Finding a great company to invest in can be a lot like fishing. You have to know exactly where to look to find a tasty fish. And if you have ever eaten smoked Dolly Varden trout which is very similar to Artic Char, you know how tasty it can be!
Amidst this comparison we are pleased to be introducing the “Dolly Varden Silver Corporation” (TSX,V: DV) to our subscribers and like the trout we feel this is quite a tasty prospect! The Dolly Varden trout is like a junior company in that it exists in a feast or famine situation. The Dolly Varden trout actually feasts every day for a month on salmon eggs which are not actually going to turn into fish. It´s belly expands as it does so and this sustains it for the remainder of the year when food is scarce. After a period of extreme famine due to drastically poor conditions in the junior resource sector, plus dodging being eaten by a much bigger fish (more on this later), Dolly Varden Silver appears set to start feasting.
MANAGEMENT:
Former President Rosie Moore saved the sinking ship and should be giving a lot of kudos. She saved the company from a hostile takeover from Hecla Mining – more on that in the Market Interest Section. Currently Dolly Varden is in good hands with new President and CEO Gary Cope steering the ship.
LOCATION:
Location often means the difference between success and failure in the mining business. You can have the greatest deposit but if it costs a fortune to ship the ore to a mill, or to ship the concentrates overland, it can throw a lot of cold water on the profits or stop production from ever starting. Dolly Varden is very fortunate to have their project located in northwestern British Columbia only 25 km from open water, meaning overland shipping costs will be low upon production. Hence it’s location has led to the company name and this is a great situation in our estimation. And like the Dolly Varden trout must be near the mighty salmon to survive, our Dolly Varden is in close proximity to some mighty big fish.
Dolly Varden is in a very elite neighbourhood known as the ‘Stewart complex’. This area is known for high grade projects with the world famous Eskay Creek mine located only 100 km north. (Now a closed mine). The exciting Brucejack gold project owned by Pretiun Resources is located even closer – and all 3 are all considered to be on the same overall trend.
SIZE:
The Dolly Varden property is approximately 9,400 hectares or 94 sq km (app 36 square miles) in total making this a sizeable property considering it’s past mining history.
And like our trout companion we expect the size of its belly of resources to expand!
The company currently holds four historical deposits on which between 1919 and 1959, about 20 million ounces of silver was produced in total, with the majority of the ore having been mined at about 13 ounces per ton. A smaller amount was mined at approximately 36 ounces per ton. If history is any indication there is plenty of room to expand these estimates since their type of deposit is known as VMS (volcanic massive sulphide) which are known to occur in region sized clusters.
EXISTING DEPOSITS:
The four deposits in order of mineral estimate size are the Torbrit, Dolly Varden, Wolf and North Star.
Added together they are estimated by the company to contain approximately 32 million ounces of high grade silver in the indicated category and over 10 million ounces of high grade silver in the inferred category. (More details can be found at their – Website).
MARKET INTEREST:
All of these positive attributes were enough to attract the attention of leading low cost silver producer Hecla Mining (NYSE.HL).
You might say they were fishing for a nice Dolly Varden trout…. but this Dolly Varden proved to be too a slippery catch for Hecla!
In June 2016 they launched a formal takeover bid for the company at CAD .69 cents per share but Dolly Varden management wasn’t taking the hook! Since Hecla was already an investor in the company the bid was rejected on the grounds that it was an insider bid and “and therefore Hecla must obtain and disseminate to the Company’s shareholders (at its own expense) an independent formal valuation.” (from a Dolly Varden company press release.)
Hecla announced that they were disappointed but intended to maintain their share ownership in Dolly Varden and in fact took part in the private placement which they had been trying to foil by buying out the company. They did this in order to maintain their ownership percentage, which is approximately 19% of outstanding shares. This capital raise left Dolly Varden debt free with 100% ownership of their properties which is an enviable position to be in as any junior will tell you….Seems like this fish ended up turning the tables…..
The takeaway from all of this is one of the worlds leading silver mining companies with 4 operating mines wanted to own Dolly Varden’s properties and when they couldn’t achieve that goal they bought more shares anyways! So what do the experts know that we should know?
This points to a highly prospective junior company with multiple deposits and past production in an area known for very large and exceptionally well mineralized VMS deposits (volcanic massive sulphide) .
REGIONAL GEOLOGY:
The geology in this region is known as the Stewart Mining Camp, home of the famous high grade Eskay Creek Mine Gold Silver Mine.
In fact the company has a comparison to the Eskay Creek mine on their website. Eskay Creek is now closed is but widely known for very high grades of precious metals and for being one of Barrick Mining’s lowest cost producers. Barrick in fact is looking for similar deposits in the area. Fishing for another big catch you might say…
In layman’s terms the theory is that Eskay Creek was produced by a so called “Black Smoker” which is basically an undersea volcano emitting mineral rich material which piles up and eventually finds itself gathered in deposits on a mountain range many, many years later. Very high grade mineralization can occur this way, and the company feels that their mineralization may have occurred in a similar fashion.
The following image from the Dolly Varden website illustrates how mineralization is believed to have occurred:
Another very impressive “big fish” not quite so far north is the Brucejack project which is owned by Pretiun Resources (TSX:PVG NYSE:PVG). With a recently updated estimate of 8.1 million ounces of gold in the proven and probable reserves category, you really couldn’t ask for a much better neighbourhood to be fishing in- especially with four deposits already identified.There is obviously a lot of mining expertise in the region which is handy to be able to draw upon. The following image from the Dolly Varden website shows how close they are to some of the most exciting mineral deposits you can find anywhere…
Speaking of mining expertise Dolly Varden has just announced a new exploration director with amazing credentials. Joining up with an award winning professional geoscientist with more than 35 years in the business is a sign you are getting serious! Ben Whiting P.Geo won IAC Explorer of the Year in 2008 and won a medal as “Economic Geologist” as well as doing work as an adjunct professor at Queens University in the Geo Sciences and Mining Engineers Departments. He is also Vice President of Exploration for two other TSX.V listed companies. A class act for sure.
SHARE STRUCTURE
Dolly Varden has a very low amount of outstanding shares, fully diluted they have 38,809,254 shares outstanding. At the current share price of CAD .60 cents this gives them a market cap of just over $23 million which given their 100% ownership and lack of debt, we see as an excellent company to consider having in a portfolio. Management is doing a very good job of looking out for shareholders in our opinion, fighting off a takeover and maintaining ownership through extremely difficult famine conditions.
So besides being in very good company in the smoked fish category as far as their name goes, Dolly Varden is also in amazing company geologically speaking with some of British Columbia’s finest discoveries, it appears that it is time to feast.
It is also very encouraging that the company is expanding existing deposits in a precious metals market where the silver price is still under-performing by most standards. If Dolly Varden can continue to prove up high grade silver resources and the silver price begins to gain more ground as many experts have long predicted, we could see a double whammy appreciation of market cap for this well positioned Canadian junior silver company.
Therefore, we wouldn’t be surprised to see the company celebrate some great mineral discoveries at a company function one of these days.
Smoked trout anyone?
Happy Investing,
Dr. Kal KoTECHa
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© 2010 Junior Gold Report
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