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Some companies walk their talk.
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That’s certainly true of Bunker Hill Mining (BNKR.CN; BHLL.OTC), which has been delivering consistently good news on putting its historic mine in Idaho back into production.
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The Bunker Hill Mine was massive. It was in operation for almost 100 years and produced 165 million ounces of silver before the EPA closed the mine in the early 1980s, declaring it a superfund site.
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Fast forward to 2016 and, with the remediation finished, Bunker Hill saw a chance to settle the last piece of the agreement with the EPA and get the mine back in operation.
But because the previous team that led Bunker Hill didn’t have the management firepower to get a deal done, the project languished.
That is until 2020, when a new management team led by former Barrick COO Richard Williams took the helm and began knocking down roadblocks to development at a rapid clip.
As you’re about to see, the latest examples of this team’s impact have put Bunker Hill Mine on a clear path to production and a lucrative re-rating for the company appears to be right around the corner.
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The Last Remaining EPA Hurdle Cleared
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Bunker Hill made an announcement in late December that changed the whole complexion of the company.
The Bunker Hill Mine had been held up from production by a $19 million reclamation bill owed to the EPA as the final government impediment to bringing the Bunker Hill mine back to life.
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The key was to get an agreement to get the obligation paid in a way that would set Bunker Hill Mining up for success.
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The deal the EPA agreed to was good for both parties, with Bunker Hill paying $2 million up front and the EPA consenting to get paid the remaining $17 million from future cash flow from the mine.
The transaction has Bunker Hill focused on a lucrative niche of bringing other projects in similar circumstances back to life.
And in the meantime, they’re checking off the final boxes to get the huge Bunker Hill project back into lucrative production…
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Money For Mine Construction
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The EPA deal was made possible by a concurrent catalyst: Sprott’s agreement to provide a $50 million financing package for the mine.
That transaction consists of a royalty debenture, a convertible debt piece and a streaming agreement.
The $8 million royalty debenture and the $6 million convertible debenture have already been paid, and the $27-$37 million multi-metals stream is due in early Q2 2022.
With the initial funds, Bunker Hill was able to make its $2 million payment to the EPA and take full ownership of the mine.
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The purchase of the mine was the third piece of the December deal, and it has unlocked the potential for development at the Bunker Hill Mine.
The move to take the mine from a lease-purchase option to a 100% ownership stake underscores the company’s commitment to bringing the mine back to life.
It’s just one more example of a management team that delivers on its promises.
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Yet another example of that fact is the memorandum of understanding Bunker Hill recently signed on a mill in eastern Washington.
The mill is owned by Teck and lies just 145 miles away from the Bunker Hill Mine. It has crushing, grinding and flotation circuits for a 1,500 tonne per day operation.
It’s a perfect fit for the Bunker Hill Mine, which already has tens of millions of dollars of in-place infrastructure left behind by prior operators.
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That’s a huge advantage for the company, as the infrastructure allows it to dramatically cut the initial capital expense of getting this historic mine back up and running.
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As of the most recent preliminary economic assessment for Bunker Hill, that capex stands at just $44 million…on a mine projected to generate $143 million in 5%-discounted, after-tax NPV.
And that is based on conservative metal prices. Using current metal prices, the after-tax NPV jumps to over $350 million.
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…With More Catalysts Directly Ahead
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With an abundance of silver-exploration upside to go with the near-term production story, Bunker Hill Mining is looking at a series of value-creating catalysts to come.
It will start with a prefeasibility study on the mine, due out in Q2 2022. That will be followed by the award of EPCM contracts, a decision on whether to mine underground or at surface, and mine planning and engineering, followed by a construction decision.
With that decision will come the advance of the $37 million stream from Sprott — which is enough money to get the Bunker Hill Mine almost all the way through to construction.
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The best part is that this clear path to production is taking place while Bunker Hill Mining is trading at only about a C$40 million market cap, a mere fraction of its current-metals-price NPV.
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Bunker Hill plans to be in commercial production by the end of 2023, a rapid start that owes to a lack of permitting constraints and a straightforward restart process thanks to all that in-place infrastructure.
As the company continues to clear the remaining hurdles to development, that market cap makes Bunker Hill a fantastic lever on rising silver prices, one that you’ll want to begin doing your due diligence on now.
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