Eric Sprott boosts ownership in Dolly Varden Silver

Mine financier Eric Sprott is increasing his stake in Dolly Varden Silver (TSXV: DV; US-OTC: DOLLF) to 19.9% — buying 7 million common shares of the company in a private placement at a price of 33¢ per share for gross proceeds of $2.3 million.

“Eric is currently our largest shareholder with around 12.8% holdings in the company,” Shawn Khunkhun, Dolly Varden’s CEO, said in an interview. “Through this offering, we’re getting strategic support from somebody who is aligned with our long-term interests and who also provides a good source of funding.”

The financing, announced on May 19, “will allow us to conserve the hard dollars we have in the treasury and to top-up our flow-through balance sheet, which would allow us to spend around $4 million on the property and still have around $2 million in the treasury.”

The proceeds will be used for exploration, with a 10,000-metre drilling program slated for the summer at the company’s wholly owned Dolly Varden silver property in northwestern B.C.’s Gold Triangle region, 46 km southeast of Stewart and 23 km northeast of Alice Arm.

“This property has either been producing or has been explored for the last 100 years, with discoveries made on an annual basis,” Khunkhun said. “Some exciting discoveries were made on the property last year, so we’ll be following those up with our summer drilling program.”

In addition to the $2.3 million financing with Sprott, the company also announced a second private placement on May 20 of 10 million common shares at 45¢ per share for additional proceeds of $4.5 million.

An advanced exploration project with well-understood targets, according to Khunkhun, the property covers  88 sq. km approximately 46 km southeast of Stewart and 23 km northeast of Alice Arm on the central west coast of British Columbia. It also hosts four historic mines that produced 20 million oz. silver before the cessation of mining operations in 1959.

Currently, the property contains indicated mineral resources of 3.42 million tonnes grading 299.8 grams silver per tonne for 32.93 million contained silver oz. and inferred resources of 1.29 million tonnes grading 277 grams silver for 11.45 million oz. silver for a cut-off grade of 150 grams silver per tonne.

Under the May 19 deal with Sprott, Hecla Mining (NYSE: HL) has the right to retain its interest in the company by purchasing shares at 33¢, and, under the May 20 offering, Hecla will also be entitled to acquire common shares at 40¢ per share to maintain its pro-rata equity interest in the company.

“Hecla is also a 10%-plus shareholder,” Khunkhun said. “Should Hecla Canada decide to exercise its rights under the agreement, any common shares issued to them would be added to those issued as part of the offering.”

In addition to its equity stake in Dolly Varden Silver, Hecla is also active in the region with its wholly-owned Kinskuch property, which is located directly to the southeast of the Dolly Varden silver property and covers around 594 square kilometres.

At press time in Toronto, Dolly Varden Silver was trading at 41¢ per share within a 52-week trading range of 16¢ and 47¢.

The company has 83 million common shares outstanding for a $34.42-million market capitalization.