The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
Merging two precious metal projects in BC's Kitsault Valley North of 60 Mining News – December 10, 2021
Drilling tests a target on the 1,500-meter Starlight-Racehorse trend within a gold belt on the western side of the Dolly Varden property that extends north toward Fury Gold's Homestake Ridge gold-silver deposit.
In a deal that will consolidate two advanced mineral exploration properties in the Kitsault Valley area south of Stewart, British Columbia, Dolly Varden Silver Corp. has agreed to acquire Fury Gold Mines Ltd.'s Homestake Ridge gold-silver project for roughly C$50 million.
"The decision to vend Homestake is a difficult one given the exploration upside and our positive outlook for the commodity markets," said Fury Gold Mines Chair Ivan Bebek. "However, we feel that bringing the two projects together is clearly the best path forward and are very excited to be partnering with the team at Dolly Varden."
Lying along the northwest side of Dolly Varden's high-grade silver project, the roughly 18,530-acre (7,500 hectares) Homestake Ridge project currently hosts 816,719 ounces of gold, 17.8 million oz of silver, 15.9 million pounds of copper, and 17.3 million lb of lead in three zones – Homestake Main, Homestake Silver and South Reef.
Homestake Main, currently the largest and most advanced of the three deposits, hosts 736,000 metric tons of indicated resource averaging 7.02 grams per metric ton (165,993 oz) gold, 74.8 g/t (1.8 million oz) silver, 0.18% (2.9 million lb) copper, and 0.08% (1.3 million lb) lead; plus 1.75 million metric tons of inferred resource averaging 6.33 g/t (355,553 oz) gold, 35.9 g/t (2 million oz) silver, 0.35% (13.3 million lb) copper, and 0.11% (4.1 million lb) lead.
This high-grade gold deposit lies along a precious metals exploration trend that extends roughly 10 kilometers (six miles) southeast to the high-grade silver deposits on Dolly Varden's namesake property.
The approximately 21,745-acre (8,800 hectares) Dolly Varden land package covers four historic mines that produced more than 19 million ounces of silver over four decades, beginning in 1919.
Deposits associated with these historic mines – Torbrit, Dolly Varden, Wolf, and North Star – host 3.42 million metric tons of indicated resource averaging 299.8 g/t (32.93 million oz) silver; plus 1.29 million metric tons of inferred resource averaging 277 g/t (11.48 million oz) silver.
Under the proposed deal with Fury, Dolly Varden will merge these precious metal-rich properties into a single project with 34.7 million oz of silver and 166,000 oz of gold in the indicated resource category; plus 29.3 million oz of silver and 817,000 oz of gold in the inferred category.
"We are excited to combine two adjacent precious metals projects located in one of the world's top mining jurisdictions," said Dolly Varden Silver CEO Shawn Khunkhun. "We expect that this combination will result in significant synergies in the areas of exploration, development, permitting and production."
To realize these synergies, Dolly Varden has agreed to pay C$5 million in cash and issue 76.5 million shares to Fury.
Haywood Securities Inc. has deemed the roughly C$50 million acquisition price, based on a Dolly Varden share price of roughly C59 cents, to be fair.
A preliminary economic assessment completed early last year outlined a 900-metric-ton-per-day mining operation at Homestake Ridge that would produce 590,000 gold-equivalent oz over a 13-year mine life.
At US$1,620/oz gold and US$14.40/oz silver, the standalone mine envisioned in the PEA was calculated to generate US$173 million in after-tax net present value (5% discount) and a 32% internal rate of return.
It is expected that the consolidation of Homestake Ridge and Dolly Varden, plus the exploration upside the Kitsault Valley project offers, will create economies of scale that can be considered in future mine studies.
"The commercial logic behind the combination of these two adjacent assets is very strong," said Fury Gold Mines CEO Tim Clark. "We look forward to having our shareholders benefit from the exciting growth and development of the Kitsault Valley project, and to Fury becoming a partner and significant shareholder of Dolly Varden."
Upon completion of the deal, Fury will have the right to nominate two directors to the Dolly Varden board and will be able to maintain these seats as long as the company holds at least 20% of Dolly Varden's outstanding shares.
The Dolly Varden board of directors has unanimously approved the Homestake Ridge acquisition, but the deal will need to be approved by a majority of its shareholders. The company's board, management, and certain shareholders, including Eric Sprott, which hold a combined 18.2% of Dolly Varden shares, have agreed to vote in favor of the transaction.
A special shareholder meeting to consider the Homestake Ridge acquisition is slated to be held in February.
Over his more than 16 years of covering mining and mineral exploration, Shane has become renowned for his ability to report on the sector in a way that is technically sound enough to inform industry insiders while being easy to understand by a wider audience.
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