New Silver Discoveries in the Golden Triangle

Earlier this year, I wrote an article on Dolly Varden Silver Corporation, a company which is exploring for silver in British Columbia's Golden Triangle.Dolly Varden's 100% owned, 8,800 hectares of property is set in the heart of the Golden Triangle, and in proximity to the world-famous Eskay Creek mine which produced approximately 150 Moz of silver, and 3.5 Moz of gold over the course of its mine life.

On May 29th, Dolly Varden announced the commencement of their 5,000m drill program. The original plan called for 2/3 of the cash to be allocated towards expanding their existing high-grade 42.6 Moz of silver resource. The remaining 1/3 was to be used for some reconnaissance drilling on targets beyond the current resource estimates.

Dolly Varden Silver ResourceFast-forward to today and the drill results have been great. In fact, things have been going well enough in all areas of the drill program that the company has announced an extension. Before getting into any of the specifics, let's take a quick look at the silver market.

Current Silver Market

According to The Silver Institute, the net balance between silver supply and demand since 2007 has been negative, meaning there is a shortfall in supply.While this is very bullish for silver, the price hasn't shown the strength that you may expect, because, thus far, it has averaged around USD $17 in 2017.

In June, I interviewed Maria Smirnova, Senior Portfolio Manager at Sprott Asset Management. Smirnova currently manages the Sprott Silver Equities Class, which is a fund that seeks to achieve long-term capital growth through investment in silver equity securities of companies that are directly or indirectly involved in the exploration, mining, production or distribution of silver.

In the interview I asked Smirnova about her outlook for silver for the remainder of 2017. She replied,

"It's hard for me to see much downside for silver at these levels. We've come off a high of $21 last year and now it's at $16.50. Basically, if you go much lower, companies will go back to environments where they don't make money. In that environment, production will have to start coming off and the supply-demand-balance will be pressured and, as it is, I would say that from the physical perspective, silver has been in a physical supply deficit for three or four years now." ~ Maria Smirnova

Given that we averaged about USD $17 per ounce of silver in 2017, as Smirnova says, we're hovering around the cost of production for many of the world's silver producers.This doesn't mean the price can't go lower, as it certainly can, but given some current events in the world of silver production, I believe there's a higher probability for higher silver prices.

Tahoe Resource's Problem in Guatemala

The prices of commodities are set by their supply and demand fundamentals. When there isn't enough of a certain commodity, such as silver, while not instantaneously, the price should go up over time. Supply interruptions can occur for a variety of reasons, but possibly the most dreaded is for political reasons, as the outcomes can be devastating.

Political or jurisdictional risk is very real and, when things go from good to bad, seemingly overnight, it's more important for you to have a good handle on the amount of risk you're taking on when investing in mining companies. A current example of this is Tahoe Resources' problems in Guatemala.

In July of this year, the Guatemala government suspended Tahoe Resources' Escobal mining license until it can examine CALAS's (a non-governmental organization) claim that the Ministry of Energy and Mines violated the Xinca Indigenous Peoples' right to consultation before granting a mining license to Tahoe's Guatemala subsidiary, Minera San Rafael. (Tahoe Resources News Release)

The Escobal Mine is the 2nd largest primary silver mine in the world, with proven and probable mineral reserves totaling 23.7 million tons with an average grade of 351 g/t, which translates into roughly 267.5 million ounces of silver. The mine had been operating for 3 years and, in 2016, produced 21.2 million ounces of silver in concentrate.

When could we see this issue resolved? In the same news release, Tahoe says the following,

"the Company will also be requesting the Supreme Court to resolve CALAS's definitive constitutional claim. The definitive constitutional claim and appeal process could take between 12 and 18 months" ~ Tahoe Resources News Release

While this issue certainly doesn't guarantee appreciation in the silver price, I do believe it gives us a higher probability for higher prices based on the fundamentals of the silver sector.

Dolly Varden Drill Results

Whether you think the silver price is going higher or not, buying quality companies in premier jurisdictions, in my opinion, should be your main objective when it comes to investing in the mining sector.

Dolly Varden's latest drill results further solidify themselves in this high quality category, as it appears as though the next resource estimate will be much larger. To note, the previous resource estimate gave no credit to the lead and zinc present in the mineralization, which is a large omission, especially given the high zinc prices that we have seen lately.

As seen in the news release, thus far, the Torbrit domain will play a big part in the expansion of the existing resource, as they want to focus on its down dip extensions and the gap between it and the Wolf domain.Drill results thus far show that the encountered mineralization is in line with the domain's historical data and has provided support for the geological model of the deposit.

Confidence in the geological model should provide the company and us as investors with a higher degree of confidence moving forward as they explore new targets on the property.

Here are a few of the highlights from the Torbrit drill results released, thus far:

Hole DV17-039 yielded two mineralized intercepts. The Upper Zone consisted of a core length of 11.20 m (9.98 m true thickness) grading Ag 97.6 g/t, Pb 0.41 % and Zn 1.25 % for a silver-equivalent of 180.9 g/t. Within this Upper Zone interval is 1.95 m (1.74 m true thickness) grading Ag 182.6 g/t, Pb 1.05 % and Zn 1.66 % for a silver-equivalent of 314.5 g/t. The Lower Zone consisted of a core length of 15.00 m (12.72 m true thickness) grading Ag 172.4 g/t, Pb 0.69 % and Zn 0.81 % for a silver-equivalent of 244.4 g/t. Within this Lower Zone interval is 6.00 m (5.09 m true thickness) grading Ag 355.3 g/t, Pb 1.63 % and Zn 1.30 % for a silver-equivalent of 493.1 g/t. ~ July.26/17

Hole DV17-040 - Lower Zone consisted of a core length of 12.55 m (9.89 m true thickness) grading Ag 514.3 g/t, Pb 0.09 % and Zn 0.04 % for a silver-equivalent of 520.2 g/t. Within this Lower Zone interval is 7.00 m (5.52 m true thickness) grading Ag 757.4 g/t, Pb 0.12 % and Zn 0.05 % for a silver-equivalent of 765.1 g/t. ~ Aug.9/17 News Release

Also, and arguably the most exciting part of the results released, thus far, is the discovery of a new zone, within the Dolly Varden-Torbrit Horizon (DVTH), located 200 metres north and 200 metres deeper than the north side of the Torbrit Deposit and the additional discovery along the Moose-Lamb Fault.

Hole DV17-063 intersected epithermal vein-style mineralization along a fault zone and further down the hole intersected VMS-style mineralization of the DVTH.

The fault zone intercept in DV17-063 yielded some very high grade results with a core length of 11.00 metres (7.07m true thickness) grading Ag 394.2 g/t, Pb 2.27% and Zn 0.46% for a silver equivalent of 514.2 g/t. Also, within this zone interval is 4.00 metres (2.57m true thickness) grading Ag 987.5 g/t, Pb 5.90% and Zn 0.90% for a silver-equivalent of 1,283.8 g/t.

The DVTH zone intercept in DV17-063 also yielded some very high grade results with a core length of 22.74 metres (21.37m true thickness) grading Ag 433.3 g/t, Pb 0.74% and Zn 0.22% for a silver equivalent of 476.1 g/t. Also, within this zone interval is 7.15 metres (6.72m true thickness) grading Ag 1,180.7 g/t, Pb 1.83% and Zn 0.26% for a silver-equivalent of 1,271.9 g/t.

These results are very encouraging and certainly present the company with a reason to expand their drill program.

NOTE: For those who may not have seen the news releases, here's a link to Dolly Varden's webpage or, of course, you can find all the materials on SEDAR.

A Conversation with Rob van Egmond

I had the opportunity to speak with Rob van Egmond, Dolly Varden's Chief Geologist, about the drill program results, what this has taught them about the deposits and where the company is headed.

Brian: When we spoke earlier this year, you outlined the goal of this summer's drill program being primarily to expand the existing resource and also to drill some highly prospective targets outside of the known zones.

Are you on your way to achieving what you set out to do? Please explain.

Rob: We have achieved our goal and are currently continuing on exploration drilling. This was possible by better than average drilling output that brought our costs down, which allowed us to drill more meters within the same budget. The drilling within the Torbrit and Dolly Varden resource areas confirmed mineralization and verified modelled mineralization based on pre 1980's historic data. Testing prospective targets outside of the known zones has been viewed as the way to add value to the project through discovery. The extra meterage gained and utilized in exploration drilling has been successful in adding a new discovery to this historic property.

Brian: Thus far, in regards to the property's known zones, what has this summer's drill program taught the company's geologists about the deposits?

Rob: The drilling of the known deposits have helped us understand the zonation within these deposits and given us the basis for comparison on our exploration drilling. Besides the obvious mineralization, the deposit drilling has given us an understanding of alteration associated with mineralization. The alteration elements were read using a real time XRF, and new exploration drilling could be compared to it also using the XRF data. In addition, the core from the known deposits was used to take numerous density samples to better characterize the resource modelling. Rock density data needed to be increased to increase confidence in the model.

Brian: In the August 29th news release, it was confirmed that the drill program would be expanded upon, with a further $3.5 million to $6.5 million to be spent.

What has prompted the company to consider more than doubling the planned drill program?

Rob: The program was increased due to many more targets to be tested and the fact that the weather window and efficient drilling has allowed us the flexibility to continue. Also, the discovery of a new zone of Torbrit style mineralization by exploration drilling has given the company the encouragement to continue testing new targets.

Brian: Upon completion of this year's drill program, and the results hopefully being what you expected, can you give the readers an idea of where Dolly Varden is headed in 2018?

Rob: 2018 will consist of continued exploration drilling as well as a program to test the extents and define the newly discovered Torbrit style mineralization.

Concluding Remarks

Dolly Varden Silver Corp. presents a great value proposition, especially considering their latest drill results and how they should help boost the current high grade 42.6 Moz silver resource. With primary silver mines becoming harder and harder to find, results such as these become that much more important to the silver sector.

With a host of new targets to drill, Dolly Varden truly does have blue sky exploration potential, and for those looking for exposure to the silver sector, this is a junior silver company which checks all of the right boxes.

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Until next time,

Brian LeniP.Eng

Founder - Junior Stock Review

Disclaimer: The following is not an investment recommendation, it is an investment idea. I am not a certified investment professional, nor do I know you and your individual investment needs. Please perform your own due diligence to decide whether this is a company and sector that is best suited for your personal investment criteria. I do not own Dolly Varden Silver Corporation stock. All Dolly Varden Silver Corporation analytics were taken from their website and press releases. Dolly Varden Silver Corporation is a Sponsor of Junior Stock Review.