Sign up UNITED KINGDOM
Proactive Investors - Run By Investors For Investors

Bunker Hill Mining: One of America’s most historic mines is ready for a comeback

Modest price tag to re-start production of about $15 million
zinc ingot
Zinc ingot bearing the Bunker Hill name

Mining investment is back in a big way if the first quarter of 2018 is any indication, and it’s helping set the stage for one of the largest and most storied mines in the United States to finally come back onstream – the Bunker Hill Mine in Idaho’s Coeur d’Alene Mining District.

Seasoned mining industry observers won’t be surprised to learn that the man behind the project is Bruce Reid, Chief Executive Officer of Bunker Hill Mining (CSE:BNKR).  Reid has acquired, worked on and sold six mines in his career, five of which are currently in production (number six is slated to begin producing in 2020 or 2021).  Bunker Hill will make seven and mark the culmination of an effort ongoing for over two decades.

“I tried twice in the last 20 years to get Bunker Hill but wasn’t able,” Reid explains.  “When the largest shareholder of what has become Bunker Hill Mining asked me to lead his company, I told him, ‘Go get the Bunker.’”

Sure enough, he got it, although the deal originally agreed with the heirs of the long-time owner was re-written in August 2017, shortly after Bunker Hill Mining began trading on the CSE.

The Bunker Hill mine went into production in the mid-1880s and remained in operation until 1981.  For many years early in its life it was said to be one of the largest mines in the world.

“Bunker Hill leads the way as one of the most important mines ever in American history,” says Reid.  “It produced over 35 million tons of high-grade lead-zinc, about 8.5% lead, 4.5% zinc and 2 to 3 ounces of silver.  When it closed it had resources and reserves of over 60 million tons, or almost twice what had been mined.

“Collectively, it has about 9 million tons of 5.5% to 6% zinc, 2% lead and a little more than an ounce of silver left in stopes that are already open and not flooded.”

That is a major amount of rock waiting to be harvested, and the cost of getting the mine back up and running is far from astronomical.  Just US$15mln would re-launch operations at 1,000 tons per day, and scaling up to 3,000 tons per day, as plans call for within two years, could make Bunker Hill the largest lead-zinc-silver mine in the United States outside of the gigantic Red Dog mine in Alaska, according to Reid.

Why, then, if all that ore is just sitting there has the mine remained inactive for so long?  The owner at the time proved hard to convince and the US Environmental Protection Agency (EPA) was heavily involved as well, running a wastewater treatment facility onsite to deal with acidic effluent. While the Mine itself was not  involved, the associated lead-zinc smelter caused significant pollution in the entire Silver Valley and the district was the site of a billion dollar cleanup through the EPA  Superfund. That is mostly completed now as the Valley is in much better condition.

The deal now in place with the mine owners is a 24-month lease under which the project can be purchased for US$25mln over 10 years.  Another US$20mln would go to the EPA, this amount a partial acknowledgement of costs accumulated for clean-up over the years.  An operating Bunker Hill Mine would also pay the EPA $1 million per year to continue operating the wastewater plant.

“The EPA has proven to be a good partner -- they are reasonable,” says Reid.  “People want to see the mine back in production for a number of reasons, one of them being jobs.  But also, this mine, if left alone, will only get more troublesome as parts internally break and water starts leaking from different areas.  If it’s in production, however, we’d have the cash flow and earnings to build up the closure bond, and to take care of many longer term problematic areas.

Reid is not only a formally trained geologist, but also a former analyst and successful investment banker.  He thus has detailed insight into the metals markets Bunker Hill would once again serve.

“Zinc is in a deficit in terms of the raw metal,” Reid explains.  “We are still losing production even with the price being up, and some mines that have been dragged back into production are running out of ore.  The zinc concentrate market is even tighter – it looks like concentrate could be in deficit for another three years.”

And while one might think the omnipresent talk about future battery technologies would undermine the lead market, Reid says it is “amazing” how tight the lead concentrate market is right now.

Details regarding the path to production for Bunker Hill are still to be decided but could entail initially toll milling (utilising another entity’s mill), although ultimately the company will want to build its own mill plant.

“My estimate is that starting the mine utilising a toll milling arrangement is estimated to be about $10 million including working capital,” explains Reid.  “I’m in active discussions with a number of financiers and toll milling partners and we hope to be in production in 2018. The longer term goal, though, is to build our own expandable process plant right on site, which is also part of the Patented Land package involving the entire Bunker Hill Mine site.”

It is an amazingly near-term timeline for a small company that began trading less than a year ago, but given the Bunker Hill Mine’s size, grade and favourable jurisdiction, plus the strength of Reid and his team of local professionals, the market is buying in, having taken the company’s share price as high as $3.15 since its debut.

Also amazing to observers who know how the financial markets work is that Reid, his team and that the one large shareholder have put their shares into a voting trust and none of the shares can be sold until there is a change of control, which is another way to say that Reid must sell the entire company for the insiders to ever realise on their share positions.  We’re talking approximately 15 million shares out of the company’s 33 million outstanding.

That lock-up suits Reid just fine.  He knows he has a monster by the tail and his track record suggests that few people could be better at finding a buyer when the time comes.

“This is one of the most important lead-zinc resources in the Americas that is not producing currently,” Reid concludes.  “And then once we put it into production we’ll follow up with a drill programme to beef up reserves and resources.  Bunker Hill is a big one.  It will outlast us all.”

View full BNKR profile View Profile

Related Articles

1524566266_zinc-periodic-3.jpg
April 24 2018
Connemara now has a five million tonne zinc resource at the Stonepark joint venture, and continues to work up its gold projects
Work programmes across the Erris Resources portfolio now underway, with results in shortly
April 25 2018
Erris has an active exploration programme and the support of some major mining companies
1528469183_zinc-truck-lorry.jpg
June 08 2018
The company has been moving towards a maiden resource at its Peru project for some time

No investment advice

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person. You further understand that none of the information providers or their affiliates will advise you personally concerning the nature, potential, advisability, value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter.

You understand that the Site may contain opinions from time to time with regard to securities mentioned in other products, including company related products, and that those opinions may be different from those obtained by using another product related to the Company. You understand and agree that contributors may write about securities in which they or their firms have a position, and that they may trade such securities for their own account. In cases where the position is held at the time of publication and such position is known to the Company, appropriate disclosure is made. However, you understand and agree that at the time of any transaction that you make, one or more contributors may have a position in the securities written about. You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate.

From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.

© Proactive Investors 2018

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use