Situated within a region mostly known for its vast copper and gold resources, Dolly Varden Silver Corp. (TSXV: DV) (OTC: DOLLF) is uniquely positioned as a pure silver miner exploring the Golden Triangle of British Columbia.
The company’s flagship and namesake project hosts as many as four historically active silver mines, including two past-producing deposits with a combined silver production of 20 million ounces between 1919 and 1959.
Exploration focus is currently on expanding the high-grade silver resource at the Torbrit deposit, which accounted for most of the historic production (19 Moz), and finding potential Torbrit “look-alikes” along a trend that stretches over 4.5 km.
The ultimate goal is to advance Dolly Varden to be the next high-grade pure silver mine in this prolific mining region.
Golden Triangle Overview
While most of the world’s silver is mined in Latin America and China, British Columbia should not be overlooked as a past and future silver producer. The province is endowed with one of the richest mineralized regions on the planet, in the Golden Triangle of northwestern BC.
With over a century of mining history, the Triangle has been the site of three gold rushes and some of Canada’s greatest mines, including Premier, Snip and Eskay Creek. Other significant and well-known deposits include Brucejack, Galore Creek, Copper Canyon, Schaft Creek, KSM, Granduc and Red Chris.
The Golden Triangle takes its name from a 500 km belt of mineralization that stretches from the British Columbia-Yukon border in the north, to the town of Kitsault, just southeast of the port of Stewart, BC. The Kitsault area is historically associated with molybdenum and silver production.
Dormant for a number of years due to low precious metals prices and its relative isolation compared to other mining districts, lately there has been a resurgence of interest in the Golden Triangle, with the excitement driven by:
Today, some of the world’s biggest mining companies, the “majors”, have established their presence in the Golden Triangle. These include Canada’s Teck Resources, US gold and silver giants Newmont and Hecla, and Australia’s Newcrest Mining.
At the western edge of the triangle, Teck and Newmont jointly own the Galore Creek deposit, while to the northeast, Teck and Copper Fox Metals have partnered up to advance Schaft Creek, touted as one of the largest undeveloped porphyry copper-gold-molybdenum-silver deposits in North America.
To the southeast, Skeena Resources is aiming to re-open the past-producing Eskay Creek mine, which has open-pit reserves of 3.88Moz at 4.57 grams per tonne (g/t) gold-equivalent (AuEq) in the proven and probable category. A prefeasibility study was completed this past July, and a feasibility study is expected in the first quarter of 2022.
Towards the south, Pretium’s high-grade underground Brucejack mine opened in 2017. The gold operation, sandwiched between two glaciers, features a year-round all-weather road that connects the mine to Highway 37, and grid-scale power infrastructure. Since commercial operations began, Brucejack has produced 1.3Moz.
Dealmakings in the Golden Triangle
In recent years, BC’s Golden Triangle has recently witnessed a flurry of deals involving companies looking to beef up their portfolios.
In 2019, Newcrest acquired 70% of the Red Chris open-pit operation in a joint venture with Imperial Metals. The Australian miner is investing C$135 million to build an exploration decline at the copper-gold mine. Production last year was 88.3 Mlb copper and 73,787 oz gold.
In May 2021, Newmont bought GT Gold for C$393 million, giving the world’s leading gold company control of the Tatogga copper-gold project located 14 km west of Red Chris.
Also this year, Ascot Resources secured a C$20.6 million private placement financing from Canadian mid-tier producer Yamana Gold. The funds are expected to accelerate Ascot’s exploration of the past-producing Premier gold mine. A 2020 feasibility study outlined an eight-year mine producing an average annual 132,375 oz gold and 370,500 oz of silver.
Interest from the majors in the Golden Triangle is also rubbing off on several junior companies working there.
For example, Skeena has seen a significant re-rating commensurate with its success so far in developing the historical Eskay Creek mine, moving from around $30 million market value two years ago to its current $770 million.
Eskay Creek Mining has gone from a $2 million market cap to $350 million, with its Eskay-Corey property having been shown to host five main VMS targets with the potential for nickel-copper massive sulfides and numerous occurrences of vein-style mineralization.
The exploration success and elevated status of these Golden Triangle landholders make a company like Dolly Varden Silver, with its presence in the southern corner of the Triangle (see map below), the least explored part of this prolific mining region, worth monitoring going forward.
Dolly Varden Property
The Dolly Varden silver project comprises 8,800 hectares (88 sqkm) of land in the Stewart Complex of northwestern BC, which is known to host base and precious metals deposits. The property has four historically active mines: Dolly Varden, Torbrit, North Star and Wolf.
Mining activity at the Dolly Varden property can be dated back to 1910, when the original Dolly Varden mine was discovered by Scandinavian prospectors.
In its early days, it was among the richest silver mines in the British Empire. The other deposit in the area to see production later was Torbrit, which, at one time, was the third-largest silver producer in Canada.
Historical records show these two deposits together have produced more than 20 million ounces of high-grade silver between 1919-1959, with assays of ore as high as 2,200 oz (over 72 kg) per tonne.
Production subsequently ceased due to low silver prices, and the assembled property was eventually acquired by DV with a view of re-awakening the historic silver mine.
An updated NI 43-101 resource estimate completed by the company in 2019 revealed 32.9Moz silver in indicated resources and 11.477Moz inferred, for a total of 44Moz Ag, all adjacent to the historical deposits.
Drilling and underground work that went into the resource estimation confirmed that the mineralization occurs as two styles.
The first is a bedding-parallel VMS similar to that mined at Eskay Creek to the north. Once the highest-grade gold mine in the world, Eskay Creek produced 3.3Moz gold and 160Moz silver at average grades of 45/g/t Au and 2,224 g/t Ag respectively between 1994 and 2008.
The second is a cross-cutting epithermal mineralization similar to that being developed at Pretium’s Valley of the Kings deposit (Brucejack mine).
As mentioned earlier, the southern part of the Golden Triangle is the least explored of all. Only 3% of DV’s property has been explored in detail up until now, leaving plenty of potential exploration/discovery upside.
According to DV, both the Eskay Creek and Valley of the Kings deposits are located on the same structural trend to the north of Dolly Varden’s ground. Could Dolly Varden represent the southern end of a silver district that extends northward? It’s entirely possible and further exploration may just prove it.
In 2020, the company drilled a total of 11,397 meters in 40 drill holes, 19 of which were in the Torbrit deposit area. The rest were reconnaissance and exploration drill holes, testing multiple areas on the property.
Highlights included 310 g/t over 6m, a stand-out 304 g/t over 45.82m and 306 g/t over 5.10m. Higher-grade core within those intercepts featured 648 g/t over 6.06m, 1,595 g/t over 1.06m and 1,290 g/t over 0.6m.
“We are seeing consistent intervals of high-grade silver mineralization at the Torbrit silver deposit that has the potential to support economically attractive underground bulk-mining techniques, while at the same time each successive drill program continues to demonstrate that the deposit is open for expansion,” Dolly Varden’s CEO Shawn Khunkhun said in a news release back in February.
At the time, Khunkhun didn’t rule out any additional surprises on top of a potential Torbrit-like silver discovery, referencing the million-ounce resource at the neighboring Homestake Ridge property held by Fury Gold Mines’ (TSX: FURY) as a precursor for major gold discoveries (more on this property later).
The Dolly Varden property also lies to the west of Hecla Mining’s (NYSE: HL) Kinskuch property, an early-stage project with potential for discovery of epithermal silver-gold, gold-rich porphyry and VMS deposits.
But the immediate and ultimate focus is still silver, given that Dolly Varden is the largest pure-play silver project in all of Canada.
DV is currently in the midst of an aggressive two-year drilling campaign designed to expand the existing silver resource of the Torbrit deposit and to test multiple highly prospective targets on the property. The initial surface diamond drill program consists of 10,000 meters.
For over two years, the company has been updating the resource model with drilling to bolster its understanding of the existing resource, so that it could easily target specific areas of the deposit for conversion from inferred to indicated/measured resource categories.
This year’s drilling at Torbrit will focus on areas within the updated block model where a high percentage of inferred resources exist, and where the higher silver grade blocks are at the outer edges of the model.
Consolidating Silver-Gold District
As we’ve previously discussed, DV effectively has a two-pronged approach to increasing shareholder value. Not only could it grow the Dolly Varden resource base through more drilling, but the company could also go a step further by acquiring neighboring properties.
“It’s either going to end with us being a development project in the pipeline for a producer, or we take the bull by the horns on the back of drilling success and we build it ourselves, making us a much bigger entity, a leader in the area, but either way I see it as a win for our shareholders,” DV’s chief executive Shawn Khunkhun told AOTH in an interview earlier this year.
This is where the aforementioned Homestake Ridge gold-silver property comes into play.
This week, DV made its biggest move yet by acquiring this project from Fury Gold Mines in a transaction valued at C$50 million. The Homestake property covers a 7,500-hectare land package contiguous to and northwest of the Dolly Varden property.
Homestake currently hosts an estimated resource of 165,993 oz gold and 1.8 million oz silver in the indicated category, plus 816,719 oz gold and 17.8 million oz silver in the inferred category.
The property is located within the prolific Iskut-Stewart-Kitsault belt, which hosts several precious and base metal mineral deposits, about 32 km southeast of Stewart, BC. It is situated close to regional infrastructure: Northwest Transmission Corridor, deep water access and existing road within 6 km of the deposit.
“The close proximity of the deposits that make up the current mineral resource estimates, combined with common infrastructure in the region, is expected to generate substantial co-development synergies as these deposits are advanced in combination,” DV stated in a media release.
To date, more than 275 holes for over 90,000m of drilling have been completed on the Homestake property; multiple exploration targets remain to be tested along a combined 15 km strike length.
A standalone preliminary economic assessment (PEA) for the Homestake project had previously indicated an after-tax net present value (NPV) of $173 million and an internal rate of return (IRR) of 32%, based on a 1,620/oz gold price and $14.40/oz silver price. The study estimated a total gold-equivalent production of 590,040 oz over a 13-year initial mine life, at an all-in sustaining cost (AISC) of $670/oz gold.
Following the transaction, Homestake and the Dolly Varden project will be amalgamated to form one single project known as Kitsault Valley, with a combined mineral resource base of 34.7Moz silver and 166,000 oz gold indicated and 29.3Moz silver and 817,000 oz gold inferred.
This combination would solidify DV’s Kitsault Valley project as among the largest high-grade, undeveloped precious metal assets in all of Western Canada.
Commenting on the company’s expanded footprint within the Golden Triangle, Khunkhun said this land combination is expected to result in “significant synergies in the areas of exploration, development, permitting and production.”
“The commercial logic behind the combination of these two adjacent assets is very strong,” Tim Clark, CEO and director of Fury, further added.
For months, we’ve been urging to see what the next phase of Dolly Varden’s transformation beholds, after witnessing the exploration progress the company has made on its flagship silver property. This week, we finally got our answer.
Not only does the Homestake project acquisition almost doubles its footprint within BC’s prolific Golden Triangle, the combined silver-gold property (named “Kitsault Valley”, after the remote settlement northwestern BC known for its rich mining history) now sits on what may be one of Canada’s largest undeveloped silver resources.
This deal is also a clear indication that the company, bolstered by significant fundings over the past years (including from billionaire investor Eric Sprott and Hecla), is not only looking to spend on existing exploration plans, but also on opportunities to expand its asset base.
It’s important to note that, of the consideration paid for the Homestake project, only C$5 million was cash. The remaining will be paid in equity, resulting in Fury becoming a significant shareholder with 36.9% of DV’s outstanding shares.
Such a payment structure would provide DV with great financial flexibility (~C$20 million in its cash bank prior to the deal with Fury) should it choose to pursue further growth opportunities in the future.
Dolly Varden Silver Corp.
Shares Outstanding 130.6m
Market cap Cdn$78.5m
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