Teck invests $40M to support historic Bunker Hill mine restart in Idaho

Teck Resources (TSX: TECK.A/TECK.B, NYSE: TECK) will make an investment of $40 million in Bunker Hill Mining (TSXV: BNKR) as part of its strategy to optimize its Trail Operations in British Columbia.

The investment, said Teck, secures high-quality, cost-competitive shipments of zinc and lead concentrates from the Bunker Hill mine located in Idaho’s Silver Valley.

Discovered in 1885, the Bunker Hill mine operated for nearly a century, and represents a legendary fixture in American mining history. During its active years, the mine accounted for nearly half of the base metals production from the Coeur d’Alene mining district. In 2020, Toronto-headquartered Bunker Hill Mining took over the project with a view of bringing back the once-productive mine.

Under an existing offtake agreement between the companies, production from Bunker Hill will go towards Teck’s Trail Operations, supplementing the existing feed from Teck’s Red Dog operations in Alaska.

Project financing

Teck’s investment is expected to support the completion of the Bunker Hill mine, ensuring that it remains on track to begin production in the second half of 2025. The mine was initially slated for an earlier restart, but management delayed its commissioning after determining that the restart cost was much higher than previously estimated.

According to a pre-feasibility study published in 2022, the Bunker Hill mine project has an initial capital cost of $55 million, but the revised mine plan shows a cost of $103 million. Its post-tax net present value is estimated at $52 million (at 8% discount), with an internal rate of return of 36% and 2.1-year payback.

Teck’s $40 million investment in Bunker Hill will take the form of a private placement of units priced at C$0.105 each. Separately, Bunker Hill has also arranged a placement of units at the same price, with BMO, CIBC and Red Cloud Securities acting as lead syndicates, to raise another $20 million.

The proceeds, said Bunker Hill, would provide it with sufficient capital to bring its mine closer to production. As of Thursday, the project is about 65% complete.

“This Teck-led investment helps to further strengthen and de-risk American metal supply chains, whilst creating new American mining jobs in the Silver Valley, Idaho at a critical time,” Bunker Hill CEO Sam Ash said in a news release.

The company will also sign a standby facility agreement with Teck that provides a $10 million prepayment to “further improve asset resilience” and reduce risk during the critical first three years of operation.

Additionally, the company plans to restructure its debt with creditors including Teck, Sprott Streaming and Monetary Metal, including the conversion of some debt into equity. This, Bunker Hill says, would “significantly reduce risk and increase the capital available to for investment in exploration and expansion.”

Upon closing, it is expected that Sprott will own greater than 20% of Bunker Hill’s shares and therefore become a control person. Teck is also expected to increase its stake from 6.6% to 35.8% following the debt restructuring.

Shares of Bunker Hill Mining fell 25% by 11:40 a.m. ET to C$0.15 apiece, for a market capitalization of C$50.4 million.