British Columbia is home to some of the world’s largest, highest grade precious metals mines. Truly high grade mines (>5 grams per tonne gold equivalent) of substantial scale (more than 1,000,000 ounces gold equivalent) are becoming increasingly rare and highly sought after. Dolly Varden Silver (TSX-V:DV) is a silver explorer with a high grade silver project in BC which contains over 40 million ounces of silver at grades of nearly 400 grams per tonne Ag (>5 grams per tonne Au-equivalent).
Investors who are bullish on silver should consider Dolley Varden (DV) shares for the potential to generate significant upside leverage to a rising silver price. Moreover, DV is essentially a pure play on silver with substantial infrastructure already in place in the best mining jurisdiction on the planet which makes it much easier to advance the project to a producing mine. While many silver producers are bogged down with debt and/or onerous hedges which limit shareholders’ upside to higher silver prices, DV has zero debt and is positioned to fully benefit from a rising silver price and/or additional discoveries, which would expand the size of the resource.
The Dolly Varden Project lies on the same structural and stratigraphic belts that host numerous other, on-trend, high-grade deposits, such as Eskay Creek and Brucejack. The grade, size, and location of the Dolly Varden Project caught the attention of Hecla Mining who tried an unsolicited takeover of the project last year for C$12 million.
Since fighting off Hecla’s attempt Dolly Varden has undergone a transformation which has put the company in a position to advance the project and generate maximum shareholder value in the process.
The Dolly Varden Silver Project has been mined intermittently since the 1920s when they first found metallic silver sticking out of the ground and it was mined up until the 1950s when the decline in silver and base metals prices caused the mine to shut down. Dolly Varden was largely forgotten about for several decades until the resurgence in silver prices over the last decade.
Eskay Creek and Pretium’s Brucejack Deposit are two projects which are comparable to Dolly Varden because they are both on trend with the same geologic package as Dolly Varden. The mineralization style at the Dolly Varden Mine is exactly the same as at Eskay Creek; Eskay Creek has produced 3.5 million ounces of gold and 180 million ounces of silver to date, meanwhile, Pretium has a resource north of 10 million ounces of high grade gold at Brucejack. To say that Dolly Varden is in good company would be an understatement, not to mention that the Dolly Varden resource is arguably one of the highest grade silver mines in the world.
Grade is important because there are a lot of large resources out there but few are truly high grade. The grade matters because it affects profit margins. There are lots of companies that have resources with which they can produce higher cost silver, but the Dolly Varden Project is a special one which will be able to produce silver at some very nice profit margins.
The group which originally bought the Dolly Varden mines in 2011 focused on the historic mines to find out what they were mining there and what the mineralization style was. After three years of work they were able to prove that Dolly Varden has VMS (volcanogenic massive sulphide) and epithermal mineralization – Pretium’s Brucejack is an epithermal deposit of virtually identical geological signature as Dolly Varden.
In 2015 DV took the work that had been done the previous three years and ran its first ever resource estimate which outlined ~43 million ounces of silver. In addition, what really sets Dolly Varden apart is the grade of the mineralization; Dolly Varden is high grade, 333 grams of silver per tonne. The grade of the Dolly Varden resource puts it in the class of some of the really nice Mexican underground silver mines. There is also a great deal left to explore on the property package – if you imagined DV’s land package as an 8 1/2 x 11 piece of paper the deposits we know have fit in about a postage stamp size area at the bottom edge of it. So there is still ~95% of the remaining property with the exact same lithology and the same historic showings to explore. DV is taking what it knows so far and projecting it on the remainder of the Dolly Varden project.
In Dolly Varden’s latest drill program in 2016, which was about 2,300 meters in total, the company focused about 700 meters of it on the Torbrit which is one of the historic mines (Dolly Varden released drill results from Torbrit at the end of November which included a broader intercept of 19.4 meters grading 485 g/t silver), and the other 1600 meters was for regional exploration purposes.
The previous year’s exploratory drill program also had some really good intercepts on the order of several meters of a couple hundred grams per tonne silver. DV even had a ½ meter intercept of 3,000 grams of silver per tonne. Unfortunately due to the late start to the 2015 drill program when results were released on December 23, 2015 the market was already asleep and nobody really paid attention.
Given its world class location and incredibly high grades DV shares are cheap relative to its peer group; its peer group is trading at around $1.60/ounce of Ag in reserves while DV shares are trading at around $.55/ounce:
Moreover, the closest comparable company to DV is Alexco Resources (TSX-V:AXR) and Alexco is trading at $3.15/ounce in the ground. This means that theoretically Dolly Varden stands to revalue substantially higher as the company continues to de-risk the project.
DV is committed to exploring the rest of the Dolly Varden property and finding a resource that rivals, or exceeds, the resource that was mined back in the ‘20s and ‘50s both in terms of size and grade. During the last year Dolly Varden has received five unsolicited takeover offers, the latest of which was from Hecla Mining, one of DV’s largest shareholders. This is a company that is being watched closely by major and mid-tier silver producers and a takeout at a substantial premium during 2017 is far from a longshot.
DV’s plan is to continue exploring to expand its resource as opposed to simply developing the resource that is already known and exploring new targets on the property. The company is doing both and firmly believes that this strategy will generate the maximum value for Dolly Varden shareholders.
Dolly Varden has roughly C$4 million in the bank and the company plans to begin its summer 2017 drill program in June. This year’s drill program will be at least twice the size of last year’s which was 2,500 meters. Dolly Varden has no trouble raising capital if it should decide to increase the size of its summer exploration program, however, the company has consistently demonstrated that it is acutely cognizant of shareholder dilution and deploys shareholder capital in a prudent and effective manner.
Dolly Varden is one of the most attractive exploration stage pure play silver projects in North America. The fact that the company has received no less than five unsolicited takeover offers in the last year only serves to further confirm this. In addition, owning DV shares allows silver investors to have their cake and eat it too – you get plenty of leverage to upside in the silver price with a large exploration upside component which offers ample potential for organic growth. Dolly Varden’s final drill results from its 2016 drill campaign offers investors plenty to chew on, however, the summer 2017 exploration program sets up to be truly exciting with a full ½ year drill season, no shortage of prospective drill targets, and a cashed up treasury.
The article is for informational purposes only and is neither a solicitation for the purchase of securities nor an offer of securities. Readers of the article are expressly cautioned to seek the advice of a registered investment advisor and other professional advisors, as applicable, regarding the appropriateness of investing in any securities or any investment strategies, including those discussed above. Dolly Varden Silver Corp. is a high-risk venture stock and not suitable for most investors. Consult Dolly Varden Silver Corp’s SEDAR profile for important risk disclosures.
EnergyandGold has been compensated to cover Dolly Varden Silver and so some information may be biased. EnergyandGold.com, EnergyandGold Publishing LTD, its writers and principals are not registered investment advisors and advice you to do your own due diligence with a licensed investment advisor prior to making any investment decisions.
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