UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2023 OR For the transition period from to Commission file number: 333-150028 BUNKER HILL MINING CORP. (Exact Name of Registrant as Specified in its Charter) (State of other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) (416) 477-7771 (Registrant’s Telephone Number, including Area Code) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒ Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes Indicate by check mark whether the Registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”) during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐ to this Form 10-Q. ☒ 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. Smaller reporting company ☒ Indicate by check mark whether the Registrant is a shell company, as defined in Rule 12b-2 of the Exchange Act. Yes ☐ No ☒ Number of shares of Common Stock outstanding as of TABLE OF CONTENTS PART I – FINANCIAL INFORMATION Item 1. Financial Statements The condensed interim consolidated financial statements of Bunker Hill Mining Corp., (“Bunker Hill”, the “Company”, or the “Registrant”) Bunker Hill Mining Corp. Condensed Interim Consolidated Balance Sheets (Expressed in United States Dollars) Unaudited The accompanying notes are an integral part of these unaudited condensed interim consolidated financial Bunker Hill Mining Corp. Condensed Interim Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) (Expressed in United States Dollars) 4,226,574 214,714 The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements. Bunker Hill Mining Corp. Condensed Interim Consolidated Statements of Cash Flows (Expressed in United States Dollars) Unaudited 68,656 (384,984 240,000 - $ The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements. Bunker Hill Mining Corp. Condensed Interim Consolidated Statements of Changes in Shareholders’ Deficiency (Expressed in United States Dollars) Unaudited - The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements. Bunker Hill Mining Corp. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited) Three (Expressed in United States Dollars) 1. Nature and Continuance of Operations and Going Concern Bunker Hill Mining Corp. (the “Company”) was incorporated under the laws of the state of Nevada, U.S.A. on February 20, 2007, under the name Lincoln Mining Corp. Pursuant to a Certificate of Amendment dated February 11, 2010, the Company changed its name to Liberty Silver Corp., and on September 29, 2017, the Company changed its name to Bunker Hill Mining Corp. The Company’s registered office is located at 1802 N. Carson Street, Suite 212, Carson City, Nevada 89701, and its head office is located at 82 Richmond Street East, Toronto, Ontario, Canada, M5C 1P1. As of the date of this Form 10-Q, the Company had one subsidiary, Silver Valley Metals Corp. The Company was incorporated for the purpose of engaging in mineral exploration activities. It continues to work at developing its project with a view towards putting it into production. Going Concern: These unaudited condensed interim consolidated financial statements have been prepared on a going concern basis. The Company has incurred losses since inception resulting in an accumulated deficit of $ Management is considering various financing alternatives including, but not limited to, raising capital through the capital markets, debt, and closing on the multi-metals stream transaction (see note 7). These unaudited The Russia/Ukraine Crisis: The Company’s operations could be adversely affected by the effects of the Russia/Ukraine crisis and the effects of sanctions imposed against Russia or that country’s retributions against those sanctions, embargos or further-reaching impacts upon energy prices, food prices and market disruptions. The Company cannot accurately predict the impact the crisis will have on its operations and the ability of contractors to meet their obligations with the Company, including uncertainties relating the severity of its effects, the duration of the conflict, and the length and magnitude of energy bans, embargos and restrictions imposed by governments. In addition, the crisis could adversely affect the economies and financial markets of the United States in general, resulting in an economic downturn that could further affect the Company’s operations and ability to finance its operations. Additionally, the Company cannot predict changes in precious metals pricing or changes in commodities pricing which may alternately affect the Company either positively or negatively. The accompanying unaudited condensed interim consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission for interim financial information. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, shareholders’ deficiency, or cash flows. It is management’s opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation. The unaudited condensed interim consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K, which contains the annual audited consolidated financial statements and notes thereto, together with the Management’s Discussion and Analysis, for the year ended December 31, Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes for items such as mineral reserves, useful lives and depreciation methods, potential impairment of long-lived assets, deferred income taxes, settlement pricing of commodity sales, fair value of stock based compensation, accrued liabilities, estimation of asset retirement obligations and reclamation liabilities, convertible debentures, and warrants. Estimates are based on historical experience and various other assumptions that the Company believes to be reasonable. Actual results could differ from those estimates. 3. Accounts receivable and prepaid expenses Accounts receivable and prepaid expenses consists of the following: Schedule of Accounts receivable and prepaid expenses 4. Equipment, Right-of-Use asset and Process Plant Equipment consists of the following: Schedule of Equipment The total depreciation expense Process Plant Purchase from Teck Resources Limited On May 13, 2022, the Company completed purchase of a comprehensive package of equipment and parts inventory from Teck Resources Limited (“Teck”). The package comprises substantially all processing equipment of value located at the Pend Oreille mine site, including complete crushing, grinding and flotation circuits suitable for a planned ~1,500 ton-per-day operation at the Bunker Hill site, and total inventory of nearly 10,000 components and parts for mill, assay lab, conveyer, field instruments, and electrical spares. The purchase of the mill has been valued at: The process plant was purchased in an assembled state in the seller’s location, and included major processing systems, significant components, and a large inventory of spare parts. The Company has disassembled and transported it to the Bunker Hill site, and will be reassembling it as an integral part of the Company’s future operations. The Company determined that the transaction should be accounted for as an asset acquisition, with the process plant representing a single asset, with the exception of the inventory of spare parts, which has been separated out and appears on the balance Schedule of Plant Asset Consists September 30, 2022 Ball Mill upgrade On August 30, 2022, the Company entered into an agreement to purchase a ball mill from D’Angelo International LLC for $675,000. The purchase of the mill is to be made in three cash $100,000 $100,000 Right-of-use asset consists of the following: Schedule of Right-of-use Asset The total depreciation expense 5. Bunker Hill Mine and Mining Interests Bunker Hill Mine Complex The Company purchased the Bunker Hill Mine (the “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 announced on 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 Common Shares of the Company. The Company agreed to make an advance payment of $2,000,000, credited towards the purchase price of the Mine, which had the effect of decreasing the remaining amount payable to purchase the Mine to an aggregate of $3,400,000 payable in cash and $2,000,000 in Common Shares of the Company. 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 EPA in this regard totaled $11,000,000. The Company completed the purchase of the Mine on January 7, 2022. The terms of the purchase price were modified to $5,400,000 in cash, from $3,400,000 of cash and $2,000,000 of Common Shares. Concurrent with the purchase of the Mine, the Company assumed incremental liabilities of $8,000,000 to the EPA, consistent with the terms of the amended Settlement Agreement with the EPA that was executed in December 2021 (see “EPA Settlement Agreement” section below). The $5,400,000 contract cash paid at purchase was the $7,700,000 less the $2,000,000 deposit and $300,000 credit given by the seller for prior years’ maintenance payments. The purchase of the mine has been valued on January 7, 2022: Capitalized legal and closing costs of $444,785. The carrying cost of the Mine is comprised of the following: Schedule of Mining Interests Management has determined the purchase to be an acquisition of a single Land On March 3, 2022, the Company purchased a 225-acre surface land parcel for $202,000 which includes the surface rights to portions of 24 patented mining claims, for which the Company already owns the mineral rights. During the three months ended March 31, 2023, the Company entered into a lease agreement with C & E Tree Farm LLC for the lease of a land parcel overlaying a portion of the Company’s existing mineral claims package. The Company is committed to making monthly payments of $10,000 through February 2026. The Company has the option to purchase the land parcel through March 1, 2026, for $3,129,500 less 50% of the payments made through the date of purchase. 6. Environmental Protection Agency Historical Cost Recovery Payables - EPA As a part of the lease of the Mine, the Company was required to make payments pursuant to an agreement with the Through 2021, the Company engaged in discussions with the EPA to reschedule these payments in ways that enable the sustainable operation of the Mine as a viable long-term business. Effective December 19, 2021, the Company entered into an amended Settlement Agreement between the Company, Idaho Department of Environmental Quality, US Department of Justice, and the EPA (the “Amended Settlement”). Upon the effectivity of the Amended Settlement, the Company would become fully compliant with its payment obligations to these parties. The Amended Settlement modified the payment schedule and payment terms for recovery of the aforementioned historical environmental response costs. Pursuant to the terms of the Amended Settlement, upon purchase of the Bunker Hill Mine and the satisfaction of financial assurance commitments (as described below), the $19,000,000 of cost recovery liabilities will be paid by the Company to the EPA on the following dates: Schedule of Amended Settlement Environmental Protection Agency Agreement In addition to the changes in payment terms and schedule, the Amended Settlement included a commitment by the Company to secure $17,000,000of financial assurance in the form of performance bonds or letters of credit deemed acceptable to the EPA within 180 days from the effective date of the Amended The Company completed the purchase of the Mine (see note 5) and made the initial $2,000,000 cost recovery payment on January 7, 2022. Concurrent with the purchase of the Mine, the Company assumed the balance of the EPA liability totaling $17,000,000, an increase of $8,000,000. During the Water Treatment Charges – Separate to the cost recovery liabilities outlined above, the Company is responsible for the payment of ongoing water treatment charges. Water treatment charges incurred through December 31, 2021 7. Promissory Promissory Notes On September 22, 2021, the Company issued a non-convertible promissory note in the amount of $2,500,000bearing interest of 15% per annum and payable at maturity. At On February 21, 2023, the Company issued a non-convertible promissory note to a related party in the amount of $18,000 per annum, payable at maturity, which was the earlier of one year or the receipt of an equity or debt financing. Both promissory notes, including interest, were settled on March 27, 2023. 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. (“SRSR”). The non-binding term sheet with SRSR outlined a $50,000,000 project financing package that the Company On June 17, 2022, the Company consummated a new $15,000,000 convertible debenture (the “CD2”). As a result, total potential funding from SRSR was further increased to $66,000,000 including the RCD, CD1, CD2 and the Stream (together, the “Project Financing Package”). $8,000,000 Royalty Convertible Debenture 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 Shares at the Company’s option, until such time that SRSR elects to convert a royalty, with such conversion option expiring at the earlier of advancement of the Stream or July 7, 2023 (subsequently amended as described below). In the event of conversion, the RCD will cease to exist and the Company will grant a royalty for 1.85% of life-of-mine gross revenue from mining claims considered to be historically worked, contiguous to current accessible underground development, and covered by the Company’s 2021 ground geophysical survey (the “SRSR Royalty”). A 1.35% rate will apply to claims outside of these areas. The RCD was initially secured by a share pledge of the Company’s operating subsidiary, Silver Valley, until a full security package was put in place concurrent with the consummation of the CD1. In the event of non-conversion, the principal of the RCD will be repayable in cash. Concurrent with the funding of the CD2 in June 2022, the Company and SRSR agreed to a number of amendments to the terms of the RCD, including an amendment of the maturity date from July 7, 2023 to March 31, $6,000,000 The Company closed the $6,000,000 CD1 on January 28, 2022, which was increased from the previously-announced $5,000,000. The CD1 bears interest at an annual rate of 7.5%, payable in cash or shares at the Company’s option, and matures on July 7, 2023 (subsequently amended, as described below). The CD1 is secured by a pledge of the Company’s properties and assets. Until the closing of the Stream, the CD1 was to be convertible into Common Shares at a price of C$ per Common Share, subject to stock exchange approval (subsequently amended, as described below). Alternatively, SRSR may elect to retire the CD1 with the cash proceeds from the Stream. The Company may elect to repay the CD1 early; if SRSR elects not to exercise its conversion option at such time, a minimum of 12 months of interest would apply. Concurrent with the funding of the CD2 in June 2022, the Company and SRSR agreed to a number of amendments to the terms of the CD1, including that the maturity date would be amended from July 7, 2023 to March 31, 2025, and that the CD1 would remain outstanding until the new maturity date regardless of whether the Stream is advanced, unless the Company elects to exercise its option of early repayment. The Company determined that the amendments in the terms of the $15,000,000 Series 2 Convertible Debenture (CD2) 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 shares at the Company’s option, and matures on March 31, In light of the Series 2 Convertible Debenture financing, the previously permitted additional senior secured indebtedness of up to $15 million for project finance has been removed. The Company determined that in accordance with ASC 815 Derivatives and Hedging, each debenture will be valued and carried as a single instrument, with the periodic changes to fair value accounted through earnings, profit and loss. Consistent with the approach above, the following table summarizes the key valuation inputs as at applicable valuation dates: Schedule of Key Valuation Inputs Valuation date Maturity date Risk- adjusted rate The resulting fair values of the CD1, RCD, and CD2 at Schedule of Fair Value Derivative Liability March 31, 2023 December 31, 2022 The total gain on fair value of debentures recognized during the three The Company performs quarterly testing of the covenants in the RCD, CD1 and CD2, and was in compliance with all such covenants as of $5,000,000 Bridge Loan On December 6, 2022, the Company closed a new $5,000,000 loan facility with Sprott (the “Bridge Loan”). The Bridge Loan is secured by the same security package that is in place with respect to the RCD, CD1, and CD2. The Bridge Loan bears interest at a rate of 10.5% per annum and matures at the earlier of (i) the advance of the Stream, or (ii) June 30, 2024. In addition, the minimum quantity of metal delivered under the Stream, if advanced, would increase by 5% relative to amounts previously announced. Interest expense for three months ended March 31, 2023 and 2022 was $178,383 and $nil respectively. At March 31, 2023 interest of $131,250 ($53,985 at December 31, 2022) is included in interest payable on the consolidated balance sheets. $37,000,000 Stream A minimum of $27,000,000 and a maximum of $37,000,000 (the “Stream Amount”) will be made available under the Stream, at the Company’s option, once the conditions of availability of the Stream have been satisfied, including confirmation of full project funding by an independent engineer appointed by SRSR. If the Company draws the maximum funding of $37,000,000, the Stream would apply to 10% of payable metals sold until a minimum quantity of metal is delivered consisting of, individually, 55 million pounds of zinc, 35 million pounds of lead, and 1 million ounces of silver (subsequently amended, as described below). Thereafter, the Stream would apply to 2% of payable metals sold. If the Company elects to draw less than $37,000,000 under the Stream, the percentage and quantities of payable metals streamed will adjust pro-rata. The delivery price of streamed metals will be 20% of the applicable spot price. The Company may buy back 50% of the Stream Amount at a 1.40x multiple of the Stream Amount between the second and third anniversary of the date of funding, and at a 1.65x multiple of the Stream Amount between the third and fourth anniversary of the date of funding. As of 8. Lease The Company Schedule of Operating Lease Liability 9. Capital Stock, Warrants and Stock Options Authorized The total authorized capital is as follows: Issued and outstanding In special warrants of the Company (“March 2023 Special Warrants”) at C$4,536,020 (C$6,196,047), of which $3,661,822 was received in cash and $ In Each In connection with the For each financing, the Company has accounted for the warrants in accordance with ASC Topic 815. The warrants are considered derivative instruments as they were issued in a currency other than the Company’s functional currency of the U.S. dollar. The estimated fair value of warrants accounted for as liabilities was determined on the date of issue and marks to market at each financial reporting period. The change in fair value of the warrant is recorded in the The fair value of the warrant liabilities Schedule of Estimated Using the Binomial Model to Determine the Fair Value of Warrant Liabilities March 31, 2023 December 31, 2022 March 31, 2023 December 31, 2022 March 31, 2023 December 31, 2022 March 31, 2023 December 31, 2022 March 31, 2023 December 31, 2022 March 31, 2023 December 31, 2022 March 31, 2023 December 31, 2022 Schedule of Warrant Activity During the three months ended March 31, 2023, During the At Schedule of Warrants Outstanding Exercise Price Number of warrants March 2023 Special Warrants The Company closed a private placement of the March 2023 Special Warrants on March 27, 2023, which will convert to Common Shares and common stock purchase warrants in the third quarter of 2023 as described above. As a result, as of March 31, 2023, the Common Shares and common stock purchase warrants had not been issued. In accordance with its accounting policies, the Company has determined the fair value of the March 2023 Special Warrants as of March 31, 2023, through the valuation of the underlying Common Shares and common stock purchase warrants. As of March 31, 2023, there were 51,633,727 March 2023 Special Warrants outstanding ($nil as of December 31, 2022). The fair value of the underlying warrant liability related to the March 2023 Special Warrants was estimated using the Binomial model to determine the fair value using the following assumptions as at March 31, 2023 and December 31, 2022: Schedule of Estimated Fair Value of Special Warrant Liabilities March 31, 2023 Grant Date Compensation options At Schedule of Compensation Options Schedule of Estimated Using Black-Scholes Valuation Model for Fair Value of Broker Options Risk free interest rate Schedule of Broker Exercise Prices Grant date Fair value Stock options Schedule of Stock Options Risk free interest rate Weighted average life Risk free interest rate Weighted average life Schedule of Actual Stock Options Issued and Outstanding Three Months ended September 30, 2022 Three Months ended September 30, 2021 Nine Months ended September 30, 2022 Nine Months ended September 30, 2021 Effective March 25, 2020, the Board of Directors approved a Restricted Share Unit (“RSU”) Plan to grant RSUs to its officers, directors, key employees and consultants. Schedule of Restricted Share Units Effective April 21, 2020, the Board of Directors approved a Deferred Share Unit (“DSU”) Plan to grant DSUs to its directors. The DSU Plan permits the eligible directors to defer receipt of all or a portion of their retainer or compensation until termination of their services and to receive such fees in the form of cash at that time. Upon vesting of the DSUs or termination of service as a director, the director will be able to redeem DSUs based upon the then market price of the Company’s Schedule of Deferred Share Units As stipulated in the agreement with the EPA and as described in Note 6, the Company is required to make two types of payments to the EPA and IDEQ, one for historical water treatment cost-recovery to the EPA, and the other for ongoing water treatment. Water treatment costs incurred through December 2021 are payable to the EPA, and water treatment costs incurred thereafter are payable to the IDEQ. The IDEQ (as done formerly by the EPA) invoices the Company on an annual basis for the actual water treatment costs, which may exceed the recognized estimated costs significantly. When the Company receives the water treatment invoices, it records any liability for actual costs over and above any estimates made and adjusts future estimates as required based on these actual invoices received. The Company is required to pay for the actual costs regardless of the periodic required estimated accruals and payments made each year. On July 28, 2021, a lawsuit was filed in the US District Court for the District of Idaho brought by Crescent Mining, LLC (“Crescent”). The named defendants include Placer Mining, Robert Hopper Jr., and the Company. The lawsuit alleges that Placer Mining and Robert Hopper Jr. intentionally flooded the Crescent Mine during the period from 1991 and 1994, and that the Company is jointly and severally liable with the other defendants for unspecified past and future costs associated with the presence of 13. The Company’s key management personnel have the authority and responsibility for planning, directing and controlling the activities of the Company and consists of the Company’s executive management team and management directors. Schedule of Related Party Transactions Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended At Item 2. Management’s Discussion and Analysis of Financial Condition or Plan of Operation 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 The Russia/Ukraine Crisis: The Company’s operations could be adversely affected by the effects of the escalating Russia/Ukraine crisis and the effects of sanctions imposed against Russia or that country’s retributions against those sanctions, embargos or further-reaching impacts upon energy prices, food prices and market disruptions. The Company cannot accurately predict the impact the crisis will have on its operations and the ability of contractors to meet their obligations with the Company, including uncertainties relating the severity of its effects, the duration of the conflict, and the length and magnitude of energy bans, embargos and restrictions imposed by governments. In addition, the crisis could adversely affect the economies and financial markets of the United States in general, resulting in an economic downturn that could further affect the Company’s operations and ability to finance its operations. Additionally, the Company cannot predict changes in precious metals pricing or changes in commodities pricing which may alternately affect the Company either positively or negatively. Description of Business Corporate Information The Company was incorporated under the laws of the State of Nevada, U.S.A on February 20, 2007 under the name Lincoln Mining Corp. On February 11, 2010, the Company changed its name to Liberty Silver Corp and subsequently, on September 29, 2017, the Company changed its name to Bunker Hill Mining Corp. The Company’s registered office is located at 1802 N. Carson Street, Suite 212, Carson City Nevada 89701, and its head office is located at 82 Richmond Street East, Toronto, Ontario, Canada, M5C 1P1, and its telephone number is 416-477-7771. The Company’s website is www.bunkerhillmining.com. Information appearing on the website is not incorporated by reference into this report. Background and Overview The Company’s sole focus is the development and restart of its 100% owned flagship asset, the Bunker Hill mine (the “Mine”) The Company purchased the Bunker Hill Mine on January 7, 2022 for $5,400,000 in cash. 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 announced on August 28, 2017, with subsequent amendments and/or extensions announced on November 1, 2019, July 7, 2020, and November 20, 2020. Under the 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, published multiple economic studies and Mineral Resource Estimates, and advanced the rehabilitation and development of the Mine. In December 2021, In 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 three Comparison of the three Revenue During the Expenses During the three The decrease in total operating expenses was primarily due to (i) a decrease in mine preparation expenses of $2,507,079, (ii) a decrease in consulting and wages expenses of $1,586,562. Mine preparation expenses were $nil in the three months ended March 31, 2023 primarily as a result of the Company determining that costs directly attributed to the mine after September 30, 2022 (upon the release of the prefeasibility study) constituted mine development (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 three months ended March 31, 2023 as compared to the three Net Income and The Company had net income of $1,791,149 for the year three months ended March 31, 2023 (net loss of $2,880,886 for the three months ended March 31, 2022). In addition to the decrease in operating expenses (as described above), net income in the three months ended March 31, 2023 was positively impacted by a $772,556 increase in The Liquidity and Capital Resources Going Concern These unaudited condensed interim consolidated financial statements have been prepared on a going concern basis. The Company has incurred losses since inception resulting in an accumulated deficit of Management is considering various financing alternatives including, but not limited to, raising capital through the capital markets, debt and closing on the multi-metals stream transaction. These unaudited condensed interim consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence. Current Assets and Total Assets As of Current Liabilities and Total Liabilities As of Working Capital and Shareholders’ Deficit Cash Flow During the Subsequent Events Critical accounting estimates The preparation of the interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Estimates and judgments are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual outcomes can differ from these estimates. The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the amounts recognized in the financial statements are: Share-based payments Management determines costs for share-based payments using market-based valuation techniques. The fair value of the share awards and warrant liabilities are determined at the date of grant using generally accepted valuation techniques and for warrant liabilities at each balance Convertible loans, promissory notes and 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 The fair value estimates of the convertible loans use inputs to the valuation model that include risk-free rates, equity value per common share, USD-CAD exchange rates, spot and futures prices of minerals, expected equity volatility, expected volatility in minerals prices, discount for lack of marketability, credit spread, expected mineral production over the life of the mine, and project risk/estimation risk factors. 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. Off-Balance Sheet Arrangements The Company has no off-balance sheet arrangements. Item 3. Quantitative and Qualitative Disclosures about Market Risk Not applicable. Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures The Securities and Exchange Commission (“SEC”) defines the term “disclosure controls and procedures” to mean a company’s controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified under the SEC’s rules and forms and that information required to be disclosed is accumulated and communicated to principal executive and principal financial officers to allow timely decisions regarding disclosure. As of the end of the period covered by this report, the Company made an evaluation of the effectiveness of the design and operation of the disclosure controls and procedures over financial reporting for the timely alert to material information required to be included in the Company’s periodic SEC reports and of ensuring that such information is recorded, processed, summarized and reported within the time periods specified. This evaluation resulted in the With the participation of the CEO and CFO, the Company’s management evaluated the effectiveness of the Company’s internal control over financial reporting as of March 31, 2023 to ensure that information required to be disclosed by the Company PART II – OTHER INFORMATION Item 1. Legal Proceedings Other than as described below, neither the Company nor its property is the subject of any current, pending, or threatened legal proceedings. 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. On July 28, 2021, a lawsuit was filed in the US District Court for the District of Idaho brought by Crescent Mining, LLC (“Crescent”). The named defendants include Placer Mining, Robert Hopper Jr., and the Company. The lawsuit alleges that Placer Mining and Robert Hopper Jr. intentionally flooded the Crescent Mine during the period from 1991 and 1994, and that the Company is jointly and severally liable with the other defendants for unspecified past and future costs associated with the presence of AMD in the Crescent Mine. The plaintiff has requested unspecified damages. On September 20, 2021, the Company filed a motion to dismiss Crescent’s claims against it, contending that such claims are facially deficient. On March 2, 2022, Chief US District Court Judge, David C. Nye granted in part and denied in part the Company’s motion to dismiss. The court granted the Company’s motion to dismiss Crescent’s Cost Recovery claim under CERCLA Section 107(a), Declaratory Judgment, Tortious Interference, Trespass, Nuisance and Negligence claims. These claims were dismissed without prejudice. The court denied the motion to dismiss filed by Placer Mining Corp. for Crescent’s trespass, nuisance and negligence claims. Crescent later filed On October 26, 2021, the Company asserted claims against Crescent in a separate lawsuit. Bunker Hill Mining Corporation v. Venzee Technologies Inc. et al, Case No. 2:21-cv-209-REP, filed in the same court on May 14, 2021. The Company has subsequently executed a tolling agreement with Venzee in exchange for dropping its lawsuit. The Company originally filed this lawsuit on May 14, 2021 against other parties but has since filed an amended complaint to include its claims against Crescent. Item 1A. Risk Factors There Item 2. Unregistered Sales of Equity Securities and Use Of Proceeds Not Applicable. Item 3. Defaults upon Senior Securities None. Item 4. Mine Safety Disclosure Pursuant to Section 1503(a) of the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose in their periodic reports filed with the SEC information regarding specified health and safety violations, orders and citations, issued under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”) by the Mine Safety and Health Administration (the “MSHA”), as well as related assessments and legal actions, and mining-related fatalities. The following table provides information for the three months ended Item 5. Other Information None. Item 6. Exhibits SIGNATURES In accordance with Section 12 of the Securities Exchange Act of 1934, the Registrant has caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized. In accordance with Section 12 of the Securities Exchange Act of 1934, the Registrant has caused Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized. For the quarterly period ended September 30, 2022OR☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 nevada 32-0196442 82 Richmond Street East Toronto, Ontario, Canada M5C 1P1 (Address of Principal Executive Offices) (Zip Code) ☐☒ No ☒☐Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Emerging Growth Company ☐ November 4, 2022:May 12, 2023: 2 aa. Nevada corporation, included herein were prepared, without audit, pursuant to rules and regulations of the Securities and Exchange Commission. Because certain information and notes normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.”) were condensed or omitted pursuant to such rules and regulations, these financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2021,2022, and all amendments thereto.3 September 30, December 31, 2022 2021 ASSETS Current assets Cash $ 103,833 $ 486,063 Restricted Cash (note 6) 9,476,000 - Accounts receivable and prepaid expenses (note 6) 1,208,109 413,443 Short-term deposit (note 3) 1,000,000 68,939 Prepaid mine deposit and acquisition costs (note 5) - 2,260,463 Prepaid finance costs - 393,640 Total current assets 11,787,942 3,622,548 Non-current assets Spare parts inventory 341,004 - Equipment (note 3) 593,588 396,894 Right-of-use assets (note 4) - 52,353 Bunker Hill Mine and mining interests (note 5) 14,805,360 1 Process plant (note 3) 6,058,694 - Total assets $ 33,586,588 $ 4,071,796 EQUITY AND LIABILITIES Current liabilities Accounts payable $ 2,877,593 $ 1,312,062 Accrued liabilities 1,694,461 869,581 EPA water treatment payable (note 6) 3,847,141 5,110,706 Interest payable (notes 6 and 7) 1,156,195 409,242 DSU liability (note 12) 363,648 1,531,409 Promissory notes payable (note 7) 1,500,000 2,500,000 EPA cost recovery payable - short-term (note 6) - 11,000,000 Current portion of lease liability (note 8) - 62,277 Total current liabilities 11,439,038 22,795,277 Non-current liabilities Series 1 convertible debenture (note 7) 4,892,435 - Series 2 convertible debenture (note 7) 12,710,097 - Royalty convertible debenture (note 7) 7,359,776 - EPA cost recovery liability - long-term, net of discount (note 6) 7,420,024 - Derivative warrant liability (note 9) 4,500,387 15,518,887 Total liabilities 48,321,757 38,314,164 Shareholders’ Deficiency Preferred shares, $ par value, preferred shares authorized; preferred shares issued and outstanding (note 9) - - Common shares, $ par value, common shares authorized; and common shares issued and outstanding, respectively (note 9) 219 164 Additional paid-in-capital (note 9) 43,894,878 38,248,618 Accumulated other comprehensive income (note 7) 996,636 - Deficit accumulated during the exploration stage (59,626,902 ) (72,491,150 ) Total shareholders’ deficiency (14,735,169 ) (34,242,368 ) Total shareholders’ deficiency and liabilities $ 33,586,588 $ 4,071,796 March 31, December 31, 2023 2022 ASSETS Current assets Cash $ 3,592,558 $ 708,105 Restricted cash 6,476,000 6,476,000 Accounts receivable and prepaid expenses (note 3) 515,491 556,947 Total current assets 10,584,049 7,741,052 Non-current assets Spare parts inventory 341,004 341,004 Equipment (note 4) 566,516 551,204 Right-of-use asset (note 4) 108,536 - Long term deposit 269,015 269,015 Bunker Hill Mine and mining interests (note 5) 15,966,737 15,896,645 Process plant (note 4) 9,093,941 8,130,972 Total assets $ 36,929,798 $ 32,929,892 EQUITY AND LIABILITIES Current liabilities Accounts payable $ 5,748,304 $ 4,523,502 Accrued liabilities 1,825,499 1,500,164 Current portion of lease liability (note 8) 58,531 - Interest payable (note 7) 595,358 1,154,477 Derivative warrant liability (note 9) 1 903,697 Deferred share units liability (note 11) 374,464 573,742 Promissory notes payable (note 7) 1,500,000 1,500,000 Total current liabilities 10,102,157 10,155,582 Non-current liabilities Bridge loan 4,731,579 4,684,446 Series 1 convertible debenture (note 7) 5,093,130 5,537,360 Series 2 convertible debenture (note 7) 13,177,407 14,063,525 Royalty convertible debenture (note 7) 9,119,412 10,285,777 Environment protection agency cost recovery liability, net of discount (note 6) 8,315,772 7,941,466 Derivative warrant liability (note 9) 5,612,778 6,438,679 Total liabilities 56,152,235 59,106,835 Shareholders’ Deficiency Preferred shares, $ par value, preferred shares authorized; preferred shares issued and outstanding (note 9) - - Common shares, $ par value, common shares authorized; and common shares issued and outstanding, respectively (note 9) 255 228 Additional paid-in-capital (note 9) 48,033,043 45,161,513 Special warrants (note 9) 1,484,788 - Accumulated other comprehensive income 1,060,887 253,875 Accumulated deficit (69,801,410 ) (71,592,559 ) Total shareholders’ deficiency (19,222,437 ) (26,176,943 ) Total shareholders’ deficiency and liabilities $ 36,929,798 $ 32,929,892 statements,statements.4 Unaudited(Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Operating expenses Operation and administration $ 150,910 $ 221,451 $ 587,514 $ 1,506,859 Exploration - 1,465,157 - 8,677,194 Mine preparation 2,533,101 - 6,861,403 - Legal and accounting 210,960 335,431 975,014 872,647 Consulting 929,977 442,906 4,867,553 1,327,774 Loss from operations (3,824,948 ) (2,464,945 ) (13,291,484 ) (12,384,474 ) Other income or gain (expense or loss) Change in derivative liability (note 9) 7,315,161 6,460,513 18,538,380 22,172,679 Gain (loss) on foreign exchange (12,453 ) (26,719 ) (233,777 ) 119,655 Gain on fair value of convertible debentures 1,301,069 - 3,041,056 - Gain on EPA debt extinguishment (note 6) - - 8,614,103 - Interest expense (1,026,233 ) (8,219 ) (2,143,840 ) (8,219 ) Debenture finance costs (64,054 ) - (1,230,539 ) - Finance costs - - (455,653 ) - Other income 1,811 - 26,002 - Loss on debt settlement - - - (56,146 ) Net income for the period $ 3,690,353 $ 3,960,630 $ 12,864,248 $ 9,843,495 Other comprehensive income, net of tax: Gain on change in FV on own credit risk 625,050 - 996,636 - Other comprehensive income 625,050 - 996,636 - Comprehensive income $ 4,315,403 $ 3,960,630 $ 13,860,884 $ 9,843,495 Net income per common share – basic $ 0.02 $ 0.02 $ 0.07 $ 0.06 Net income per common share – fully diluted $ 0.01 $ 0.02 $ 0.05 $ 0.06 Weighted average common shares – basic 219,466,235 164,179,999 198,364,188 160,690,371 Weighted average common shares – fully diluted 318,204,510 164,329,999 250,681,393 160,840,371 2023 2022 Three Months Ended March 31, 2023 2022 Operating expenses Operation and administration $ 879,992 $ 259,712 Mine preparation - 2,507,079 Legal and accounting 534,911 362,736 Consulting and wages 770,585 2,357,147 Loss from operations (2,185,488 ) (5,486,674 ) Other income or gain (expense or loss) Change in derivative liability (note 9) 3,454,008 Gain on FV of convertible debentures (note 7) 1,689,701 - Gain on modification of warrants (note 9) - Gain on foreign exchange (2,886 ) 27,920 Loss on FV of debenture derivative - (73,469 ) Interest expense (note 7) (1,324,629 ) (735,237 ) Financing costs (note 9) (576,751 ) - Debenture finance costs - (67,434 ) Loss on debt settlement (note 7) (250,086 ) - Net income (loss) for the period 1,791,149 (2,880,886 ) Other comprehensive income (loss), net of tax Gain on change in FV on own credit risk (note 7) 807,012 - Other comprehensive income (loss) 807,012 - Comprehensive income (loss) 2,598,161 (2,880,886 ) Net income/(loss) per common share – basic $ 0.01 $ (0.02 ) Net income/(loss) per common share – fully diluted $ 0.01 $ (0.02 ) Weighted average common shares – basic 212,429,683 164,435,826 Weighted average common shares – fully diluted 314,666,701 165,076,880 5 Three Months Three Months Ended Ended March 31, March 31, 2023 2022 Operating activities Net income (loss) for the period $ 1,791,149 $ (2,880,886 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation (note 10) 34,391 (54,735 ) Depreciation expense 51,076 78,457 Change in fair value of warrant liability (4,226,574 ) (3,454,008 ) Gain on warrant extinguishment (214,714 ) - Units issued for services - Interest expense on lease liability (note 8) 3,611 1,317 Financing costs ) Foreign exchange loss (gain) - (27,920 ) Foreign exchange loss (gain) on re-translation of lease - 718 Loss on debt settlement 250,086 - Amortization of EPA discount 374,307 138,427 (Gain) loss on fair value of derivatives (1,689,701 ) 73,469 Imputed interest expense on convertible debentures - 468,116 Changes in operating assets and liabilities: Accounts receivable and prepaid expenses 236,893 6,905 Prepaid finance costs - (524,674 ) Accounts payable 954,046 (383,159 ) Accrued liabilities 498,412 1,545,801 Accrued EPA/IDEQ water treatment - 75,000 EPA cost recovery payable - (2,000,000 ) Interest payable 892,753 97,493 Net cash used in operating activities (1,360,593 ) (6,839,679 ) Investing activities Deposit on plant - (500,000 ) Land purchase - (202,000 ) Bunker Hill mine purchase - (5,524,322 ) Process plant (93,765 ) - Mine improvements (280,466 ) - Purchase of machinery and equipment (60,004 ) (153,350 ) Net cash used in investing activities (434,235 ) (6,379,672 ) Financing activities Proceeds from convertible debentures - 14,000,000 Proceeds from issuance of special warrants 3,661,822 - Proceeds from warrants exercise 837,459 - Proceeds from promissory note Proceeds from subscriptions received - 1,775,790 Lease payments (60,000 ) (32,422 ) Net cash provided by financing activities 4,679,281 15,743,368 Net change in cash 2,884,453 2,524,017 Cash, beginning of period 7,184,105 486,063 Cash, end of period $ 10,068,558 $ 3,010,080 Supplemental disclosures Non-cash activities Accounts payable, accrued liabilities, and promissory notes settled with special warrants issuance 874,198 $ - Interest payable settled with common shares $ 1,368,724 $ - Reconciliation from Cash Flow Statement to Balance Sheet: Cash and restricted cash end of period $ 10,068,558 $ 3,010,080 Less restricted cash 6,476,000 - Cash end of period $ 3,592,558 $ 3,010,080 Nine Months Nine Months Ended Ended September 30, September 30, 2022 2021 Operating activities Net income (loss) for the period $ 12,864,248 $ 9,843,495 Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation (300,475 ) 793,357 Depreciation expense 172,259 178,744 Change in derivative liability (18,538,380 ) (22,172,679 ) Units issued for services 1,060,858 - Imputed interest expense on lease liability 1,834 10,632 Interest expense 2,143,840 8,219 Finance costs 264,435 - Foreign exchange loss (gain) 233,059 - Foreign exchange loss (gain) on re-translation of lease (Note 8) 718 1,434 Loss on debt settlement - 56,146 Amortization of EPA discount 631,701 - Gain on fair value of convertible debt derivatives (3,041,056 ) - Gain on EPA debt extinguishment (8,614,103 ) - Changes in operating assets and liabilities: Restricted cash (9,476,000 ) - Accounts receivable (81,618 ) (13,632 ) Deposit on plant demobilization (1,000,000 ) - Prepaid finance costs 393,640 - Prepaid expenses (1,064,109 ) 72,933 Accounts payable 947,699 606,056 Accrued liabilities 526,322 1,243,042 Accrued EPA water treatment (903,565 ) - EPA cost recovery payable (2,000,000 ) - Interest payable – EPA (113,579 ) - Interest payable (639,402 ) - Net cash used in operating activities (26,531,674 ) (9,372,253 ) Investing activities Purchase of spare inventory (341,004 ) - Land purchase (202,000 ) - Bunker Hill mine purchase (5,524,322 ) - Mine improvements (356,149 ) - Purchase of Process plant (2,815,398 ) - Purchase of machinery and equipment (316,600 ) (94,693 ) Net cash used in investing activities (9,555,473 ) (94,693 ) Financing activities Proceeds from convertible debentures 29,000,000 - Proceeds from issuance of shares, net of issue costs 7,769,745 6,008,672 Proceeds from promissory note - 2,500,000 Repayment of promissory note (1,000,000 ) - Lease payments (64,828 ) (97,138 ) Net cash provided by financing activities 35,704,917 8,411,534 Net change in cash (382,230 ) (1,055,412 ) Cash, beginning of period 486,063 3,568,661 Cash, end of period $ 103,833 $ 2,513,249 Supplemental disclosures Non-cash activities Units issued to settle accounts payable and accrued liabilities $ 228,421 $ 188,607 Units issued to settle interest payable 643,906 - Mill purchase for shares and warrants 3,243,296 - Units issued to settle DSU/RSU/Bonuses 872,399 - 6 Shares Amount capital payable warrants income deficit Total Accumulated Additional Stock other Common stock paid-in- subscriptions Special comprehensive Accumulated Shares Amount capital payable warrants income deficit Total Balance, December 31, 2022 229,501,661 $ 228 $ 45,161,513 - $ - $ 253,875 $ (71,592,559 ) $ (26,176,943 ) Stock-based compensation - - 233,668 - - - - 233,668 Stock subscription received for units - Compensation options - - 111,971 - - - - 111,971 Shares issued for interest payable 16,180,846 16 1,618,811 - - - - 1,618,827 Shares issued for warrant exercise 10,416,667 11 907,080 - - - - 907,091 Special warrants - - - - 1,484,788 - - 1,484,788 Gain on fair value from change in credit risk - - - - - 807,012 - 807,012 Net income for the period - - - - - - 1,791,149 1,791,149 Balance, March 31, 2023 256,099,174 $ 255 $ 48,033,043 $ $ 1,484,788 $ 1,060,887 $ (69,801,410 ) $ (19,222,437 ) Balance, December 31, 2021 164,435,826 $ 164 $ 38,248,618 $ - $ - $ - $ (72,491,150 ) $ (34,242,368 ) Beginning balance value 164,435,826 $ 164 $ 38,248,618 $ - $ - $ - $ (72,491,150 ) $ (34,242,368 ) Stock-based compensation - - 145,186 - - - - 145,186 Stock subscription received for units - - - 1,775,790 - - - 1,775,790 Net loss for the period - - - - - - (2,880,886 ) (2,880,886 ) Net income (loss) - - - - - - (2,880,886 ) (2,880,886 ) Balance, March 31, 2022 164,435,826 $ 164 $ 38,393,804 $ 1,775,790 $ - $ - $ (75,372,036 ) $ (35,202,278 ) Ending balance value 164,435,826 $ 164 $ 38,393,804 $ 1,775,790 $ - $ - $ (75,372,036 ) $ (35,202,278 ) Accumulated Additional Stock other Common stock paid-in- subscriptions comprehensive Accumulated Shares Amount capital payable loss deficit Total Balance, December 31, 2021 164,435,442 $ 164 $ 38,248,618 $ - $ - $ (72,491,150 ) $ (34,242,368 ) Stock-based compensation - - 145,186 - - - 145,186 Stock subscription payable - - - 1,775,790 - - 1,775,790 Net loss for the period - - - - - (2,880,886 ) (2,880,886 ) Balance, March 31, 2022 164,435,442 $ 164 $ 38,393,804 $ 1,775,790 $ - $ (75,372,036 ) $ (35,202,278 ) Stock-based compensation - - 15,922 - - - 15,922 Compensation options - - 264,435 - - - 264,435 Shares issued for interest payable 1,315,857 1 269,749 - - - 269,750 Shares issued for RSUs vested 933,750 1 (1 ) - - - - Non brokered shares issued for C$ 1,471,664 1 352,854 - - - 352,855 Special warrant shares issued for C$ 37,849,325 38 9,083,719 (1,775,790 ) - - 7,307,967 Contractor shares issued for C$ 1,218,000 1 289,999 - - - 290,000 Shares issued for Process plant purchase 10,416,667 10 1,970,254 - - - 1,970,264 Shares issued @ $0.32 per share Shares issued @ $0.32 per share, shares Shares issued for debt settlement at $0.45 Shares issued for debt settlement at $0.45, shares Issue costs - - (896,009 ) - - - (896,009 ) Warrant valuation - - (6,246,848 ) - - - (6,246,848 ) Gain on fair value from change in credit risk - - - - 371,586 - 371,586 Net income for the period - - - - - 12,054,781 12,054,781 Balance, June 30, 2022 217,640,705 $ 216 $ 43,497,878 $ - $ 371,586 $ (63,317,255 ) $ (19,447,575 ) Stock-based compensation - - 27,369 - - - 27,369 Shares issued for RSUs vested 33,000 1 (1 ) - - - - Issue costs - - (4,522 ) - - - (4,522 ) Shares issued for interest payable 1,975,482 2 374,154 - - - 374,156 Gain on fair value from change in credit risk - - - - 625,050 - 625,050 Net income for the period - - - - - 3,690,353 3,690,353 Balance, September 30, 2022 219,649,187 $ 219 $ 43,894,878 $ - $ 996,636 $ (59,626,902 ) $ (14,735,169 ) Balance, December 31, 2020 143,117,068 $ 143 $ 34,551,133 $ - $ - $ (66,088,873 ) $ (31,537,597 ) Stock-based compensation - - 620,063 - - - 620,063 Shares issued at C $ per share 19,576,360 20 6,168,049 - - - 6,168,069 Shares issued for debt settlement at C$ 417,720 - 188,145 - - - 188,145 Shares issued for RSUs vested 437,332 - - - - - - Issue costs - - (159,397 ) - - - (159,397 ) Warrant valuation - - (3,813,103 ) - - - (3,813,103 ) Net income for the period - - - - - 5,837,809 5,837,809 Balance, March 31, 2021 163,548,480 $ 163 $ 37,554,890 $ - $ - $ (60,251,064 ) $ (22,696,011 ) Stock-based compensation - - 280,720 - - - 280,720 Shares issued for RSUs vested 233,057 - - - - - - Net income for the period - - - - - 45,056 45,056 Balance, June 30, 2021 163,781,537 $ 163 $ 37,835,610 $ - $ - $ (60,206,008 ) $ (22,370,235 ) Beginning balance, value 163,781,537 163 37,835,610 - - (60,206,008) (22,370,235) Stock-based compensation - - 323,538 - - - 323,538 Shares issued for RSUs vested 653,905 1 (1 ) - - - - Net income for the period - - - - - 3,960,630 3,960,630 Net income (loss) - - - - - 3,960,630 3,960,630 Balance, September 30, 2021 164,435,442 $ 164 $ 38,159,147 $ - $ - $ (56,245,378 ) $ (18,086,067 ) Ending balance, value 164,435,442 $ 164 $ 38,159,147 $ - $ - $ (56,245,378) $ (18,086,067) 7 and Nine Months Ended September 30, 2022March 31, 2023(“Silver Valley”, formerly(formerly American Zinc Corp.), an Idaho corporation created to facilitate the work being conducted at the Bunker Hill Mine in Kellogg, Idaho.59,626,90269,801,410 as at March 31, 2023 and further losses are anticipated in the development of its business. Additionally, the Company owes a total of $3,847,141 to the Environmental Protection Agency (“EPA”) (see Note 6) for water treatment that is classified as current. The Company also owes a total of $7,420,024, net of discount, to the EPA that is classified as long-term debt. The Company does not have sufficient cash to fund normal operations and meet debt obligations for the next 12 months without deferring payment on certain current liabilities and/or raising additional funds. In order to continue to meet its fiscal obligations in the current fiscal year and beyond, the Company must seek additional financing. This raises substantial doubt about the Company’s ability to continue as a going concern. Its ability to continue as a going concern is dependent upon the ability of the Company to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. The accompanying unaudited condensed interim consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.condensed interim consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.COVID-19:The Company’s operations could be significantly adversely affected by the effects of a widespread global outbreak of epidemics, pandemics, or other health crises, including the recent outbreak of respiratory illness caused by the novel coronavirus (“COVID-19”). Although the pandemic has subsided significantly, the Company cannot accurately predict the impact a COVID-19 resurgence would have on its operations and the ability of others to meet their obligations with the Company, including uncertainties relating to the ultimate geographic spread of the virus, the severity of the disease, the duration of the outbreak, and the length of travel and quarantine restrictions imposed by governments of affected countries. In addition, a significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could further affect the Company’s operations and ability to finance its operations.8 Bunker Hill Mining Corp.Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)2. Significant Accounting PoliciesThree and Nine Months Ended September 30, 2022(Expressed in United States Dollars):2. Basis of Presentation2021.2022. The financialinterim results for the three and nine monthsperiod ended September 30, 2022March 31, 2023, are not necessarily indicative of the results for the full fiscal year. The unaudited interim condensed consolidated financial statements are presented in United States dollars, which is the Company’s functional currency. March 31, December 31, 2023 2022 Prepaid expenses and deposits $ 485,491 $ 386,218 Environment protection agency overpayment (note 6) 30,000 170,729 Total $ 515,491 $ 556,947 9 & Equipment September 30, December 31, March 31, December 31, 2022 2021 2023 2022 Equipment $ 920,571 $ 603,972 $ 980,575 $ 920,571 Equipment, gross 920,571 603,972 980,575 920,571 Less accumulated depreciation (326,983 ) (207,078 ) (414,059 ) (369,367 ) Equipment, net $ 593,588 $ 396,894 $ 566,516 $ 551,204 forrelating to equipment during the three and nine months ended September 30,March 31, 2023 and March 31, 2022 was $42,81444,692 and $119,90554,015, respectively. Compared to the three and nine months ended September 30, 2021 was $34,565 and $98,961, respectively. See Note 4 for additional depreciation on the right-of-use asset.-The purchase of the mill has been valued at:- Cash consideration given, comprised of $500,000 nonrefundablenon-refundable deposit remitted on January 7, 2022 and $231,000 sales tax remitted on May 13, 2022, a total of $731,000 cash remitted.- Value of common shares issued on May 13, 2022 at the market price of that day, a value of $1,970,264. - Fair value of the warrants issued together with the inputs, as determined by a binomial model, resulted in a fair value of $1,273,032. See note 9. - As a result, the total value of the mill at the time of purchase was determined to be $3,974,296 ., including $341,004 of spare parts inventory.9Bunker Hill Mining Corp.Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)Three and Nine Months Ended September 30, 2022(Expressed in United States Dollars)sheetsheets as a currentnon-current asset in accordance with a preliminary purchase price allocation. As the plant is demobilized, transported and reassembled, installation and other costs associated with these activities will be captured and capitalized as components of the asset.At September 30, 2022, the assetProcess plant consists of the following: Deposit paid $ 500,000 Sales tax paid 231,000 Value of shares issued 1,970,264 Value of warrants issued 1,273,032 Total plant & inventory purchased 3,974,296 Site preparation costs 619,172 Demobilization 1,806,229 Less spare parts inventory (341,003 ) Pend Oreille plant asset, net $ 6,058,694 March 31, December 31, 2023 2022 Plant purchase price less inventory $ 3,633,292 $ 3,633,292 Demobilization 2,204,539 2,201,414 Site preparation costs 3,256,110 2,296,266 Pend Oreille plant asset, net $ 9,093,941 $ 8,130,972 Additionally, at September 30, 2022, the Company has paid a refundable deposit of $1,000,000 to Teck as security while demobilization activities are ongoing. This is classified as a short-term deposit on the balance sheet.payments:payments. The first two payments were made as follows:byon September 15, 2022 as a non-refundable long-term deposit (paid)byon October 15,13, 2022, (paid)$475,000 by December 15, 2022as a refundable long-term depositAt September 30, 2022,As of March 31, 2023, the Company paidhad not made the final payment of $100,000475,000 towards the purchase as a non-refundable deposit..4. Right-of-Use Asset September 30, December 31, 2022 2021 Office lease $ 319,133 319,133 Less accumulated depreciation (319,133 ) (266,780 ) Right-of-use asset, net $ - $ 52,353 March 31, December 31, 2023 2022 Loader lease 114,920 - Loader accumulated depreciation (6,384 ) - Right-of-use asset, net $ 108,536 $ - for the right-of-use asset during the three and nine months ended September 30,March 31, 2023 and March 31, 2022 was $nil6,384 and $52,35324,442, respectively. Compared (relating to the three and nine months ended September 30, 2021 was $26,594 and $79,783an expired lease), respectively.10 Bunker Hill Mining Corp.Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)Three and Nine Months Ended September 30, 2022(Expressed in United States Dollars) (See also Note 6 Environmental Protection Agency Agreement and Water Treatment Liabilities).- Contract purchase price of $7,700,000 less $300,000 credit by seller for prior maintenance payments. - Net present value of water treatment cost recovery liability assumed of $6,402,425. - - As a result, the total value of the mine at the time of purchase was determined to be $14,247,210. January 7, 2022 Contract purchase price $ 7,700,000 Less: Credit by seller for prior maintenance payments (300,000 ) Net present value of water treatment cost recovery liability assumed 6,402,425 Closing costs capitalized 2,638 Mine acquisition costs - legal 442,147 Total carrying cost of mine $ 14,247,210 March 31, December 31, 2023 2022 Bunker Hill Mine and Mining interests $ 14,247,210 $ 14,247,210 Capitalized development 1,517,526 1,447,435 Pend Oreille plant asset, net $ 15,764,736 $ 15,694,645 asset as guided by ASU 805-10. During the three and nine months ended September 30, 2022, the Company has spent an additional $356,149 and $356,149, respectively, in mine improvements.asset.Purchasepurchase and leases11 Agreement and Water Treatment Liabilities (“EPA”)Environmental Protection Agency (the “EPA”)EPA whereby for so long as the Company leases, owns and/or occupies the Mine, the Company was required to make payments to the EPA on behalf of Placer Mining in satisfaction of the EPA’s claim for cost recovery related to historical treatment costs paid by the EPA from 1995 to 2017. These payments, if all are made, will total $20,000,000. The agreement called for payments starting with $1,000,000 30 days after a fully ratified agreement was signed (which payment was made) followed by $2,000,000 on November 1, 2018, and $3,000,000 on each of the next five anniversaries with a final $2,000,000 payment on November 1, 2024. The November 1, 2018, November 1, 2019, November 1, 2020, and November 1, 2021, payments were not made. As a result, a total of $11,000,000 was outstanding as of December 31, 2021, accounted for within current liabilities. As the purchase of the Bunker Hill Mine (which would trigger the immediate recognition of the remaining liabilities due through November 1, 2024) had not yet taken place, the remaining $8,000,000 cost recovery liabilities were not recognized on the Company’s consolidated balance sheetsheets as of December 31, 2021.11Bunker Hill Mining Corp.Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)Three and Nine Months Ended September 30, 2022(Expressed in United States Dollars)Date Amount Within 30 days of Settlement Agreement $ 2,000,000 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 12 Settlement Agreement.Settlement. Once put in place, the financial assurance can be drawn on by the EPA in the event of non-performance by the Company of its payment obligations under the Amended Settlement (the “Financial Assurance”). The amount of the bonds will decrease over time as individual payments are made.As of March 31, 2022, the financial assurance had not yet been secured, and This was capitalized as such $the Company accounted for the $17,000,000 liabilities according6,402,425 to the previous payment schedule, resulting in $12,000,000 classified as a current liability and $5,000,000 as a long-term liability. The long-term portion was discounted at an interest rate of 16.5% to arrive at a net presentcarrying value of $3,402,425 after discount.the Bunker Hill Mine at time of purchase, comprised of $3,000,000 of incremental current liabilities and $5,000,000 of non-current liabilities (discounted to $3,402,425). See note 5.quarteryear ended June 30, 2022, the Company was successful in obtaining the final financial assurance. Specifically, a $9,999,000 payment bond and a $7,001,000 letter of credit were secured and provided to the EPA. This milestone provides for the Company to recognize the effects of the change in terms of the EPA liability as outlined in the December 19, 2021 agreement. Once the financial assurance was put into place, enabling the restructuring of the payment stream under the Amendment occurredSettlement with the entire $17,000,000 liability being recognized as long-term in nature. The aforementionedAs of March 31, 2023 (unchanged from December 31, 2022), the Company had two payment bond is secured bybonds of $9,999,000 and $5,000,000, and a $2,475,0002,001,000 letter of credit.credit, in place to secure this liability. The $2,475,000 and $7,001,000collateral for the payment bonds is comprised of two letters of credit of $4,475,000 in aggregate, as well as land pledged by third parties with whom the company has entered into a financing cooperation agreement that contemplates a monthly fee of $20,000 (payable in cash or common shares of the Company, at the Company’s election). The letters of credit of $6,476,000 in aggregate are secured by $9,476,000 of cash deposits under an agreement with a commercial bank. These cash depositsbank, which comprise the $9,476,0006,476,000 of restricted cash shown within current assets as of September 30, 2022.March 31, 2023.Under ASC 470-50, Debt Modifications and Extinguishments, the Company performed a comparison of NPV’s of the pre-settlement Cost Recovery obligation to the post-settlement schedule of Cost Recovery obligation to determine this was an extinguishment of debt. The Company recorded a gain on extinguishment of debt totaling $8,614,103. The old debt, including any discount, was written off and the new payment stream of the amended $17,000,000 table, including the new discount of $9,927,590, using the effective interest rate of 19.95%, was recorded to result in a net liability of $7,072,410, which is due long-term. During the three and nine months ended September 30, 2022, the Company recorded combined discount amortization expense of $347,614 and $631,701374,306 on the discounted pre- and post-extinguishment liability, respectively, bringing the net liability to $7,420,0248,315,772 as(inclusive of September 30, 2022. As at September 30, 2022 interest payable of $192,923156,343 ($306,501 at December 31, 2021) is included in interest payable on the condensed consolidated balance sheet.).12Bunker Hill Mining Corp.Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)Three and Nine Months Ended September 30, 2022(Expressed in United States Dollars)EPAIDEQarewere payable to the EPA, and charges thereafter are payable to the Idaho Department of Environmental Quality (“IDEQ”) given a handover of responsibilities for the Central Treatment Plant from the EPA to the IDEQ as of that date. The Company previously estimated a balance due to the EPA of $5,110,706 for ongoing water treatment through December 31, 2021. During the six months ended June 30, 2022, the Company received an invoice from the EPA for water treatment through October 2021. As a result, the Company reversed its previous accruals for this period and adjusted its estimated charges for November and December 2021. Through recent discussions with the EPA, the Company has confirmed that payments to the IDEQ for water treatment charges cannot be netted against invoices payable to the EPA. After taking this into account, the additional invoice received from the EPA, and a $1,000,000 payment made in April 2022, the Company has estimated water treatment payables to the EPA of $3,847,141 as of September 30, 2022 and $5,110,706 at December 31, 2021, which is reflected in current liabilities.Water Treatment Charges – IDEQFor water treatment charges beginning January 2022, theThe Company currently makes a monthly accrualpayments of $80,000100,000 to cover the IDEQ’s estimated costsIDEQ as instalments toward the cost of treating water at the Central Treatment Plant. Upon receipt of an invoice from the IDEQ for actual costs incurred, a reconciliation is performed relative to payments made, with an additional payment made or refund received as applicable. The Company accrues $100,000 per month based on its estimate of the monthly cost of water treatment. As of March 31, 2023 a prepaid expense of $30,000 (December 31, 2022: $170,729) represents the difference between the estimated cost of water treatment facility. The Company also pays an agreed-upon monthly amount of $140,000, with a true-up to be recorded and credited to or paidnet payments made by the Company onceto the actual annual costs are determined each year. At September 30, 2022, the CompanyIDEQ to date. This balance has accrued $720,000 for water treatment costs to IDEQ and has prepaid $1,260,000, leaving a net prepaid of $540,000 ($nil at December 31, 2021) which is included in prepaid expensesbeen recognized on the unaudited condensed interim consolidated balance sheet.sheets as accounts receivable and prepaid expenses.NoteNotes Payable and Convertible Debentures The promissory note was scheduled to mature on March 15, 2022; however, the note holder agreed to accept $500,000 payment, which the Company paid, by April 15, 2022, and the remaining principal and interest was deferred to June 20, 2022. Prior to the revised maturity of June 20, 2022, the note holder agreed to accept a further $500,000 payment by June 30, 2022, which the Company paid, and the remaining principal and interest was deferred to November 30, 2022. The Company purchased a land parcel for approximately $202,000on March 3, 2022, which may be used as security for the promissory note. The promissory note was originally scheduled to mature on March 15, 2022, however was extended multiple times and is currently due on June 15, 2023. Principal payments of $1,000,000 in aggregate were made in the year ended December 31, 2022.September 30, 2022,March 31, 2023, the Company owes $1,500,000in promissory notes payable, which is included in current liabilities on the condensed interim consolidated balance sheet.sheets. Interest expense for the three and nine months ended September 30,March 31, 2023 and 2022 was $56,71255,479 and $224,58992,466, respectively. For the three and nine months ended September 30, 2021, interest expense was $8,219 and $8,219, respectively. At September 30, 2022 interestMarch 31, 2023 financing costs of $327,329439,521 ($102,740($384,041 at December 31, 2021)2022) is included in interest payable on the condensed consolidated balance sheet. The effective interest rate of the promissory note is 15%.13 expectsexpected to fulfill the majority of its funding requirements to restart the Mine. The term sheet consisted of an $8,000,000 royalty convertible debenture (the “RCD”), a $5,000,000 convertible debenture (the “CD1”), and a multi-metals stream of up to $37,000,000 (the “Stream”). The CD1 was subsequently increased to $6,000,000, increasing the project financing package to $51,000,000.13Bunker Hill Mining Corp.Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)Three and Nine Months Ended September 30, 2022(Expressed in United States Dollars) (RCD)2025.2025. The parties also agreed to enter into a Royalty Put Option such that in the event the RCD is converted into a royalty as described above, the holder of the royalty will be entitled to resell the royalty to the Company for $8,000,000 upon default under the CD1 or CD2 until such time that the CD1 and CD2 are paid in full. The Company determined that the amendments in the terms of the RCD should not be treated as an extinguishment of the RCD, and have therefore been accounted for as a modification as a result of the treatment the Company reported a gain of $607,261 in the statement of operations for the period ended September 30, 2022.modification.14 Series 1 Convertible Debenture (CD1))RCDCD1 should not be treated as an extinguishment of the CD1, and have therefore been accounted for as a modification as a result of the treatment the Company reported a gain of $179,046 in the statement of operations for the period ended September 30, 2022modification.2025.2025. The CD2 is secured by a pledge of the Company’s properties and assets. The repayment terms include 3 quarterly payments of $2,000,000 each beginning June 30, 2024 and $9,000,000 on the maturity date.14Bunker Hill Mining Corp.Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)Three and Nine Months Ended September 30, 2022(Expressed in United States Dollars) Reference (2)(4) (5) Contractual
Interest rate Stock price (US$) Expected equity volatility Credit spread Risk-free rate CD1 note (1)(3) 01-28-22 07-07-23 7.50 % 0.230 120 % 8.70 % 0.92 % 16.18 % RCD note (stream not advanced scenario) 01-07-22 07-07-23 9.00 % 0.242 130 % 9.21 % 0.65 % 16.39 % RCD note (stream advanced) scenario 01-07-22 06-30-22 9.00 % 0.242 130 % 9.16 % 0.23 % 15.96 % CD1 note (1)(3) 03-31-22 07-07-23 7.50 % 0.235 120 % 8.85 % 1.80 % 17.12 % RCD note (stream not advanced scenario) 03-31-22 07-07-23 9.00 % 0.235 120 % 8.85 % 1.80 % 17.12 % RCD note (stream advanced) scenario 03-31-22 06-30-22 9.00 % 0.235 120 % 8.78 % 0.52 % 15.88 % CD2 note 06-17-22 03-31-25 10.50 % 0.222 120 % 9.45 % 3.28 % 20.95 % CD2 note 06-30-22 03-31-25 10.50 % 0.225 120 % 10.71 % 2.95 % 21.78 % CD1 note 06-30-22 03-31-25 7.50 % 0.233 120 % 10.71 % 2.95 % 19.89 % RCD note (stream not advanced scenario) 06-30-22 03-31-25 9.00 % 120 % 10.71 % 2.95 % 19.89 % RCD note (stream advanced) scenario 06-30-22 09-30-22 9.00 % 120 % 10.85 % 1.72 % 18.89 % CD1 note 09-30-22 03-31-25 7.50 % 0.085 120 % 13.31 % 4.19 % 23.35 % RCD note (stream not advanced) 09-30-22 03-31-25 9.00 % 0.085 120 % 13.31 % 4.19 % 23.35 % RCD note (stream advanced) 09-30-22 11-30-22 9.00 % 0.085 120 % 13.85 % 3.04 % 22.79 % CD2 note 09-30-22 03-31-25 10.50 % 0.085 120 % 13.31 % 4.19 % 25.21 % Reference (2)(4) (5) Valuation
date Maturity
date Contractual
Interest rate Stock price (US$) Expected equity volatility Credit spread Risk-free rate Risk-
adjusted rate CD1 note(3) (2)(4)(5)(3) 12-31-22 03-31-25 7.50 % 0.125 120 % 7.08 % 4.32 % 17.85 % RCD note (2)(4)(5) 12-31-22 03-31-25 9.00 % 0.125 120 % 7.08 % 4.32 % 17.85 % CD2 note(3) (2)(4)(5)(3) 12-31-22 03-31-25 10.50 % 0.125 120 % 7.08 % 4.32 % 19.76 % CD1 note(3) (2)(4)(5)(3) 03-31-23 03-31-25 7.50 % 0.082 115 % 11.22 % 4.06 % 21.33 % RCD note (2)(4)(5) 03-31-23 03-31-25 9.00 % 0.082 115 % 11.22 % 4.06 % 21.33 % CD2 note(3) (2)(4)(5)(3) 03-31-23 03-31-25 10.50 % 0.082 115 % 11.22 % 4.06 % 23.20 % (1) The CD’s carriesCD1 carried a Discount for Lack of Marketability (“DLOM”) of 5.0%. as of the issuance date and as of March 31, 2022. The CD2 carried a DLOM of 10.0% as of the issuance date and June 30, 2022 (2) CD1 and RCD carry an instrument-specific spread of 7.23%, CD2 carries an instrument-specific spread of 9.32% (3) The conversion price of the CD1 is $0.219 and CD2 is $0.212 as of December 31, 2022 (4) A project risk rate of 13.0% was used for all scenarios of the RCD fair value computations (5) The probabilitiesvaluation of the RCD is driven by the aggregation of (i) the present value of future potential cash flow to the royalty holder, in the event that the RCD is converted to a royalty, utilizing an estimate of future metal sales and Monte Carlo simulations of future metal prices, and (ii) the computation of the present value assuming no conversion to the 1.85% gross revenue royalty. The valuation of (i) is compared to the valuation of (ii) for each simulation, with the higher value used in the aggregation to arrive at the fair value of the RCD. This results in an implied probability of the RCD being converted to the royalty, in the event that the Stream is advanced. Based on this methodology, as of December 31, 2022, the implied probability of the RCD being converted to a 1.85% royalty, in the event that the Stream is advanced, was 89%. Credit spread, Risk-free rate, and Risk-adjusted rate shown for the stream being advanced andRCD are applicable to the streamscenario where the Stream is not being advancedadvanced. There are immaterial differences in these inputs for the scenario where the Stream is advanced. As of March 31, 2023, these were 59% and 4111.38%, respectively.4.85%, and 22.18% respectively for the Scenario where the Stream is advanced15 the issuance dates, June 30, 2022,March 31, 2023, and as of September 30,December 31, 2022, were as follows:Instrument Description Issuance date CD1 and RCD Issuance date CD2 March 31,
2022 June 30,
2022 September 30,
2022 CD1 $ 6,320,807 $ - $ 6,303,567 $ 5,633,253 $ 4,892,435 $ 5,093,130 $ 5,537,360 RCD 7,679,193 - 7,886,743 7,078,596 7,359,776 9,119,412 10,285,777 CD2 - 15,000,000 - 14,176,578 12,710,097 13,117,407 14,063,525 Total $ 14,000,000 $ 15,000,000 $ 14,190,310 $ 26,888,427 $ 24,962,308 $ 27,389,949 $ 29,886,662 and nine months ended September 30,March 31, 2023 and March 31, 2022, was $1,301,0691,689,701 and $3,041,056nil, respectively. The portion of changes in fair value that is attributable to changes in the Company’s credit risk is accounted for within other comprehensive income. During the three and nine months ended September,March 31, 2023 and March 31, 2022, the Company recognized $625,050807,012 and $996,636nil, respectively, within other comprehensive income. Interest expense for the three months ended March 31, 2023 and 2022 was $676,849 and $240,164 respectively. At March 31, 2023 interest of $nil ($691,890 at December 31, 2022) is included in interest payable on the consolidated balance sheets. For the three months ended March 31, 2023, and March 31, 2022, the Company recognized $250,086 and $nil, respectively, loss on debt settlement in the condensed interim consolidated statements of income (loss) and comprehensive income (loss) as a result of settling interest by issuance of shares.September 30, 2022.15Bunker Hill Mining Corp.Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)Three and Nine Months Ended September 30, 2022(Expressed in United States Dollars)March 31, 2023.September 30, 2022,March 31, 2023, the Stream had not been advanced.advanced.16 Concurrent with the funding of the CD2 in June 2022, the Company and SRSR agreed that the minimum quantity of metal delivered under the Stream, if advanced, will increase by 10% relative to the amounts noted above.Liabilityliabilityhad anhas operating leaseleases for office space that expired in May 2022.a loader. Below is a summary of the Company’s lease liability as of September 30, 2022:March 31, 2023: Office lease Balance, December 31, 2020 $ 176,607 Addition - Interest expense 12,696 Lease payments (129,191 ) Foreign exchange loss 2,165 Balance, December 31, 2021 62,277 Addition - Interest expense 1,834 Lease payments (64,828 ) Foreign exchange loss 717 Balance, September 30, 2022 $ - Leases Balance, December 31, 2022 $ - Addition 114,920 Interest expense 3,611 Lease payments (60,000 ) Balance, March 31, 2023 58,531 ● An increase to common shares, as approved in the July 29, 2022 annual meeting of shareholders,Common Shares with a par value of $ per common share;Common Share; and● preferred shares with a par value of $ per preferred share February 2021,March 2023, the Company closedamended the exercise price and expiry date of 10,416,667 warrants which were previously issued in a non-brokered private placement of unitsto Teck Resources (“Teck”) on May 13, 2022 in consideration for the Company’s acquisition of the Company (the “February 2021 Offering”), issuing unitsPend Oreille process plant. The warrant entitled the holder thereof to purchase one share of Common Share of the Company (“February 2021 Units”) at C$ per February 2021 Unit for gross proceeds of $6,168,069 (C$7,830,544). Each February 2021 Unit consisted of one common share of the Company and one common share purchase warrant of the Company (each, “February 2021 Warrant”), which entitles the holder to acquire a common share of the Company at C$ per common share for a period of five years. In connection with the February 2021 Offering, the Company incurred share issuance costs of $154,630 and issued compensation options (the “February 2021 Compensation Options”). Each February 2021 Compensation Option is exercisable into one February 2021 Unit at an exercise price of C$ per Warrant at any time on or prior to May 12, 2025. The Company amended the exercise price of the warrants from C$ to C$ per Warrant and the expiry date from May 12, 2025, to March 31, 2023, resulting in a gain on modification of warrants of $214,714. In March 2023, Teck exercised all warrants at an exercise price of C$ , for aggregate gross proceeds of C$1,145,834 to the Company. During the quarter the Company recognized a periodchange in derivative liability of three years.$400,152 relating to the Teck warrants using the following assumptions: volatility of %, stock price of C$ , interest rate of % to %, and dividend yield of %.16Bunker Hill Mining Corp.Notes toIn March 2023, the Condensed Interim Consolidated Financial Statements (Unaudited)Company closed a brokered private placement of special warrants of the Company (the “March 2023 Offering”), issuing 51,633,727Nine Months Ended September 30, 2022(Expressed in United States Dollars)The Company also issued February 2021 Units to settle $132,000was applied towards settlement of accounts payable, accrued liabilities at a deemed price of $0.45 based on the fair value of the units issued. As a result, the Company recorded a loss on debt settlement of $56,146.and promissory notes.April 2022,connection with the Company closed a private placement of Special Warrants and a non-brokered private placement of units of the Company for aggregate gross proceeds of approximately $9,384,622 (C$11,796,297). Related parties, including management, directors, and consultants, participated in theOffering, each March 2023 Special Warrant private placement for a total of shares (included in the total above).The Special Warrants were issued at a price of C$ per special warrant. Each Special Warrant shall beis automatically exercisable (without payment of any further consideration and subject to customary anti-dilution adjustments) into one unit (“March 2023 Unit”) of the Company (a “Brokered Unit”) on the earlier date that is the earlier of: (i) the date that is three (3)third business daysday following the date onupon which the Company has obtained both (A)notification that a receipt from the Canadian security commission in each of the each of the provinces of Canada which the purchasers and Agents (as defined herein) are residents where the Special Warrants are sold (the “Qualifying Jurisdictions”) for a (final) short-form prospectus qualifying the distribution of the common stockresale registration statement of the Company (“Common Shares”to be filed with the U.S. SEC (the “SEC”) and common stock purchase warrantsregistering the resale of the Company (the “Warrants”)Underlying Shares (as defined below) issuable upon exercise of the March 2023 Special Warrants (the “Qualification Prospectus”); and (B) notification that the registration statement, under U.S. securities laws, of the Company filed with the United States Securities and Exchange Commission (the “SEC”)issuable thereunder, has been declared effective by the SEC (the “Registration Statement”);SEC; and (ii) September 27, 2023 (collectively, the date that is six months following April 1, 2022 (the “Closing Date”“Automatic Exercise Date”). , subject to compliance with U.S. securities laws.unitMarch 2023 Unit consists of one common share of Common Share of the Company (each, a “Unit Share”) and one warrant.common stock purchase warrant of the Company (each, a “Warrant”). Each warrantwhole Warrant entitles the holder thereof to acquire one common share forCommon Share 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 April 1, 2025. The warrants shall also be exercisable on a cashless basisMarch 27, 2026, subject to adjustment in certain events. In the event that the Registration Statement has not been madedeclared effective by the SEC prior to the date of exercise.On May 31, 2022, the Company announced that it had received a receipt from the Ontario Securities Commission for its final short-form Canadian prospectus qualifying the distribution of the common stock of the Company and common stock purchase warrants of the Company issuable upon exercise of the special warrants of the Company that were issued on April 1, 2022. The Company also announced that it received notice from the United States Securities and Exchange Commission that its Form S-1 has been declared effective as of Mayor before 5:00 p.m. (EST) on July 27, 2022. As a result of obtaining the receipt for the Canadian prospectus and the declaration of effectiveness for the Form S-1,2023, each unexercised Special Warrant was automaticallywill be deemed to be exercised on the Automatic Exercise Date into one Common Share and one Warrant without further action on the partpenalty unit of the holders.The non-brokered units were issued atCompany (each, a price“Penalty Unit”), with each Penalty Unit being comprised of C$ per unit. Each unit consists of one common share1.2 Unit Shares and one warrant. Each warrant entitles the holder to acquire one warrant share for C$ until April 1, 2025.special warrants offering,March 2023 Offering, the agents earned a cash commission in the amountCompany incurred share issuance costs of C$563,968$585,765 and issued compensation options (the “March 2023 Compensation Options”). Each March 2023 Compensation Option is exercisable to acquireat an aggregateexercise price of C$ units of the Company at C$ a unit until April 1, 2024. Each compensation unit consists ofinto one common shareUnit Share and one warrant. Each warrant entitles the holder to acquire one warrant share for C$ until April 1, 2024.In April 2022, the Company issued common shares in connection with its election to satisfy interest payments under the outstanding convertible debentures for the three months ended March 31, 2022.In May 2022, the Company issued units to Teck Resources Limited in consideration towards the purchase of the Pend Oreille Processing Plant at C$ per unit. Each unit consists of one common share and one warrant. Each warrant entitles the holder to acquire one warrant share for C$ until May 13, 2025.In June 2022, the Company issued units to contractors for bonuses accrued during the three months ended March 31, 2022. Each unit consists of one common share and one warrant. Each warrant entitles the holder to acquire one warrant share for C$ until April 1, 2025.In July 2022, the Company issued common shares in connection with its election to satisfy interest payments under the outstanding convertible debentures for the three months ended June 30, 2022.17Bunker Hill Mining Corp.Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)Three and Nine Months Ended September 30, 2022(Expressed in United States Dollars)Warrant Share.unaudited condensed interim consolidated statements of income (loss) and comprehensive income (loss) as a gain or loss and is estimated using the Binomial model.17 as a resultrelated to the various tranches of warrants issued during the June 2019, August 2019, August 2020, February 2021, April 2022 special warrants, April 2022 non-brokered, May 2022 Teck purchase, and June 2022 contractor private placementsperiod were revalued as at September 30, 2022, issuance date in 2022, and December 31, 2021estimated using the Binomial model andto determine the fair value using the following assumptions:assumptions as at March 31, 2023 and December 31, 2022:April 2022 special warrants issuance September 30,
2022 April 1,
2022 Expected life 914 days 1,096 days 732 days 822 days Volatility 120 % 120 % 120 % 120 % Risk free interest rate 3.72 % 2.35 % 3.74 % 4.06 % Dividend yield 0 % 0 % 0 % 0 % Share price (C$) $ 0.115 $ 0.29 $ 0.105 $ 0.17 Fair value $ 1,488,348 $ 5,947,232 $ 1,174,663 $ 2,406,104 Change in derivative liability $ (4,458,884 ) $ - $ (1,231,441 ) April 2022 non-brokered issuance September 30,
2022 April 1,
2022 Expected life 914 days 1,096 days 732 days 822 days Volatility 120 % 120 % 120 % 120 % Risk free interest rate 3.72 % 2.35 % 3.74 % 4.06 % Dividend yield 0 % 0 % 0 % 0 % Share price (C$) $ 0.115 $ 0.29 $ 0.105 $ 0.17 Fair value $ 57,869 $ 186,190 $ 45,673 $ 93,553 Change in derivative liability $ (128,321 ) $ - $ (47,880 ) May 2022 Teck issuance September 30,
2022 May 13,
2022 June 2022 issuance Expected life 956 days 1,096 days 732 days 822 days Volatility 120 % 120 % 120 % 120 % Risk free interest rate 3.72 % 2.68 % 3.74 % 3.72 % Dividend yield 0 % 0 % 0 % 0 % Share price (C$) $ 0.115 $ 0.25 $ 0.105 $ 0.17 Fair value $ 424,053 $ 1,273,032 $ 35,101 $ 77,429 Change in derivative liability $ (848,979 ) $ - $ (42,328 ) June 2022 issuance September 30,
2022 June 30,
2022 February 2021 issuance Expected life 914 days 1,006 days 1,046 days 1,136 days Volatility 120 % 120 % 120 % 120 % Risk free interest rate 3.72 % 3.14 % 3.51 % 3.72 % Dividend yield 0 % 0 % 0 % 0 % Share price (C$) $ 0.115 $ 0.20 $ 0.105 $ 0.17 Fair value $ 47,895 $ 113,425 $ 682,573 $ 1,335,990 Change in derivative liability $ (65,530 ) $ - $ (653,416 ) 18 August 2020 issuance Expected life 153 days 243 days Volatility 120 % 120 % Risk free interest rate 3.74 % 4.06 % Dividend yield 0 % 0 % Share price (C$) $ 0.105 $ 0.17 Fair value $ 1 $ 903,697 Change in derivative liability $ (903,696 ) Bunker Hill Mining Corp.June 2019 issuance Expected life 1,006 days 1,096 days Volatility 120 % 120 % Risk free interest rate 3.51 % 3.82 % Dividend yield 0 % 0 % Share price (C$) $ 0.105 $ 0.17 Fair value $ 338,608 $ 725,737 Change in derivative liability $ (387,129 ) Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)August 2019 issuance Expected life 1,006 days 1,096 days Volatility 120 % 120 % Risk free interest rate 3.51 % 3.82 % Dividend yield 0 % 0 % Share price (C$) $ 0.105 $ 0.17 Fair value $ 520,399 $ 1,115,369 Change in derivative liability $ (594,970 ) ThreeOutstanding warrants at March 31, 2023 and Nine Months Ended September 30,March 31, 2022(Expressed in United States Dollars) were as follows:February 2021 issuance September 30,
2022 December 31,
2021 Expected life 1,228 days 1,501 days Volatility 120 % 100 % Risk free interest rate 3.72 % 1.25 % Dividend yield 0 % 0 % Share price (C$) $ 0.115 $ 0.37 Fair value $ 829,987 $ 3,483,745 Change in derivative liability $ (2,653,758 ) $ (329,358 ) August 2020 issuance September 30,
2022 December 31,
2021 Expected life 335 days 608 days Volatility 120 % 100 % Risk free interest rate 3.79 % 0.95 % Dividend yield 0 % 0 % Share price (C$) $ 0.115 $ 0.37 Fair value $ 484,745 $ 6,790,163 Change in derivative liability $ (6,305,419 ) $ (7,703,052) June 2019 issuance (i) September 30,
2022 December 31,
2021 Expected life 1,188 days 1,461 days Volatility 120 % 100 % Risk free interest rate 3.72 % 1.02 % Dividend yield 0 % 0 % Share price (C$) $ 0.115 $ 0.37 Fair value $ 460,207 $ 2,067,493 Change in derivative liability $ (1,607,286 ) $ (1,371,346) (i)During the six months ended December 31, 2020, the Company amended the exercise price to C$ per common share and extended the expiry date to December 31, 2025 for 11,660,000 warrants.August 2019 issuance (ii) September 30,
2022 December 31,
2021 Expected life 1,188 days 1,461 days Volatility 120 % 100 % Risk free interest rate 3.72 % 1.02 % Dividend yield 0 % 0 % Share price (C$) $ 0.115 $ 0.37 Fair value $ 707,282 $ 3,177,485 Change in derivative liability $ (2,470,203 ) $ (2,744,785) (ii)During the six months ended December 31, 2020, the Company amended the exercise price to C$ per common share and extended the expiry date to December 31, 2025 for 17,920,000 warrants. The terms of the remaining 2,752,900 warrants remain unchanged.Warrants Weighted Weighted average average Number of exercise price grant date warrants (C$) value ($) Balance, December 31, 2020 95,777,806 $ 0.54 $ 0.08 Issued 19,994,080 0.60 0.19 Expired (2,913,308 ) 0.48 0.14 Balance, September 30, 2021 112,858,578 $ 0.55 $ 0.19 Balance, December 31, 2021 111,412,712 $ 0.54 $ 0.18 Issued 50,955,636 0.37 0.15 Expired (239,284 ) 0.70 0.21 Balance, September 30, 2022 162,129,064 $ 0.49 $ 0.17 Weighted Weighted average average Number of exercise price grant date warrants (C$) value ($) Balance, December 31, 2021 111,412,712 $ 0.54 $ 0.18 Expired (239,284 ) 0.70 0.21 Balance, March 31, 2022 111,173,428 0.52 0.18 Balance, December 31, 2022 162,129,064 $ 0.49 $ 0.17 Exercised (10,416,667 ) 0.11 0.12 Balance, March 31, 2023 151,712,397 $ 0.50 $ 0.17 ninethree months ended September 30,March 31, 2022, February 2020 broker warrants expired.19 Bunker Hill Mining Corp.Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)Three and Nine Months Ended September 30, 2022(Expressed in United States Dollars)September 30, 2022,March 31, 2023, the following warrants were outstanding: Number of Exercise Number of warrants Exercise Number of Expiry date price (C$) warrants exercisable price (C$) warrants exercisable August 31, 2023 0.50 58,284,148 58,284,148 0.50 58,284,148 58,284,148 December 31, 2025 0.59 32,895,200 32,895,200 0.59 32,895,200 32,895,200 February 9, 2026 0.60 17,112,500 17,112,500 0.60 17,112,500 17,112,500 February 16, 2026 0.60 2,881,580 2,881,580 0.60 2,881,580 2,881,580 April 1, 2025 0.37 40,358,969 40,358,969 0.37 40,538,969 40,538,969 May 13, 2025 0.37 10,416,667 10,416,667 162,129,064 162,129,064 151,712,397 151,712,379 March 2023 special warrants issuance Expected life 1,092 days 1096 days Volatility 120 % 120 % Risk free interest rate 3.51 % 3.40 % Dividend yield 0 % 0 % Share price (C$) $ 0.105 $ 0.11 Fair value $ 2,815,761 $ 2,781,323 Change in derivative liability $ 34,438 $ - September 30, 2022,March 31, 2023, the following compensationbroker options were outstanding: Weighted Number of average compensation exercise price options (C$) Issued - August 2020 Compensation Options 3,239,907 $ 0.35 Balance, December 31, 2020 3,239,907 0.35 Issued – February 2021 Compensation Options 351,000 0.35 Balance, December 31, 2021 3,590,907 0.35 Issued – April 2022 Compensation Options 1,879,892 0.30 Balance, September 30, 2022 5,470,799 $ 0.34 Weighted Number of average broker exercise price options (C$) Balance, December 31, 2021 3,590,907 0.35 Issued – April 2022 Compensation Options 1,879,892 0.30 Balance, December 31, 2022 5,470,799 $ 0.34 Issued – March 2023 Compensation Options 2,070,258 0.12 Balance, March 31, 2023 7,541,057 0.28 The grant date fair value of the August 2020 and February 2021, and April 2022 Compensation Options were estimated at $20 521,993, $ and $ respectively, using the Black-Scholes valuation model with the following underlying assumptions:(i) The grant date fair value of the March 2023 Compensation Options were estimated at $ using the Black-Scholes valuation model with the following underlying assumptions: Grant Date Dividend yield Volatility Stock price Weighted average life August 2020 0.31 % 0 % 100 % C$ years February 2021 0.26 % 0 % 100 % C$ years April 2022 2.34 % 0 % 100 % C$ years Grant Date Risk free interest rate Dividend yield Volatility Stock price Weighted average life March 2023 3.4 % 0 % 120 % C$ years Exercise Number of Fair value Exercise Number of Expiry date price (C$) broker options ($) price (C$) broker options ($) August 31, 2023 (i) $ 0.35 3,239,907 $ 521,993 $ 0.35 3,239,907 $ 521,993 February 16, 2024 (ii) $ 0.40 351,000 $ 68,078 $ 0.40 351,000 $ 68,078 April 1, 2024 (iii) $ 0.30 1,879,892 $ 264,435 $ 0.30 1,879,892 $ 264,435 March 27, 2026(v) $ 0.12 2,070,057 $ 111,971 5,470,799 $ 854,506 7,541,057 $ 966,477 (i)i)Exercisable into one August 2020 Unit (ii)ii)Exercisable into one February 2021 Unit (iii)iii)Exercisable into one April 2022 Unit iv) Exercisable into one March 2023 Unit 20Bunker Hill Mining Corp.Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)Three and Nine Months Ended September 30, 2022(Expressed in United States Dollars) Weighted average Number of exercise price stock options (C$) Balance, December 31, 2020 8,015,159 $ 0.62 Granted (i) 1,037,977 0.34 Balance, December 31, 2021 9,053,136 $ 0.58 Granted (ii) 300,000 0.15 Expired May 01, 2022 (47,500 ) Balance, September 30, 2022 9,305,636 $ 0.52 Weighted average Number of exercise price stock options (C$) Balance, December 31, 2022 9,053,136 $ 0.58 Granted 700,000 $ 0.15 Expired, May 1, 2022 (47,000 ) $ 10.00 Forfeited (150,000 ) $ 0.15 Expired, December 31, 2022 (235,500 ) $ 0.50 Balance, December 31, 2022 9,320,636 $ 0.51 Balance, March 31, 2023 9,320,636 $ 0.51 (i)On February 19, 2021, stock options were issued to an officer of the Company, of which stock options vested immediately and the balance of stock options vested on December 31, 2021. These options have a -year life and are exercisable at C$ per common share. The grant date fair value of the options was estimated at $. The vesting of these options resulted in stock-based compensation of $nil for the three and nine months ended September 30, 2022, compared to $ and $ for the three and nine months ended September 30, 2021, respectively, which is included in operation and administration expenses on the consolidated statements of income (loss) and comprehensive income (loss).(ii)On August 24, 2022, stock options were issued to an employee of the Company, of which vested immediately and the remaining balance of outstanding options to vest equally over the next two anniversaries of the grant date. These options have a -year life and are exercisable at C$ per common share. The grant fair value of the options was estimated at $. The vesting of these options resulted in stock-based compensation of $ for the three and nine months ended September 30, 2022, which is included in the operation and administration expense of the consolidated statements of income (loss) and comprehensive income (loss).Schedule of Estimated Using Black-Scholes Valuation Model for Fair value of Stock Options Dividend yield Volatility Stock price (i) % % % C$ years (ii)On August 24, 2022, stock options were issued to an employee of the Company, of which stock options vested immediately and the balance of stock options will vest equally over two years on the anniversary date of issuance. These options have a -year life and are exercisable at C$ per common share. The grant date fair value of the options was estimated at $. The vesting of these options resulted in stock-based compensation of $ for the period ended September 30, 2022, which is included in operation and administration expenses on the consolidated statements of income (loss) and comprehensive income (loss).The fair value of these stock options was determined on the date of grant using the Black-Scholes valuation model, and using the following underlying assumptions: Dividend yield Volatility Stock price (ii) % % % C$ years 2021 Number of Number of remaining Number of options remaining Number of options Exercise Exercise contractual options vested Grant date contractual options vested Grant date price (C$) price (C$) life (years) outstanding (exercisable) fair value ($) life (years) outstanding (exercisable) fair value ($) 0.60 200,000 200,000 52,909 0.60 1,575,000 1,575,000 435,069 0.55 5,957,659 2,978,830 1,536,764 0.335 1,037,977 1,037,977 204,213 0.15 150,000 150,000 14,465 0.15 400,000 200,000 37,387 0.50 235,000 235,000 46,277 9,320,636 6,141,807 $ 2,280,807 0.60 200,000 200,000 52,909 0.60 1,575,000 1,575,000 435,069 0.55 5,957,659 1,489,415 1,536,764 0.335 1,037,977 1,037,977 204,213 0.15 300,000 150,000 28,930 9,305,636 4,687,392 $ 2,304,162 Potentially dilutive securities include convertible loan payable, warrants, broker options, stock options, and unvested restricted share units (“RSU”). Diluted income per share reflects the assumed exercise or conversion of all dilutive securities using the treasury stock method. Net income (loss) and comprehensive income (loss) for the period 4,315,403 3,960,630 13,860,884 9,843,495 Basic income (loss) per share Weighted average number of common shares - basic 219,466,235 164,179,999 198,364,188 160,690,371 Net income (loss) per share – basic 0.02 0.02 0.07 0.06 Net income (loss) and comprehensive income (loss) for the period 4,315,403 3,960,630 13,860,884 9,843,495 Dilutive effect of convertible debentures (502,389 ) - (1,945,686 ) - Dilutive effect of warrants on net income - - - - Diluted net income (loss) and comprehensive income (loss) for the period 3,813,014 3,960,630 11,915,198 9,843,495 Diluted income (loss) per share 219,466,234 164,179,999 198,364,188 160,690,371 Weighted average number of common shares - basic Diluted effect: Warrants, broker options, and stock options, convertible debentures, and RSUs 98,738,276 150,000 52,317,205 150,000 Weighted average number of common shares - fully diluted 318,204,510 164,329,999 250,681,393 160,840,371 Net income (loss) per share - fully diluted 0.01 0.02 0.05 0.06 21Bunker Hill Mining Corp.Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)Three and Nine Months Ended September 30, 2022(Expressed in United States Dollars) Weighted Weighted average average grant date grant date fair value fair value Number of per share Number of per share shares (C$) shares (C$) Unvested as at December 31, 2020 988,990 $ 0.39 Granted 1,348,434 0.38 Vested (1,516,299 ) 0.41 Forfeited (245,125 ) 0.52 Unvested as at December 31, 2021 576,000 $ 0.62 576,000 $ 0.62 Granted 624,750 0.29 6,620,641 0.17 Vested (774,750 ) 0.40 (2,373,900 ) 0.18 Unvested as at September 30, 2022 426,000 $ 0.60 Unvested as at December 31, 2022 4,822,741 $ 0.22 - - Unvested as at March 31, 2023 (ii) 4,822,741 $ 0.22 (i) On April 14, 2020, the Company granted RSUs to a certain officer of the Company. The RSUs vest in one fourth increments upon each anniversary of the grant date. The vesting of these RSUs resulted in stock-based compensation of $ and $ for the nine months ended September 30, 2022 and 2021, respectively, which is included in operation and administration expenses on the condensed interim consolidated statements of income (loss) and comprehensive income (loss).(ii) On April 20, 2020, the Company granted RSUs to a certain director of the Company. The RSUs vest in one fourth increments upon each anniversary of the grant date. The vesting of these RSUs resulted in stock-based compensation of $ and $ for the nine months ended September 30, 2022 and 2021, respectively, which is included in operation and administration expenses on the condensed interim consolidated statements of income (loss) and comprehensive income (loss).(iii) On November 16, 2020, the Company granted RSUs to certain directors of the Company. The RSUs vest in one fourth increments upon each anniversary of the grant date. The vesting of these RSUs resulted in stock-based compensation of $ and $ for the nine months ended September 30, 2022 and 2021, respectively, which is included in operation and administration expenses on the condensed interim consolidated statements of income (loss) and comprehensive income (loss).22(i) On January 10, 2022, the Company granted RSUs to a consultant of the Company, vested immediately. The vesting of these RSUs resulted in stock-based compensation of $ for the year ended December 31, 2022, which is included in operation and administration expenses on the consolidated statements of income (loss) and comprehensive income (loss). (ii) Includes RSU’s which had vested as of March 31, 2023 but had not been converted to Common Shares. Bunker Hill Mining Corp.Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)Three and Nine Months Ended September 30, 2022(Expressed in United States Dollars)(iv) On December 6, 2020, the Company granted RSUs to a consultant of the Company. The RSUs vest in one sixth increments per month. The vesting of these RSUs resulted in stock-based compensation of $ and $ for the nine months ended September 30, 2022 and 2021, respectively, which is included in operation and administration expenses on the condensed interim consolidated statements of income (loss) and comprehensive income (loss).(v) On January 1, 2021, the Company granted RSUs to a consultant of the Company. RSUs vested immediately with the remaining RSUs vesting in one twelfth increments per month. During the year ended 2021, a total of RSUs vested, and in July 2021, the consultant forfeited the remaining unvested RSUs, resulting in a reversal of share-based compensation of $. The vesting of these RSUs resulted in stock-based compensation of $ and $ for the nine months ended September 30, 2022 and 2021, respectively.(vi) On July 1, 2021, the Company granted RSUs to a consultant of the Company, vesting immediately. The vesting of these RSUs resulted in stock-based compensation of $ and $ for the nine months ended September 30, 2022 and 2021, respectively.(vii) On August 5, 2021, the Company granted RSUs to consultants of the Company, vesting immediately. The vesting of these RSUs resulted in stock-based compensation of $ and $ for the nine months ended September 30, 2022 and 2021, respectively.(viii) On January 10, 2022, the Company granted RSUs to a consultant of the Company, vesting immediately. The vesting of these RSUs resulted in stock-based compensation of $ for the nine months ended September 30, 2022, which is included in operation and administration expenses on the condensed interim consolidated statements of income (loss) and comprehensive income (loss).(ix) On April 29, 2022, the Company granted RSUs to certain consultants of the Company, vesting immediately. The vesting of these RSUs resulted in stock-based compensation of $ for the nine months ended September 30, 2022, which is included in operation and administration expenses on the condensed interim consolidated statements of income (loss) and comprehensive income (loss).(x) On June 30, 2022, the Company granted RSUs to a consultant of the Company, vesting immediately. The vesting of these RSUs resulted in stock-based compensation of $ for the nine months ended September 30, 2022, which is included in operation and administration expenses on the condensed interim consolidated statements of income (loss) and comprehensive income (loss).(xi) On September 29, 2022 the Company granted RSUs to two consultants of the Company, vesting immediately. The vesting of these RSUs resulted in stock-based compensation of $ for the nine months ended September 30, 2022, which is included in operation and administration expenses on the condensed interim consolidated statements of income (loss) and comprehensive income (loss).common shareCommon Share on the date of redemption in exchange for cash.2322 Bunker Hill Mining Corp.Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)Three and Nine Months Ended September 30, 2022(Expressed in United States Dollars) Weighted average grant date fair value Number of per share shares (C$) Unvested as at December 31, 2020 and September 30, 2021 (i) 7,500,000 $ 1.03 Unvested as at December 31, 2021 5,625,000 $ 1.03 Granted (i) 210,000 0.20 Vested (ii)(iii) (3,125,000 ) 1.03 Unvested as at September 30, 2022 2,710,000 $ 1.00 Weighted average grant date fair value Number of per share shares (C$) Unvested as at December 31, 2021 5,625,000 $ 1.03 Vested (ii) (625,000 ) 1.03 Unvested as at March 31, 2022 5,000,000 $ 1.03 Unvested as at December 31 2022 and March 31, 2023 $ (i) On April 21, 2020, the Company granted DSUs. The DSUs vest in one fourth increments upon each anniversary of the grant date and expire in years. On July 1, 2022 the Company granted DSU’s, these DSU’s vest after months of the issuance date. During the nine months ended September 30, 2022, and 2021 the Company recognized $ and $, respectively, recovery of stock-based compensation related to the DSUs, which is included in operation and administration expenses on the condensed interim consolidated statements of income (loss) and comprehensive income (loss), as DSU’s were settled in cash during the 9 months ended September 30, 2022. Upon redemption of the 2,500,000 DSUs (see (iii)) the fair value of the remaining DSU liability at September 30, 2022 was $.(ii)On March 31, 2022, the Board approved the early vesting of DSUs for one of the Company’s Directors. (iii)During the nine months ended September 30, 2022, the director redeemed 2,500,000 DSUs for C$750,000, and elected to use net proceeds to subscribe for units in the Company’s April 2022 special warrant issuance at C$ per unit, with the balance of the redeemed amount payable in cash after applicable withholding tax deductions. The DSU’s were therefore all accelerated to vest.13.12. Commitments and Contingenciesacid mine drainage (“AMD”)AMD in the Crescent Mine. The plaintiff has requested unspecified damages. On September 20, 2021, the Company filed a motion to dismiss Crescent’s claims against it, contending that such claims are facially deficient. On March 2, 2022, Chief US District Court Judge, David C. Nye granted in part and denied in part the Company’s motion to dismiss. The court granted the Company’s motion to dismiss Crescent’s Cost Recovery claim under CERCLA Section 107(a), Declaratory Judgment, Tortious Interference, Trespass, Nuisance and Negligence claims. These claims were dismissed without prejudice. The court denied the motion to dismiss filed by Placer Mining Corp. for Crescent’s trespass, nuisance and negligence claims. Crescent later filed an amended complaint on April 1, 2022. Placer Mining Corp. and Bunker Hill Mining Corp are named as co-defendants. Bunker Hill responded to the amended filing, refuting and denying all allegations made in the complaint except those that are assertions of fact as a matter of public record. The Company believes Crescent’s lawsuit is without merit and intends to vigorously defend itself, as well as Placer Mining Corp. pursuant to the Company’s indemnification of Placer Mining Corp in the Sale and Purchase agreement executed between the companies for the Mine on December 15, 2021.24Bunker Hill Mining Corp.NotesDuring the three months ended March 31, 2023, the Company entered into a lease agreement with C & E Tree Farm LLC for the lease of a land parcel overlaying a portion of the Company’s existing mineral claims package. The Company is committed to the Condensed Interim Consolidated Financial Statements (Unaudited)making monthly payments of $10,000Three and Nine Months Ended September 30, 2022(Expressed in United States Dollars) through February 2026.14.Related party transactions September 30, September 30, September 30, September 30, 2022 2021 2022 2021 Consulting fees and wages $ 248,472 $ 276,049 $ 1,832,323 $ 846,604 Three Months
Ended
March 31, 2023 Three Months
Ended
March 31, 2022 Consulting Fees and Salaries $ 215,448 $ 1,097,610 September 30,March 31, 2023 and March 31, 2022, and September 30, 2021, $15,000248,533 and $102,235825,776, respectively is owed to key management personnel with all amounts included in accounts payable and accrued liabilities.On July 1, 2022 the Company issued 210,000 DSU’s to a director of the Company.15.14. Subsequent EventsIn October 2022, the Company issued common shares in connection with its election to satisfy interest payments under the outstanding convertible debentures for the three months ending September 30, 2022.None.During October 2022, the Company reported that it has been successful in securing a new payment bond to secure a portion of its cost recovery obligations to the US Environmental Protection Agency (the “US EPA”), resulting in a $3,000,000 improvement in liquidity. As reported in the Company’s financial statements for the period ending September 30, 2022, the Company held restricted cash of $9,476,000 as of September 30, 2022 which included $7,001,000 as collateral for a letter of credit to the US EPA. This letter of credit has been reduced to $2,000,001 as a result of a new $5,000,000 payment bond obtained through an insurance company. The collateral for the new payment bond is comprised of a $2,000,000 letter of credit and land pledged by third parties, with whom the Company has entered into a financing cooperation agreement that contemplates a monthly fee of $20,000 (payable in cash or common shares of the Company, at the Company’s election). The new payment bond is scheduled to increase to $7,001,000 (from $5,000,000) upon the advance of the multi-metals Stream from Sprott Private Resource Streaming & Royalty Corp. (see the Company’s news release of December 20, 2021 for further detail), which would result in a further $2,001,000 improvement in liquidity for the Company from the release of restricted cash.In October 2022, the Company reported that it awarded a new water management consulting services contract to MineWater LLC (“MineWater”) for strategic environmental support at the Bunker Hill Mine through September 30, 2023. Pursuant to the contract, the Company agreed to pay MineWater $60,000 in cash and issue Restricted Share Units, which were issued and vested immediately to common shares of the Company that are subject to customary resale restrictions in Canada and the United States.In November 2022, the Company awarded Restricted Share Units to certain executives in relation to an annual grant under its Long-Term Incentive Plan. The RSUs vest in one-third increments on March 31 of 2023, 2024, and 2025.2523 company’sCompany’s plans and objectives with respect to the present and future operations of the company,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 companyCompany 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’sCompany’s other filings with the sec.SEC. No statements contained in the following discussion should be construed as a guarantee or assurance of future performance or future results.COVID-19 Coronavirus Pandemic Response and ImpactFollowing the outbreak of the COVID-19 coronavirus global pandemic (“COVID-19”) in early 2020, in March 2020 the U.S. Centers for Disease Control issued guidelines to mitigate the spread and health consequences of COVID-19. The Company implemented changes to its operations and business practices to follow the guidelines and minimize physical interaction, including using technology to allow employees to work from home when possible. As long as they are required, the operational practices implemented could have an adverse impact on our results. Although the pandemic has subsided significantly, the negative impact of COVID-19 remains uncertain, including on overall business and market conditions. There is uncertainty related to the potential additional impacts COVID-19 could have on our operations and financial results for the year.24 Current Operations. 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.26In 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, purchased the Bunker Hill Mine, purchased a process plant, and advanced the rehabilitation and development of the Mine. The Company is focused on completing the financing for, and execution of, a potential restart of operations at the Mine.Lease and Purchase of the Bunker Hill MineJanuary 2022, as described below.termsmost recent of these agreements, the November 20, 2020 amended agreement (the “Amended Agreement”), a purchase price of $7,700,000Company was agreed, with $5,700,000 payable in cash (with an aggregate of $300,000 to be credited toward the purchase price of the Mine as having been previously paid by the Company) and $2,000,000 in Common Shares of the Company. The Company agreedrequired 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 payable to purchase the Mine to an aggregate of $3,400,000 payable in cash and $2,000,000 in Common Shares of the Company.The Amended Agreement also required payments pursuant to an agreement with the U.S. Environmental Protection Agency (“EPA”) whereby for so long as the Company leases, owns and/or occupies the Mine, the Company would make payments to the EPA on behalf of Placer Mining in satisfaction of the EPA’s claim for historical water treatment cost recovery in accordance with the Settlement Agreement reached with the EPA in 2018. Immediately prior to the purchase of the Mine, the Company’s liability to EPA in this regard totaled $11,000,000.The 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 Shares. Concurrent with the purchase of the Mine, the Company assumed incremental liabilities of $8,000,000 to the EPA, consistent with the terms of the amended Settlement Agreement with the EPA that was executed in December 2021 (see “EPA 2018 Settlement Agreement & 2021 Amended Settlement Agreement” in the “Our Business” section below)above).EPA 2018 Settlement Agreement & 2021 Amended Settlement AgreementBunker 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 study27in conjunction with its intention to purchase the mine complex, the Company entered into an amended Settlement Agreement (the “Amendment”) between the Company, Idaho Department of Environmental Quality, US Department of Justice and the EPA modifying the payment schedule and payment terms for recovery of historical environmental response costs at Bunker Hill Mine incurred by the EPA. With the purchase of the mine subsequent to the end of the period, the remaining payments of the EPA cost recovery liability would be assumed by the Company, resulting init announced 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 resumption of payments in 2024 were agreed in order to allow the Company to generate sufficient revenue from mining activities at the Bunker Hill Mine to address remaining payment obligations from free cash flow.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. Should the Company fail to make its scheduled payment, the EPA can draw against this financial assurance. The amount of the bonds or letters of credit will decrease over time as individual payments are made. If the Company failed to post the final financial assurance within 180 days of the execution of the Amendment, the terms of the original agreement would be reinstated.During the quarter ended June 30, 2022, the Company was successful in obtaining the financial assurance. Specifically, a $9,999,000 payment bond and a $7,001,000 letter of credit were secured and provided to the EPA. This milestone provides for the Company to recognize the effects of the change in terms of the EPA liability as outlined in the December 20, 2021, agreement. Once the financial assurance was put into 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. The aforementioned payment bond and letter of credit are secured by $2,475,000 and $7,001,000 of cash deposits, respectively.Project Finance Packageproject finance package with Sprott Private Resource Streaming & Royalty Corp.On December 20, 2021,, an amended Settlement Agreement with the Company executed a non-binding term sheet outlining a $50,000,000 project finance package with Sprott Private Resource Streaming and Royalty Corp. (“SRSR”). The non-binding term sheet with SRSR outlined a project financing package that the Company expects to fulfill the majority of its funding requirements to restart the Mine. The term sheet consisted of an $8,000,000 royalty convertible debenture (the “RCD”), a $5,000,000 convertible debenture (the “CD1”), and a multi-metals stream of up to $37,000,000 (the “Stream”). The CD1 was subsequently increased to $6,000,000, increasing the project financing package to $51,000,000.On June 17, 2022, the Company consummated a new $15,000,000 convertible debenture (the “CD2”). As a result, total potential funding from SRSR was further increased to $66,000,000 including the RCD, CD1, CD2EPA, 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 Shares at the Company’s option, until such time that SRSR elects to convert a royalty, with such conversion option expiring at the earlier of advancementpurchase of the Stream or July 7, 2023 (subsequently amended as described below). InBunker Hill Mine, setting the event of conversion, the RCD will cease to exist and the Company will grantstage for a royalty for 1.85% of life-of-mine gross revenue from mining claims considered to be historically worked, contiguous to current accessible underground development, and covered by the Company’s 2021 ground geophysical survey (the “SRSR Royalty”). A 1.35% rate will the apply to claims outside of these areas. The RCD was initially secured by a share pledgerapid restart 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.Concurrent with the funding of the CD2 in June 2022, the Company and SRSR agreed to a number of amendments to the terms of the RCD, including an amendment of the maturity date from July 7, 2023, to March 31, 2025. The parties also agreed to a Royalty Put Option such that in the event the RCD is converted into a royalty as described above, the holder of the royalty will be entitled to resell the royalty to the Company for $8,000,000 upon default under the CD1 or CD2 until such time that the CD1 and CD2 are paid in full.The Company closed the $6,000,000 CD1 on January 28, 2022, which was increased from the previously announced $5,000,000. The CD1 bears interest at an annual rate of 7.5%, payable in cash or shares at the Company’s option, and matures on July 7, 2023 (subsequently amended, as described below). The CD1 is secured by a pledge of the Company’s properties and assets. Until the closing of the Stream, the CD1 was to be convertible into Common Shares at a price of C$0.30 per Common Share, subject to stock exchange approval (subsequently amended, as described below). Alternatively, SRSR may elect to retire the CD1 with the cash proceeds from the Stream. The Company may elect to repay the CD1 early; if SRSR elects not to exercise its conversion option at such time, a minimum of 12 months of interest would apply.28Concurrent with the funding of the CD2 in June 2022, the Company and SRSR agreed to a number of amendments to the terms of the CD1, including that the maturity date would be amended from July 7, 2023, to March 31, 2025, and that the CD1 would remain outstanding until the new maturity date regardless of whether the Stream is advanced, unless the Company elects to exercise its option of early repayment. The Company determined that 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 shares at the Company’s option, and matures on March 31, 2025. The CD2 is secured by a pledge of the Company’s properties and assets. The repayment terms include 3 quarterly payments of $2,000,000 each beginning June 30, 2024, and $9,000,000 on the maturity date.Mine.lightJanuary 2022, with the closing of the Series 2 Convertible Debenture financing, the previously permitted additional senior secured indebtedness of up to $15 million for project finance has been removed.A minimum of $27,000,000 and a maximum of $37,000,000 (the “Stream Amount”) will be made available under the Stream, at the Company’s option, once the conditions of availabilitypurchase of the Stream have been satisfied including confirmation of full project funding by an independent engineer appointed by SRSR. If the Company draws the maximum funding of $37,000,000, the Stream would apply to 10% of payable metals sold until a minimum quantity of metal is delivered consisting of, individually, 55 million pounds of zinc, 35 million pounds of lead, and 1 million ounces of silver (subsequently amended, as described below). Thereafter, the Stream would apply to 2% of payable metals sold. If the Company elects to draw less than $37,000,000 under the Stream, the percentage and quantities of payable metals streamed will adjust pro-rata. The delivery price of streamed metals will be 20% of the applicable spot price. The Company may buy back 50% of the Stream Amount at a 1.40x multiple of the Stream Amount between the second and third anniversary of the date of funding, and at a 1.65x multiple of the Stream Amount between the third and fourth anniversary of the date of funding. As of September 30, 2022, the Stream had not been advanced.Concurrent withBunker Hill Mine, the funding of the CD2 in June 2022,$8,000,000 Royalty Convertible Debenture and $6,000,000 Series Convertible Debenture, and the Company and SRSR agreed that the minimum quantityannouncement of metal delivered under the Stream, if advanced, will increase by 10% relative to the amounts noted above.Process PlantOn January 25, 2022, the Company announced that it had entered into a non-binding Memorandum of Understanding (“MOU”) with Teck Resources Limited (“Teck”)an MOU for the purchase of a comprehensive package of equipment and parts inventory from itsthe Pend Oreille site (the “Process Plant”) in eastern Washington State, approximately 145 milesprocess plant from the Bunker Hill Mine by road. The package comprises substantially all processing equipment of value located at the site, including complete crushing, grinding and flotation circuits suitable for a planned ~1,500 ton-per-day operation at Bunker Hill, and total inventory of 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 with a subsidiary of Teck to satisfyResources Limited, the remaining purchase price forCompany embarked on a program of activities with the Process Plant by waygoal of an equity issuanceachieving a restart of the Company. Teck will receive 10,416,667 unitsMine. Key milestones and achievements from January 2022 onwards have included the closing of the Company (the “Teck Units”) at a deemed issue price of C$0.30 per unit. Each Teck Unit consists of one Common Share and one Common Share purchase warrant (the “Teck Warrants”). Each whole Teck Warrant entitles the holder to acquire one Common Share at a price of C$0.37 per Common Share for a period of three years. The equity issuance and purchase of the Process Plant occurred on May 13, 2022.Ball Mill upgradeOn August 30, 2022,Pend Oreille process plant, the Company entered into an agreement to purchase a ball mill from D’Angelo International LLC for $675,000. The purchasedemobilization of the mill isprocess plant to be made in three cash payments:the Bunker Hill site, the completion of demolition activities at the Pend Oreille site, a Prefeasibility Study envisaging the restart of the Mine, and the completion of the primary portion of the ramp decline connecting the 5 and 6 Levels of the Bunker Hill Mine.$100,000 by September 15, 2022 as a non-refundable deposit (paid)$100,000 by October 15, 2022 (paid)$475,000 by December 15, 2022At September 30, 2022, the Company paid $100,000 towards the purchase as a non-refundable deposit.29and nine months ended September 30, 2022March 31, 2023 and September 30, 2021.March 31, 2022. Unless otherwise stated, all figures herein are expressed in U.S. dollars, which is the Company’s functional currency.and nine months ended September 30,March 31, 2023 and 2022 and 2021ninethree months ended September 30,March 31, 2023, and 2022, and 2021, respectively, the Company generated no revenue.and nine months ended September 30,March 31, 2023, and 2022, the Company reported total operating expenses of $3,824,948$2,185,488 and $13,291,484,$5,486,674, respectively. Compared25 and nine months ended September 30, 2021, the Company reported total operating expenses of $2,464,945March 31, 2022.$12,384,474, respectively.Comprehensive Incometotal operating expenses is primarilythe gain due to change in derivative liability ($4,226,574 for the three months ended March 31, 2023 compared to $3,454,008 for the three months ended March 31, 2022) driven by a proportionally greater decline in the Company’s share price in Q1 2023 relative to Q1 2022, a $214,714 gain on extinguishment of Teck warrants during Q1 2023 and an increase in mine preparation legal and consulting fees whenthe gain on fair value of convertible debentures of $1,689,701 (three months ended March 31, 2022: $nil). This was partially offset by an increase in interest expense of $589,392 ($1,324,629 for the three months ended March 31, 2023 compared to $735,237 for the three and nine-month periodsmonths ended September 30, 2021. The Company was engaged in an active exploration campaign during the three and nine-month periods ended September 30, 2021, whereas the Company’s primary focus during the three and nine-month periods ended September 30, 2022 was on advancing mine restart efforts, including underground development and process plant demobilization activities.March 31, 2022).significant increaseCompany had comprehensive income of $2,598,161 for the three months ended March 31, 2023 (comprehensive loss of $2,880,886 for the month three ended March 31, 2022). Comprehensive income for the three months ended March 31, 2023, is inclusive of a $807,012 gain on change in consulting fees reflects the engagement of numerous engineering, geological and other professional firms to assist the Company in consummating several complex debt and equity financings, the purchases of the mine and processing plant, the EPA financial assurance requirements, fair value measurements of complex instruments, and advancement of project activities. These fees were somewhat offset by a decrease in operational and administration expenses.For financial accounting purposes,on own credit risk ($nil for the Company reports all direct exploration expenses under the exploration expense line item of the condensed interim consolidated statements of income (loss) and comprehensive income (loss)three months ended March 31, 2022). Management determined that costs of the mine in the most recent quarter constituted mine preparation costs rather than exploration costs, since it was not focused on expanding the mineral resources but was invested to execute on the tasks and projects required to get the mine into shape for production activities. Certain indirect expenses may be reported as operation and administration expense or consulting expense on the unaudited condensed interim consolidated statements of income and comprehensive income.$59,626,902$69,801,410 as at March 31, 2023 and further losses are anticipated in the development of its business. Additionally, the Company owes a total of $7,420,024 net of discount to the EPA (see Note 6) that is classified as long-term debt. The Company does not have sufficient cash to fund normal operations and meet debt obligations for the next 12 months without deferring payment on certain current liabilities and/or raising additional funds. In order to continue to meet its fiscal obligations in the current fiscal year and beyond, the Company must seek additional financing. This raises substantial doubt about the Company’s ability to continue as a going concern. Its ability to continue as a going concern is dependent upon the ability of the Company to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. The accompanying unaudited condensed interim consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.30Debt and Equity Financings, EPA obligations, and Mine PurchaseAs described above, during the nine months ended September 30, 2022, the Company closed on three convertible debentures totaling $29,000,000 and equity financings (net of issuance costs) totaling $7,769,745 and used the proceeds to purchase the Bunker Hill Mine and the processing plant, as well as satisfy short-term obligations to the EPA including satisfaction of its financial assurance commitments, cost recovery and water treatment payments, advancement of mine restart activities and the funding of working capital requirements.September 30, 2022, the Company’s balance sheet reflects thatMarch 31, 2023, the Company had: i)had total current assets of $11,787,942,$10,584,049, compared to total current assets of $3,622,548$7,741,052 at December 31, 20212022 – an increase of $8,165,394;$2,842,997; and ii) total assets of $33,586,588,$36,929,798, compared to total assets of $4,071,796$32,929,892 at December 31, 20212022 – an increase of $29,514,792.$3,999,906. The increase in current assets was primarily due to an increase in restrictedunrestricted cash as a result of the proceeds from the convertible debenturesnon-brokered private placement of units of the Company and equity financings, and from increases in prepaid expenses and deposits.the exercise of warrants. Total assets increased principally due to the increase in cash from financings and the purchase of the Bunker Hill Mine,additions to the process plant and inventory.during the three months ended March 31, 2023.26 September 30, 2022, the Company’s balance sheet reflects thatMarch 31, 2023, the Company had total current liabilities of $11,439,038$10,102,157 and total liabilities of $48,321,757,$56,152,235, compared to total current liabilities of $22,795,277$10,155,581 and total liabilities of $38,314,164$59,106,835 at December 31, 2021. The decrease in the current liabilities is primarily reflective of financing and assurance activities that moved the EPA cost recovery liability from current to long term liabilities.2022. Total liabilities increaseddecreased as a result of the closingrevaluations of the three convertible debentures and movement of the EPA cost recovery liability from current to long term, offset by the decrease in the long-term derivative warrant liability, promissory note.liabilities.On September 30, 2022,As of March 31, 2023, the Company had a working capital balance of $384,904$481,892 and a shareholders’ deficiency of $14,735,169$19,222,437 compared to negativea working capital deficit of $19,172,729$2,414,530 and a shareholders’ deficiency of $34,242,368 for the year ended$26,176,943 as of December 31, 2021. Working2022. The working capital balance increased during the ninethree months ended September 30, 2022March 31, 2023, primarily due to fundingthe closing of a brokered private placement of special warrants of the Company and proceeds received from debt and equity financings, and the reclassificationexercise of cost recovery liabilities from current to long-term. Shareholders’ equity increasedwarrants. The shareholders’ deficiency decreased primarily due to proceeds received from equity financing in the quarter and comprehensive net income of $3,690,353 and $12,864,248 for the three and nine-month periods ended September 30, 2022, driven by decreases in the fair value of the derivative warrant liability.quarter.ninethree months ended September 30, 2022,March 31, 2023, the Company had a net cash decreaseincrease of $382,230, which represents cash provided from convertible debentures and equity financings, with proceeds used to satisfy short-term obligations with the EPA, purchase of the Bunker Hill Mine and a processing plant, partial repayment of the outstanding promissory note, advancement of mine restart activities, and funding of working capital requirements.During the nine months ended September 30, 2022, cash of $26,531,674 was used in operating activities,$2,884,453, primarily due to the usageclosing of $9,476,000a brokered private placement of special warrants of the Company and proceeds received from the exercise of warrants. Cash expenditures during the three months ended March 31, 2023 were primarily utilized to secure the Company’s financial assurance obligations with the EPA, $3,000,000 of payments against EPA cost recovery and water treatment payables, funding of mine restart activities, and otherfund working capital requirements. This compares with cash used in operating activities of $9,372,253 for the nine months ended September 30, 2021.During the nine months ended September 30, 2022, cash of $9,555,473 was used in investing activities for the purchase of the Bunker Hill Mine, a process plant, equipment, and real estate, compared with $94,693 used for investing activities in the nine months ended September 30, 202131During the nine months ended September 30, 2022, cash of $35,704,917 was provided by financing activities by the three convertible debentures and the equity financings, offset by cash used for lease payments and repayment of a promissory note, compared with cash of $8,411,534 provided by financing activities in the nine months ended September 30, 2021During October 2022, the Company issued 8,252,940 common shares in connection with its election to satisfy interest payments under the outstanding convertible debentures for the three months ending September 30, 2022.None.During October 2022, the Company reported that it has been successful in securing a new payment bond to secure a portion of its cost recovery obligations to the US Environmental Protection Agency (the “US EPA”), resulting in a $3,000,000 improvement in liquidity. As reported in the Company’s financial statements for the period ending September 30, 2022, the Company held restricted cash of $9,476,000 as of September 30, 2022 which included $7,001,000 as collateral for a letter of credit to the US EPA. This letter of credit has been reduced to $2,000,001 as a result of a new $5,000,000 payment bond obtained through an insurance company. The collateral for the new payment bond is comprised of a $2,000,000 letter of credit and land pledged by third parties, with whom the company has entered into a financing cooperation agreement that contemplates a monthly fee of $20,000 (payable in cash or common shares of the Company, at the Company’s election).The new payment bond is scheduled to increase to $7,001,000 (from $5,000,000) upon the advance of the multi-metals Stream from Sprott Private Resource Streaming & Royalty Corp. (see the Company’s news release of December 20, 2021 for further detail), which would result in a further $2,001,000 improvement in liquidity for the Company from the release of restricted cash.In October 2022, the Company reported that it awarded a new water management consulting services contract to MineWater LLC (“MineWater”) for strategic environmental support at the Bunker Hill Mine through September 30, 2023. Pursuant to the contract, the Company agreed to pay MineWater $60,000 in cash and issue 1,599,150 Restricted Share Units, which were issued and vested immediately to common shares of the Company that are subject to customary resale restrictions in Canada and the United States.In November 2022, the Company awarded 4,396,741 Restricted Share Units to certain executives in relation to an annual grant under its Long-Term Incentive Plan. The RSUs vest in one-third increments on March 31 of 2023, 2024, and 2025.sheetsheets 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.27 Warrantsaccrued liabilitieswarrantsand conversion feature derivative liability, volatility and dividend yield and making assumptions about them.32Complex Financing TransactionsThe Given the nature, complexity and variability of the various actual cost items included in the invoice, the Company has engaged in a series of complex financing transactions, which involveused the issuance of certain conversion features embedded in the debt, including options to receive interest payments in the formmost recent invoice as its estimate of the Company’s shares and to purchase a gross revenue royalty in the Bunker Hill Mine. These instruments require evaluation to determine fair values of the debt and the embedded conversion features, which require complex calculations of many appropriate inputs to the valuation model variables, including but not limited to the expected life of the debt instrument and conversion feature derivative liability, volatility of the Company’s shares, effective discount rates, probabilities of operational assumptions as related to an anticipated royalty revenue stream, the Company’s own credit risk and other inputs. The Company has to make estimates of each of these inputs in applying a valuation model to accountwater treatment costs for the derivative values, the presentation of these values, the periodic changes to the fair values and the recognition of these changes.future periods.identificationconclusion that the design and operation of significant deficiencies. Based on the context in which the individual deficiencies occurred, management has concluded that these are significant deficiencies. The Company’s CEO and CFO are in the process of making significant improvements to the disclosure controls and procedures in order to provide reasonable assurancewere effective as of the effectiveness of the controls and procedures.March 31, 2023.Changes in Internal Control Over Financial ReportingMitigating these significant deficiencies, however, is that, commencing in DecemberThe management of 2021, the Company has replaced certainis responsible for the preparation of the financial statements and related financial information appearing in this report. The financial statements and notes have been prepared in conformity with accounting resources by engaging qualified finance and accounting staff who are experienced in established and proven internal controls and accounting procedures with other companiesprinciples generally accepted in the same industry. AsUnited States of America. The management of the work productCompany also is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. A company’s internal control over financial reporting is defined as a process designed to provide reasonable assurance regarding the reliability of these qualified stafffinancial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that: i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; ii) provide reasonable assurance that transactions are reflectedrecorded as necessary to permit preparation of financial statements in Company transactions more fullyaccordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in 2022,accordance with authorizations of management will be able to address these remaining significant deficiencies.and directors of the Company; and iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.As partManagement, including the CEO and CFO, does not expect that the Company’s disclosure controls, procedures and internal control over financial reporting will prevent all error and all fraud. Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable, not absolute, assurance that the objectives of the afore-mentioned engagement, Management has engagedcontrol system are met and may not prevent or detect misstatements. Further, over time, control may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate. The design of a third-party firmcontrol system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to assisttheir costs. Because of the inherent limitations in developing Disclosure Controlsall control systems, no evaluation of controls can provide absolute assurance that all control issues and Proceduresinstances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and Internal Controls Over Financial Reporting. Thethat breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.intendsin the reports filed or submitted by the Company under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, including to remedy these significant deficiencies dependentensure that information required to be disclosed by the Company in the reports filed or submitted by the Company under the Exchange Act is accumulated and communicated to the Company’s management, including the Company’s principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on havingthat evaluation, the Company’s CEO and CFO have concluded that the internal control over financial resources available to complete them.reporting was effective as of March 31, 2023.3328 anit amended complaint on April 1, 2022. Placer Mining Corp. and Bunker Hill Mining Corp are named as co-defendants. Bunker Hill respondedand Placer have until May 20, 2022 to respond to the amended filing, refuting and denying all allegations made in the complaint except those that are assertions of fact as a matter of public record.filing. The Company believes Crescent’sCrescent Mining LLC’s lawsuit against Placer Mining Corp. is without merit and intends to vigorously defend itself, as well as Placer Mining Corp. vigorously pursuant to the Company’s indemnification of Placer Mining Corp in the Sale and Purchase agreement executed between the companies for the Mine on December 15, 2021.are significant risks in investinghave been no changes to our risk factors as reported in our common shares. Reference is made toannual report on Form 10-K for the risks described in our prospectus filed with the SEC on Mayyear ended December 31, 2022, which is incorporated herein by reference.2022.29 34September 30, 2022.March 31, 2023.Mine Mine Act
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(yes/no) Mine Act §104 Violations (1) Mine Act §104(b) Orders (2) Mine Act §104(d) Citations and Orders (3) Mine Act §110(b)(2) Violations (4) Mine Act §107(a) Orders (5) Proposed Assessments from MSHA (In dollars $) Mining Related Fatalities Mine Act §104(e) Notice (yes/no) (6) Pending Legal Action before Federal Mine Safety and Health Review Commission (yes/no) Bunker Hill Mine 0 0 0 0 0 0 0 No No 0 0 0 0 0 0 0 0 No (1) The total number of violations received from MSHA under §104 of the Mine Act, which includes citations for health or safety standards that could significantly and substantially contribute to a serious injury if left unabated. (2) The total number of orders issued by MSHA under §104(b) of the Mine Act, which represents a failure to abate a citation under §104(a) within the period of time prescribed by MSHA. (3) The total number of citations and orders issued by MSHA under §104(d) of the Mine Act for unwarrantable failure to comply with mandatory health or safety standards. (4) The total number of flagrant violations issued by MSHA under §110(b)(2) of the Mine Act. (5) The total number of orders issued by MSHA under §107(a) of the Mine Act for situations in which MSHA determined an imminent danger existed. (6) A written notice from the MSHA regarding a pattern of violations, or a potential to have such pattern under §104(e) of the Mine Act. Exhibit No. Document 31.1 Certification of the Chief Executive Officer pursuant to Rule 13a-14 of the Exchange Act 31.2 Certification of the Chief Financial Officer pursuant to Rule 13a-14 of the Exchange Act 32.1 Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS Inline XBRL Instance Document 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) 3530 Date: November 4, 2022Date: May 12, 2023 BUNKER HILL MINING CORP. By /s/ Sam Ash Sam Ash, Chief Executive Officer and President Date: November 4, 2022Date: May 12, 2023 BUNKER HILL MINING CORP. By /s/ David Wiens David Wiens, Chief Financial Officer and Corporate Secretary 31