Step-Out Drilling Paying Off for Golden Triangle Silver Co.

Dolly Varden Silver Corp.'s (DV:TSX.V; DOLLF:OTCQX) recent drill results from step-out directional drilling at its 100%-owned Kitsault Valley project in British Columbia's Golden Triangle "continue to push the margins of known high-grade mineralization" at the project, analyst Marcus Giannini of Haywood Capital Markets wrote in an updated research note.

The company said mineralization was intersected in a 40-meter southwest step-out at the Wolf Vein, grading 1,091 grams per tonne silver (g/t Ag) over 9.38 meters, with significant base metal grades.

"We highlight that of the 25,000 meters of drilling budgeted for the project, 8,000 meters has been allocated to the Wolf Vein as high-grade silver mineralization continues to trend down plunge below the sedimentary rock cover, with the most recent hole extending mineralization through a 40-meter southwest step-out," the analyst wrote on Aug. 12, the day Dolly Varden released the results. "Overall, these initial results from Wolf continue to illustrate the uncapped nature of the vein system at depth, as additional assays down-plunge are anticipated in the near-term."

Dolly Varden said in its release it is using directional drilling to precisely target areas for step-out and infill work. Drillhole DV24-404 is the initial "mother" hole on a step-out collared at surface from which three additional holes were directed off at depths near the base of the sedimentary cap (DV24-409, 412, and 414).

Assays are pending for the three "daughter" holes. Further results from DV24-404 included 2,505 g/t Ag, 3.42% lead (Pb), and 2.88% zinc (Zn) over 1.63 meters.

Giannini noted that the location of hole DV24-404 and its daughter holes continue to show a "strong consistency of mineralization within Wolf, as well as an increase in base metal content."

"We also view the increase in base metal grades and existence of native silver in the aforementioned hole as a strong indication that this system likely remains open at depth," he wrote. "In turn, the company aims to prioritize drilling to the southwest throughout the remainder of the 2024 season in order to fully capture the extent of this high-grade trend."

Assigning the stock a Buy rating with a CA$2.40 per share target price, he said that the company "continues to demonstrate various avenues of growth across its property . . .  We continue to view Dolly’s high-grade endowment as an increasingly attractive target for larger North American-focused precious metal producers."

'Higher Risk, Higher Reward'

According to Dolly Varden Vice President Exploration Rob van Egmond, the upside of step-out holes is that they may reveal something entirely new. In this case, the company is exploring a mineralized plunge that is returning high-grade results and appears to be getting wider as the drill goes deeper.

Step-out holes aim to expand mineralization zones, which infill drilling is used to confirm the mineralization between holes.

"Step-out holes are higher risk and higher reward than infill drilling," van Egmond told Guy Bennett, chief executive officer of Global Stock News, in a release on Thursday. "There is a possibility that a step-out hole will be dead, which cuts off your speculation."

Marcus Giannini of Haywood Capital Markets wrote, "We continue to view Dolly’s high-grade endowment as an increasingly attractive target for larger North American-focused precious metal producers."

"In this case, we are exploring a mineralized plunge that is returning high-grade results and appears to be getting wider as we go deeper," he continued.

Dolly Varden's precious metal inventory has increased 300% in the last four years through acquisition, according to the release. Exploration drilling done after 2019 will be added in on the next property wide mineral resource estimate (MRE).

"Exploration drilling is important for Dolly Varden," van Egmond told GSN. "We see growth potential on the property. There's a lot of unexplored areas, and surface showings that deserve attention. The allocation of this summer's exploration meters includes four or five targets."

Directional drilling has steered the holes to intersect the Wolf Vein at specific points that were a minimum of 30 meters apart, the release said. Assays are pending for the three "daughter" holes.

The Catalyst: Inflation Numbers

Silver spot prices rose to a new all-time high of US$32.43 per ounce on May 20 and have been volatile since, mainly because of U.S. inflation data and China's economic health, according to FX Empire. The price was US$28.45 Thursday.

Data released Wednesday showed a moderate increase in inflation in July, with annual inflation falling below 3% for the first time since 2021.

"While this data supports the case for a rate cut, it also suggests that a large reduction is unlikely, tempering market expectations," FX Empire's James Hyerczyk wrote. "The initial reaction led to a sell-off in silver, as traders reassessed the likelihood of aggressive monetary easing. However, some market participants believe the response was overly negative, contributing to the slight recovery in silver prices seen during the Asian trading session."

Silver is the most conductive element in nature, and is used to coat electrical contacts in computers, phones, cars, and appliances. It's also an important element in solar technology.

According to the Silver Institute's World Silver Survey, global demand for silver "massively exceeded" supply last year, a deficit that is expected to extend into a fourth consecutive year in 2024.

Mordor Intelligence noted that the white metal is expected to register a compound annual growth rate (CAGR) of more than 5% between 2024 and 2029.

"An increase in the demand for new technological products is expected to help the market expand in the future," Mordor analysts wrote. According to a U.S. Geological Survey report, "27% of the silver produced in the United States was being utilized in electrical and electronic applications."

Ownership and Share Structure

According to Dolly Varden, 48% of the company is held by institutional investors, including Fidelity Management & Research Company LLC, Sprott Asset Management LP, U.S. Global Investors Inc., Delbrook, and Extract Capital. 

About 44% is with strategic investors, including 19% with Fury Gold Mines, 15% with Hecla, and Eric Sprott owns 10% himself. 

The rest, 8%, is with retail and high-net-worth investors.

The company has 286.21 million outstanding shares. Its market cap is CA$317.1 million, and its 52-week trading range is CA$0.58–1.29 per share.

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. 

For additional disclosures, please click here.