Dolly Varden Silver (TSX-V: DV) CEO Shawn Khunkhun on Distinguishing Dolly Varden as a Pure High-Grade Silver Company

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the President and CEO of Dolly Varden Silver (TSX-V: DV)(OTC: DOLLF), Mr. Shawn Khunkhun. Shawn, how are you this morning?

Shawn Khunkhun: Gerardo, I'm doing excellent. Very nice to be with you this morning.

Gerardo Del Real: I am excited to help tell this story because I believe we are in the early stages of what will be a historic precious metals market. You had some news this morning that I want to get to. But before we get into that, I know you recently came on and took over, took the reins at Dolly Varden Silver. So I have to ask, can you walk me through what attracted you to the company? And then give us a brief overview of your background and then we'll get into the team and the asset and what we have to look forward to moving forward.

Shawn Khunkhun: Perfect, Gerardo. I'm very happy to be here. I'll start with my background and then I'll go into Dolly Varden. I've been in the mining business for 16 years. I started at a time where we were at the beginning of a really strong gold bull market. I helped build a company that went from inception to about a $1.5 billion dollar valuation. After we saw gold top out at $1,900 and as we moved into a bear market I stayed in the space and got very, very familiar with quality assets and started looking at these assets at these much lower valuations.

Coming around to Dolly Varden, the opportunity in Dolly is I've been made aware of the history on the property. Dolly is a very historic mine in Northwestern, BC with very, very high-grade production grades, 500 gram production out of the Torbrit Mine. About 20 million ounces of gold have been produced on the property. I was aware of Dolly and essentially what led me to take on the reins as CEO was I was watching a company that had some very, very good fundamentals. They controlled the deposit. They had 100% interest. They had a clean balance sheet. There was about $3 million in the bank. But on an enterprise value per ounce they were trading at half the value of their peers. That's where I saw the opportunity.

That's why I joined the company. What I've done in the first 6 months here is we've taken the treasury from $3 million to $20 million. We're now in a position where we can go out and we can realize the full potential of the property. We have realigned the shareholders. We've been backed by Eric Sprott. Eric has come in since myself and the new management team has come in and taken a 20% stake in the company. You've got Eric Sprott at 20%, you've got Hecla at over 10%, and then we've got some other notable precious metals investors rounding out another 35%. 

We've got just a solid foundation from a structure standpoint. We've got a robust cash position and we're anchored with about a 44 million ounce high-grade silver deposit that used to be a very, very rich producing silver mine. It was only really abandoned due to the price of silver being at $0.85 an ounce back in 1959.

Gerardo Del Real: Let me go over that production profile because within a 10-year period the mine produced, I believe, 18 million ounces of silver at 466.3 grams per tonne. Let's be clear, what you're targeting here is high-grade silver, gold, an then obviously there's some base metal credits that apply as well, right?

Shawn Khunkhun: The way we report is we just report the silver. What makes Dolly very special is it's predominantly a silver mine, but there is some other byproducts. The numbers that you went over are from the Torbrit Mine. If you look at the old Dolly Varden Mine that was a mine that was producing at over 1,000 grams per tonne. Where we have resources is 85% of our resources are at Torbrit but the other 15% are spread amongst three other deposits, including the old Dolly Varden Mine.

One of the big opportunities here, Gerardo, is there's an exploration trend on our property that goes for about 4.5 kilometers where there is many other – whether they're surface showings, whether they're past-producing mines, whether they're new, exciting discoveries. For instance Chance, which yielded some exceptional results last season. The point I'm trying to get across here is there is a lot of rich targets on the property.

Gerardo Del Real: You mentioned the current resource. Can we get into that a bit? Because I know that the metallurgical recovery rates, the testing and the silver recovery rates are pretty robust. I believe 87% and 86%, respectively at Torbrit and Dolly Varden. Correct?

Shawn Khunkhun: That is correct. Yeah. See, what I love about this project is everything is modern. The resource estimate came out in 2019. Every year the compliance and the governance around these types of reports gets more stringent and more stringent. It should really give investors confidence in our numbers. This is a modern resource estimate that was published in the spring of 2019 and the metallurgical work was also reported at that same time.

Gerardo Del Real: The indicated resource stands at 32.9 million ounces of silver at 300 grams per tonne silver, and the inferred resource at 11.48 million ounces of silver at 277 grams per tonne silver. You mentioned the strong institutional ownership of over 60% and obviously the strategic investment by Eric Sprott and Hecla. 

A large part of what has to have attracted those folks to Dolly Varden is the strong team. I mean, you have some of the better, stronger, more well-known names in the space, people that know this region and this area. I've got to believe that's extremely valuable to you as you look to grow the asset base, right?

Shawn Khunkhun: Absolutely. I come from a capital markets background. But really I think one of the things that sets us apart is we've got a director and a technical advisor in Rob McLeod, who's not only had four M&A transactions but is also from the Stewart area and has worked on many mines and discoveries that are in the area. So knowing the nuances of the Golden Triangle and how these different systems are formed and how to efficiently explore and develop them is very, very important. 

In addition to myself and Rob, we're supported by a board that has worked with companies like Coeur Mining, Hecla, Anglo. We've got a very, very strong experienced board and management team.

Gerardo Del Real: Let's get to how that asset base is going to grow. You had some news this morning I mentioned. The headline reads, “Dolly Varden Silver Step Outs Intersects Multiple Silver Zones including 1,083 g/t Ag over 2.7 meters within 12.75 meters of 351 g/t Ag.” Can you speak to this morning's news?

Shawn Khunkhun: Yeah, absolutely. I think the key here for today's news is we're demonstrating strong silver mineralization. We're demonstrating significant thickness. Essentially, it's our belief that there is the potential to expand the resource. With these step-out holes extending Torbrit validates that belief that we're only scratching the surface here along this corridor. There is big, big potential here to grow current resources. 

Now, this is one aspect of the drill campaign. We have two rigs that are out right now that are working. In addition to resource expansion drilling, we're also going up along that 4.5 kilometer trend and are going out for more exploratory holes. So those results are also pending, Gerardo.

Gerardo Del Real: Excellent. You mentioned the strong mining jurisdiction. How are community relations? We know social license in this day and age is absolutely critical to advancing a project and I know you would like nothing less than to be able to have a transaction under your belt, a notch on the belt there. How are relationships locally?

Shawn Khunkhun: So we're part of an organization called the BC Regional Mining Association. It's essentially three groups. It's government, it's First Nations – these are the indigenous populations of the region – and it's companies. So the four companies that make up this group are Dolly Varden, Skeena, Ascot and GT Gold. These are four prominent explorer-developers in the area. 

What we've done is we've partnered with government and with the First Nations to let the world know that this part of British Columbia, the Golden Triangle, Northwest BC is open for business. We've got a very pro-First Nations group. All the local communities, whether it's Stewart, if it's some of the surrounding areas around the townships of Terrace or Smithers, they're very, very supportive of mining. We're in just a great, great jurisdiction. Particularly during times of COVID-19 we're able to drive to our sites. Being here in BC, it's just been a huge competitive advantage for us.

Gerardo Del Real: You have the robust treasury, $20 million in cash you mentioned. How do you plan on allocating that? What can shareholders and people frankly that are looking for a high-grade silver story in a stable jurisdiction with a lot of upside? How do you plan to allocate those funds and what can we expect the rest of the year, Shawn?

Shawn Khunkhun: When I first came into Dolly Varden we were in a $17 silver universe and with, call it, 50 million ounces in the ground at these grades my first thought was, "Let's go out and let's test this exploration corridor and let's grow these resources." With the price of silver shooting up like it has over the summer and having that leverage to the price of silver it's not only wanted me to look at the exploration potential and unlock that value for our shareholders but to also start looking at the project through a development lens. Some of these funds could be used for future studies going down the path of development.

Gerardo Del Real: Fantastic, fantastic. Well listen, it seems like you have a busy 4th quarter planned, Shawn. I'm looking forward to having you back on. If you're able to duplicate the kind of results that you announced today I sense it's going to be a fun 4th quarter and a fantastic 2021. 

Is there anything else that you'd like to add? Thank you for your time by the way. I really appreciate it.

Shawn Khunkhun: The last thing I'd just like to say is in mining, there's thousands of stocks of companies to choose from all over the world from Australia to South America to Australia. I think the one thing that we've got here that's very rare is we have a pure high-grade silver company. I've got a short list of maybe 50 companies that qualify for that. What makes us even more rare amongst a very small group of companies is that we're in Canada. Most of the silver that's mined is coming out of Chile, Argentina, Mexico, Peru. I think what makes Dolly so special is we are a pure silver play, we've got grade and we're in Canada.

Gerardo Del Real: I suspect you're likely on the list of several bigger companies yourself, Shawn.

Shawn Khunkhun: I concur.

Gerardo Del Real: Thank you so much. I appreciate your time. You take care.

Shawn Khunkhun: Okay. Thank you so much, Gerardo.

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