditures during the year ended December 31, 2023, were primarily related to process plant and general working capital requirements.

 

Subsequent Events

 

Share Issuance

 

On January 9, 2024, the Company issued 7,392,859 shares of common stock in connection with its election to satisfy interest payments under the outstanding convertible debentures for the three months ending December 31, 2023.

 

On January 29, 2024, the Company granted 672,450 RSUs to a certain member of management of the Company. The RSUs vest on January 29, 2025.

 

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:

 

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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.

 

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, spot and futures prices of minerals, expected equity volatility, expected volatility in minerals prices, discount for lack of marketability, credit spread, expected mineral production over the life of the mine, and project risk/estimation risk factors.

 

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 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.

 

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DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

 

Directors and Executive Officers

 

The following table sets forth the directors, executive officers, their ages, and all offices and positions held within the Company as of December 31, 2023. Directors are elected for a period of one year and thereafter serve until their successor is duly elected by the stockholders and qualified. Officers and other employees serve at the will of the Board.

 

Name   Position Held with the Company   Age   Date First Elected or Appointed
Sam Ash   President, CEO and Director   45   April 14, 2020
Richard Williams   Executive Chairman and Director   57   March 27, 2020
Gerbrand van Heerden   CFO and Corporate Secretary   47   January 12, 2021
Mark Cruise   Director   53   June 30, 2022
Cassandra Joseph   Director   52   November 2, 2020
Dickson Hall   Director   71   January 5, 2018
Pamela Saxton   Director   71   October 30, 2020
Paul Smith   Director   53   July 5, 2023

 

Biographical Information

 

Sam Ash was a Partner from 2015 to 2018 at Barrick Gold Corp. (“Barrick”) and held various roles over the nine years employed there between 2009 and 2018. This includes three years as General Manager of the Lumwana Copper Mine in Zambia (2016–2018), Technical Support Manager to Barrick’s Copper Business Unit (2014–2016), General Support Manager on the Cortez Mine in Nevada (2012–2014) and Chief Engineer leading the roll-out of new Underground Mining standards in the USA and Tanzania (2011–2012). Prior to his time at Barrick, Mr. Ash served as Manager of New Operations for Veris Gold Corp. (formerly, Yukon-Nevada Gold Corp.), primarily on the Jerritt Canyon Mine in Nevada, and also as an Underground Mine Supervisor with Drummond Company, Inc. He has recently completed his Master’s Degree in Leadership and Strategy at the London Business School and has a BS in Mining Engineering from the University of Missouri Rolla.

 

Richard Williams is an executive with an established track-record of transformational leadership within the mining industry and other demanding environments. He is currently an advisor to companies facing complex operational, political or ESG challenges. Formerly the Chief Operating Officer of Barrick (2015–2018) and the company’s Executive Envoy to Tanzania (2017–2018), he has also served as Chief Executive Officer of the Afghan Gold and Minerals Company (2010-2014), non-executive director of Trevali Mining Corporation (2019–2022) and as a non-executive director of Gem Diamonds Limited (2007–2015). Prior to his commercial mining experience, Mr. Williams served as the Commanding Officer of the British Army’s Special Forces Regiment, the SAS. He holds an MBA from Cranfield University, a BSc in Economics from University College London and an MA in Security Studies from Kings College London.

 

Gerbrand van Heerden is the Company’s Chief Financial Officer and Corporate Secretary. Gerbrand is an experienced mining company CFO with over 20 years of mining industry experience. From May 2020 to October 2023, Mr. van Heerden served as the Chief Financial Officer of BMC Minerals Limited. From November 2017 to May 2020, he served in various roles at Trevali Mining Corporation, including as Chief Financial Officer and Senior Vice President of Business Development/Finance. From March 2013 to October 2017, Mr. van Heerden served as the Chief Financial Officer of Rosh Pinah Zinc Corporation (Proprietary) Limited, a subsidiary of Glencore Plc. From October 2005 to March 2013, he served in various roles at Metorex Limited, including as General Manager of Metorex Commercial Services, a finance executive, and as Group Financial Controller. Mr. van Heerden started his professional career as a Tax and Assurance Manager with Deloitte. He is a CPA registered with the Chartered Professional Accountants of British Columbia and a CA(SA) registered in South Africa and holds a Bachelor of Commerce (Honors) Degree in Accounting from the University of Johannesburg.

 

Mark Cruise is a professional geologist with over 27 years of international exploration, development and mining experience. A former polymetallic commodity specialist with Anglo American plc, Dr. Cruise founded and was Chief Executive Officer of Trevali Mining Corporation. Under his leadership, from 2007 to 2019, the company grew from an initial discovery into a global zinc-lead-silver producer with operations in the Americas and Africa. Dr. Cruise currently serves as a non-executive director of Velocity Minerals Ltd. (since 2017), NiCAN Ltd (since 2022), Interra Copper Corp (sine 2023) and Volta Metals Ltd. (since 2023). He previously served as COO, CEO, and director of New Pacific Metals Corp. (2020–2022), a non-executive director of Abzu Resources (2010–2011), Prism Resources Inc. (2016–2019), Ethos Gold Corporation (2010–2015), and Tincorp Metals Inc. (formerly Whitehorse Gold Corp.) (2020–2022).

 

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Cassandra Joseph is an American lawyer with extensive experience managing the commercial relationship between mining companies and environmental regulators. Since February 2023, she has been Vice President, General Counsel and Corporate Secretary of Ivanhoe Electric Inc. Ms. Joseph was Senior Vice President, General Counsel and Corporate Secretary for Nevada Copper Corp. from May 2019 to January 2023 and Associate General Counsel for Tahoe Resources Inc. from 2015 until it was acquired by Pan American Silver Corp. in 2019. She also served as a non-executive director of Century Lithium Corporation (2021–2023). Before this, she worked for the Attorneys General of California (2001–2005) and Nevada (2011–2015), as Deputy and Senior Deputy Attorney General, and as a partner in Watson Rounds PLC (now Brownstein Hyatt Farber Schreck LLP) (2005–2011). Educated at Santa Clara University, and University of California at Berkeley, she was called to the State Bar of California in 1999; the U.S. Court of Appeals, Ninth Circuit in 2001; State Bar of Nevada in 2005; and the U.S. Supreme Court, U.S. Court of Appeals and Federal Circuit in 2007.

 

Dickson Hall currently serves as a director of the Company. Since August 2016, he has been a partner in Valuestone Advisors Limited, manager of Valuestone Global Resources Fund 1, a mining fund associated with Jiangxi Copper Corporation and China Construction Bank International. Mr. Hall has more than 40 years’ experience in the resource field, much of it in Asia. From 2005 to 2016, he directed corporate development efforts in Asia for Hunter Dickinson Inc. (HDI), raising capital, establishing strategic partnerships and broadening the Asian shareholder base for HDI public companies. From 2007 to 2011, he was Senior Vice President of Continental Minerals Corporation, which developed the Xietongmen copper-gold project in Tibet, China before selling to China’s Jinchuan Group in 2011 for $446 million. Since 2014 Mr. Hall has been a director and Investment Committee member of Can-China Global Resources Fund, an energy and mining fund backed by the Export-Import Bank of China. Mr. Hall currently serves as a non-executive director of New Pacific Metals Corp. (since 2022) and Arcland Resources Inc (since 2023), and he previously served as a non-executive director of Nova Canada Enterprises (2001–2004), Stepstone Enterprises Ltd. (2001–2004), Kona Bay Technologies Inc. (2004–2020), CY Oriental Holdings Ltd. (2007–2011), Baikal Forest Corp. (2011–2012), Hylands International Holdings Inc. (2013–2016), Nanotech Security Corp. (2015–2019), and Bexar Ventures Inc. (2018–2020). Mr. Hall is a graduate of the University of British Columbia (BA, MA) and has diplomas from Beijing University and Beijing Language Institute.

 

Pam Saxton is an experienced mining company executive and director. She has served on the Board of Timberline Resources Corporation and as Audit Committee Chair since May 2021 and was a Board Member and Audit Committee Chair at Pershing Gold Corporation from 2017 to 2019. She also has served on the Board of Aquila Resources Inc. from 2019 to 2021 and served on a North American Advisory Board for Damstra Technology – Damstra Holdings Limited from 2021 to 2022. As an executive, she served as Executive Vice President and CFO for Thompson Creek Metals Company (2008–2016) and as CFO for NewWest Gold Corporation (2006-2007). Having started her professional life working as an auditor for Arthur Andersen in Denver, Colorado, her career has included senior finance appointments in the American natural resources industry, including serving as VP Finance for Franco-Nevada Corporation’s U.S. Operations. Ms. Saxton is qualified to serve on the Board by virtue of her expertise in finance, accounting and auditing matters.

 

Paul Smith is the former Head of Strategy at Glencore (LON: GLEN) (2011–2020), and CFO of the DRC-based Glencore subsidiary Katanga Mining (2019–2020). He is currently Managing Partner at Voltaire Minerals Partners, a Swiss-based critical metals advisory business (since October 2022), a non-executive director at Seadrill (NYSE: SSDRL) (since November 2021) and a director at Echion Technologies Ltd (since August 2021). He trained as an accountant before working as an investment banker at Close Brothers and Credit Suisse. He is based in Zug, Switzerland and leads the Growth Committee of the board of directors of the Company.

 

Family Relationships

 

There are no family relationships between any of the current directors or officers of the Company.

 

Involvement in Certain Legal Proceedings

 

Neither the Company nor its property is the subject of any other pending legal proceedings, and no other such proceeding is known to be contemplated by any governmental authority. The Company is not aware of any other legal proceedings in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of the Company’s voting securities, or any associate of any such director, officer, affiliate or security holder of the Company, is a party adverse to the Company or any of its subsidiaries or has a material interest adverse to the Company or any of its subsidiaries.

 

Directorships

 

None of the Company’s executive officers or directors is a director of any company with a class of equity securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of the Exchange Act or any company registered as an investment company under the Investment Company Act of 1940.

 

Code of Ethics

 

The Company’s Board has adopted a code of ethics that will apply to its principal executive officer, principal financial officer and principal accounting officer or controller and to persons performing similar functions. The code of ethics is designed to deter wrongdoing and to promote honest and ethical conduct, full, fair, accurate, timely and understandable disclosure, compliance with applicable laws, rules and regulations, prompt internal reporting of violations of the code and accountability for adherence to the code. The Company will provide a copy of its code of ethics, without charge, to any person upon receipt of written request for such, delivered to our corporate headquarters. All such requests should be sent care of Bunker Hill Mining Corp., Attn: Corporate Secretary, 82 Richmond Street East, Toronto, Ontario, Canada, M5C 1P1.

 

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EXECUTIVE COMPENSATION

 

Summary Compensation Table

 

The following table sets forth, for the years indicated, all compensation paid, distributed or accrued for services, including salary and bonus amounts, rendered in all capacities by the Company’s principal executive officer, chief financial officer and all other executive officers; the information contained below represents compensation paid, distributed or accrued to the Company’s officers for their work related to the Company.

 

Name and Principal Position  Year  Salary ($)   Bonus ($)   Stock Awards (1,2,3) ($)   Option Awards ($)   Non-Equity Incentive Plan Compensation (#)   Non-qualified Deferred Compensation Earnings ($)   All other Compensation ($)   Total ($) 
                                    
Gerbrand van Heerden                                           
Chief Financial Officer  December 31,2023   52,000    80,000    -    -    -    -    -    132,000 
                                            
David Wiens(2)  December 31,2023   199,998    46,675    185,673    -    -    -    3,600    435,946 
Former Chief Financial Officer  December 31,2022   219,848    163,467    118,217    -    -    -    -    501,532 
                                            
Richard Williams  December 31,2023   240,000    46,253    339,846    -    -    -    -    626,099 
Executive Chairman  December 31,2022   240,000    132,084    128,964    -    -    -    -    501,048 
                                            
Sam Ash(5)  December 31,2023   270,000    48,924    371,717    -    -    -    -    690,641 
Chief Executive Officer  December 31,2022   270,000    168,600    145,085    -    -    -    -    583,685 

 

  (1) In November 2022, 3,378,548 RSUs were issued to officers of the Company. These RSUs are calculated using a share price of C$.0155 on the applicable grant date and will vest in one third increments on March 31, 2023, March 31, 2024, and March 31, 2025.
  (2) In June 2023, 2,742,405 RSUs were issued to officers of the Company. These RSUs are calculated using a share price of C$.024 on the applicable grant date and vested immediately.
  (3) In July 2023, 4,832,600 RSUs were issued to officers of the Company. These RSUs are calculated using a share price of C$.023 on the applicable grant date and will vest in one third increments on March 31, 2024, March 31, 2025, and March 31, 2026.
  (4) David Wiens resigned as the Company’s CFO on October 31, 2023.
  (5) Gerbrand van Heerden became the Company’s CFO on November 1, 2023.

 

Grant of Plan Based Awards

 

On June 1, 2023, 2,742,405 RSUs were issued to officers of the Company. These RSUs vested immediately.

 

On July 4, 2023, 4,832,600 RSUs were issued to officers of the Company. These RSUs will vest in one third increments on March 31, 2024, March 31, 2025, and March 31, 2026.

 

On November 17, 2022, 3,378,548 RSUs were issued to officers of the Company. These RSUs will vest in one third increments on March 31, 2023, March 31, 2024, and March 31, 2025.

 

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Outstanding Stock Options Awards At Fiscal Year End

 

The following table provides a summary of equity awards outstanding at December 31, 2023, for each of the named executive officers.

 

   Option Awards       Stock Awards 
Name  Number of Securities Underlying Unexercised Options (#) Exercisable   Number of Securities Underlying Unexercised Options (#) Unexercisable   Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)  

Option Exercise Price

(C$)

  

Option

Expiration

Date

  

Number of Shares or Units of Stock That Have Not Vested

(#)

  

Market Value of Shares or Units of Stock That Have Not Vested

($)

  

Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested

(#)

  

Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested

($)

 
Gerbrand van Heerden                                    
                                              
Sam Ash                               2,720,467    226,260 
                                              
Richard Williams   2,968,244    989,415        0.55    April 20, 2025            2,329,304    193,727 
                                              
David Wiens   1,037,977            0.335    

October 31, 2024

                 

 

(1) As of December 31, 2023, Richard Williams held 3,750,000 vested DSUs and 1,250,000 unvested DSUs.

 

Long-Term Incentive and Compensation Plans

 

As part of its overall compensation, the Company provides for time-based RSUs, DSUs and options (“Options,” and collectively with RSUs and DSUs, “Awards”) that may be granted to employees, officers and eligible consultants and directors of the Company and its affiliates. Recipients of Awards are defined as “Participants”.

 

The aim of the Company’s compensation program is to attract and retain highly qualified executives and to link compensation to performance and shareholder value. This must ensure that the compensation is sufficiently competitive to achieve this objective. The Board considers a number of factors in order to determine compensation, including the Company’s contractual obligations, the individual’s performance and other qualitative aspects of the individual’s performance and achievements, the amount of time and effort the individual will devote to the Company and the Company’s financial resources.

 

The Company’s compensation program is comprised of:

 

  (a) A base salary or management fee arrangement and benefits. The base salaries or management fee arrangements and benefits paid to the key executives are not based on any specific formula and are set so as to be competitive with other companies of similar size and state of development in the mineral industry. This base salary also includes sign-on incentives, which may be issued in the form of cash, RSUs, DSUs or Options.
  (b) A short-term incentive program in the form of bonuses. Bonuses are paid to key executives based on individual, team and Company performance and the executive’s position in the Company. Any bonus awards are at the sole discretion of the Board.
  (c) Long-term incentives consist of DSUs, RSUs, and Options which provide the Board with additional long-term incentive mechanisms to align the interests of the directors, officers, employees or consultants of the Company with shareholder interests. These incentives also provides for, among other things, an accelerated vesting of awards in the event of a change in control, thereby aligning the Company’s practices with current corporate governance best practices respecting a change in control.

 

The Board believe that equity-based compensation plans are the most effective way to align the interests of management with those of shareholders. Long-term incentives must also be competitive and align with the Company’s compensation philosophy.

 

The Company does not have a pension plan that provides for payments or benefits to its executive officers.

 

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Change of Control Agreements

 

The Company has provided change of control benefits to certain senior officers to encourage them to continue their employment in the event of a purchase, sale, reorganization, or other significant change in the business.

 

If the employment agreement of the senior officer is terminated by the (a) Company without just cause, or (b) senior officer for good reason pursuant to the terms of the employment agreement, at any time within 12 months of a change of control, the Company is required to make a lump sum severance payment equal to 24 months of base salary. In addition, at such time all Awards shall be deemed to have vested, and all restrictions and conditions applicable to such Awards shall be deemed to have lapsed and the Awards shall be issued and delivered.

 

Employment Agreements

 

The Company has various employment agreements with certain executives, which provide for compensation and certain other benefits and for severance payments under certain circumstances. Certain employment agreements also contain clauses that become effective upon a change of control of the Company, as described above. The Company may be obligated to pay certain amounts to such employees upon the occurrence of any of the defined events in the various employment agreements.

 

Equity Compensation Plan Information

 

RSU Plan

 

On August 4, 2023, the shareholders of the Company approved the Amended and Restated Restricted Stock Unit Incentive Plan of the Company (the “RSU Plan”). Pursuant to the RSU Plan, restricted stock units (“RSUs”) of the Company have been reserved for purposes of possible future issuances, with each RSU representing the right to receive one share of Company common stock. The RSU Plan is intended to enhance the Company’s ability to attract and retain highly qualified officers, directors, key employees, consultants and other persons, and to motivate such officers, directors, key employees, consultants and other persons to serve the Company and to expend maximum effort to improve the business results and earnings of the Company by providing to such persons an opportunity to acquire or increase a direct proprietary interest in the operations and future success of the Company. To this end, the RSU Plan provides for the grant of RSUs and any of these awards of RSUs (“RSU Awards”) may, but need not, be made as performance incentives to reward attainment of annual or long-term performance goals of the Company.

 

The following information is intended to be a brief description and summary of the material features of the RSU Plan:

 

  (a) The maximum number of shares of common stock available for issuance under the RSU Plan is 26,581,075, subject to adjustment or increase of such number pursuant to the terms of the RSU Plan.
     
  (b) The number of share of common stock to be issued under the RSU Plan shall not exceed 10% of the total number of the issued and outstanding shares of common stock as of July 5, 2023.
     
  (c) In the event that an RSU Award is settled in cash, forfeited, surrendered, cancelled or otherwise terminated, the shares of common stock reserved for issuance in connection with such RSU Award will be returned to the pool of available common stock authorized for issuance under the RSU Plan and will be available for reservation pursuant to a new RSU Award grant.
     
  (d) RSU Awards may be made under the RSU Plan to any employee, director or consultant of the Company, as the Board shall determine and designate from time to time.
     
  (e) RSU Awards granted under the RSU Plan are subject to a minimum vesting period of one year, with certain exceptions.
     
  (f) RSU Awards granted under the RSU Plan may, in the discretion of the Board, be granted either alone or in addition to, in tandem with, or in substitution or exchange for, any other RSU Award or any award granted under another plan of the Company.
     
  (g) At the time a grant of RSUs is made, the Board may, in its sole discretion, establish a vesting period applicable to such RSUs, and each RSU Award may be subject to a different vesting period.

 

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Option Plan

 

Also on August 4, 2023, the shareholders of the Company approved the Bunker Hill Mining Corp. Amended and Restated Stock Option Plan (the “Option Plan”). Under the Option Plan, shares of common stock have been reserved for purposes of possible future issuance of incentive stock options, non-qualified stock options, and stock grants to employees, directors and certain key individuals. The purpose of the Option Plan is to advance the interests of the Company by (i) providing certain employees, senior officers, directors, or consultants of the Company (collectively, the “Optionees”) with additional performance incentives; (ii) encouraging share ownership by the Optionees; (iii) increasing the proprietary interest of the Optionees in the success of the Company; (iv) encouraging the Optionees to remain with the Company; and (v) attracting new employees, officers, directors and consultants to the Company.

 

The following information is intended to be a brief description and summary of the material features of the Option Plan:

 

  (a) The aggregate maximum number of shares of common stock available for issuance under the Option Plan is 10% of the outstanding common stock at any given time, subject to adjustment of such number pursuant to the terms of the Option Plan. Any shares of common stock subject to an option which has been granted under the Option Plan and which has been surrendered, terminated, or expired without being exercised, in whole or in part, will again be available under the Option Plan.
  (b) The exercise price of an option shall be determined by the Board at the time each option is granted, provided that such price shall not be less than the closing price of the common stock on the principal stock exchange(s) upon which the common stock is listed and posted for trading on the trading day immediately preceding the day of the grant of the option, less the applicable discount permitted by the TSX Venture Exchange, if any.
  (c) Options granted to persons conducting Investor Relations Activities (as defined in the Option Plan) for the Company must vest in stages over twelve months with no more than ¼ of the options vesting in any three-month period.
  (d) In the event an Optionee ceases to be eligible for the grant of options under the Option Plan, options previously granted to such person will cease to be exercisable within a period of 12 months following the date such person ceases to be eligible under the Option Plan.
  (e) In the event that a take-over bid or issuer bid is made for all or any of the issued and outstanding common stock, then the Board may, by resolution, permit all options outstanding to become immediately exercisable in order to permit shares of common stock issuable under such options to be tendered to such bid.

 

DSU Plan

 

On April 21, 2020, the Board approved the adoption of the Company’s Deferred Share Unit Plan (the “DSU Plan”), pursuant to which the Board may grant DSUs to eligible persons under the DSU Plan. Each DSU entitles the grantee to receive on vesting an amount equal to: (A) the number of vested DSUs elected to be redeemed multiplied by (B) the fair market value of the Company’s common stock less (C) any applicable withholdings pursuant to the DSU Plan. The purposes of the DSU Plan are to: (i) align the interests of directors of the Company with the long term interests of shareholders of the Company; and (ii) allow the Company to attract and retain high quality directors.

 

The following information is intended to be a brief description and summary of the material features of the DSU Plan:

 

  (a) A committee of directors of the Company appointed by the Board to administer the DSU Plan may grant DSUs to any director of the Company in its sole discretion.
  (b) Awards may be made under the DSU Plan to any director of the Company, as the committee appointed by the Board shall determine and designate from time to time.
  (c) Should the Company’s common stock no longer be publicly traded at the relevant time such that the fair market value of the common stock cannot be determined in accordance with the formula set out in the definition of that term pursuant to the DSU Plan, the fair market value of a share of common stock shall be determined by the committee appointed by the Board in its sole discretion.
  (d) At the time a grant of DSUs is made, the committee appointed by the Board may, in its sole discretion, establish a vesting period applicable to such DSUs.

 

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The following tables give information about the Company’s equity compensation plans as of December 31, 2023:

 

Plan category  Number of securities to be issued upon exercise of outstanding options, warrants   Weighted average exercise price of outstanding options, warrants   Number of securities remaining available for future issuances under equity compensation plans, excluding securities reflected in column (a) 
   (a)   (b)   (c) 
Equity compensation plans approved by security holders   8,970,636   $0.38    23,295,512 
Equity compensation plans not approved by security holders   -    -    - 
Total   8,970,636   $0.38    23,295,512 

 

Plan category  Number of securities to be issued upon exercise of outstanding RSUs and DSUs   Weighted average grant date price of outstanding RSUs and DSUs   Number of securities remaining available for future issuances under equity compensation plans, excluding securities reflected in column (a) 
   (a)   (b)   (c) 
RSU Plan   7,044,527   $0.18    19,536,548 
DSU Plan   0    N/A    N/A 
Total   7,044,527   $0.18    19,536,548 

 

Director Compensation

 

The general policy of the Board is that compensation for independent directors should be a fair mix between cash and equity-based compensation. Additionally, the Company reimburses directors for reasonable expenses incurred during the course of their performance. There are no long-term incentive or medical reimbursement plans. The Company does not pay directors, who are part of management, for Board service in addition to their regular employee compensation. The Board determines the amount of director compensation. The board may appoint a compensation committee to take on this role.

 

The following table provides a summary of compensation paid to directors during the year ended December 31, 2023.

 

Director  Fees Earned or Paid in Cash
($)
  

Stock

Awards

($)

  

Option

Awards

($)

  

Non-Equity

Incentive Plan

Compensation

($)

  

Nonqualified

Deferred

Compensation

Earnings

  

All Other

Compensation

($)(1) (2)

  

Total

($)

 
Dickson Hall                       65,103    65,103 
Mark Cruise   31,240                    65,103    96,343 
Richard Williams   286,253    339,846                    626,099 
Paul Smith   19,322                        40,684    60,006 
Pam Saxton   34,832                    75,119    109,951 
Cassandra Joseph   34,832                    75,119    109,951 

 

(1) DSUs granted to Dickson Hall, Mark Cruise, Pam Saxton, and Cassandra Joseph are calculated using a share price of C$0.23 on the applicable grant date.
(2) DSUs granted to Paul Smith are calculated using a share price of C$0.22 on the applicable grant date.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

Directors and Executive Officers

 

The following table sets forth the number of shares of Bunker Hill common stock owned beneficially by each director and named executive officer of the Company as of April 12, 2024 (unless another date is specified by footnote below), and by all current directors and executive officers of Bunker Hill as a group:

 

  

Amount and Nature of

Beneficial Ownership *

 
Name of Individual or Group (a)  Shares     

Percent of

Class (b)

 
Richard Williams, Executive Chairman   8,959,194   (c)   2.6%
Sam Ash, CEO and Director   4,651,713   (d)   1.4%
David Wiens, Former CFO   3,770,626   (e)   1.1%
Cassandra Joseph, Director   744,116   (f)   ** 
Dickson Hall, Director   736,000   (g)   ** 
Pamela Saxton, Director   483,000   (h)   ** 
Mark Cruise, Director   350,000   (i)   ** 
Gerbrand Van Heerden, CFO   98,285   (j)   ** 
Paul Smith, Director   0       ** 
Current Directors and Executive Officers as a Group  (a total of 8 persons)   16,022,308       4.6%

 

* Unless otherwise indicated, each person listed has the sole power to vote and dispose of the shares listed. Pursuant to Rule 13d-3 under the Exchange Act, beneficial ownership includes shares as to which the individual or entity has or shares voting power or investment power, and any shares that the individual or entity has the right to acquire within 60 days of April 12, 2024, including through the exercise of any option, warrant, or right. For each individual or entity that holds options, warrants or rights to acquire shares, the shares of Bunker Hill common stock underlying those securities are treated as owned by that holder and as outstanding shares when that holder’s percentage ownership of Bunker Hill common stock is calculated. That Bunker Hill common stock is not treated as outstanding when the percentage ownership of any other holder is calculated.
   
** The percent of class owned is less than 1%.
   
(a) Except as otherwise indicated below, the address and telephone number of each of these persons is c/o Bunker Hill Mining Corp., 82 Richmond Street East, Toronto, Ontario M5C 1P1, Canada and (416) 477-7771, respectively.
   
(b) Based on a total of 338,999,216 shares of Bunker Hill common stock outstanding as of April 12, 2024.
   
(c) Includes (i) 4,453,916 shares of common stock, (ii) 3,957,659 shares subject to stock options exercisable within 60 days of April 12, 2024, and (iii) 547,619 shares subject to warrants exercisable within 60 days of April 12, 2024.
   
(d) Includes (i) 3,563,210 shares of common stock, (ii) 988,503 shares subject to warrants exercisable within 60 days of April 12, 2024, and (iii) 100,000 shares subject to RSUs convertible within 60 days of April 12, 2024.
   
(e) Includes (i) 2,109,456 shares of common stock, (ii) 1,037,977 shares subject to stock options exercisable within 60 days of April 12, 2024, and (iii) 542,193 shares subject to warrants exercisable within 60 days of April 12, 2024.
   
(f) Includes (i) 403,558 shares of common stock and (ii) 340,558 shares subject to warrants exercisable within 60 days of April 12, 2024.

 

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(g) Includes (i) 368,000 shares of common stock and (ii) 368,000 shares subject to warrants exercisable within 60 days of April 12, 2024.
   
(h) Includes (i) 273,000 shares of common stock and (ii) 210,000 shares subject to warrants exercisable within 60 days of April 12, 2024.
   
(i) Includes (i) 175,000 shares of common stock and (ii) 175,000 shares subject to warrants exercisable within 60 days of April 12, 2024.
   
(i) Includes 98,285 shares of common stock.

 

Holders of More Than 5% of Bunker Hill Common Stock

 

The following table sets forth information (as of the date indicated) as to all persons or groups known to Bunker Hill to be beneficial owners of more than 5% of issued and outstanding shares of Bunker Hill common stock as of April 12, 2024.

 

Name and Address of Beneficial Holder 

Shares

Beneficially

Owned

   Percent of Class (a) 
Sprott Asset Management LP, Royal Bank Plaza, South Tower, 200 Bay Street, Suite 2600, P.O. Box 26, Toronto, Ontario M5J 2J1, Canada   141,339,201(b)   32.7%
Sprott Asset Management USA, Inc., 320 Post Road, Suite 230, Darien, Connecticut 06820          
Resource Capital Investment Corp., 1910 Palomar Point Way, Suite 200, Carlsbad, California 92008          

 

(a) Based on a total of 338,999,216 shares of Bunker Hill common stock outstanding as of April 12, 2024.
   
(b) This information is based on a Form 62-103F3 (Required Disclosure by an Eligible Institutional Investor Under Part 4) filed on the SEDAR+ website (www.sedarplus.ca) on January 10, 2024, which includes (i) 42,093,972 shares of common stock, (ii) 339,000 shares subject to warrants exercisable within 60 days of April 12, 2024, and (iii) 92,744,770 shares subject to convertible debentures convertible within 60 days of April 12, 2024, the sum of which shares has been upwardly adjusted for the issuance of 6,161,459 shares of common stock on April 4, 2024.

 

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

Certain Relationships and Related Transactions

 

There were no material transactions, or series of similar transactions, during the Company’s last fiscal year, or any currently proposed transactions, or series of similar transactions, to which the Company was or is to be a party, in which the amount involved exceeded the lesser of $120,000 or one percent of the average of the small business issuer’s total assets at year-end for the last three completed fiscal years and in which any director, executive officer or any security holder who is known to the Company to own of record or beneficially more than five percent of any class of the Company’s common stock, or any member of the immediate family of any of the foregoing persons, had an interest.

 

Director Independence

 

The Company’s common stock is currently traded on the TSX-V, under the symbol BNKR, and as such, is not subject to the rules of any national securities exchange which requires that a majority of a listed company’s directors and specified committees of its board of directors meet independence standards prescribed by such rules. For the purpose of preparing the disclosures in this document with respect to director independence, the Company has used the definition of “independent director” within the meaning of National Instrument 52-110 – Audit Committees adopted by the Canadian Securities Administration and as set forth in the Marketplace Rules of the NASDAQ, which defines an “independent director” generally as being a person, other than an executive officer or employee of the company or any other individual having a relationship which, in the opinion of the company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

 

Pam Saxton, Cassandra Joseph, Mark Cruise, Dickson Hall and Paul Smith are currently the only “independent” directors of the Company.

 

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DESCRIPTION OF SECURITIES TO BE REGISTERED

 

Our authorized capital stock consists of consists of 1,500,000,000 shares of common stock with a par value of $0.000001 per share and 10,000,000 preferred shares with a par value of $0.000001 per preferred share. As of April 12, 2024, there were 338,999,216 shares of our common stock outstanding.

 

The following description of our common stock and provisions of our articles of incorporation and by-laws is only a summary. Investors are directed for a complete description of the terms and provisions of our articles and by-laws, which are exhibits to the registration statement which contains this prospectus. We encourage you to review complete copies of our articles and by-laws.

 

Voting Rights

 

Holders of our common stock are entitled to one vote per share on all matters to be voted upon by the shareholder.

 

Dividend Rights

 

Holders of our common stock are entitled to receive ratably such dividends, if any, as may be declared by the Board out of funds legally available for dividends.

 

Liquidation Rights

 

Upon the liquidation, dissolution, or winding up of our company, the holders of our common stock are entitled to share ratably in all of our assets which are legally available for distribution after payment of all debts and other liabilities.

 

Conversion and Redemption

 

Holders of our common stock have no preemptive, subscription, redemption or conversion rights.

 

Preferred Stock

 

The Articles of Incorporation authorizes the Board to establish one or more series of preferred stock. Unless required by law or by any stock exchange, and subject to the terms of the articles of incorporation, the authorized shares of preferred stock will be available for issuance without further action by holders of our common stock.

 

The Board is able to determine, with respect to any series of preferred stock, designations, powers, preferences and relative, participating, optional or other rights, if any, and the qualifications, limitations or restrictions thereof, if any.

 

The Company could issue a series of preferred stock that could, depending on the terms of the series, impede or discourage an acquisition attempt or other transaction that some, or a majority, of the holders of our common stock might believe to be in their best interests or in which the holders of our common stock might receive a premium over the market price of our common stock. Additionally, the issuance of preferred stock may adversely affect the rights of holders of our common stock by restricting dividends on the common stock, diluting the voting power of the common stock or subordinating the rights of the common stock to distributions upon a liquidation, dissolution or winding up or other event. As a result of these or other factors, the issuance of preferred stock could have an adverse impact on the market price of our common stock.

 

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Change of Control

 

Nevada’s “Acquisition of Controlling Interest Statute” applies to Nevada corporations that have at least 200 shareholders, with at least 100 shareholders of record being Nevada residents and that do business directly or indirectly in Nevada. Where applicable, the statute prohibits an acquiror from voting shares of a target company’s stock after exceeding certain threshold ownership percentages, until the acquiror provides certain information to the company and a majority of the disinterested shareholders vote to restore the voting rights of the acquiror’s shares at a meeting called at the request and expense of the acquiror. If the voting rights of such shares are restored, shareholders voting against such restoration may demand payment for the “fair value” of their shares. The Nevada statute also restricts a “business combination” with “interested shareholders,” unless certain conditions are met, with respect to corporations which have at least 200 shareholders of record. A “combination” includes:

 

  (i) any merger with an “interested shareholder,” or any other corporation which is or after the merger would be, an affiliate or associate of the interested shareholder;
  (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of assets, to an “interested shareholder,” having an aggregate market value equal to 5% or more of the aggregate market value of the corporation’s assets; an aggregate market value equal to 5% or more of the aggregate market value of all outstanding shares of the corporation; or representing 10% or more of the earning power or net income of the corporation;
  (iii) any issuance or transfer of shares of the corporation or its subsidiaries, having an aggregate market value equal to 5% or more of the aggregate market value of all the outstanding shares of the corporation to the “interested shareholder”
  (iv) the adoption of any plan or proposal for the liquidation or dissolution of the corporation proposed by the “interested shareholder”;
  (v) certain transactions which would result in increasing the proportionate percentage of shares of the corporation owned by the “interested shareholder”; or
  (vi) the receipt of benefits, except proportionately as a shareholder, of any loans, advances or other financial benefits by an “interested shareholder.”

 

An “interested shareholder” is a person who, together with affiliates and associates, beneficially owns (or within the prior three years, did beneficially own) 10% or more of the corporation’s voting stock. A corporation to which this statute applies may not engage in a “combination” within three years after the interested shareholder acquired its shares, unless the combination or the interested shareholder’s acquisition of shares was approved by the board of directors before the interested shareholder acquired the shares. If this approval was not obtained, then after the three-year period expires, the combination may be consummated if all applicable statutory requirements are met.

 

Approval of mergers, conversion, amendments to the articles of incorporation, and sales, leases or exchanges of all of the property or assets of a corporation, whether or not in the ordinary course of business, requires the affirmative vote or consent of the holders of a majority of the outstanding shares entitled to vote, except that, unless required by the articles of incorporation, no vote of shareholders of the corporation surviving a merger is necessary if:

 

  (i) the merger does not amend the articles of incorporation of the corporation;
  (ii) each outstanding share immediately prior to the merger is to be an identical share after the merger;
  (iii) The number of voting shares outstanding immediately after the merger, plus the number of voting issued as a result of the merger, either by the conversion of shares securities issued pursuant to the merger or the exercise of rights and warrants issued pursuant to the merger, will not exceed by more than 20% the total number of voting shares of the surviving domestic corporation outstanding immediately before the merger; and
  (iv) the number of participating shares (i.e. shares that entitle their holders to participate without limitation in distribution) outstanding immediately after the merger, plus the number of participating shares issuable as a result of the merger, either by the conversion of securities issued pursuant to the merger or the exercise of rights and warrants issued pursuant to the merger, will not exceed by more than 20% the total number of participating shares outstanding immediately before the merger.

 

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PRINCIPAL ACCOUNTING FEES AND SERVICES