| Item 1.01 |
Entry into a Material Definitive Agreement. |
On
June 23, 2023, Bunker Hill Mining Corp., a Delaware corporation (the “Company”), and Silver Valley Metals Corp., an
Idaho corporation and wholly owned subsidiary of the Company (“Silver Valley”), entered into (i) a metals purchase
agreement (the “Metals Purchase Agreement”) with an affiliate of Sprott Private Resource Streaming & Royalty Corp.
(“Sprott Streaming”), (ii) a loan agreement (the “Loan Agreement”) with two affiliates Sprott Streaming
(collectively, the “Lenders”), and (iii) a fourth omnibus amendment agreement with certain affiliates of Sprott Streaming
and the other parties named therein (the “Omnibus Amendment Agreement”) for an upsized $67 million project financing
package. The package consists of a $46 million multi-metals stream (the “Stream”) and a $21 million new debt facility
(the “Debt Facility”) that is available for draw, subject to certain terms and conditions, for two years at the Company’s
election. Including the previously funded $8 million Royalty Convertible Debenture (the “RCD”), $6 million Series
1 Convertible Debenture (the “CD1”), and $15 million Series 2 Convertible Debenture (the “CD2”),
the total commitment of Sprott Streaming and its affiliates to the Bunker Hill mine restart increased to $96 million. The transactions
contemplated by the Metals Purchase Agreement, the Loan Agreement, and the Omnibus Amendment Agreement closed on June 23, 2023.
Metals
Purchase Agreement and Royalty Agreement
Pursuant
to the Metals Purchase Agreement, the maximum amount of refined silver, lead and zinc under the Stream increased from $37 million to
$46 million (the “Stream Amount”). The terms of the Stream are unchanged from those announced in December 2021, applying
to 10% of payable metals sold until a minimum quantity of metal is delivered consisting of, individually, approximately 63.5 million
pounds of zinc, 40.4 million pounds of lead, and 1.2 million ounces of silver. Thereafter, the Stream will apply to 2% of payable metals
sold. 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
previously contemplated, upon funding of the Stream, the RCD was repaid by the Company, and Silver Valley granted to an affiliate of
Sprott Streaming a royalty for 1.85% of life-of-mine gross revenue (the “Royalty”) from mining claims considered to
be historically worked (the “Primary Claims”), contiguous to current accessible underground development, and covered
by the Company’s 2021 ground geophysical survey, pursuant to a royalty agreement, dated as of June 23, 2023, among the Company,
Silver Valley, and an affiliate of Sprott Streaming (the “Royalty Agreement”). A 1.35% rate will apply to claims outside
of these areas (the “Secondary Claims”). The previously announced royalty put option permits Sprott Streaming to resell
the Royalty to the Company for $8 million upon default under the CD1 or CD2 until such time that they are repaid in full.
The
Company agreed to guarantee the payment and performance of all of the covenants and obligations of Silver Valley under the Metals Purchase
Agreement.
Loan
Agreement
Pursuant
to the Loan Agreement, the Lenders agreed to make available to the Company the Debt Facility to finance, in part, the construction and
development of the Bunker Hill mine. The Debt Facility consists of a $21 million facility that is available for draw at the Company’s
election for a period of two years. Any amounts drawn will bear interest of 10% per annum, payable annually in cash or capitalized until
three years from closing of the Debt Facility at the Company’s election, and thereafter payable in cash only. The maturity date
of any drawings under the Debt Facility is June 23, 2027. For every $5 million or part thereof advanced under the Debt Facility, the
Company will grant a new 0.5% life-of-mine gross revenue royalty, on the same terms as the Royalty, to a maximum of 2.0% on the Primary
Claims and 1.4% on the Secondary Claims. The Company may buy back 50% of these royalties for $20 million.
Omnibus
Amendment Agreement
Pursuant
to the Omnibus Amendment Agreement, the parties extended the maturities of the CD1 and CD2 to March 31, 2026, when the full $6 million
and $15 million, respectively, will become due.
The
foregoing descriptions of the Metals Purchase Agreement, the Loan Agreement, the Omnibus Amendment Agreement, and the Royalty Agreement
do not purport to be complete and are qualified in their entirety by reference to the full text of the Metals Purchase Agreement, the
Loan Agreement, the Omnibus Amendment Agreement and the Royalty Agreement, copies of which are filed as Exhibits 10.1, 10.2, 10.3, and
10.4, respectively, to this Current Report on Form 8-K, which are incorporated herein by reference.
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The
representations, warranties and covenants contained in the Metals Purchase Agreement, the Loan Agreement, the Omnibus Amendment Agreement,
and the Royalty Agreement were made solely for purposes of such agreements and as of a specific date, were solely for the benefit of
the parties to such agreements and may be subject to standards of materiality applicable to the contracting parties that differ from
those applicable to security holders. Security holders should not rely on the representations, warranties, and covenants or any descriptions
thereof as characterizations of the actual state of facts or condition of the Company. Moreover, information concerning the subject matter
of the representations and warranties may change after the date of the Metals Purchase Agreement, the Loan Agreement, the Omnibus Amendment
Agreement and the Royalty Agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures.