Bunker Hill Mining defaults on mine lease

In March, Bunker Hill Mining (CSE: BNKR) hosted a reception at Toronto’s Hockey Hall of Fame, where guests lined up to pose for photographs with former Maple Leafs stars Wendel Clark and Darryl Sittler, as the retired NHL players signed their names on a stack of hockey pucks.

The event was designed to generate buzz about the company at the Prospectors & Developers Association of Canada’s (PDAC) annual four-day convention, one of the world’s premier mineral exploration and mining conferences.

On the last day of PDAC, the company released news that it had signed a deal with the U.S. Environmental Protection Agency (EPA) and the U.S. Department of Justice allowing it to operate the past-producing Bunker Hill mine without “incurring liability for any hazardous substances, pollutants or contaminants that migrated from the mine in the past.”

The Bunker Hill mine at one time was the largest producing mine in the Coeur d’Alene zinc, lead and silver district in northern Idaho, and the company had hopes of putting it back into production. Under the deal with the EPA, Bunker Hill Mining agreed to pay the agency US$20 million over seven years for historic water-treatment costs dealing with the mine’s effluent.

A 1993 photo of the lead smelter at the Bunker Hill mine in Kellogg, Idaho. Credit: U.S. National Park Service.

In addition, the company agreed to make semi-annual payments of US$480,000 (US$80,000 per month) to the EPA to continue running the water-treatment facility, on top of the US$160,000 a month Bunker Hill Mining was paying under a lease-purchase agreement to the mine’s underlying owner, Placer Mining.

But on Oct. 2, Bunker Hill Mining announced it had defaulted on US$400,000 in lease payments due at the end of September and on Oct. 1.

The company’s CEO, Bruce Reid, resigned on Oct. 12.

Bunker Hill Mining is now trading at 6¢ per share, down from the $2.16 per share it traded at on the last day of PDAC in March, and the $3.15 per share it traded at in January.

The company has 35 million common shares outstanding for a $2.1-million market capitalization.

John Ryan, a director of Bunker Hill Mining and now also its CEO, was not immediately available for comment, but Nicholas Konkin, the company’s head of marketing and communications, spoke with The Northern Miner.

“Unfortunately, with the price of commodities and the appetite for mining companies slowing drastically since March, we found it increasingly difficult to fully finance the company to achieve the goals we set out for ourselves this year,” Konkin said. “We opted to default on the property payment that was due at the end of September and tried to renegotiate with the underlying owner unsuccessfully, so we gave the project back … the payments became quite onerous, and the US$400,000 a quarter was difficult to justify to the capital markets.”

Management and insiders own 44% of the company’s shares, with institutions owning 16% and retail, 40%.

Valuestone Global Resources Fund 1 (owned by private equity fund manager Valuestone, which was set up by China’s Jiangxi Copper Corp.) owns 16% of the company’s shares (19.9% fully diluted), Konkin says, while Royal Bank Global Asset Management invested $1.85 million for 5.5% of the company’s shares, and EDE Value Fund, a small fund created in February 2017 by EDE Asset Management Inc., owns 3%.

In August, Bunker Hill Mining closed a $1.37-million private placement with investors Gemstone 102 Ltd., a wholly owned subsidiary of Valuestone, and Hummingbird Resources.

Konkin noted that the company’s new CEO and his team “are in the process of working out a new strategy that will hopefully clean up the situation we are in at the moment.”

One of the issues Bunker Hill Mining has faced over its short history as a public company, however, has been its association with Bobby Genovese.

The Canadian businessman, whose privately held B.G. Capital Group has interests in a polo club, luxury real estate and multimillion-dollar yachts, is facing charges levelled by the U.S. Securities and Exchange Commission filed in August 2017, alleging he was involved in a $17-million scheme to manipulate the share price of Liberty Silver.

In July 2018, Genovese lost a motion to dismiss the SEC charges and a New York judge ruled that the allegations were sufficient for trial. (An earlier class-action suit against him in 2012 did not qualify for class-action status.)

Genovese owns 25% of the shares of Bunker Hill Mining held by management and insiders, Konkin confirmed, but said they are locked up in escrow.

“Bobby wanted to work with Bruce, so he got an agreement to purchase the Bunker Hill mine, but part of that meant we had to use the Liberty Silver shell,” Konkin said. “We were aware of the past history with Bobby and we made strides to ensure the market was comfortable with the fact that Bobby was in the deal, but had no influence. So all of Bobby’s 13 million shares in the company were locked up in an escrow account that he couldn’t touch.”

Genovese optioned 4 million of the 13 million shares to Bruce Reid, Howard Crosby, one of the company’s directors, and John Ryan, at $1 per share, and kept the other 9 million in his own name, Konkin said.

“That was our gesture to the market to alleviate any concerns … and that was pre-SEC investigation, and based on the class-action suit that started five or six years ago.”

At the time Genovese was accused of manipulating shares of Liberty Silver (between August and October 2012), when the company’s only significant asset was a small exploration project called Trinity Silver, Konkin said.

“We were always going to change the name,” he added. “So when the SEC launched an investigation [of Genovese] three months after we went public, it was in our interest to change the name.”

Bunker Hill Mining changed its name from Liberty Silver on Nov. 29, 2017.