The precious metals bull market is upon us; those who have put their money into precious metals and precious metals stocks saw massive gains in 2016. A correction in the gold price that started last August, however, saw prices of the related mining stocks fall. Now, in a historically strong period of the year for precious metals and their related equities, we have begun another ramp up in the bull market.

While gold is typically the precious metal of choice when it comes to investment and commentary, it shouldn’t overshadow silver, which is really gold on steroids. What do I mean by this? Well, during the last bull market, stretching from around 2001 to 2011, the silver bullion price moved from a low of around $4.06 USD per ounce (Kitco Historical Silver Price) in 2001 to a high of $48.70 USD per ounce (Kitco Historical Silver Price) in 2011. Now, I don’t know many people who were able to buy at the low and sell at the high, but for those that did, they received about a 12 times return on capital invested.

There are a few junior resource sector heavyweights that have advocated for silver’s bullish future. One of these sector heavyweights is Eric Sprott, Chairman of Sprott Inc., who has spoken many times about his bullish outlook on silver prices in the years ahead. In an interview, Sprott says,

“I think silver will be the investment of the decade...I thought gold was the investment of the last decade” ~Eric Sprott (Interview)

I tend to agree with Sprott in thinking that the future is bright for silver. Silver’s fundamental supply and demand figures are interesting, as The Silver Institute, a nonprofit international association which draws its membership from across the silver industry, shows a net deficit in silver for the last 9 years. Silver does have a major industrial portion to its demand and, therefore, unlike gold, has a supply which is physically diminishing through its industrial consumption. Check out The Silver Institute’s World Silver Survey 2016 for a more in-depth look at the silver supply and demand story.

The fact is, there just aren’t many primary silver producers in the world. Therefore, when economic primary silver mineralization is found, there is a tremendous amount of interest due to its rarity. Today, I have for you a story about a junior company which owns a highly prospective property in British Columbia’s Golden Triangle,and is looking to expand on its already sizeable silver deposit. This company is Dolly Varden Silver Corporation (DV:TSXV). Let’s take a look.


Dolly Varden Silver Corporation

Set in one of the world’s premiere mining jurisdictions, British Columbia (BC), Canada, Dolly Varden Silver Corporation (Dolly Varden) possesses a collection of 4 high-grade silver deposits with a collective indicated resource of 31,778,000, at 321.6 g/t, and an inferred resource of 10,784,000 ounces at 373.3 g/t of silver.

Dolly Varden’s 8,800 hectare property is 100% owned and located in northern BC’s famed Golden Triangle. For those unfamiliar, the Golden Triangle has a long history of successful mining ventures. Its history dates back to the 1890s, where it was a popular stop off for prospectors on their way to the Yukon and Alaska, where the gold rush was peaking.

Today, the Golden Triangle is home to some of the biggest names in junior mining, most notably, Pretium Resources’ multi-million ounce epithermal gold deposit, Brucejack, and Seabridge Gold’s multi-million ounce copper/gold deposit, KSM.

Arguably the Golden Triangle’s most famous mine, as measured by yield, was Barrick Gold’s Eskay Creek. Eskay Creek, which completed production in March 2008, had a prolific production record, producing approximately 150 Moz of silver, and 3.5 Moz of gold over the course of its mine life. Also, it should be noted that Eskay Creek was, at one time, the highest grade gold mine in the world at 48 g/t, and the fifth largest silver mine by volume.


A New Beginning

Over the last year, Dolly Varden has shaken things up with a couple of notable changes;

  • The appointment of new President and CEO, Gary Cope. Cope has been a leader in Corporate Management and Strategy for over 33 years. He specializes in the financing side of the business, with a string of successful negotiations, most notably the financing of the South Kemess project and the sale of Orko Silver Corp to Coeur d’Alenes Mine Corp. Currently, he holds the position of President and CEO of Orex Minerals Inc. and Barsele Minerals Corp.
  • The discharge of its restrictive debt financing via a flexible $2.5 million loan, and a $7.2 million private placement completed in July 2016. (Financing details can be found here)
  • Dolly Varden was able to finance further this past December, bulking up their treasury to complete further drilling in 2017. (Financing details can be found here)

The flexible loan and private placement leave Dolly Varden with a streamlined share structure and their treasury filled, enabling them to act on their plan to expand their existing resource and explore new targets with tremendous upside potential.

It should be noted that Hecla Mining Company filed a formal takeover bid to purchase all outstanding shares of Dolly Varden on July 8, 2016. Hecla’s takeover bid was summarized in Dolly Varden’s July 11, 2016 news release;

“The Hecla Offer was precipitated by Dolly Varden’s announcement, two weeks previously, on June 13, 2016, that it would replace a restrictive loan from Hecla (as agent) (the “Restrictive Loan”) with a new flexible loan that would allow Dolly Varden to issue equity to discharge all Company debt and raise funds for exploration."

The news release further discusses the reasons for the bid's failure, citing missed valuation requirements under Ontario and Quebec securities laws, and the withholding of information concerning Hecla’s prospective Kinskuch exploration property – which is in close proximity to Dolly Varden.

In all, mergers and acquisitions make up the vast majority of junior company success stories, and the fact that Dolly Varden already has one under its belt speaks to the upside potential of this company.


Proven Management and Technical Team

Dolly Varden’s Vice President of Exploration is Ben Whiting, who is a Professional Geologist with more than 35 years of experience in the international mining industry. Whiting’s professional experience ranges widely, as he is a past adjunct Professor from Queen’s University, a special advisor on mining industry matters to government agencies and the World Bank, and most importantly, has worked for a number of junior and senior mining companies, managing a wide range of operations from exploration through to production.

Currently, Whiting is the VP of exploration for Barsele Minerals Corp and Orex Minerals. Both Whiting and Cope are a part of these management teams, bringing a familiarity and cohesiveness to Dolly Varden, which should prove to be beneficial as they put together a game plan for 2017.

Robert van Egmond is Dolly Varden’s Chief Geologist and has over 25 years of experience in the mining industry. Van Egmond has worked for a number of different companies over the course of his career, ranging from major mining companies such as Cominco, BHP and Kennecott, to junior explorers such as Orex Minerals, Platinum Group Metals and Northern Dynasty. Working for these companies has exposed van Egmond to a number of different deposit types and levels of development, truly giving him a well rounded look at the entire lifecycle of a mining company. This experience should prove invaluable to the Dolly Varden team.

Cope’s management team is rounded out by Chief Financial Officer Stephen Brohman and Corporate Secretary Melissa Martensen, who also sits on the boards of Barsele Minerals, Orex Minerals and Silver Viper Minerals Corp.

Also, Dolly Varden has a technical committee which is comprised of: Ben Whiting (VP Exploration), Don Birak (a geologist with over 37 years of experience in the minerals industry), Kurt Allen (a geologist with over 25 years of experience in mineral exploration and the mining industry), and last but not least, technical advisor, Dr. Nick Carter P.Eng (an economic geologist with over 50 years of experience in the mineral industry).

The Dolly Varden management and technical teams are built with a tremendous amount of mineral industry work experience and familiarity between colleagues, which is so very important for the execution of an action plan. 2017 is set to display this expertise as the team looks to put Dolly Varden on track to hit their goal of expanding their existing resource to 100 Moz of silver.


Premiere Mining Jurisdiction

British Columbia’s provincial government is set on promoting and supporting mining within its borders. As outlined by BC Premier, Christy Clark, in a letter to the Minister of Energy and Mines, the honourable Bill Bennett,

“Work with the Ministry of Finance and Geoscience BC to establish long-term, predictable funding to foster oil, gas and mineral exploration and development in BC” ~Minister Letter

Further, BC Hydro completed the $716 million Northwest Transmission Line Project (NTLP), which was provided by the province to supply power to potential industrial developments in northern BC. The new line runs from Skeena Substation north to a new substation near Bob Quinn Lake, a stretch of nearly 344 kilometres (BC Hydro) (Power Line Geography).

Typically, energy and accessibility are major sticking points for companies that explore in some of the more remote parts of the world. In BC’s case, they are trying to remedy this sticking point by providing the infrastructure needed for junior companies to become producers, or more importantly for the provincial government, to become large employers.

Dolly Varden is in a great position as far as infrastructure goes; there's an existing 25 kilometre road to the mine from a deep tide-water port, and they are 30 kilometres from the power grid (NTLP). These are staples for success in the mining industry, because when they don't exist, it's incredibly difficult to find an economical substitute.

The Dolly Varden property is located within the Nisga Nation territory. Is this cause for concern? The answer is no, a treaty was negotiated between the Nisga Nation, the Government of British Columbia, and the Government of Canada. The treaty includes 2,019 square kilometres of land, $196.1 million dollars, entitlements to harvest fish and many other wildlife species, and much more. The treaty came in effect on May 11th, 2000. Source: Nisga Nation


The Dolly Varden Property

The Dolly Varden property resides in what is known as the Stikine terrane. This terrane contains a plethora of different mineral deposits, such as volcanic massive sulphide (VMS), alkaline porphyry copper-gold, and transitional epithermal intrusion-related precious metals types. The exploration potential of this geology is truly superb, as Dolly Varden’s property shares similar mineralization to Eskay Creek’s precious metal VMS deposit, and the epithermal vein style Brucejack deposit (Pretium).

The Dolly Varden property was a past producer and has a historical mine production on its Dolly Varden and North Star deposits. From 1919 to 1921, around 1.3 Moz of silver at 35.66 oz/t (1,109 g/t) were produced. The Torbit deposit was mined from 1949 to 1959 and produced around 18.7 Moz of silver at 13.58 oz/t (422 g/t) (2015 Technical Report on the Dolly Varden Property - pg.15 (News release - September 30, 2015) ).

Modern day exploration of the Dolly Varden property from 2011 to 2014 totalled $16.64 million and led to Dolly Varden’s maiden resource estimate (2015 Technical Report on the Dolly Varden Property (News release - September 30, 2015) – pg.1).

Source: Dolly Varden – Technical Report filed on Sedar


2016 Drill Program

Dolly Varden allocated around 1/3 of its funds in 2016 to the drilling of their existing resource areas. Why? Firstly, the maiden resource didn’t allocate any value to the lead and zinc that exists in the deposit, due to a lack of geological information that’s needed to make a proper estimate on those secondary minerals. Historic Torbrit deposit data suggest base metal grades of about 0.42% Pb and 0.50% Zn. In past production, silver reported to the lead concentrate.

Secondly, the specific gravity data which was used in the modelling for the maiden resource was conservative, and was affected by the inadequacy of the available data. The Dolly Varden team believes that with the known presence of barite and sulfides, the specific gravity should increase and, therefore, result in a greater tonnage. Thirdly, further drilling should help to better outline the existing silver resource, as they will be able to obtain additional mineral density figures and fill gaps between existing drill holes.

Drill assay results were released November 23, 2016 for the 2016 field program on the Dolly Varden project. The program totalled 2,311.6 metres of core drilling, as well as surface mapping and sampling. It was highlighted by the intersection of multiple mineralized zones, including 2.0 metres of 2,488.5 g/t of silver within a broader intercept of 19.4 metres grading 485 g/t silver.

The 2016 field program verified the potential on Ace-Galena with the intersection of 405.7 g/t silver over 3.25 metres, which extends the mineralized horizons an additional 300 metres along strike. This only represents 10% of the 6 kilometre prospective trend. Further, the 2016 field program provided mapping and surface sampling data needed to prioritize and de-risk Dolly Varden’s exploration targets: Ace-Galena, Chance, Kitsol, Musketeer.


2017 Drill Program

I had the chance to speak with Rob van Egmond, Dolly Varden’s Chief Geologist, about the 2017 drill program. Summarized from our discussion:

  • ⅔ of the drill program will be focused on expanding the existing resource on the Dolly Varden, Torbrit down dip extensions and the gap between the Wolf and Torbrit domains.
  • The goal, not necessarily right after this drill program, is to expand the resource up to 100 Moz of silver, which is more than double the existing resource.
  • The remaining ⅓ will be focused on exploration or reconnaissance targets such as prospective areas within the Ace Galena domain.
  • Also, there will be geological mapping, plus geophysical and geochemical surveys planned for both the main Dolly Varden Ag-Pb-Zn Project and the adjacent Big Bulk Cu-Au Project.

NOTE: Dolly Varden owns the Big Bulk Copper-Gold Property which is located 10 km to the southeast along the south shore of Kinskuch Lake. The property is 2,640 hectares and consists of 7 mineral claims. Geologically, the Big Bulk property is in alkai porphyritic rocks of the Hazelton Group.

Interestingly, properties in the surrounding area, such as Auryn Resources’ Homestake Ridge Property, which sits directly north of Dolly Varden, will see extensive drilling in 2017. I asked van Egmond why there’s such interest in the this region of the Golden Triangle? To summarize, he said that it’s the age of the rocks; this area shares the same stratigraphy as the Eskay Creek mine, so a lot of the focus is on this similar VMS style mineralization.

PUSH: Expansion of the existing resource and the blue sky potential of new mineralization through the reconnaissance drilling of prospective targets.


A Comparison with One of Its Peers

To understand how Dolly Varden measures up in terms of valuation, I'm going to compare it to one of its peers. Now, you can never find an exact comparison, but I believe Alexco Resources fits the bill, in this case:

  • Alexco Resources – company analytics taken from Corporate Presentation
  • Primary Silver Company – 5 deposits on property
  • Location – Yukon, Canada (just north of BC)
  • MCAP - $239,400,000 (at the time that this report was written – TSX Listing)
  • Indicated and Inferred (I&I) (Cumulative Silver Resource) – 67,300,000 oz
  • MCAP (CDN $) / I&I (Ag oz) = 3.56 $/oz

Alexco is both an explorer and producer (they shut down production during the 2011 to 2015 bear market due to silver price declines), and while they are ahead of Dolly Varden in terms of asset development, they have many similarities. Both are located in pro-mining jurisdictions in Canada, both have multi-million ounce silver resources in the I&I category, and both have exploration potential. When comparing MCAP to I&I oz ratios, however, there’s a massive difference, as Dolly Varden’s ratio sits at 0.64 CDN $/oz compared to Alexco’s 3.56 CDN $/oz.

I don't disagree that Alexco’s production capacity is certainly worth something, but with Dolly Varden’s I&I resource at around 42.6 Moz of silver and the potential for it to be much higher, Dolly Varden is undervalued, in my opinion.

Here is a table of some other comparables:

Source: Dolly Varden


In summary, Dolly Varden has yet to gain recognition from the market for the deposit that it possesses, highlighting the 42.5 Moz and the low MCAP per oz valuation, as many of the Dolly Varden comparables trade at valuations well north of 1.00 CDN $/oz.

When you put it all together, at its current (at the time of writing) paltry market capitalization of around $26 million CAD, Dolly Varden Silver Corporation is, in my opinion, a tremendous bargain.

  • Consider that they possess the following:
  • Blue sky potential for exploration and all existing deposits are open
  • A proven management and technical team
  • Premiere jurisdiction – British Columbia
  • Around $3 million in their treasury, with no debt
  • A tight share structure
  • Current high-grade silver mineral resource of around 31.7 Moz Indicated and 10.7 Moz Inferred

To me, Dolly Varden's strong foundation sets it up well for overcoming the challenges that are commonplace in the junior mining industry; depleting treasuries, the possibility of exploration blunders, and the prospect of a falling commodity price. Take advantage of this silver company's undervaluation!


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Until next time,


Brian Leni P.Eng

Founder – Junior Stock Review


Disclaimer: The following is not an investment recommendation, it is an investment idea. I am not a certified investment professional, nor do I know you and your individual investment needs. Please perform your own due diligence to decide whether this is a company and sector that is best suited for your personal investment criteria. I do not own Dolly Varden Silver Corporation stock. All Dolly Varden Silver Corporation Corporation analytics were taken from their website and press releases. Dolly Varden Silver Corporation is a Sponsor of Junior Stock Review.