Bunker Hill delays restart of historic silver mine in Idaho after costs swell

The proposed restart of the iconic Bunker Hill silver-lead-zinc mine in Idaho has been delayed until at least the second quarter of 2025 after its developer, Bunker Hill Mining (TSXV: BNKR, US-OTC: BHLL), determined that the project would cost nearly twice as much as expected. Shares fell.

Following a review of the mine restart plan, Bunker Hill now forecasts US$103 million in total restart costs (excluding working capital), up from the previously forecasted US$67 million, and more than double the US$56 million shown in the 2022 pre-feasibility study, the company said Friday.

“This revised plan takes full account of the many challenges facing the project and the rest of the U.S. mining industry,” Sam Ash, Bunker Hill CEO said in a release. “Work onsite continues round the clock at the highest intensity possible to complete mechanical installation and commissioning and deliver the demanding restart plan.”

Bunker Hill shares were down 7.7% to 12¢ apiece on Friday afternoon in Toronto, trading near its 52-week low of 9¢. Its market capitalization is around $42 million.

The revision results from a surge in input costs, namely a 53% rise in construction labour costs over the past 12 months, a 40% increase in both structural steel and copper prices, and the cost of concrete being 20% higher. As labour is the main input cost in the project’s mechanical installation and commissioning stages, this has been the most challenging to mitigate, Bunker Hill said.

In addition, upgrades to the tailings management system envisaged in the 2022 pre-feasibility study has resulted in another US$8 million in additional costs. An unanticipated leave of the specialist contractor working on the tailings filter press is also expected to delay the construction timeline.

While the company considered deferring the construction of the tailings filter press into 2026, it was determined following an engineering study that this staged solution was not feasible and it would be better to continue the complete construction as planned, but on a delayed timeline.

As of Friday, the project construction is 64% complete with 98% of procurement done. The processing plant, which is scheduled for staged commissioning by year-end, is at 66% completion, while the underground development is 80% complete and on budget. The aforementioned tailings filter press is 38% complete.

To fund the ongoing development of the Bunker Hill mine, the company intends to draw down on the US$21 million standby facility provided by Sprott Private Resource Streaming and Royalty Corp. and finalize the ongoing discussions with its strategic partners for another US$30 million in potential financing.

Legendary silver mine

The former Bunker Hill mine stands as a legendary fixture in American mining history for its exceptional base metal and silver production. It is located in the Coeur d’Alene mining district of Idaho, which is renowned for its rich silver deposits.

The iconic mine operated for over a century, from its discovery in 1885 until its closure in 1991. During its 95-year run, Bunker Hill yielded 42.7 million tons of ore, boasting average grades of 8.43% lead, 4.52% zinc, and 3.52 oz. of silver per ton. Total amount of silver extracted from the mine is reported at 165 million ounces.

In 2020, a new leadership team took over the project, focusing on sustainable development and exploration of Bunker Hill’s untapped resources. Based on the analysis of historical data, the company believes that Bunker Hill has the potential to be revived as a high-grade zinc-silver-lead operation.

The 2022 PFS gave the project an after-tax net present value (at 8% discount) of US$52 million and an internal rate of return of 36%. This is based on probable reserves totalling 3.2 million tonnes grading 1.12 oz. silver, 2.59% lead and 5.81% zinc.