Notes
to Condensed Interim Consolidated Financial Statements
Three
Months Ended March 31, 2021
(Expressed
in United States Dollars)
Unaudited
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. (formerly American Zinc Corp.), an Idaho corporation created to facilitate the work being conducted
at the Bunker Hill Mine in 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.
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 $60,251,064 and further losses are anticipated in the development
of its business. The Company does not have sufficient working capital needed to meet its current fiscal obligations and commitments.
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
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 and debt
financing. These 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 as a going concern.
The
ability of the Company to emerge from the exploration stage is dependent upon, among other things, obtaining additional financing
to continue operations, explore and develop the mineral properties and the discovery, development, and sale of reserves.
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 (“COVID19”).
The Company cannot accurately predict the impact COVID19 will 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.
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
Months Ended March 31, 2021
(Expressed
in United States Dollars)
Unaudited
2.
Basis of presentation
The
accompanying unaudited condensed interim consolidated financial statements 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/T, which contains the annual audited consolidated
financial statements and notes thereto, together with the Management’s Discussion and Analysis, for the six months ended
December 31, 2020. The interim results for the period ended March 31, 2021 are not necessarily indicative of the results for the
full fiscal year. The unaudited interim condensed consolidated financial statements are presented in USD, which is the functional
currency.
3.
Equipment
Equipment
consists of the following:
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
Equipment
|
|
$
|
509,279
|
|
|
$
|
509,279
|
|
|
|
|
|
509,279
|
|
|
|
509,279
|
|
|
Less accumulated depreciation
|
|
|
(103,382
|
)
|
|
|
(73,552
|
)
|
|
Equipment, net
|
|
$
|
405,897
|
|
|
$
|
435,727
|
|
The
total depreciation expense during the three months ended March 31, 2021 was $29,830 (three months ended March 31, 2020 - $2,281).
4.
Right-of-use asset
Right-of-use
asset consists of the following:
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
Office lease
|
|
$
|
319,133
|
|
|
$
|
319,133
|
|
|
Less accumulated depreciation
|
|
|
(186,997
|
)
|
|
|
(160,402
|
)
|
|
Right-of-use asset, net
|
|
$
|
132,136
|
|
|
$
|
158,731
|
|
The
total depreciation expense during the three months ended March 31, 2021 was $26,595 (three months ended March 31, 2020 - $25,932).
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
Months Ended March 31, 2021
(Expressed
in United States Dollars)
Unaudited
5.
Mining interests
Bunker
Hill Mine Complex
On
November 27, 2016, the Company entered into a non-binding letter of intent with Placer Mining Corp. (“Placer Mining”),
which letter of intent was further amended on March 29, 2017, to acquire the Bunker Hill Mine in Idaho and its associated milling
facility located in Kellogg, Idaho, in the Coeur d’Alene Basin (as amended, the “Letter of Intent”). Pursuant
to the terms and conditions of the Letter of Intent, the acquisition, which was subject to due diligence, would include all mining
claims, surface rights, fee parcels, mineral interests, existing infrastructure, machinery and buildings at the Kellogg Tunnel
portal in Milo Gulch, or anywhere underground at the Bunker Hill Mine Complex. The acquisition would also include all current
and historic data relating to the Bunker Hill Mine Complex, such as drill logs, reports, maps, and similar information located
at the mine site or any other location.
During
the year ended June 30, 2017, the Company made payments totaling $300,000 as part of this Letter of Intent. These amounts were
initially capitalized and subsequently written off during fiscal 2018 and were included in exploration expenses.
On
August 28, 2017, the Company announced that it signed a definitive agreement (the “Agreement”) for the lease and option
to purchase the Bunker Hill Mine assets (the “Bunker Assets”).
Under
the terms of the Agreement, the Company was required to make a $1,000,000 bonus payment to Placer Mining no later than October
31, 2017, which payment was made, along with two additional $500,000 bonus payments in December 2017. The 24month lease commenced
November 1, 2017. During the term of the lease, the Company was to make $100,000 monthly mining lease payments, paid quarterly.
The
Company had an option to purchase the Bunker Assets at any time before the end of the lease and any extension for a purchase price
of $45,000,000 with purchase price payments to be made over a ten-year period to Placer Mining. Under the terms of the agreement,
there is a 3% net smelter return royalty (“NSR”) on sales during the lease and a 1.5% NSR on the sales after the purchase
option is exercised, which post-acquisition NSR is capped at $60,000,000.
On
October 2, 2018, the Company announced that it was in default of the Agreement. The default arose as a result of missed lease
and operating cost payments, totaling $400,000, which were due at the end of September and on October 1, 2018. As per the Agreement,
the Company had 15 days, from the date notice of default was provided (September 28, 2018), to remediate the default by making
the outstanding payment. While management worked with urgency to resolve this matter, management was ultimately unsuccessful in
remedying the default, resulting in the Agreement being terminated.
On
November 13, 2018, the Company announced that it was successful in renewing the Agreement, effectively with the original Agreement
intact, except that monthly payments were reduced to $60,000 per month for 12 months, with the accumulated reduction in payments
of $140,000 per month (“deferred payments”) being accrued. As at March 31, 2021, the Company has accrued for a total
of $nil (December 31, 2020 - $nil), which is included in accounts payable. These deferred payments will be waived should
the Company choose to exercise its option.
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
Months Ended March 31, 2021
(Expressed
in United States Dollars)
Unaudited
5. Mining
interests (continued)
Bunker
Hill Mine Complex (continued)
On
November 1, 2019, the Agreement was amended (the “Amended Agreement”). The key terms of the Amended Agreement are
as follows:
|
●
|
The
lease period was extended for an additional period of nine months to August 1, 2020,
with the option to extend for a further six months based upon payment of a one-time $60,000
extension fee (extended);
|
|
●
|
The
Company will make monthly care and maintenance payments to Placer Mining of $60,000 until
exercising the option to purchase; and
|
|
●
|
The
purchase price is set at $11,000,000 for 100% of the Bunker Assets to be paid with $6,200,000
in cash, and $4,800,000 in common shares. The purchase price also includes the negotiable
United States Environmental Protection Agency (“EPA”) costs of $20,000,000.
The Amended Agreement provides for the elimination of all royalty payments that were
to be paid to the mine owner. Upon signing the Amended Agreement, the Company paid a
onetime, nonrefundable cash payment of $300,000 to the mine owner. This payment will
be applied to the purchase price upon execution of the purchase option. In the event
the Company elects not to exercise the purchase option, the payment shall be treated
as an additional care and maintenance payment.
|
On
July 27, 2020, the Company extended the lease with Placer Mining for a further 18 months for a $150,000 extension fee. This extension
expires on August 1, 2022.
On
November 20, 2020, the Company signed a further amendment to the Amended Agreement. Under the terms of this amendment:
|
●
|
The
Company will continue to make monthly care and maintenance payments to Placer Mining
of $60,000 until exercising the option to purchase;
|
|
●
|
The
purchase price was reduced to $7,700,000 in cash, with $5,700,000 payable in cash (with
an aggregate of $300,000 to be credited toward the purchase price of the Bunker Assets
as having been previously paid by the Company and an aggregate of $5,400,000 payable
in cash outstanding) and $2,000,000 in common shares. The reference price for the payment
in common shares will be based on the common share price of the last equity raise before
the option is exercised;
|
|
●
|
The
Company’s contingent obligation to settle $1,787,300 of accrued payments due to
Placer Mining has been waived. As a result, the Company recorded a gain on settlement
of accounts payable of $1,787,300 during the six months ended December 31, 2020; and
|
|
●
|
The
Company is to make an advance payment of $2,000,000 (paid) to Placer Mining which shall
be credited toward the purchase price if and when the Company elects to exercise its
purchase right. In the event that the Company irrevocably elects not to exercise its
purchase right, the advance payment of $2,000,000 will be repaid to the Company within
twelve months from the date of such election. The amount has been recorded as a long
term deposit. This payment had the effect of decreasing the remaining amount payable
to purchase the Bunker Assets to an aggregate of $3,400,000 payable in cash and $2,000,000
in Common Shares of the Company.
|
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
Months Ended March 31, 2021
(Expressed
in United States Dollars)
Unaudited
5. Mining
interests (continued)
Bunker
Hill Mine Complex (continued)
In
addition to the payments to Placer Mining, and pursuant to an agreement with the EPA whereby for so long as Bunker leases, owns
and/or occupies the Bunker Hill Mine, the Company will make payments to the EPA on behalf of the current owner in satisfaction
of the EPA’s claim for cost recovery. These payments, if all are made, will total $20,000,000. The agreement calls for payments
starting with $1,000,000 30 days after a fully ratified agreement was signed followed by a payment schedule detailed below:
|
Date
|
|
Amount
|
|
|
Action
|
|
Within 30 days of the effective date
|
|
$
|
1,000,000
|
|
|
Paid
|
|
November 1, 2018
|
|
$
|
2,000,000
|
|
|
Not paid
|
|
November 1, 2019
|
|
$
|
3,000,000
|
|
|
Not paid
|
|
November 1, 2020
|
|
$
|
3,000,000
|
|
|
Not paid
|
|
November 1, 2021
|
|
$
|
3,000,000
|
|
|
|
|
November 1, 2022
|
|
$
|
3,000,000
|
|
|
|
|
November 1, 2023
|
|
$
|
3,000,000
|
|
|
|
|
November 1, 2024
|
|
$
|
2,000,000
|
|
|
|
In
addition to these cost recovery payments, the Company is to make semi-annual payments of $480,000 on June 1 and December 1 of
each year, to cover the EPA’s costs of operating and maintaining the water treatment facility that treats the water being
discharged from the Bunker Hill Mine. The Company also has received invoices from the EPA for additional water treatment charges
for the periods from December 2017 to October 2019. A total of $2,309,388 was outstanding as at March 31, 2021 (December 31, 2020
- $2,309,388). The Company received the supporting details from the EPA and began the process of reconciling and reviewing these
invoices in September 2020. The unpaid EPA balance is subject to interest at the rate specified for interest on investments of
the EPA Hazardous Substance Superfund. As at March 31, 2021, the interest accrued on the unpaid EPA balance is $210,522 (December
31, 2020 - $162,540).
As
of March 31, 2021, the Company has accrued an estimate for additional water treatment charges based on 2018 and 2019 invoices
received from the EPA, for a total of an additional annual accrual of $640,000. The Company has included all unpaid and accrued
EPA payments and accrued interest in accounts payable and accrued liabilities amounting to $11,506,577 (December 31, 2020 - $11,298,594).
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
Months Ended March 31, 2021
(Expressed
in United States Dollars)
Unaudited
6. Convertible
loan payable
On
June 13, 2018, the Company entered into a loan and warrant agreement with Hummingbird Resources PLC (“Hummingbird”),
an arm’s length investor, for an unsecured convertible loan in the aggregate sum of $1,500,000, bearing interest at 10%
per annum, maturing in one year. Contemporaneously, the Company agreed to issue 229,464 share purchase warrants, entitling the
lender to acquire 229,464 common shares of the Company, at a price of C$8.50 per common share, for two years. Under the terms
of the loan agreement, the lender may, at any time prior to maturity, convert any or all of the principal amount of the loan and
accrued interest thereon, into common shares of the Company at a price per share equal to C$8.50. In the event that a notice of
conversion would result in the lender holding 10% or more of the Company’s issued and outstanding shares, then, in the alternative,
and under certain circumstances, the Company would be required to pay cash to the lender in an amount equal to C$8.50 multiplied
by the number of shares intended to be issued upon conversion. Further, in the event that the lender holds more than 5% of the
issued and outstanding shares of the Company subsequent to the exercise of any of its convertible securities held under this placement,
it shall have the right to appoint one director to the board of the Company. Lastly, among other things, the loan agreement further
provides that for as long as any amount is outstanding under the convertible loan, the investor retains a right of first refusal
on any Company financing or joint venture/strategic partnership/disposal of assets.
In
August 2018, the amount of the Hummingbird convertible loan payable was increased to $2,000,000 from its original $1,500,000 loan,
net of $45,824 of debt issue costs. An additional 116,714 warrants with each warrant exercisable at C$4.50 were issued. Under
the terms of the amended and restated loan agreement, Hummingbird may, at any time prior to maturity, convert any or all of the
principal amount of the loan and accrued interest thereon, into common shares of Bunker as follows: (i) $1,500,000, being the
original principal amount (the “Principal Amount”), may be converted at a price per share equal to C$8.50; (ii) 229,464
common shares may be acquired upon exercise of warrants at a price of C$8.50 per warrant for a period of two years from the date
of issuance; (iii) $500,000, being the additional principal amount (the “Additional Amount”), may be converted at
a price per share equal to C$4.50; and (iv) 116,714 common shares may be acquired upon exercise of warrants at a price of C$4.50
per warrant for a period of two years from the date issuance. In the event that Hummingbird would acquire common shares in excess
of 9.999% through the conversion of the Principal Amount or the Additional Amount, including interest accruing thereon, or on
exercise of the warrants as disclosed herein, the Company shall pay to Hummingbird a cash amount equal to the common shares exercised
in excess of 9.999%, multiplied by the conversion price.
During
the year ended June 30, 2019, Hummingbird agreed to extend the scheduled maturity date of the loan to June 30, 2020. This was
accounted for as a loan extinguishment which resulted in the recording of a net loss on loan extinguishment.
In
June 2019, the Company settled $100,000 of the Additional Amount by issuing 2,660,000 common shares, which resulted in the recording
of a net loss on loan extinguishment.
In
February 2020, the Company settled $300,000 of the Additional Amount by issuing 696,428 common shares, which resulted in the recording
of a net loss on loan extinguishment of $9,407.
In
June 2020, Hummingbird agreed to extend the scheduled maturity date of the loan to July 31, 2020.
In
October 2020, the Company settled the full amount of the outstanding loan by issuing 5,572,980 common shares at a deemed price
of C$0.49 based on the fair value of the shares issued. As a result, the Company recorded a gain on debt settlement.
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
Months Ended March 31, 2021
(Expressed
in United States Dollars)
Unaudited
6. Convertible
loan payable (continued)
The
Company has accounted for the conversion features and warrants in accordance with ASC Topic 815. The conversion features and warrants
are considered derivative financial liabilities as they are convertible into common shares at a conversion price denominated in
a currency other than the Company’s functional currency of the U.S. dollar. The estimated fair value of the conversion features
and warrants was determined on the date of issuance and marked to market at each financial reporting period.
Accretion
expense for the three months ended March 31, 2021 was $nil (three months ended March 31, 2020 - $37,713) based on effective interest
rate of 16% after the loan extension.
Interest
expense for the three months ended March 31, 2021 was $nil (three months ended March 31, 2020 - $43,616). As at March 31, 2021,
the Company has an outstanding interest payable of $nil (December 31, 2020 - $nil).
|
|
|
Amount
|
|
|
|
|
|
|
|
Balance, December 31, 2019
|
|
$
|
1,815,500
|
|
|
Accretion expense
|
|
|
75,093
|
|
|
Loss on loan extinguishment
|
|
|
9,407
|
|
|
Partial extinguishment
|
|
|
(300,000
|
)
|
|
Loan extinguishment
|
|
|
(1,600,000
|
)
|
|
Balance, December 31, 2020 and March 31, 2021
|
|
$
|
-
|
|
7. Promissory
notes payable
(i)
On November 13, 2019, the Company issued a promissory note in the amount of $300,000. The note was unsecured, bore interest of
1% monthly, and is due on demand after 90 days from issuance. In consideration for the loan, the Company issued 400,000 common
share purchase warrants to the lender. Each whole warrant entitles the lender to acquire one common share of the Company at a
price of C$0.80 per share for a period of two years.
On
April 24, 2020, the Company extended the maturity date of the promissory note payable to August 1, 2020. In consideration, the
Company issued 400,000 common share purchase warrants to the lender at an exercise price of C$0.50. The warrants expire on November
13, 2021. This was accounted for as a loan modification.
During
the six months ended December 31, 2020, the Company repaid $110,658 of the promissory note and settled the remaining balance of
$218,281 (C$288,000), which included interest payable of $28,939, in full by issuing 822,857 August 2020 Units (as defined in
note 9).
The
Company has accounted for the warrants in accordance with ASC Topic 815. The warrants are considered derivative financial liabilities
as they are convertible into common shares at a conversion price denominated in a currency other than the Company’s functional
currency of the US dollar. The estimated fair value of the warrants was determined on the date of issuance and marks to market
at each financial reporting period.
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
Months Ended March 31, 2021
(Expressed
in United States Dollars)
Unaudited
7. Promissory
notes payable (continued)
(i)
(continued)
The
fair value of the warrants were estimated using the Binomial model to determine the fair value of the derivative warrant liabilities
using the following assumptions:
|
November 2019 issuance
|
|
December 31, 2020
|
|
|
March 31, 2021
|
|
|
Expected life
|
|
|
317 days
|
|
|
|
227 days
|
|
|
Volatility
|
|
|
100
|
%
|
|
|
100
|
%
|
|
Risk free interest rate
|
|
|
0.64
|
%
|
|
|
0.59
|
%
|
|
Dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
Share price
|
|
$
|
0.41
|
|
|
$
|
0.28
|
|
|
Fair value
|
|
$
|
40,999
|
|
|
$
|
10,688
|
|
|
Change in derivative liability
|
|
|
|
|
|
$
|
30,311
|
|
|
April 2020 issuance
|
|
December 31, 2020
|
|
|
March 31, 2021
|
|
|
Expected life
|
|
|
317 days
|
|
|
|
227 days
|
|
|
Volatility
|
|
|
100
|
%
|
|
|
100
|
%
|
|
Risk free interest rate
|
|
|
0.27
|
%
|
|
|
0.26
|
%
|
|
Dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
Share price
|
|
$
|
0.41
|
|
|
$
|
0.28
|
|
|
Fair value
|
|
$
|
58,373
|
|
|
$
|
20,803
|
|
|
Change in derivative liability
|
|
|
|
|
|
$
|
37,570
|
|
Accretion
expense for the three months ended March 31, 2021 was $nil (three months ended March 31, 2020 - $70,537) based on an effective
interest rate of 11% after the loan extension.
Interest
expense for the three months ended March 31, 2021 was $nil (three months ended March 31, 2020 - $9,000). As at March 31, 2021,
the Company has an outstanding interest payable of $nil (December 31, 2020 - $nil).
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
Months Ended March 31, 2021
(Expressed
in United States Dollars)
Unaudited
8. Lease liability
The
Company has an operating lease for office space that expires in 2022. Below is a summary of the Company’s lease liability
as of March 31, 2021:
|
|
|
Office lease
|
|
|
|
|
|
|
|
Balance, December 31, 2019
|
|
$
|
274,981
|
|
|
Addition
|
|
|
-
|
|
|
Interest expense
|
|
|
22,156
|
|
|
Lease payments
|
|
|
(123,098
|
)
|
|
Foreign exchange loss
|
|
|
2,568
|
|
|
Balance, December 31, 2020
|
|
|
176,607
|
|
|
Addition
|
|
|
-
|
|
|
Interest expense
|
|
|
4,210
|
|
|
Lease payments
|
|
|
(32,000
|
)
|
|
Foreign exchange loss
|
|
|
2,016
|
|
|
Balance, March 31, 2021
|
|
|
150,833
|
|
|
Less: current portion
|
|
|
(119,146
|
)
|
|
Long-term lease liability
|
|
$
|
31,687
|
|
In
addition to the minimum monthly lease payments of C$13,504, the Company is required to make additional monthly payments amounting
to C$12,505 for certain variable costs. The schedule below represents the Company’s obligations under the lease agreement
in Canadian dollars.
|
|
|
Less than 1 year
|
|
|
1-2 years
|
|
|
2-3 years
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base rent
|
|
$
|
162,048
|
|
|
$
|
27,008
|
|
|
$
|
-
|
|
|
$
|
189,056
|
|
|
Additional rent
|
|
|
150,060
|
|
|
|
25,009
|
|
|
|
-
|
|
|
|
175,069
|
|
|
|
|
$
|
312,108
|
|
|
$
|
52,017
|
|
|
$
|
-
|
|
|
$
|
364,125
|
|
The
monthly rental expenses are offset by rental income obtained through a series of short term subleases held by the Company.
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
Months Ended March 31, 2021
(Expressed
in United States Dollars)
Unaudited
9. Capital stock, warrants and stock options
Authorized
The
total authorized capital is as follows:
|
●
|
750,000,000
common shares with a par value of $0.000001 per common share; and
|
|
●
|
10,000,000
preferred shares with a par value of $0.000001 per preferred share
|
Issued
and outstanding
On
February 26, 2020, the Company closed a non-brokered private placement, issuing 2,991,073 common shares of the Company at C$0.56
per common share for gross proceeds of C$1,675,000 ($1,256,854) and incurring financing costs of $95,763, and issuing 239,284
broker warrants. Each broker warrant entitles the holder to acquire one common share at a price of C$0.70 per common share for
a period of two years. The Company also issued 696,428 common shares for $300,000 which was applied to reduce the principal amount
owing under the convertible loan facility (see note 6).
During
the three months ended March 31, 2020, the Company issued 1,403,200 June 2019 Units and 1,912,000 August 2019 Units at a deemed
price of C$0.05 as finder’s fees with a total value of C$165,760 ($125,180) to a shareholder of the Company.
On
May 12, 2020, the Company closed a non-brokered private placement, issuing 107,143 common shares of the Company at C$0.56 per
common share for gross proceeds of C$60,000 ($44,671).
On
August 14, 2020, the Company closed the first tranche of a brokered private placement of units of the Company (the “August
2020 Offering”), issuing 35,212,142 units of the Company (“August 2020 Units”) at C$0.35 per August 2020 Unit
for gross proceeds of $9,301,321 (C$12,324,250). Each August 2020 Unit consisted of one common share of the Company and one common
share purchase warrant of the Company (each, an “August 2020 Warrant”), which entitles the holder to acquire a common
share of the Company at C$0.50 per common share until August 31, 2023. In connection with the first tranche of the August 2020
Offering, the Company incurred share issuance costs of $709,488 (C$849,978) and issued 2,112,729 compensation options (the “August
2020 Compensation Options”). Each August 2020 Compensation Option is exercisable into one August 2020 Unit at an exercise
price of C$0.35 until August 31, 2023.
On
August 25, 2020, the Company closed the second tranche of the August 2020 Offering, issuing 20,866,292 August 2020 Units at C$0.35
per August 2020 Unit for gross proceeds of $5,510,736 (C$7,303,202). In connection with the second tranche of the August 2020
Offering, the Company incurred share issuance costs of $237,668 (C$314,512) and issued 1,127,178 August 2020 Compensation Options.
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
Months Ended March 31, 2021
(Expressed
in United States Dollars)
Unaudited
9. Capital stock, warrants and stock options (continued)
Issued
and outstanding (continued)
In
the August 2020 Offering, the fair value of warrants, which are treated as a liability and fair value accounted for, were greater
than gross proceeds. As a result, a loss of $940,290 has been recognized and $947,156 of total share issue costs were also expensed.
The
Company also issued 2,205,714 August 2020 Units to settle $177,353 of accounts payable, $55,676 of accrued liabilities, $28,300
of interest payable, and $344,185 of promissory notes payable at a deemed price of $0.67 based on the fair value of the units
issued. As a result, the Company recorded a loss on debt settlement of $899,237.
On
October 9, 2020, the Company issued 5,572,980 common shares at a deemed price of C$0.49 based on the fair value of the common
shares issued to settle $1,600,000 of convertible loan payable and $500,000 of interest payable. As a result, the Company recorded
a gain on debt settlement of $23,376.
In
February 2021, the Company closed a non-brokered private placement of units of the Company (the “February 2021 Offering”),
issuing 19,576,360 units 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, an “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 $159,397 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 for a period
of three years.
The
Company also issued 417,720 February 2021 Units to settle $132,000 of 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.
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 condensed interim consolidated statements
of income and comprehensive income as a gain or loss and is estimated using the Binomial model.
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
Months Ended March 31, 2021
(Expressed
in United States Dollars)
Unaudited
9. Capital stock, warrants and stock options (continued)
Issued
and outstanding (continued)
The
fair value of the warrant liabilities related to the various tranches of warrants issued during the period were estimated using
the Binomial model to determine the fair value using the following assumptions on the day of issuance and as at March 31, 2021:
|
February 2021 issuance
|
|
February 9 and 16, 2021
|
|
|
March 31, 2021
|
|
|
Expected life
|
|
|
1826 days
|
|
|
|
1776 days
|
|
|
Volatility
|
|
|
100
|
%
|
|
|
100
|
%
|
|
Risk free interest rate
|
|
|
0.49
|
%
|
|
|
0.83
|
%
|
|
Dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
Share price
|
|
|
$0.27 and $0.29
|
|
|
$
|
0.28
|
|
|
Fair value
|
|
$
|
3,813,103
|
|
|
$
|
3,687,179
|
|
|
Change in derivative liability
|
|
|
|
|
|
$
|
125,924
|
|
The
warrant liabilities as a result of the August 2018, November 2018, June 2019, August 2019, and August 2020 private placements
were revalued as at March 31, 2021 and December 31, 2020 using the Binomial model and the following assumptions:
|
August 2018 issuance
|
|
December 31, 2020
|
|
|
March 31, 2021
|
|
|
Expected life
|
|
|
221 days
|
|
|
|
131 days
|
|
|
Volatility
|
|
|
100
|
%
|
|
|
100
|
%
|
|
Risk free interest rate
|
|
|
1.23
|
%
|
|
|
1.15
|
%
|
|
Dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
Share price
|
|
$
|
0.41
|
|
|
$
|
0.28
|
|
|
Fair value
|
|
$
|
nil
|
|
|
$
|
nil
|
|
|
Change in derivative liability
|
|
|
|
|
|
$
|
nil
|
|
|
November 2018 issuance
|
|
December 31, 2020
|
|
|
March 31, 2021
|
|
|
Expected life
|
|
|
332 days
|
|
|
|
242 days
|
|
|
Volatility
|
|
|
100
|
%
|
|
|
100
|
%
|
|
Risk free interest rate
|
|
|
1.09
|
%
|
|
|
1.15
|
%
|
|
Dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
Share price
|
|
$
|
0.41
|
|
|
$
|
0.28
|
|
|
Fair value
|
|
$
|
52,540
|
|
|
$
|
12,840
|
|
Change in derivative liability
|
|
|
|
|
|
$
|
39,700
|
|
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
Months Ended March 31, 2021
(Expressed
in United States Dollars)
Unaudited
9. Capital stock, warrants and stock options (continued)
Issued
and outstanding (continued)
|
June 2019 issuance (i)
|
|
December 31, 2020
|
|
|
March 31, 2021
|
|
|
Expected life
|
|
|
1826 days
|
|
|
|
1736 days
|
|
|
Volatility
|
|
|
100
|
%
|
|
|
100
|
%
|
|
Risk free interest rate
|
|
|
0.85
|
%
|
|
|
1.15
|
%
|
|
Dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
Share price
|
|
$
|
0.41
|
|
|
$
|
0.28
|
|
|
Fair value
|
|
$
|
3,438,839
|
|
|
$
|
2,098,336
|
|
|
Change in derivative liability
|
|
|
|
|
|
$
|
1,340,503
|
|
(i)
In December 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)
|
|
December 31, 2020
|
|
|
March 31, 2021
|
|
|
Expected life
|
|
|
213-1826 days
|
|
|
|
123-1736 days
|
|
|
Volatility
|
|
|
100
|
%
|
|
|
100
|
%
|
|
Risk free interest rate
|
|
|
0.81
|
%
|
|
|
0.72
|
%
|
|
Dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
Share price
|
|
$
|
0.41
|
|
|
$
|
0.28
|
|
|
Fair value
|
|
$
|
5,922,270
|
|
|
$
|
3,504,971
|
|
|
Change in derivative liability
|
|
|
|
|
|
$
|
2,417,299
|
|
(ii)
In December 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.
|
August 2020 issuance
|
|
December 31, 2020
|
|
|
March 31, 2021
|
|
|
Expected life
|
|
|
973 days
|
|
|
|
883 days
|
|
|
Volatility
|
|
|
100
|
%
|
|
|
100
|
%
|
|
Risk free interest rate
|
|
|
1.31
|
%
|
|
|
0.30
|
%
|
|
Dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
Share price
|
|
$
|
0.41
|
|
|
$
|
0.28
|
|
|
Fair value
|
|
$
|
14,493,215
|
|
|
$
|
8,009,146
|
|
|
Change in derivative liability
|
|
|
|
|
|
$
|
6,484,069
|
|
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
Months Ended March 31, 2021
(Expressed
in United States Dollars)
Unaudited
9. Capital stock, warrants and stock options (continued)
Warrants
|
|
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
|
|
|
|
|
average
|
|
|
average
|
|
|
|
|
Number of
|
|
|
exercise price
|
|
|
grant date
|
|
|
|
|
warrants
|
|
|
(C$)
|
|
|
value ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2019
|
|
|
36,452,284
|
|
|
$
|
0.48
|
|
|
$
|
0.27
|
|
|
Issued
|
|
|
3,554,484
|
|
|
|
0.28
|
|
|
|
0.03
|
|
|
Balance, March 31, 2020
|
|
|
40,006,768
|
|
|
$
|
0.45
|
|
|
$
|
0.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2020
|
|
|
95,777,806
|
|
|
$
|
0.54
|
|
|
$
|
0.08
|
|
|
Issued
|
|
|
19,994,080
|
|
|
|
0.60
|
|
|
|
0.19
|
|
|
Balance, March 31, 2021
|
|
|
115,771,886
|
|
|
$
|
0.55
|
|
|
$
|
0.10
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
Exercise
|
|
|
Number of
|
|
|
warrants
|
|
|
Expiry date
|
|
price (C$)
|
|
|
warrants
|
|
|
exercisable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 1, 2021
|
|
|
0.25
|
|
|
|
2,752,900
|
|
|
|
2,752,900
|
|
|
August 9, 2021
|
|
|
4.50
|
|
|
|
160,408
|
|
|
|
160,408
|
|
|
November 28, 2021
|
|
|
1.00
|
|
|
|
645,866
|
|
|
|
645,866
|
|
|
November 13, 2021
|
|
|
0.80
|
|
|
|
400,000
|
|
|
|
400,000
|
|
|
November 13, 2021
|
|
|
0.50
|
|
|
|
400,000
|
|
|
|
400,000
|
|
|
February 26, 2022
|
|
|
0.70
|
|
|
|
239,284
|
|
|
|
239,284
|
|
|
August 31, 2023
|
|
|
0.50
|
|
|
|
58,284,148
|
|
|
|
58,284,148
|
|
|
December 31, 2025
|
|
|
0.59
|
|
|
|
32,895,200
|
|
|
|
32,895,200
|
|
|
February 9, 2026
|
|
|
0.60
|
|
|
|
17,112,500
|
|
|
|
17,112,500
|
|
|
February 16, 2026
|
|
|
0.60
|
|
|
|
2,881,580
|
|
|
|
2,881,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115,771,886
|
|
|
|
115,771,886
|
|
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
Months Ended March 31, 2021
(Expressed
in United States Dollars)
Unaudited
9. Capital stock, warrants and stock options (continued)
Broker
options
|
|
|
|
|
|
Weighted
|
|
|
|
|
Number of
|
|
|
average
|
|
|
|
|
broker
|
|
|
exercise price
|
|
|
|
|
options
|
|
|
(C$)
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2019 and March 31, 2020
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2020
|
|
|
3,239,907
|
|
|
$
|
0.35
|
|
|
Issued - February 2021 Compensation Options
|
|
|
351,000
|
|
|
|
0.40
|
|
|
Balance, March 31, 2021
|
|
|
3,590,907
|
|
|
$
|
0.35
|
|
(i)
The grant date fair value of the February 2021 Compensation Options were estimated at $68,078 using the Black-Scholes valuation
model with the following underlying assumptions:
|
Risk
free interest rate
|
|
Dividend
yield
|
|
Volatility
|
|
Stock
price
|
|
Weighted
average life
|
|
0.26%
|
|
0%
|
|
100%
|
|
C$0.35
|
|
3
years
|
|
|
|
Exercise
|
|
|
Number of
|
|
|
|
|
|
Expiry date
|
|
price (C$)
|
|
|
broker options
|
|
|
Fair value ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 31, 2023 (i)
|
|
|
0.35
|
|
|
|
3,239,907
|
|
|
|
521,993
|
|
|
February 16, 2024 (ii)
|
|
|
0.40
|
|
|
|
351,000
|
|
|
|
68,078
|
|
|
|
|
|
|
|
|
|
3,590,907
|
|
|
|
590,071
|
|
(i)
Exercisable into one August 2020 Unit
(ii)
Exercisable into one February 2021 Unit
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
Months Ended March 31, 2021
(Expressed
in United States Dollars)
Unaudited
9. Capital stock, warrants and stock options (continued)
Stock
options
The
following table summarizes the stock option activity during the periods ended March 31, 2021:
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
average
|
|
|
|
|
Number of
|
|
|
exercise price
|
|
|
|
|
stock options
|
|
|
(C$)
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2019 and March 31, 2020
|
|
|
1,692,500
|
|
|
$
|
1.27
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2020
|
|
|
8,015,159
|
|
|
$
|
0.62
|
|
|
Granted (iv)
|
|
|
1,037,977
|
|
|
|
0.34
|
|
|
Balance, March 31, 2021
|
|
|
9,053,136
|
|
|
$
|
0.58
|
|
(i)
On October 24, 2019, 1,575,000 stock options were issued to directors and officers of the Company. These options have a 5-year
life and are exercisable at C$0.60 per share. The grant date fair value of the stock options was estimated at $435,069. The vesting
of these options resulted in stock-based compensation of $23,813 for the three months ended March 31, 2021 (three months ended
March 31, 2020 - $85,891), which is included in operation and administration expenses on the condensed interim consolidated
statements of income and comprehensive income.
(ii)
On April 20, 2020, 5,957,659 stock options were issued to certain directors of the Company. Each stock option entitles the holder
to acquire one common share of the Company at an exercise price of C$0.55. The stock options vest in one fourth increments upon
each anniversary of the grant date and expire in 5 years. The grant date fair value of the stock options was estimated at $1,536,764.
The vesting of these options results in stock-based compensation of $197,342 (three months ended March 31, 2020 - $nil), which
is included in operation and administration expenses on the condensed interim consolidated statements of income and comprehensive
income.
(iii)
On September 30, 2020, 200,000 stock options were issued to a consultant. Each stock option entitles the holder to acquire one
common share of the Company at an exercise price of C$0.60. The stock options vest 50% at 6 months and 50% at 12 months from the
grant date and expire in 3 years. The grant date fair value of the options was estimated at $52,909. The vesting of these options
resulted in stock-based compensation of $19,460 for the three months ended March 31, 2021 (three months ended March 31, 2020 -
$nil), which is included in operation and administration expenses on the condensed interim consolidated statements of income
and comprehensive income.
(iv)
On February 19, 2021, 1,037,977 stock options were issued to an officer of the Company, of which 273,271 stock options vest immediately
and the balance of 764,706 stock options shall vest 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 $73,346 for the three months ended March 31, 2021 (three months ended March 31, 2020 -
$nil), which is included in operation and administration expenses on the condensed interim consolidated statements of income
and comprehensive income.
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
Months Ended March 31, 2021
(Expressed
in United States Dollars)
Unaudited
9. Capital stock, warrants and stock options (continued)
Stock
options (continued)
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
|
|
(i)
|
|
1.54%
|
|
0%
|
|
100%
|
|
C$0.50
|
|
5
years
|
|
(ii)
|
|
0.44%
|
|
0%
|
|
100%
|
|
C$0.50
|
|
5
years
|
|
(iii)
|
|
0.25%
|
|
0%
|
|
100%
|
|
C$0.58
|
|
3
years
|
|
(iv)
|
|
0.64%
|
|
0%
|
|
100%
|
|
C$0.34
|
|
5
years
|
The
following table reflects the actual stock options issued and outstanding as of March 31, 2021:
|
|
|
|
Weighted average
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
remaining
|
|
|
Number of
|
|
|
options
|
|
|
|
|
|
Exercise
|
|
|
contractual
|
|
|
options
|
|
|
vested
|
|
|
Grant date
|
|
|
price (C$)
|
|
|
life (years)
|
|
|
outstanding
|
|
|
(exercisable)
|
|
|
fair value ($)
|
|
|
|
10.00
|
|
|
|
1.09
|
|
|
|
47,500
|
|
|
|
47,500
|
|
|
|
258,013
|
|
|
|
0.50
|
|
|
|
1.75
|
|
|
|
235,000
|
|
|
|
235,000
|
|
|
|
46,277
|
|
|
|
0.60
|
|
|
|
2.50
|
|
|
|
200,000
|
|
|
|
100,000
|
|
|
|
52,909
|
|
|
|
0.60
|
|
|
|
3.57
|
|
|
|
1,575,000
|
|
|
|
975,000
|
|
|
|
435,069
|
|
|
|
0.55
|
|
|
|
4.05
|
|
|
|
5,957,659
|
|
|
|
-
|
|
|
|
1,536,764
|
|
|
|
0.335
|
|
|
|
4.89
|
|
|
|
1,037,977
|
|
|
|
273,271
|
|
|
|
204,213
|
|
|
|
|
|
|
|
|
|
|
|
9,053,136
|
|
|
|
1,630,771
|
|
|
|
2,533,245
|
|
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
Months Ended March 31, 2021
(Expressed
in United States Dollars)
Unaudited
10. Restricted share units
Effective
March 25, 2020, the Board of Directors approved a Restricted Share Unit (“RSU”) Plan to grant RSUs to its officers,
directors, key employees and consultants.
The
following table summarizes the RSU activity during the periods ended March 31, 2021:
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
average
|
|
|
|
|
|
|
|
grant date
|
|
|
|
|
|
|
|
fair value
|
|
|
|
|
Number of
|
|
|
per share
|
|
|
|
|
shares
|
|
|
(C$)
|
|
|
|
|
|
|
|
|
|
|
Unvested as at December 31, 2019 and March 31, 2020
|
|
|
-
|
|
|
$
|
-
|
|
|
Unvested as at December 31, 2020
|
|
|
988,990
|
|
|
$
|
0.39
|
|
|
Granted (v)
|
|
|
735,383
|
|
|
|
0.41
|
|
|
Vested
|
|
|
(437,332
|
)
|
|
|
0.41
|
|
|
Unvested as at March 31, 2021
|
|
|
1,287,041
|
|
|
$
|
0.39
|
|
(i)
On April 20, 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 results in stock-based compensation of $26,968 for the three
months ended March 31, 2021 (three months ended March 31, 2020 - $nil), which is included in operation and administration expenses
on the condensed interim consolidated statements of income and comprehensive income.
(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 results in stock-based compensation of $9,148 for the three
months ended March 31, 2021 (three months ended March 31, 2020 - $nil), which is included in operation and administration expenses
on the condensed interim consolidated statements of income and comprehensive income.
(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 results in stock-based compensation of $7,996 for the three
months ended March 31, 2021 (three months ended March 31, 2020 - $nil), which is included in operation and administration expenses
on the condensed interim consolidated statements of income and comprehensive income.
(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 results in stock-based compensation of $49,112 for the three months ended March 31, 2021 (three months ended
March 31, 2020 - $nil), which is included in operation and administration expenses on the condensed interim consolidated statements
of income and comprehensive income.
(v)
On January 1, 2021, the Company granted 735,383 RSUs to a consultant of the Company. Of the 735,383 RSUs, 245,128 RSUs vested
immediately, and the remaining 490,255 RSUs vested in 1/12 increments per month. The vesting of these RSUs results in stock-based
compensation of $212,878 for the three months ended March 31, 2021 (three months ended March 31, 2020 - $nil), which is included
in operation and administration expenses on the condensed interim consolidated statements of income and comprehensive income.
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
Months Ended March 31, 2021
(Expressed
in United States Dollars)
Unaudited
11. Deferred share units
Effective
April 21, 2020, the Board of Directors approved a Deferred Share Unit (“DSU”) Plan to grant DSUs to its directors.
The DSU Plan permits the eligible directors to defer receipt of all or a portion of their retainer or compensation until termination
of their services and to receive such fees in the form of cash at that time.
Upon
vesting of the DSUs or termination of service as a director, the director will be able to redeem DSUs based upon the then market
price of the Company’s common share on the date of redemption in exchange for cash.
The
following table summarizes the DSU activity during the periods ended March 31, 2021:
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
average
|
|
|
|
|
|
|
|
grant date
|
|
|
|
|
|
|
|
fair value
|
|
|
|
|
Number of
|
|
|
per share
|
|
|
|
|
shares
|
|
|
(C$)
|
|
|
|
|
|
|
|
|
|
|
Unvested as at December 31, 2019 and March 31, 2020
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested as at December 31, 2020 and March 31, 2021
|
|
|
7,500,000
|
(i)
|
|
$
|
0.65
|
|
(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. During the three months ended March 31, 2021, the Company recognized $85,535 recovery of stock-based
compensation related to the DSUs (three months ended March 31, 2020 - $nil), which is included in operation and administration
expenses on the condensed interim consolidated statements of income and comprehensive income.
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
Months Ended March 31, 2021
(Expressed
in United States Dollars)
Unaudited
12. Income per share
Potentially
dilutive securities include convertible loan payable, warrants, broker options, stock options, RSUs and DSUs. Diluted income per
share reflects the assumed exercise or conversion of all dilutive securities using the treasury stock method.
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
Net income and comprehensive income for the period
|
|
$
|
5,837,809
|
|
|
$
|
9,301,597
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per share
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares - basic
|
|
|
154,102,811
|
|
|
|
74,242,891
|
|
|
Net income per share - basic
|
|
$
|
0.04
|
|
|
$
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per share
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares - basic
|
|
|
154,102,811
|
|
|
|
74,242,891
|
|
|
Diluted effect:
|
|
|
|
|
|
|
|
|
|
Warrants, broker options, and stock options
|
|
|
1,090,016
|
|
|
|
23,335,636
|
|
|
Weighted average number of common shares - fully diluted
|
|
|
155,192,827
|
|
|
|
97,578,527
|
|
|
Net income per share - fully diluted
|
|
$
|
0.04
|
|
|
$
|
0.10
|
|
13.
Commitments and contingencies
As
stipulated by the agreements with Placer Mining as described in note 5, the Company is required to make monthly payment of $60,000
for care and maintenance.
As
stipulated in the agreement with the EPA and as described in note 5, the Company is required to make two payments to the EPA,
one for cost-recovery, and the other for water treatment. As at March 31, 2021, $11,506,577 payable to the EPA has been included
in accounts payable and accrued liabilities. The Company is now engaged with the EPA to discuss an amendment to or deferral of
these payments.
The
Company has entered into a lease agreement which expires in May 2022. Monthly rental expenses are approximately C$26,000 and are
offset by rental income obtained through a series of short term subleases held by the Company. See note 8.
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
Months Ended March 31, 2021
(Expressed
in United States Dollars)
Unaudited
14. Related party transactions
Compensation
of key management personnel
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.
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Consulting fees
|
|
$
|
324,619
|
|
|
$
|
69,755
|
|
At
March 31, 2021, $171,223 is owed to key management personnel (December 31, 2020 - $45,000) with all amounts included in
accounts payable and accrued liabilities.
Share
subscriptions
During
the three months ended March 31, 2021, the CEO of the Company subscribed for 208,860 units in the February 2021 Offering.
During
the three months ended March 31, 2021, the Company issued 208,860 February 2021 Units at a deemed price of $0.45 to settle $66,000
of debt owed to the CFO.
During
the three months ended March 31, 2021, the Company issued 208,860 February 2021 Units at a deemed price of $0.45 to settle $66,000
of debt owed to a consultant that is deemed to be a related party.
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
Months Ended March 31, 2021
(Expressed
in United States Dollars)
Unaudited
15. Financial instruments
Fair
values
The
carrying amounts reported in the condensed interim consolidated balance sheets for cash and cash equivalents, accounts
receivable excluding HST, accounts payable, accrued liabilities, DSU liability and lease liability, all of which are financial
instruments, are a reasonable estimate of fair value because of the short period of time between the origination of such instruments
and their expected realization and current market rate of interest. The Company measured its DSU liability at fair value on recurring
basis using level 1 inputs and derivative warrant liabilities at fair value on recurring basis using level 3 inputs. There were
no transfers of financial instruments between levels 1, 2, and 3 during the period ended March 31, 2021 and year ended December
31, 2020.
Foreign
currency risk
Foreign
currency risk is the risk that changes the rates of exchange on foreign currencies will impact the financial position of cash
flows of the Company. The Company is exposed to foreign currency risks in relation to certain activities that are to be settled
in Canadian dollars. Management monitors its foreign currency exposure regularly to minimize the risk of an adverse impact on
its cash flows.
Concentration
of credit risk
Concentration
of credit risk is the risk of loss in the event that certain counterparties are unable to fulfill its obligations to the Company.
The Company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and
cash equivalents. The Company places its cash and cash equivalents with financial institutions of high credit worthiness. At times,
its cash equivalents with a particular financial institution may exceed any applicable government insurance limits. The Company’s
management also routinely assesses the financial strength and credit worthiness of any parties to which it extends funds and as
such, it believes that any associated credit risk exposures are limited.
Liquidity
risk
Liquidity
risk is the risk that the Company’s consolidated cash flows from operations will not be sufficient for the Company to continue
operating and discharge its liabilities. The Company is exposed to liquidity risk as its continued operation is dependent upon
its ability to obtain financing, either in the form of debt or equity, or achieving profitable operations in order to satisfy
its liabilities as they come due.
SPECIAL
NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS
Certain
statements in this report, including statements in the following discussion, are what are known as “forward looking statements”,
which are basically statements about the future. For that reason, these statements involve risk and uncertainty since no one can
accurately predict the future. Words such as “plans,” “intends,” “will,” “hopes,”
“seeks,” “anticipates,” “expects “and the like often identify such forward looking statements,
but are not the only indication that a statement is a FORWARD-LOOKING statement. Such forward looking statements include statements
concerning THE COMPANY’S plans and objectives with respect to the present and future operations of the Company, and statements
which express or imply that such present and future operations will or may produce revenues, income or profits. Numerous factors
and future events could cause the Company to change such plans and objectives or fail to successfully implement such plans or
achieve such objectives, or cause such present and future operations to fail to produce revenues, income or profits. Therefore,
the reader is advised that the following discussion should be considered in light of the discussion of risks and other factors
contained in this report and in the Company’s other filings with the UNITED STATES SECURITIES AND EXCHANGE COMMISSION (“SEC”).
NO STATEMENTS CONTAINED IN THE FOLLOWING DISCUSSION SHOULD BE CONSTRUED AS A GUARANTEE OR ASSURANCE OF FUTURE PERFORMANCE OR FUTURE
RESULTS.