Bunker Hill Mining Corp. (CSE—BNKR) is bunkering in Idaho, through the prolific Silver Valley. The prefeasibility study (PFS) had been done earlier, but a more recent update shows the mineral resource is much larger than first assumed.
Under new Idaho-based leadership, Bunker Hill Mining intends to sustainably restart and develop the Bunker Hill mine as the first step in consolidating a portfolio of North American precious metals assets with a focus on silver.
Management now assumes a much larger mineable resource (10 million tonnes compared with 3.36 million tons in the PFS). “While this represents considerable upside, we note that our assumption reflects the inclusion of ‘established’ residual in-mine measured-and-indicated and 50 per cent of inferred resources – not blue-sky exploration potential,” Ryan Walker, of Echelon Capital Markets states.
Furthermore, the work done was accomplished by “a very strong management team”, Mr. Walker adds. Management, however sounding slightly humble, drove home to the analyst the significant head start they had via onsite and local infrastructure already in place.
The analyst, in his “speculative buy” thesis, highlights the Bunker Hill mine restart project’s advanced stage bolstered by significant pre-existing infrastructure on patented claims and private ground in politically stable Idaho; near-term production potential; very experienced management; and still historically elevated zinc prices (on enduring low metal stocks owing to curtailed European refining capacity reflecting the ongoing energy crisis there).
“We were also impressed by the ease of access (the local town of Kellogg growing up around the mine). And, while a historic producer (producing for over 95 years beginning in 1885) we highlight that the mine’s infrastructure appeared to be in very good condition – having been originally overbuilt and subsequently well maintained,” the analyst remarks on the Idaho infrastructure.
“Indeed, a tour of the surface and underground revealed a well-organized operation belying the mine’s age – demonstrating management and (mining services contractor) Coeur d’Alene Mine Contracting (CMC) commitment to safety. We also highlight CMC’s proficiency with refurbishing and replacing the mine’s existing underground timber support – something of a dying art – again giving us confidence in their ability to effectively mine going forward.”
The key next steps ahead of construction include the completion of detailed engineering for the process plant and paste plant, contemporaneous with continued underground development to establish initial mining areas.
Looking ahead, the main catalyst for the story remains finalization of financing for the proposed mine restart. The initial capex estimate under the PFS is US$55 million, and with current cash of just US$4 million and an impending US$37-million stream facility with Sprott Private Resource Streaming and Royalty Corp. (SRSR).
“We currently model a US$10-million concentrate prepayment agreement (recall here that Canadian firm Teck Resources Ltd. has an option to acquire all zinc and lead concentrate production for an initial five years). We also assume a near-term US$5-million equity issue (at current share price), with a follow-up second-half 2023 US$5-million raise (at $0.25 per share). We note here that Bunker Hill is permitted a US$5-million funding shortfall prior to restart activities under the SRSR agreement,” the analyst adds.
Due to the above mentioned financing assumptions, as well as equity dilution issues from the equity raises, concentrate pre-payment and recent US$15-million debenture, the analyst reduces his target price to $0.40 per share from $0.60.
This is an edited version of an article that was originally published for subscribers in the October 28, 2022, issue of Investor’s Digest of Canada. You can profit from the award-winning advice subscribers receive regularly in Investor’s Digest of Canada.
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Investor's Digest of Canada •1/18/23 •