Transformed Dolly Varden Silver in discovery mode, says CEO

Looking back on the past two years since he took the reins as CEO of Dolly Varden Silver (TSXV: DV), Shawn Khunkhun points to a critical acquisition the company made in December 2021 as being the lynchpin to the company’s recent exploration and fundraising success.

The British Columbia-focused explorer has district-scale holdings, the Kitsault Valley project, in the southern leg of the province’s so-called Golden Triangle – a region that has generated about $5 billion in M&A activity since 2018.

Khunkhun tells The Northern Miner the company has undergone a metamorphosis since he took the reins in February 2020, pivoting on a better-defined strategy to de-risk the project, expand the existing resources and grow the business.

“Our goal is to either groom this project into a saleable asset in the next 36 months or to have it ready for a construction decision for ourselves. If someone like Hecla Mining (NYSE: HL) were to acquire us today, we’d comprise about 15% of their total resource base,” said Kunkhun in an interview.

When the executive first came to Dolly, it held a 44 million oz. high-grade silver resource, but it had already seen 20 million oz. of production. The former 100-year-old Dolly Varden silver mining camp covers four historic mines that produced more than 19 million oz of silver over four decades beginning in 1919.

“We set to work to bring in the right shareholders and cash infusion. The strategic alignment with key investors such as Hecla and mining entrepreneur Eric Sprott helped us have one of the strongest shareholder registries out there.”

A critical development came in December 2021 when Dolly Varden acquired Fury Gold Mines’ (TSX: FURY; NYSE-AM: FURY) Homestake Ridge gold and silver project in a cash-and-scrip deal valued at $50 million.

Homestake Ridge is next to Dolly Varden’s namesake project and sits about 32 km southeast of Stewart and 113 km from the town of Terrace.

Khunkhun says the acquisition was crucial for solidifying the company’s position in the prospective Kitsault Trend and added critical mass to the combined Kitsault Valley project. The combined project hosts 34.7 million oz. silver in indicated, comprising 3.4 million tonnes at 299.8 grams silver per tonne at the Dolly Varden project, and 736,000 tonnes grading 74.8 grams at the Homestake Ridge deposit. Hoestake also has a gold component of 165,993 oz. held in 1.8 million tonnes at 1.02 grams per tonne.

A further 29.3 million oz. silver is inferred, comprising 1.3 million tonnes grading 277 grams per tonne at the Dolly Varden deposit, and 5.5 million tonnes at 100 grams silver per tonne at Homestake Ridge, which again also includes a gold component of 17.4 million tonnes at 4.58 grams per tonne.

equivalent basis, the project hosts about 140 million oz. across all categories.

Since completing the acquisition, under the leadership of VP Exploration Robert van Egmond, appointed in March, the company has been focusing on converting the existing Homestake resource to higher-confidence categories. It has released regular drill results through 2022, reporting wide intercepts that include bonanza silver and high gold values.

Khunkhun said the 2022 exploration drilling program was split equally between the resource expansion and upgrading at Homestake and the Torbrit deposits and looking for discoveries along the Kitsault Valley trend.

It has completed an expanded program of 37,000 metres in 108 drill holes, for which results for 50 drill holes remain pending from Homestake Ridge and Dolly Varden.

The company deployed three diamond drill rigs, with a fourth added during the season on new zones.

It had also completed ground geophysics along the 5.4 km central valley area, which generated new targets.

Discovery potential

According to Khunkhun, most importantly, the team completed geological field work, with structural mapping leading to discovery targeting.

On Nov. 20, Dolly Varden released promising explorations results from the emerging Wolf target. A highlight intercept from the 2022 season at Wolf returned 412 grams of silver per tonne over 12.8 metres (5.4 metres actual width), including 2.2 metres (0.9 metres true width) grading 1,646 grams silver, 2.4% lead, 3.1% zinc and 0.1 grams gold.

The program has significantly expanded the high-grade silver mineralization, which occurs in wide and localized shoots hosted within silica vein and breccia sets, Khunkhun says.

“The continuity of silver mineralization underneath the sedimentary cover near the bottom of the Kitsault Valley results in new blind discoveries within the Dolly Varden mining camp. It’s a result of innovative exploration and modelling techniques,” he said.

Additional results from step-out drill holes testing for deeper, down-plunge mineralization from DV22-316 at the Wolf Vein are currently pending.

“Torbrit represents a 50 million ounce silver deposit, which after depletion over the years currently sits at around 35 million oz. left in the ground. I want to find another Torbrit, and I suspect we are finding that in Wolf,” he said.

During the summer, the company drill-tested below the sediments and hit the important Hazelton Volcanic Sequence that delivered the high-grade intercepts.

It represents a volcanogenic system with 30-40-metre-thick intervals, with more mineralization up to 300 metres depth emplaced during a secondary epithermal mineralizing event. This event is responsible for the kilogram silver hits reported to date.

“While it’s early stage, we can already see a conceptual bulk mining operation here in the future, and what’s more, we’re starting to see more gold at depth at Wolf. It spells mineral upside,” said Khunkhun.

“We’re starting to get gold in the system as well. If you study the Golden Triangle and look at Eskay Creek, the Premier, and Bruce Jack deposits – they all started as high-grade silver deposits and then later morphed into some of the biggest and richest gold mines in the planet,” said Khunkhun.

Having just closed a $22.6-million private placement in which Hecla participated to maintain its 10.21% interest in Dolly Varden, the company heads into the New Year with $28 million cash in the bank. It is fully funded for a planned $21 million drilling campaign to execute its de-risking, growth and discovery strategy.

Company shares have traded between 36¢ and $1.02 over the past 12 months, last trading at 80¢ per share. While the stock had come down from its recent highs, it still is up 16%. It has a current market cap of $203 million.