| COMMITMENTS AND CONTINGENCIES | NOTE 16 – COMMITMENTS AND CONTINGENCIES Compliance with Environmental Regulations The Company’s exploration activities
are subject to laws and regulations controlling not only the exploration and mining of mineral properties but also the effect of such
activities on the environment. Compliance with such laws and regulations may necessitate additional capital outlays or affect the economics
of a project, and cause changes or delays in the Company’s activities. Property Concessions in Mexico To properly maintain property concessions in
Mexico, the Company is required to pay a semi-annual fee to the Mexican government and complete annual assessment work. Royalty The Company has agreed to pay a 2% net smelter
return royalty on certain property concessions within the Sierra Mojada Property based on the revenue generated from production. Total
payments under this royalty are limited to $6.875 million (the “Royalty”). To date, no royalties have been paid. Litigation and Claims Mineros Norteños Case On
May 20, 2014, Mineros Norteños filed an action in the Local First Civil Court in the District of Morelos, State of Chihuahua,
Mexico, against the Company’s subsidiary, Minera Metalin, claiming that Minera Metalin breached an agreement regarding the development
of the Sierra Mojada Property. Mineros Norteños sought payment of the Royalty, including interest at a rate of 6% per annum since
August 30, 2004, even though no revenue has been produced from the applicable mining concessions. It also sought payment of wages
to the cooperative’s members since August 30, 2004, even though none of the individuals were hired or performed work for Minera
Metalin under this agreement and Minera Metalin did not commit to hiring them. On January 19, 2015, the case was moved to the Third
District Court (of federal jurisdiction). On October 4, 2017, the court ruled that Mineros Norteños was time barred from bringing
the case. On October 19, 2017, Mineros Norteños appealed this ruling. On July 31, 2019, the Federal Appeals Court upheld
the original ruling. This ruling was subsequently challenged by Mineros Norteños and on January 24, 2020, the Federal Circuit
Court ruled that the Federal Appeals Court must consider additional factors in its ruling. In March 2020, the Federal Appeals Court upheld
the original ruling after considering these additional factors. In August 2020, Mineros Norteños appealed this ruling, which appeal
the Company timely responded and objected to on October 5, 2020. On March 26, 2021, the Federal Circuit Court issued a final and
conclusive resolution, affirming the Federal Appeals Court decision. Despite the judgments in favour of the Company, Mineros Norteños
has continued to block access to the facilities at Sierra Mojada since September 2019. The Company has filed criminal complaints
with the State of Coahuila, federal and state authorities have been contacted to intervene and terminate the blockade, and the Company
has attempted to negotiate with Mineros Norteños, without resolution to date. The Company has not accrued any amounts in its interim
condensed consolidated financial statements with respect to this claim. ICSID
Arbitration On March 2,
2023, the Company filed the NAFTA Notice of Intent As
Arbitration proceedings are in early stages, the Company cannot determine the likelihood of succeeding in collecting any amount, as such
has not accrued any amounts in the interim condensed consolidated financial statements with respect Valdez Case On February 15,
2016, Messrs. Jaime Valdez Farias and Maria Asuncion Perez Alonso (collectively, “Valdez”) filed an action before the
Local First Civil Court of Torreon, State of Coahuila, Mexico, against the Company’s subsidiary, Minera Metalin, claiming that Minera
Metalin had breached an agreement regarding the development of the Sierra Mojada Property. Valdez sought payment in the amount of $5.9
million for the alleged breach of the agreement. On April 28, 2016, Minera Metalin filed its response to the complaint, asserting various
defenses, including that Minera Metalin terminated the agreement before the payment obligations arose and that certain conditions precedent
to such payment obligations were never satisfied by Valdez. The Company and the Company’s Mexican legal counsel asserted all applicable
defenses. In May 2017, a final judgment was entered finding for the Company, the defendant, acquitting the Company of all of the plaintiff’s
claims and demands. However, due to a technicality in an early procedural act, Valdez was allowed to, and did, challenge the judgment
before a local Appeals Court. On October 1, 2020, the Appeals Court entered a resolution overturning the previous judgment and entering
a resolution in favor of Valdez in the amount of $5 million, plus court costs. In November 2020, the judgment of the Appeals Court was
timely challenged by the Company by means of an “Amparo” lawsuit (Constitutional protection) before a Federal Circuit Court.
In June 2021, the Federal Circuit Court ruled in favour of the plaintiff. The Company believes these judgments are contrary to applicable
law. The plaintiff initiated proceedings to enforce the Appeals Court resolution, and the Company has offered a mining concession as payment
in full to terminate this controversy definitively. The Company believes the likelihood of the plaintiff succeeding in collecting any
amount on this claim is remote, as such the Company has not accrued any amounts in its condensed
interim From time to time,
the Company is involved in other disputes, claims, proceedings and legal actions arising in the ordinary course of business. The Company
intends to vigorously defend all claims against the Company and pursue its full legal rights in cases where the Company has been harmed.
Although the ultimate outcome of these proceedings cannot be accurately predicted due to the inherent uncertainty of litigation, in the
opinion of management, based upon current information, no other currently pending or overtly threatened proceeding is expected to have
a material adverse effect on the Company’s business, financial condition or results of operations. Arbitration Financing On September 5, 2023, the Company entered into the
LFA with Bench Walk (Note 5). Under the terms of the LFA, Bench Walk has agreed to fund the Company with up to $9.5 million to cover the
Company’s legal, tribunal and external expert costs and defined corporate operating expenses associated with the Claim in relation
to the international arbitration proceedings as a purchase of a contingent entitlement to damages. The Company continues to have complete
control over the conduct of the international arbitration proceedings, insofar as the proceedings relate to the Company’s claims,
and continues to have the right to settle with the respondent, discontinue proceedings, pursue the proceedings to trial and take any action
the Company considers appropriate to enforce judgment. The Company agreed that Bench Walk shall be entitled
to receive a share of any proceeds arising from the Claim Proceeds of up to 3.5x Bench Walk’s capital outlay (or, if greater, a
return of 1.0x Bench Walk’s capital outlay plus 30% of Claim Proceeds). The actual return to Bench Walk may be lower than the foregoing
amounts depending on how quickly the Claim is resolved. As security for Bench Walk’s entitlement
to receive a share of the Claim Proceeds under the LFA, the Company granted to Bench Walk a security interest in the Claim Proceeds, the
Claim, all documents of title pertaining to the Claim, rights under any appeal bond or similar instrument posted by any of the defendants
in the Claim, and all proceeds of any of the foregoing. Management Retention Agreement and Salaries The Company has established a Management Retention
Agreement (the “MRA”), which is a long-term incentive program to retain key personnel of the Company who have important historical
information and knowledge to contribute with respect to the Arbitration. The MRA provides that if the Company is successful and the Company
receives damages proceeds, 12% of the net proceeds will be directed to the MRA for distribution to its participants. Each participant
must satisfy specific Arbitration related duties and if they do so, each participant may be entitled to a pre-defined percentage of the
proceeds received by the MRA. The Toronto Stock Exchange (the “TSX”) has provided its conditional approval of the MRA dependent
upon the MRA being approved by the Company’s disinterested shareholders at Silver Bull’s 2024 annual meeting of shareholders
in April 2024. Additionally, management of the Company has
agreed to defer a portion of its salaries, as well as an annual bonuses granted, with the deferred amounts only being paid in the event
that the Company is successful in its Arbitration proceedings and the Company having sufficient funds to pay the deferred amounts after
discharging amounts owed to priority creditors, such as Bench Walk. Deferred amounts owed to management will accrue interest at
a rate of 6% per annum, compounded annually. As of January 31, 2024, the deferred salary and bonus amounts, with accrued interest is approximately
$196,000. As the outcome of the Arbitration is not determinable
as at January 31, 2024, no expense has been recorded in relation to the above. |
