Dolly Varden Silver Corp. (DV:TSX.V; DOLLF:OTCQX) offers upside in exploration potential on its sizable land package and in its current, likely expandable mineral resource, purported Haywood Securities analyst Marcus Giannini in a May 9 research note. Giannini recently took over covering this mining company.
"While we believe the opportunity for discovery within the greater land package remains a significant catalyst for future value creation, we also view the current endowment of defined gold and silver resources as a starting point for a modest underground and conventional mining and processing scenario," Giannini wrote.
142% gain, catalysts
Haywood has a Buy rating and a CA$2.40 per share target price on the Canadian explorer-developer, currently trading at about CA$0.99 per share, noted Giannini. As such, the implied return for investors is 142%.
"We recommend investors accumulate shares of Dolly at current prices," Giannini wrote. "We believe the primary value driver for Dolly over the short and long term should occur by way of the drill bit, as the firm's 2024 program nears commencement."
Start of this summer exploration campaign is an upcoming catalyst for Dolly Varden Silver, as is an update to the mineral resource estimate for its Kitsault Valley project in British Columbia's Golden Triangle.
Initial production scenario
Giannini presented the highlights of the Dolly Varden Silver story.
One is the company's existing high-grade gold and silver resource for its Kitsault Valley project, comprised of gold-rich Homestake Ridge to the north and various silver-dominant deposits to the south (Dolly Varden, Torbrit, North Star and Wolf). The current Indicated plus Inferred resource at Kitsault Valley totals 64,000,000 ounces of silver and 982,712 ounces of gold.
"Grade, jurisdiction and upside to resource growth sets these ounces apart from other peers in the space," Giannini wrote.
Based on the current resource, Haywood outlined a production scenario for Dolly Varden Silver, in which it has two underground mines feeding ore to a centralized processing plant. Production would be about 84,000 of gold equivalent (Au eq) per annum for about 13.5 years. Estimated costs would be US$150 million (US$150M) as initial capex, US$851 per ounce of Au eq as the all-in sustaining cost and US$78M as life-of-mine sustaining capital.
"Our assumed production scenario may be conservative," Giannini commented.
Potential for new discoveries
Given Dolly Varden Silver's 163 square kilometer land package in the prolific Golden Triangle, Giannini asserted, numerous opportunities exist for the Vancouver-based mining company to discover additional mineralization at Kitsault Valley and grow its existing resource.
"Driven by the underlying geology and metallogenic setting, we continue to see promising drill results within the current resources, as well as when stepping out into more untested zones," added the analyst.
Various deposits remain open at depth and along strike. Untested targets exist along the Kitsault Valley Trend that lies between the contiguous Dolly Varden and Homestake Ridge properties. Beyond the known deposits, the greater Kitsault Valley land package offers prospective targets, too.
"Dolly Varden's planned 2024 exploration program could be transformational as high-priority areas remain open for expansion while untested regional targets could lead to additional deposit discoveries," Giannini wrote.
The company has sufficient cash for this planned work.
Attractive takeout target
Giannini wrote that Haywood expects additional merger and acquisitions activity to occur, particularly in tier one jurisdictions such as the Golden Triangle, and Dolly Varden Silver's Kitsault Valley could get taken out, for various reasons.
The project has high quality ounces. Its "mineralogy and depositional context" are similar to those seen at another Golden Triangle project, Brucejack, acquired for US$2.8 billion in 2022 by Newcrest Mining. Already, North American producers have expressed an interest in Dolly Varden Silver, such as Hecla Mining, now with about a 15% stake in it.
"Kitsault Valley remains a good fit for established producers," wrote Giannini.
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