Bunker Hill's Strategic Share Issuance: Addressing Debt and Fueling Growth

Bunker Hill Mining Corp. (TSXV:BNKR | OTCQB:BHLL) recently announced its decision to issue shares in satisfaction of debenture interest payment obligations, a strategic move that addresses its debt obligations while potentially fueling its growth. This article explores the implications of this transaction on Bunker Hill's earnings per share (EPS), share price, market capitalization, debt-to-equity ratio, and the pricing of the issued shares.

Bunker Hill elected to issue an aggregate of 7,392,859 shares of common stock at a price of USD$0.07 per share, based on 90% of the 10-day volume weighted average trading price of the Company's shares on the TSX Venture Exchange (TSX-V) during the Pricing Period. This issuance addresses the aggregate USD$517,500.00 interest payable on its 7.5% and 10.5% convertible debentures, which mature in March 2028 and March 2029, respectively.



The issuance of shares to satisfy debenture interest can dilute EPS by increasing the number of outstanding shares. Assuming a constant net income, Bunker Hill's new EPS can be calculated as (Net Income / (Old Outstanding Shares + Issued Shares)) = (Net Income / (10,000,000 + 7,392,859)) = (Net Income / 17,392,859). This results in a decrease in EPS compared to the previous period.

The issuance of 7,392,859 shares by Bunker Hill at USD$0.07 per share dilutes existing shareholders' equity. Assuming a pre-issuance market capitalization of USD$50 million (based on a share price of USD$1.00 and 50 million shares outstanding), the issuance increases shares outstanding to 57,392,859, reducing the post-issuance share price to USD$0.87. This results in a new market capitalization of USD$49.9 million, a 0.2% decrease. The dilution may temporarily pressure the share price, but the company's strategic focus on restarting and developing the Bunker Hill Mine could offset this impact.



Bunker Hill's decision to issue shares in satisfaction of debenture interest payment obligations will likely increase its equity and decrease its debt, thereby improving its debt-to-equity ratio. Assuming the issuance of 7,392,859 shares at USD$0.07 per share, the transaction will raise approximately USD$517,500 in equity. This will offset the USD$517,500 in debt represented by the interest payment. Consequently, Bunker Hill's debt-to-equity ratio will decrease, indicating enhanced financial health. However, the dilution effect from issuing new shares may impact the company's earnings per share and share price.

The pricing of the issued shares reflects a discount to the 10-day volume weighted average trading price, indicating a potential undervaluation of the company's stock. The discount suggests that the company may be facing financial constraints, as it is issuing shares at a lower price than the market value. However, the fact that the company is issuing shares to satisfy debenture interest payment obligations indicates that it is addressing its debt obligations, which could be seen as a positive sign for its financial health. The involvement of Sprott, a major investor, in the issuance also suggests that there is still interest in the company's prospects.

In conclusion, Bunker Hill's strategic share issuance addresses its debt obligations while potentially fueling its growth. Although the issuance dilutes EPS and may temporarily pressure the share price, the company's focus on restarting and developing the Bunker Hill Mine could offset these impacts. The pricing of the issued shares reflects a discount to the market value, indicating a potential undervaluation of the company's stock. As Bunker Hill continues to address its debt obligations and execute its strategic plans, investors should monitor its progress closely.