Bunker Hill Mine Purchase And Amended Agreement With EPA

TORONTO - Bunker Hill Mining Corp. reported achievement of its key short-term objectives, including the execution of a non-binding term sheet outlining a $50 million non-dilutive project finance package, the purchase of the Bunker Hill Mine, and the execution of a settlement agreement amendment with the US Environmental Protection Agency (“US EPA” or “EPA”).

Sam Ash, CEO, stated, “We are exceedingly pleased to announce the accomplishment of our key objectives, most notably a proposed $50 million project finance package that we expect to provide the majority of our funding requirements in a non-dilutive manner. Together with the purchase of the mine and an amended settlement agreement with the EPA, a rapid restart of the prolific Bunker Hill Mine is now clearly within sight. This will provide enormous social and economic benefits to northern Idaho, significant returns for our shareholders, and allow us to honor our commitments to the EPA. We look forward to next steps, including advancement to a formal construction decision and the review of our revised TSX-V Exchange listing application”.

The Company has executed a non-binding term sheet with SRSR outlining a $50 million project finance package that the Company expects to fulfill the majority of its funding requirements to restart the mine and reach commercial production in mid-2023. The package consists of an $8 million Royalty Convertible Debenture, a $5 million Convertible Debenture, and a multi-metals Stream of up to $37 million.

Subject to settlement of definitive documentation with SRSR, the Company expects that $8 million will be advanced under the Royalty Convertible Debenture in January 2022. These proceeds will fund the purchase of the Bunker Hill Mine and near-term working capital requirements, including a $2 million payment to the EPA in January 2022. The Royalty Convertible Debenture will initially bear interest at an annual rate of 9.0%, payable in cash or shares at the Company’s option, until such time that SRSR elects to convert it into a Royalty, with such conversion option expiring at the earlier of advancement of the Stream or 18 months. In the event of conversion, the Royalty Convertible Debenture 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. A 1.35% rate will apply to claims outside of these areas. The Royalty Convertible Debenture will initially be secured by a share pledge of the Company’s operating subsidiary, until such time that a full security package is put in place. In the event of non-conversion, the principal of the Royalty Convertible Debenture will be repayable in cash.

Subject to settlement of definitive documentation with SRSR, the Company expects that an aggregate amount of $5 million will be advanced under the Convertible Debenture, also in January 2022. These proceeds will fund capital expenditures and working capital requirements in Q1 2022. The Convertible Debenture will bear interest at an annual rate of 7.5%, payable in cash or shares at the Company’s option, and a maturity of 18 months from the closing of the Royalty Convertible Debenture. Until the closing of the Stream, the Convertible Debenture is convertible into shares of the Company at a share price of CAD 0.30 per share. Alternatively, SRSR may elect to retire the Convertible Debenture with the cash proceeds of the Stream. The Company may elect to re-pay the Convertible Debenture early; if SRSR elects not to exercise its conversion option at such time, a minimum of 12 months of interest would apply.

SRSR has concluded its initial due diligence process, including a site visit to the Bunker Hill Mine and a detailed project review by third party engineering and geological consultants, and has obtained Investment Committee approval to fund the $8 million Royalty Convertible Debenture and $5 million Convertible Debenture.

Subject to SRSR internal approvals, further technical and other diligence (including confirmation of full project funding by an independent engineer appointed by SRSR), and satisfactory definitive documentation, the Company expects to close the Stream concurrent with a formal construction decision being made by early Q2 2022. A minimum of $27 million and a maximum of $37 million (the “Stream Amount”) will be made available under the Stream, at the Company’s option, once the conditions for availability of the Stream have been satisfied. Assuming the maximum funding of $37 million is drawn, 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. Thereafter, the Stream would apply to 2% of payable metals sold. If the Company elects to draw less than $37 million 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. The Company will be permitted to incur additional indebtedness of $15 million and a cost over-run facility of $13 million from other financing counterparts. losing of the Royalty Convertible Debenture, Convertible Debenture, and Stream are conditional on the conclusion of a number of matters, including finalization of definitive documentation, regulatory and stock exchange approvals, and closing of the purchase of the Bunker Hill Mine.

With the execution of the EPA settlement agreement amendment and the expected receipt of $8 million proceeds from the Royalty Convertible Debenture, the Company has exercised its option to purchase the Bunker Hill Mine from Placer Mining Corp. and a definitive agreement has been signed by both parties. The terms of the purchase were modified to $5.4 million in cash, from $3.4 million of cash and $2.0 million of common shares in the Company. Purchase of the mine consists of over 400 patented mining claims and 5,800 acres of private land, an ideal scenario with respect to permitting considerations. The extensive in-place infrastructure and significant mineral potential included in the acquisition positions Bunker Hill for a rapid restart, and a return to free cash flow generation with exceptional growth potential in can be considered the pre-eminent silver mining district in the world. Closing of the transaction is expected in January 2022, concurrent with funding of the Royalty Convertible Debenture, approval of the transaction by Placer Mining Corp. shareholders, and satisfaction of other closing conditions.

The amended Settlement Agreement (the “Amendment”) between the Company, Idaho Department of Environmental Quality, US Department of Justice and US EPA modifies the payment schedule and payment terms for recovery of historical environmental response costs at Bunker Hill Mine by US EPA. A total of $19 million remains to be paid by the Company. The new payment schedule includes a $2 million payment to US EPA within 30 days of execution of this amendment. The remaining $17 million will be annually in $3,000,000 amounts until November 1, 2029. $2,000,000 plus accrued in interest.