Teck Resources (TSX: TECK.A/TECK.B, NYSE: TECK) says it’s investing $40 million (C$57 million) in Bunker Hill Mining (TSXV: BNKR, US-OTC: BHLL) as part of a strategy to improve efficiency at its Trail refining operation in British Columbia.
The investment is part of $70 million being raised to sustain the Bunker Hill mine restart in Idaho. It combines with debt restructuring to lift Teck’s ownership of Bunker Hill to 36% from 6.6%. The deal secures high-quality, cost-competitive shipments of zinc and lead concentrates for Trail which is also fed from Teck’s Red Dog in Alaska. The Bunker Hill mine is due to restart in this year’s second half.
Teck’s investment dilutes existing shareholders to below 40% of the company, executive chairman Richard Williams confirmed to The Northern Miner in an interview Thursday. Management had tough choices: to sell at a complete loss or dilute and keep skin in the game. The bailout financing was needed to restructure crushing debt following rising costs and delays.
“We’re not disrespecting our shareholders – the greatest dilutive event is to sell the thing for zero, right?” Williams said by phone from Toronto. “So the fact that we have secured a strategic partner like Teck and we have changed the structure of our non-equity finance is a painful pill to take right now, but there’ll be much more value for shareholders over the long term than the alternative, which is to not build the thing.”
Williams pointed out that Teck’s counterpolitical move amid trade war tensions secures a strategic North American supply chain. The Trail smelter is critical to the United States defense machine—it supplies half the germanium and gallium it consumes.
“This Teck-led investment helps to further strengthen and de-risk American metal supply chains, while creating new American mining jobs in the Silver Valley, Idaho at a critical time,” Bunker Hill CEO and president Sam Ash said in a release.
Shares of Bunker Hill Mining fell 18% in Toronto to 16¢ apiece on Thursday afternoon, as wider markets plunged on tariff fears, for a market capitalization of $57.4 million.
Project financing
Teck’s $40 million investment in Bunker Hill will take the form of a private placement of units priced at 10.5¢ 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 company is to 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 under takeover rules.
According to a prefeasibility 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 an 8% discount), with an internal rate of return of 36% and 2.1-year payback.
With files by Henry Lazenby in Vancouver.
Be the first to comment on "Teck invests $40M to restart Bunker Hill in Idaho"