Silver Co.'s Charitable Offering To Include Eric Sprott

Dolly Varden Silver Corp. (DV:TSX.V; DOLLF:OTCQX) announced a CA$15 million bought-deal charitable public offering that is expected to include participation from mining financier Eric Sprott.

A group of underwriters has agreed to buy 14,285,700 flow-through shares of Dolly Varden to be sold to charitable purchasers at a price of CA$1.05 per charity flow-through share for a total of CA$14,999,985.

The company said Sprott, through 2176423 Ontario Ltd., indicated he intends to participate.

Dolly Varden said the funds would be used for exploration, resource expansion, and drilling at its 100%-owned Kitsault Valley in British Columbia's Golden Triangle, which includes both the Homestake Ridge and Dolly Varden properties. Last month, the silver company announced it had intersected a new gold-rich zone, prompting Chris Temple, editor and publisher of The National Investor, to call its assay numbers "remarkable."

"They really have turned themselves into one of the more compelling district plays," Chris Temple of The National Investor said.

"They really have turned themselves into one of the more compelling district plays," Temple said of Dolly Varden.

According to the Association for Mineral Exploration, traditional flow-through shares are sold to end-buyers and held for eventual tax deductions through the issuers. Flow-through charitable financings are sold to philanthropists who sell the shares to investors and receive tax credits for the donation with no fees charged to the issuer or end buyer.

"The governments allow the eligible exploration expenses to be 'passed along' to the investor who purchases flow-through shares," the AME reported. "The incentive has been around for decades and has helped build a number of mines in Canada and advance projects in more remote regions, providing employment and skills training for a variety of people from line-cutters to engineers."

More Details of Transaction

Research Capital Corp. is the sole book-runner and co-lead underwriter of the offering, together with co-lead underwriter Haywood Securities Inc., on behalf of a syndicate of underwriters, including Raymond James Ltd.

The closing of the offering is expected to occur on or about March 21, subject to the company receiving all necessary regulatory approvals, including the approval of the TSX Venture Exchange, to list the charity flow-through shares on the date of closing, Dolly Varden said in a release.

The underwriters will receive an aggregate cash fee equal to 5% of the gross proceeds of the offering, the company said. Eventus Capital Corp. has been appointed as a special adviser.

"If there are a few more holes like this, Dolly Varden Silver may need to put 'gold' in its name," Bob Moriarty of 321gold.com wrote this week.

Under existing agreements with Dolly Varden, Hecla Mining Co. (HL:NYSE) and Fury Gold Mines Ltd. (FURY-T) are entitled to acquire common shares of the company in connection with the offering at a price of 80 cents per common share to maintain their pro rata equity interest in the company. If exercised, those common shares issued will be in addition to those issued as part of the offering.

On the same day, Fury announced in another release that it had entered into an agreement with Haywood Securities Inc. to sell up to 5.45 million shares of Dolly Varden at 73.5 cents per share for up to about (CA)$4 million in private, off-market interactions for exploration and capitals funds.

After the transaction, Fury's ownership in Dolly Varden will be reduced from the current 22% to 19.99% of its outstanding common shares.

"Fury will continue to hold its shares in Dolly Varden for investment purposes and will evaluate its investment in Dolly Varden on a continuing basis and may increase or decrease its holdings in Dolly Varden in the future," Fury said in the release.

Hecla owns about 10% of Dolly Varden, according to Reuters.

The Catalyst: 'Bonanza-Grade' Gold

Highlights from the last 48 drill holes at Homestake Ridge released last month included one hole that returned 79.49 grams per tonne gold (g/t Au) and 60 g/t silver (Ag) over 12.45 meters, including 1,335 g/t Au and 781 g/t Ag over 0.68 meters.

"If there are a few more holes like this, Dolly Varden Silver may need to put 'gold' in its name," Bob Moriarty of 321gold.com wrote this week.

One analyst said the results included "bonanza-grade" gold. Marcus Giannini of Haywood Capital Markets said the results compare favorably to Newcrest's Brucejack Gold Mine, which produces 300,000 ounces Au per year.

Homestake Ridge's new high-grade zone "hints at a broader gold trend between Homestake Silver and Main," he wrote. "We expect the Company’s 2024 summer drill program to include follow-up drilling within this area by way of further step-out holes along trend."

Announcing its 2024 drill plans will be an upcoming catalyst for the company, as will launching a royalty business with the Nisga'a Nation of northwestern British Columbia and completing a Kitsault Valley mineral resource estimate.

Moriarty also noted that DV's tight ownership structure could "really ignite the stock."

"If generalist investors return to the precious metals space, Dolly Varden Silver's low float could lead to an outsized move as buyers chase limited shares," he wrote. 

Ownership and Share Structure

Reuters provided a breakdown of the company's ownership and share structure, where management and insiders own approximately 0.11% of the company. According to Reuters, Director Darren P. Devine owns 0.07%, Director James Anthony Sabala owns 0.02%, and Director Robert John McLeod owns 0.01%.

Reuters reported that strategic investors own 41.6% of the company, as Fury owns 22.01% of the company with 59.50 million shares (to be reduced to 19.99% once its sale of Dolly Varden shares closes), Hecla owns 10% of the company with 27.04 million shares, and 2176423 Ontario, Ltd. owns 9.49% of the company with 25.63 million shares.

According to Reuters, institutions own approximately 13.41% of the company, including Fidelity Management & Research Company L.L.C. with 6.29%, Sprott Asset Management L.P. with 2.01%, E.T.F. Managers Group, L.L.C. with 1.96%, and Mirae Asset Global Investments (U.S.A.) L.L.C. with 1.33%.

Ownership will be subject to change once the deal with Fury is closed.

Reuters reports that there are 270 million shares outstanding with 157.9 million free-float traded shares. The company has a market cap of CA$213.35 and trades in a 52-week range of CA$0.58 and CA$1.24.

Important Disclosures:

1. Dolly Varden Silver Corp. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000.
2. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Dolly Varden Silver Corp.
3. Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
4.  This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company. 

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Contributing Author Disclosures

1. Bob Moriarty: I, or members of my immediate household or family, own securities of: Dolly Varden Silver Corp. My company has a financial relationship with Dolly Varden Silver Corp. I determined which companies would be included in this article based on my research and understanding of the sector.