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~~ ~~September 30,~~ ~~2022~~

For the quarterly period ended March 31, 2023

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 333-150028

BUNKER HILL MINING CORP.

(Exact Name of Registrant as Specified in its Charter)

nevada		32-0196442
(State of other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

82 Richmond Street East
Toronto, Ontario, Canada		M5C 1P1
(Address of Principal Executive Offices)		(Zip Code)

(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 ☐☒ No ☒☐

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.

Large accelerated filer ☐

Accelerated filer ☐

Non-accelerated filer ☒

Smaller reporting company ☒

Emerging Growth 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 ~~November 4, 2022:~~May 12, 2023: ~~229,501,661~~256,099,174

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION	3

Item 1. Financial Statements	3

Item 2. Management’s Discussion and Analysis of Financial Condition or Plan of Operation	2624

Item 3. Quantitative and Qualitative Disclosures about Market Risk	3328

Item 4. Controls and Procedures	3328

PART II – OTHER INFORMATION	3429

Item 1. Legal Proceedings	3429

Item 1A. Risk Factors	3429

Item 2. Unregistered Sales of Equity Securities and Use Of Proceeds	3429

Item 3. Defaults upon Senior Securities	3430

Item 4. Mine Safety Disclosure	3430

Item 5. Other Information	3530

Item 6. Exhibits	3530

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”) 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.

Bunker Hill Mining Corp.

Condensed Interim Consolidated Balance Sheets

(Expressed in United States Dollars)

Unaudited

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, $0.000001 par value, 10,000,000 preferred shares authorized; Nil preferred shares issued and outstanding (note 9) - -
Common shares, $0.000001 par value, 1,500,000,000 common shares authorized; 219,649,187 and 164,435,442 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, $0.000001 par value, 10,000,000 preferred shares authorized; Nil preferred shares issued and outstanding (note 9) - -
Common shares, $0.000001 par value, 1,500,000,000 common shares authorized; 256,099,174 and 229,501,661 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
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial ~~statements,~~statements.

4

Bunker Hill Mining Corp.
Condensed Interim Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
(Expressed in United States Dollars)
~~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)
4,226,574
3,454,008
Gain on FV of convertible debentures (note 7) 1,689,701 -
Gain on modification of warrants (note 9)
214,714
-
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

The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
5

Bunker Hill Mining Corp.
Condensed Interim Consolidated Statements of Cash Flows
(Expressed in United States Dollars)
Unaudited

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
68,656
-
Interest expense on lease liability (note 8) 3,611 1,317
Financing costs
(384,984
)
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
240,000

-

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 -
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
6

Bunker Hill Mining Corp.
Condensed Interim Consolidated Statements of Changes in Shareholders’ Deficiency
(Expressed in United States Dollars)
Unaudited
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$0.30 1,471,664 1 352,854 - - - 352,855
Special warrant shares issued for C$0.30 37,849,325 38 9,083,719 (1,775,790 ) - - 7,307,967
Contractor shares issued for C$0.30 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 $0.40 per share 19,576,360 20 6,168,049 - - - 6,168,069
Shares issued for debt settlement at C$0.58 417,720 - 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)
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
7

Bunker Hill Mining Corp.
Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)
Three ~~and Nine~~ Months Ended ~~September 30, 2022~~March 31, 2023
(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. ~~(“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.

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 $~~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 $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.

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 ~~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.

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.
8

~~Bunker Hill Mining Corp.~~
~~Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)~~2. Significant Accounting Policies
~~Three and Nine Months Ended September 30, 2022~~
~~(Expressed in United States Dollars)~~:

2. Basis of Presentation

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, ~~2021.~~2022. The ~~financial~~interim results for the ~~three and nine months~~period ended ~~September 30, 2022~~March 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.

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
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
4. Equipment, Right-of-Use asset and Process Plant ~~& Equipment~~

Equipment consists of the following:
Schedule of 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

The total depreciation expense ~~for~~relating to equipment during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and March 31, 2022 was $~~42,814~~44,692 and $~~119,905~~54,015, 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.~~

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 purchase of the mill has been valued at:~~
- Cash consideration given, comprised of $500,000 ~~nonrefundable~~non-refundable deposit remitted on January 7, 2022 and $231,000 sales tax remitted on May 13, 2022, a total of $731,000 cash remitted.
- Value of common shares issued on May 13, 2022 at the market price of that day, a value of $1,970,264.
- Fair value of the warrants issued together with the inputs, as determined by a binomial model, resulted in a fair value of $1,273,032. 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.
9
~~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)~~
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 ~~sheet~~sheets as a ~~current~~non-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 asset~~Process plant consists of the following:
Schedule of Plant Asset Consists

September 30,
2022

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.~~
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 ~~payments:~~payments. The first two payments were made as follows:

$100,000 byon September 15, 2022 as a non-refundable long-term deposit ~~(paid)~~
$100,000 byon October ~~15,~~13, 2022, ~~(paid)~~
$~~475,000~~ ~~by December 15, 2022~~as a refundable long-term deposit

~~At September 30, 2022,~~As of March 31, 2023, the Company ~~paid~~had not made the final payment of $~~100,000~~475,000 ~~towards the purchase as a non-refundable deposit.~~.

4. ~~Right-of-Use Asset~~
Right-of-use asset consists of the following:
Schedule of 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 $ -

The total depreciation expense ~~for the right-of-use asset~~ during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and March 31, 2022 was $~~nil~~6,384 and $~~52,353~~24,442~~, respectively. Compared~~ (relating to ~~the three and nine months ended September 30, 2021 was $26,594~~ ~~and $79,783~~an 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)~~
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. ~~(See also Note 6 Environmental Protection Agency Agreement and Water Treatment Liabilities).~~

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:
- Contract purchase price of $7,700,000 less $300,000 credit by seller for prior maintenance payments.
- Net present value of water treatment cost recovery liability assumed of $6,402,425.
-
Capitalized legal and closing costs of $444,785.
- As a result, the total value of the mine at the time of purchase was determined to be $14,247,210.
The carrying cost of the Mine is comprised of the following:
Schedule of Mining Interests

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

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

Land ~~Purchase~~purchase and leases

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.
11
6. Environmental Protection Agency ~~Agreement~~ and Water Treatment Liabilities (“EPA”)

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 ~~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 ~~sheet~~sheets as of December 31, 2021.
11
~~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)~~

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
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

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 ~~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.

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.
~~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 according~~6,402,425 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.
During the ~~quarter~~year 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 ~~occurred~~Settlement with the entire $17,000,000 liability being recognized as long-term in nature. ~~The aforementioned~~As of March 31, 2023 (unchanged from December 31, 2022), the Company had two payment ~~bond is secured by~~bonds of $9,999,000 and $5,000,000, and a $~~2,475,000~~2,001,000 letter of ~~credit.~~credit, in place to secure this liability. The $~~2,475,000~~ ~~and $7,001,000~~collateral for the payment bonds is comprised of two letters of credit of $4,475,000 in aggregate, as well as land pledged by third parties with whom the company has entered into a financing cooperation agreement that contemplates a monthly fee of $20,000 (payable in cash or common shares of the Company, at the Company’s election). The letters of credit of $6,476,000 in aggregate are secured by $~~9,476,000~~ of cash deposits under an agreement with a commercial ~~bank. These cash deposits~~bank, which comprise the $~~9,476,000~~6,476,000 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 $631,701~~374,306 on the discounted ~~pre- and post-extinguishment~~ liability, ~~respectively,~~ bringing the net liability to $~~7,420,024~~8,315,772 as(inclusive of ~~September 30, 2022. As at September 30, 2022~~ interest payable of $~~192,923~~156,343 ($~~306,501~~ ~~at December 31, 2021) is included in interest payable on the condensed consolidated balance sheet.~~).
12
~~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)~~
Water Treatment Charges – ~~EPA~~IDEQ
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 ~~are~~were payable to the EPA, and charges thereafter are payable to the Idaho Department of Environmental Quality (“IDEQ”) given a handover of responsibilities for the Central Treatment Plant from the EPA to the IDEQ as of that date. ~~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 – IDEQ~~
~~For water treatment charges beginning January 2022, the~~The Company currently makes a monthly ~~accrual~~payments of $~~80,000~~100,000 to ~~cover~~ the ~~IDEQ’s estimated costs~~IDEQ 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 paid~~net payments made by the Company ~~once~~to the ~~actual annual costs are determined each year. At September 30, 2022, the Company~~IDEQ 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 expenses~~been recognized on the ~~unaudited condensed interim~~ consolidated balance ~~sheet.~~sheets as accounts receivable and prepaid expenses.
7. Promissory ~~Note~~Notes Payable and Convertible Debentures
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. ~~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.
At ~~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 $~~56,712~~55,479 and $~~224,589~~92,466~~, respectively. For the three and nine months ended September 30, 2021, interest expense was $8,219~~ ~~and $8,219~~, respectively. At ~~September 30, 2022 interest~~March 31, 2023 financing costs of $~~327,329~~439,521 ($~~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%.
On February 21, 2023, the Company issued a non-convertible promissory note to a related party in the amount of $120,000, and a separate non-convertible promissory note in the amount of $120,000 to another party. Each promissory note bore fixed interest of $18,000 per annum, payable at maturity, which was the earlier of one year or the receipt of an equity or debt financing. Both promissory notes, including interest, were settled on March 27, 2023.
13
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 ~~expects~~expected 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.

13
~~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)~~
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 ~~(RCD)~~

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, ~~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
$6,000,000 ~~Series 1~~ Convertible Debenture (CD1))

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.

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 ~~RCD~~CD1 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, 2022~~modification.
$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, ~~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.

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.

14
~~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)~~
Consistent with the approach above, the following table summarizes the key valuation inputs as at applicable valuation dates:
Schedule of Key Valuation Inputs

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 (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 carries~~CD1 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 ~~probabilities~~valuation 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 and~~RCD are applicable to the ~~stream~~scenario where the Stream is not ~~being advanced~~advanced. 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 advanced
15

The resulting fair values of the CD1, RCD, and CD2 at ~~the issuance dates, June 30, 2022,~~March 31, 2023, and as of ~~September 30,~~December 31, 2022, were as follows:
Schedule of Fair Value Derivative Liability
Instrument Description Issuance date CD1 and RCD Issuance date CD2 March 31,
2022 June 30,
2022 September 30,
2022
March 31,
2023

December 31,
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

The total gain on fair value of debentures recognized during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and March 31, 2022, was $~~1,301,069~~1,689,701 and $~~3,041,056~~nil, 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 $~~625,050~~807,012 and $~~996,636~~nil, 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.

The Company performs quarterly testing of the covenants in the RCD, CD1 and CD2, and was in compliance with all such covenants as of ~~September 30, 2022.~~
15
~~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)~~March 31, 2023.

$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 ~~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.~~
8. Lease ~~Liability~~liability

The Company ~~had an~~has operating ~~lease~~leases 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:
Schedule of Operating Lease Liability
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
9. Capital Stock, Warrants and Stock Options

Authorized

The total authorized capital is as follows:

● ~~An increase to~~ 1,500,000,000 ~~common shares, as approved in the July 29, 2022 annual meeting of shareholders,~~Common Shares with a par value of $0.000001 per ~~common share;~~Common Share; and
● 10,000,000 preferred shares with a par value of $0.000001 per preferred share

Issued and outstanding

In ~~February 2021,~~March 2023, the Company ~~closed~~amended the exercise price and expiry date of 10,416,667 warrants which were previously issued in a ~~non-brokered~~ private placement ~~of units~~to Teck Resources (“Teck”) on May 13, 2022 in consideration for the Company’s acquisition of the ~~Company (the “February 2021 Offering”), issuing~~ ~~19,576,360~~ ~~units~~Pend Oreille process plant. The warrant entitled the holder thereof to purchase one share of Common Share of the Company ~~(“February 2021 Units”) at C$0.40~~ ~~per February 2021 Unit for gross proceeds of $6,168,069~~ ~~(C$7,830,544~~). Each February 2021 Unit consisted of one common share of the Company and one common share purchase warrant of the Company (each, “February 2021 Warrant”), which entitles the holder to acquire a common share of the Company at C$~~0.60~~ ~~per common share for a period of~~ ~~five years. In connection with the February 2021 Offering, the Company incurred share issuance costs of $154,630~~ ~~and issued~~ ~~351,000~~ ~~compensation options (the “February 2021 Compensation Options”). Each February 2021 Compensation Option is exercisable into one February 2021 Unit~~ at an exercise price of C$~~0.40~~0.37 per Warrant at any time on or prior to May 12, 2025. The Company amended the exercise price of the warrants from C$0.37 to C$0.11 per Warrant and the expiry date from May 12, 2025, to March 31, 2023, resulting in a gain on modification of warrants of $214,714. In March 2023, Teck exercised all 10,416,667 warrants at an exercise price of C$0.11, for aggregate gross proceeds of C$1,145,834 to the Company. During the quarter the Company recognized a ~~period~~change in derivative liability of ~~three years.~~$400,152 relating to the Teck warrants using the following assumptions: volatility of 120%, stock price of C$0.11, interest rate of 3.42% to 4.06%, and dividend yield of 0%.

16
~~Bunker Hill Mining Corp.~~
~~Notes to~~In 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 51,633,727
special warrants of the Company (“March 2023 Special Warrants”) at C$~~Three~~0.12 per March 2023 Special Warrant for $4,536,020 (C$6,196,047), of which $3,661,822 was received in cash and ~~Nine Months Ended September 30, 2022~~
$~~(Expressed in United States Dollars)~~
~~The Company also issued~~ ~~417,720~~874,198 ~~February 2021 Units to settle $132,000~~was 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.

In ~~April 2022,~~connection with the ~~Company closed a private placement of~~ ~~37,849,325~~ ~~Special Warrants and a non-brokered private placement of~~ ~~1,471,664~~ ~~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 the~~Offering, each March 2023 Special Warrant ~~private placement for a total of~~ ~~4,809,160~~ ~~shares (included in the total above).~~
~~The Special Warrants were issued at a price of C$0.30~~ ~~per special warrant. Each Special Warrant shall be~~is 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 ~~days~~day 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 warrants~~registering 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.
Each ~~unit~~March 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 ~~warrant~~whole Warrant entitles the holder thereof to acquire one ~~common share for~~Common Share of the Company (a “Warrant Share”, and together with the Unit Shares, the “Underlying Shares”) at an exercise price of C$~~0.37~~0.15 per Warrant Share until ~~April 1, 2025. The warrants shall also be exercisable on a cashless basis~~March 27, 2026, subject to adjustment in certain events. In the event that the Registration Statement has not been ~~made~~declared 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 May~~or 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 automatically~~will be deemed to be exercised on the Automatic Exercise Date into one ~~Common Share and one Warrant without further action on the part~~penalty unit of the ~~holders.~~
~~The non-brokered~~ ~~1,471,664~~ ~~units were issued at~~Company (each, a ~~price~~“Penalty Unit”), with each Penalty Unit being comprised of C$~~0.30~~ ~~per unit. Each unit consists of one common share~~1.2 Unit Shares and ~~one warrant. Each warrant entitles the holder to acquire one warrant share for C$0.37~~1.2 Warrants. ~~until April 1, 2025.~~

In connection with the ~~special warrants offering,~~March 2023 Offering, the ~~agents earned a cash commission in the amount~~Company incurred share issuance costs of ~~C$563,968~~$585,765 and issued 2,070,258 compensation options (the “March 2023 Compensation Options”). Each March 2023 Compensation Option is exercisable ~~to acquire~~at an ~~aggregate~~exercise price of C$~~1,879,892~~0.12 ~~units of the Company at C$0.30~~ ~~a unit until April 1, 2024. Each compensation unit consists of~~into one ~~common share~~Unit Share and one ~~warrant. Each warrant entitles the holder to acquire one warrant share for C$0.37~~ ~~until April 1, 2024.~~
~~In April 2022, the Company issued~~ ~~1,315,856~~ ~~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~~ ~~10,416,667~~ ~~units to Teck Resources Limited in consideration towards the purchase of the Pend Oreille Processing Plant at C$0.245~~ ~~per unit. Each unit consists of one common share and one warrant. Each warrant entitles the holder to acquire one warrant share for C$0.37~~ ~~until May 13, 2025.~~
~~In June 2022, the Company issued~~ ~~1,218,000~~ units to contractors for bonuses accrued during the three months ended March 31, 2022. Each unit consists of one common share and one warrant. Each warrant entitles the holder to acquire one warrant share for C$~~0.37~~ ~~until April 1, 2025.~~
~~In July 2022, the Company issued~~ ~~1,975,482~~ ~~common shares in connection with its election to satisfy interest payments under the outstanding convertible debentures for the three months ended June 30, 2022.~~
17
~~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)~~Warrant Share.

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 ~~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
The fair value of the warrant liabilities ~~as a result~~related 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 placements~~period were ~~revalued as at September 30, 2022, issuance date in 2022, and December 31, 2021~~estimated using the Binomial model ~~and~~to determine the fair value using the following ~~assumptions:~~assumptions as at March 31, 2023 and December 31, 2022:
Schedule of Estimated Using the Binomial Model to Determine the Fair Value of Warrant Liabilities
April 2022 special warrants issuance September 30,
2022 April 1,
2022
March 31,
2023

December 31,
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
March 31,
2023

December 31,
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
March 31,
2023

December 31,
2022

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
March 31,
2023

December 31,
2022

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
March 31,
2023

December 31,
2022

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
March 31,
2023

December 31,
2022

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
March 31,
2023

December 31,
2022

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 )
~~Three~~Outstanding 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$0.59~~ ~~per common share and extended the expiry date to~~ ~~December 31, 2025~~ ~~for~~ ~~11,660,000~~ ~~warrants.~~
August 2019 issuance (ii) September 30,
2022 December 31,
2021
Expected life 1,188 days 1,461 days
Volatility 120 % 100 %
Risk free interest rate 3.72 % 1.02 %
Dividend yield 0 % 0 %
Share price (C$) $ 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$0.59~~ ~~per common share and extended the expiry date to~~ ~~December 31, 2025~~ ~~for~~ ~~17,920,000~~ ~~warrants. The terms of the remaining~~ ~~2,752,900~~ ~~warrants remain unchanged.~~
~~Warrants~~
Schedule of Warrant Activity
Weighted Weighted
average average
Number of exercise price grant date
warrants (C$) 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

During the three months ended March 31, 2023, 10,416,667 May 2022 Teck warrants were exercised. During the ~~nine~~three months ended ~~September 30,~~March 31, 2022, 239,284 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)~~
At ~~September 30, 2022,~~March 31, 2023, the following warrants were outstanding:
Schedule of Warrants Outstanding Exercise Price
Number of
Exercise Number of warrants Exercise Number of
Number of
warrants

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
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 2023 special warrants issuance
March 31,
2023

Grant
Date

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 $ -

Compensation options

At ~~September 30, 2022,~~March 31, 2023, the following ~~compensation~~broker options were outstanding:
Schedule of Compensation Options
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, $68,078~~ ~~and $264,435~~ ~~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 $111,971 using the Black-Scholes valuation model with the following underlying assumptions:
Schedule of Estimated Using Black-Scholes Valuation Model for Fair Value of Broker Options
Grant Date
Risk free
interest rate
Dividend yield Volatility Stock price Weighted average life
August 2020 0.31 % 0 % 100 % C$0.35 3 years
February 2021 0.26 % 0 % 100 % C$0.40 3 years
April 2022 2.34 % 0 % 100 % C$0.30 2 years
Grant Date Risk free interest rate Dividend yield Volatility Stock price Weighted average life
March 2023 3.4 % 0 % 120 % C$0.11 3 years

Schedule of Broker Exercise Prices
Exercise Number of Fair value Exercise Number of
Grant date
Fair value

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
20
~~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)~~
Stock options

The following table summarizes the stock option activity during the ~~nine~~three months ended ~~September 30, 2022:~~March 31, 2023:
Schedule of Stock Options
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,~~ ~~1,037,977~~ ~~stock options were issued to an officer of the Company, of which~~ ~~273,271~~ ~~stock options vested immediately and the balance of~~ ~~764,706~~ ~~stock options vested on December 31, 2021. These options have a~~ 5~~-year life and are exercisable at C$0.335~~ ~~per common share. The grant date fair value of the options was estimated at $204,213. The vesting of these options resulted in stock-based compensation of $nil for the three and nine months ended September 30, 2022, compared to $43,941~~ ~~and $160,750~~ 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,~~ ~~300,000~~ ~~stock options were issued to an employee of the Company, of which~~ ~~150,000~~ ~~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~~ 5~~-year life and are exercisable at C$0.15~~ ~~per common share. The grant fair value of the options was estimated at $28,930. The vesting of these options resulted in stock-based compensation of $14,465~~ ~~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).~~
~~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:~~
~~Schedule of Estimated Using Black-Scholes Valuation Model for Fair value of Stock Options~~

Risk free
interest rate
Dividend yield Volatility Stock price
Weighted
average life

(i) 0.64 % 0 % 100 % C$0.34 5 years
~~(ii)~~ ~~On August 24, 2022,~~ ~~300,000~~ ~~stock options were issued to an employee of the Company, of which~~ ~~150,000~~ ~~stock options vested immediately and the balance of~~ ~~150,000~~ ~~stock options will vest equally over two years on the anniversary date of issuance. These options have a~~ 5~~-year life and are exercisable at C$0.15~~ ~~per common share. The grant date fair value of the options was estimated at $28,930. The vesting of these options resulted in stock-based compensation of $14,465~~ ~~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:~~

Risk free
interest rate
Dividend yield Volatility Stock price
Weighted
average life

(ii) 3.27 % 0 % 120 % C$0.15 5 years
2021

The following table reflects the actual stock options issued and outstanding as of ~~September 30, 2022:~~March 31, 2023:
Schedule of Actual Stock Options Issued and Outstanding
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 0.50 200,000 200,000 52,909
0.60 1.57 1,575,000 1,575,000 435,069
0.55 2.06 5,957,659 2,978,830 1,536,764
0.335 2.89 1,037,977 1,037,977 204,213
0.15 0.65 150,000 150,000 14,465
0.15 4.65 400,000 200,000 37,387
0.50 0.5 235,000 235,000 46,277 9,320,636 6,141,807 $ 2,280,807
0.60 1.25 200,000 200,000 52,909
0.60 2.35 1,575,000 1,575,000 435,069
0.55 2.81 5,957,659 1,489,415 1,536,764
0.335 3.64 1,037,977 1,037,977 204,213
0.15 4.90 300,000 150,000 28,930
9,305,636 4,687,392 $ 2,304,162

10. ~~Income per Share~~
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.
~~Schedule of Income Per Share~~

Three Months
ended
September 30,
2022

Three Months
ended
September 30,
2021

Nine Months
ended
September 30,
2022

Nine Months
ended
September 30,
2021

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
21
~~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)~~
~~11.~~Restricted Share Units

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.

The following table summarizes the RSU activity during the ~~nine~~three months ended ~~September 30, 2022:~~March 31, 2023:
Schedule of Restricted Share Units
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~~ ~~400,000~~ ~~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 $30,380~~ ~~and $57,495~~ 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~~ ~~200,000~~ ~~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 $10,452~~ ~~and $19,796~~ 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~~ ~~168,000~~ ~~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 $12,612~~ ~~and $24,255~~ 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 500,000 RSUs to a consultant of the Company, vested immediately. The vesting of these RSUs resulted in stock-based compensation of $122,249 for the year ended December 31, 2022, which is included in operation and administration expenses on the consolidated statements of income (loss) and comprehensive income (loss).
(ii) Includes 1,507,580 RSU’s which had vested as of March 31, 2023 but had not been converted to Common Shares.
~~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~~ ~~220,990~~ ~~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 $nil~~ ~~and $58,740~~ 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~~ ~~735,383~~ ~~RSUs to a consultant of the Company.~~ ~~245,128~~ ~~RSUs vested immediately with the remaining RSUs vesting in one twelfth increments per month. During the year ended 2021, a total of~~ ~~490,258~~ ~~RSUs vested, and in July 2021, the consultant forfeited the remaining~~ ~~245,125~~ ~~unvested RSUs, resulting in a reversal of share-based compensation of $64,870. The vesting of these RSUs resulted in stock-based compensation of $nil~~ ~~and $265,101~~ ~~for the nine months ended September 30, 2022 and 2021, respectively.~~
~~(vi) On July 1, 2021, the Company granted~~ ~~17,823~~ ~~RSUs to a consultant of the Company, vesting immediately. The vesting of these RSUs resulted in stock-based compensation of $nil~~ ~~and $4,026~~ ~~for the nine months ended September 30, 2022 and 2021, respectively.~~
~~(vii) On August 5, 2021, the Company granted~~ ~~595,228~~ ~~RSUs to consultants of the Company, vesting immediately. The vesting of these RSUs resulted in stock-based compensation of $nil~~ ~~and $100,022~~ ~~for the nine months ended September 30, 2022 and 2021, respectively.~~
~~(viii) On January 10, 2022, the Company granted~~ ~~500,000~~ ~~RSUs to a consultant of the Company, vesting immediately. The vesting of these RSUs resulted in stock-based compensation of $122,249~~ 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~~ ~~76,750~~ ~~RSUs to certain consultants of the Company, vesting immediately. The vesting of these RSUs resulted in stock-based compensation of $16,800~~ 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~~ ~~15,000~~ ~~RSUs to a consultant of the Company, vesting immediately. The vesting of these RSUs resulted in stock-based compensation of $2,328~~ 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~~ ~~33,000~~ ~~RSUs to two consultants of the Company, vesting immediately. The vesting of these RSUs resulted in stock-based compensation of $2,889~~ 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).

~~12.~~11. Deferred 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 ~~common share~~Common 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)~~
The following table summarizes the DSU activity during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~2022:
Schedule of Deferred Share Units
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 2,710,000 $ 1.00

(i) ~~On April 21, 2020, the Company granted~~ ~~7,500,000~~ ~~DSUs. The DSUs vest in one fourth increments upon each anniversary of the grant date and expire in~~ 5 ~~years. On July 1, 2022 the Company granted~~ ~~210,000~~ ~~DSU’s, these DSU’s vest after~~ 12 ~~months of the issuance date. During the nine months ended September 30, 2022, and 2021 the Company recognized $493,060~~ ~~and $430,964~~, 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 $363,648~~.
~~(ii)~~ On March 31, 2022, the Board approved the early vesting of 625,000 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~~ ~~375,000~~ ~~units in the Company’s April 2022 special warrant issuance at C$0.30~~ ~~per unit, with the balance of the redeemed amount payable in cash after applicable withholding tax deductions. The DSU’s were therefore all accelerated to vest.~~

~~13.~~12. Commitments and Contingencies

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 ~~acid 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.

24
~~Bunker Hill Mining Corp.~~
~~Notes~~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 ~~the Condensed Interim Consolidated Financial Statements (Unaudited)~~making monthly payments of $10,000
~~Three and Nine Months Ended September 30, 2022~~
~~(Expressed in United States Dollars)~~ through February 2026.

13. ~~14.~~Related party transactions

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

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

At ~~September 30,~~March 31, 2023 and March 31, 2022, ~~and September 30, 2021,~~ $~~15,000~~248,533 and $~~102,235~~825,776, 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 Events
~~In 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.~~
2523

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 ~~company’s~~Company’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 ~~company~~Company to change such plans and objectives or fail to successfully implement such plans or achieve such objectives, or cause such present and future operations to fail to produce revenues, income or profits. Therefore, the reader is advised that the following discussion should be considered in light of the discussion of risks and other factors contained in this report and in the ~~company’s~~Company’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 Impact~~
Following 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.

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.

24
~~Current Operations~~
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”). 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.

26
In early 2020, a new management team comprised of former executives from Barrick Gold Corp. assumed leadership of the Company. Since that time, the Company has conducted multiple exploration campaigns, published multiple economic studies, 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 Mine~~
The Company purchased the Bunker Hill Mine on January 7, 2022 for $5,400,000 in ~~January 2022, as described below.~~
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 ~~terms~~most recent of these agreements, the ~~November 20, 2020 amended agreement (the “Amended Agreement”), a purchase price of $7,700,000~~Company 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 Agreement~~
Bunker Hill entered into a Settlement Agreement and Order on Consent with the EPA on May 15, 2018. This agreement limits the Company’s exposure to the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) liability for past environmental damage to the mine site and surrounding area to obligations that include:
● ~~Payment of $20,000,000 for historical water treatment cost recovery for amounts paid by the EPA from 1995 to 2017~~
● Payment for water treatment services provided by the EPA at the Central Treatment Plant (“CTP”) in Kellogg, Idaho until such time that Bunker Hill either purchases or leases the CTP or builds a separate EPA-approved water treatment facility
● ~~Conducting a work program as described in the Ongoing Environmental Activities section of this study~~
27

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 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 Package~~project 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). In~~Bunker Hill Mine, setting the ~~event of conversion, the RCD will cease to exist and the Company will grant~~stage 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.
28
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 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.

In ~~light~~January 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 availability~~purchase 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 with~~Bunker 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 quantity~~announcement of ~~metal delivered under the Stream, if advanced, will increase by 10% relative to the amounts noted above.~~
~~Process Plant~~
~~On January 25, 2022, the Company announced that it had entered into a non-binding Memorandum of Understanding (“MOU”) with Teck Resources Limited (“Teck”)~~an MOU for the purchase of ~~a comprehensive package of equipment and parts inventory from its~~the Pend Oreille ~~site (the “Process Plant”) in eastern Washington State, approximately 145 miles~~process 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 satisfy~~Resources Limited, the ~~remaining purchase price for~~Company embarked on a program of activities with the ~~Process Plant by way~~goal of ~~an equity issuance~~achieving a restart of the ~~Company. Teck will receive 10,416,667 units~~Mine. 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 upgrade~~
~~On 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 purchase~~demobilization of the ~~mill is~~process 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, 2022~~
~~At September 30, 2022, the Company paid $100,000 towards the purchase as a non-refundable deposit.~~
29
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 ~~and nine~~ months ended ~~September 30, 2022~~March 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.

Comparison of the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~

Revenue

During the ~~nine~~three months ended ~~September 30,~~March 31, 2023, and 2022, ~~and 2021,~~ respectively, the Company generated no revenue.

Expenses

During the three ~~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. ~~Compared~~
25
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 ~~and nine~~ months ended ~~September 30, 2021, the Company reported total operating expenses of $2,464,945~~March 31, 2022.
Net Income and ~~$12,384,474, respectively.~~Comprehensive Income

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 ~~total operating expenses is primarily~~the 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 when~~the 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 periods~~months 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).

The ~~significant increase~~Company 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.

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 ~~$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.
30

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.
~~Debt and Equity Financings, EPA obligations, and Mine Purchase~~

As 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.
Current Assets and Total Assets

As of ~~September 30, 2022, the Company’s balance sheet reflects that~~March 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, ~~2021~~2022 – 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, ~~2021~~2022 – an increase of ~~$29,514,792.~~$3,999,906. The increase in current assets was ~~primarily~~ due to an increase in ~~restricted~~unrestricted cash as a result of the proceeds from the ~~convertible debentures~~non-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
Current Liabilities and Total Liabilities

As of ~~September 30, 2022, the Company’s balance sheet reflects that~~March 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 ~~increased~~decreased as a result of the ~~closing~~revaluations 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.

Working Capital and Shareholders’ Deficit

~~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 ~~negative~~a 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. Working~~2022. The working capital balance increased during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023, primarily due to ~~funding~~the closing of a brokered private placement of special warrants of the Company and proceeds received from ~~debt and equity financings, and~~ the ~~reclassification~~exercise of ~~cost recovery liabilities from current to long-term. Shareholders’ equity increased~~warrants. 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.

Cash Flow

During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, the Company had a net cash ~~decrease~~increase 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 ~~usage~~closing of ~~$9,476,000~~a 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 other~~fund 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, 2021
31
During 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, 2021

Subsequent Events

During 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.
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 ~~sheet~~sheets date thereafter. Assumptions are made and judgment used in applying valuation techniques. These assumptions and judgments include estimating the future volatility of the stock price and expected dividend yield. Such judgments and assumptions are inherently uncertain. Changes in these assumptions affect the fair value estimates.

27
~~Warrants~~
Convertible loans, promissory notes and ~~accrued liabilities~~warrants

Estimating the fair value of derivative warrant liability requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the issuance. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the warrants ~~and conversion feature~~ derivative liability, volatility and dividend yield and making assumptions about them.
32
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.
~~Complex Financing Transactions~~
~~The~~ 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 involve~~used the ~~issuance of certain conversion features embedded in the debt, including options to receive interest payments in the form~~most 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.
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 ~~identification~~conclusion 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 assurance~~were effective as of ~~the effectiveness of the controls and procedures.~~March 31, 2023.

~~Changes in~~ Internal Control Over Financial Reporting

~~Mitigating these significant deficiencies, however, is that, commencing in December~~The management of ~~2021,~~ the Company ~~has replaced certain~~is 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 companies~~principles generally accepted in the ~~same industry. As~~United States of America. The management of the ~~work product~~Company 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 staff~~financial 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 ~~reflected~~recorded as necessary to permit preparation of financial statements in ~~Company transactions more fully~~accordance 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 part~~Management, 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 engaged~~control 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 firm~~control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to ~~assist~~their costs. Because of the inherent limitations in ~~developing Disclosure Controls~~all control systems, no evaluation of controls can provide absolute assurance that all control issues and ~~Procedures~~instances 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. The~~that 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.
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 ~~intends~~in 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 dependent~~ensure 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 ~~having~~that 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

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 anit amended complaint on April 1, 2022. Placer Mining Corp. and Bunker Hill Mining Corp are named as co-defendants. Bunker Hill ~~responded~~and 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’s~~Crescent 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.

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 ~~are significant risks in investing~~have been no changes to our risk factors as reported in our ~~common shares. Reference is made to~~annual report on Form 10-K for the ~~risks described in our prospectus filed with the SEC on May~~year ended December 31, ~~2022, which is incorporated herein by reference.~~2022.

Item 2. Unregistered Sales of Equity Securities and Use Of Proceeds

Not Applicable.
29
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.

34
The following table provides information for the three months ended ~~September 30, 2022.~~March 31, 2023.

Mine 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) 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.

Item 5. Other Information

None.

Item 6. Exhibits
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

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.
~~Date: November 4, 2022~~
Date: May 12, 2023
BUNKER HILL MINING CORP.

By /s/ Sam Ash
Sam Ash, Chief Executive Officer and President
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.
~~Date: November 4, 2022~~

Date: May 12, 2023
BUNKER HILL MINING CORP.

By /s/ David Wiens
David Wiens, Chief Financial Officer and Corporate Secretary

31


	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, $0.000001 par value, 10,000,000 preferred shares authorized; Nil preferred shares issued and outstanding (note 9)		-			-
Common shares, $0.000001 par value, 1,500,000,000 common shares authorized; 219,649,187 and 164,435,442 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, $0.000001 par value, 10,000,000 preferred shares authorized; Nil preferred shares issued and outstanding (note 9)		-			-
Common shares, $0.000001 par value, 1,500,000,000 common shares authorized; 256,099,174 and 229,501,661 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


	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

	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		68,656			-
Interest expense on lease liability (note 8)		3,611			1,317
Financing costs		(384,984	)
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		240,000			-
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			-

	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	)

	-	Cash consideration given, comprised of $500,000 ~~nonrefundable~~non-refundable deposit remitted on January 7, 2022 and $231,000 sales tax remitted on May 13, 2022, a total of $731,000 cash remitted.
	-	Value of common shares issued on May 13, 2022 at the market price of that day, a value of $1,970,264.
	-	Fair value of the warrants issued together with the inputs, as determined by a binomial model, resulted in a fair value of $1,273,032. 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.


	September 30, 2022
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

	-	Contract purchase price of $7,700,000 less $300,000 credit by seller for prior maintenance payments.
	-	Net present value of water treatment cost recovery liability assumed of $6,402,425.
	-	Capitalized legal and closing costs of $444,785.
	-	As a result, the total value of the mine at the time of purchase was determined to be $14,247,210.


	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

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


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 (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	%

	(1)	The ~~CD’s carries~~CD1 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 ~~probabilities~~valuation 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 and~~RCD are applicable to the ~~stream~~scenario where the Stream is not ~~being advanced~~advanced. 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 advanced

Instrument Description	Issuance date CD1 and RCD		Issuance date CD2		March 31, 2022		June 30, 2022		September 30, 2022		March 31, 2023		December 31, 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

	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~~ 1,500,000,000 ~~common shares, as approved in the July 29, 2022 annual meeting of shareholders,~~Common Shares with a par value of $0.000001 per ~~common share;~~Common Share; and
	●	10,000,000 preferred shares with a par value of $0.000001 per preferred share

April 2022 special warrants issuance	September 30, 2022			April 1, 2022			March 31, 2023			December 31, 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			March 31, 2023			December 31, 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							March 31, 2023			December 31, 2022
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	)

August 2020 issuance	March 31, 2023			December 31, 2022
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	)

June 2019 issuance	March 31, 2023			December 31, 2022
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	)

August 2019 issuance	March 31, 2023			December 31, 2022
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	)

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)

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)

				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

					Number of
	Exercise		Number of		warrants		Exercise		Number of		Number of warrants
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	March 31, 2023			Grant Date
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		$	-