In a move triggered by a labor strike notice, Newmont, the world’s largest gold miner, announced yesterday the suspension of operations at its Peñasquito mine in Mexico. The National Union of Mine and Metal Workers of the Mexican Republic issued a notice to the company on June 7, demanding a hike in the profit-sharing benefit delineated in the Collective Bargaining Agreement. The requested increase from the existing 10% to 20% has led to the halt of operations at the mine.
This event comes nearly a year after an agreement in July, where the company conceded to pay its represented workforce a profit-sharing bonus up to 10%.
The Peñasquito mine, a big contributor to Newmont’s output, produced an attributable gold production of 686,000 ounces in 2021, emphasizing the potential impact of this operational halt on Newmont’s production figures depending on how long it takes to find a resolution.
The suspension of operations at the Peñasquito mine carries significant implications for the global silver market. As Mexico’s largest silver mine and the world’s second-largest, Peñasquito’s contribution to global silver production is substantial.
Given that Mexico also holds the title as the world’s largest silver producer, this operational interruption could potentially send ripples through the silver market depending on the length of this disruption.
The unfolding situation occurs against a backdrop of surging global demand for silver, which soared 18% last year, reaching a historic peak of 1.24 billion ounces. This surge has led to a significant supply deficit, as reported by the Silver Institute. The institute further projects persistent silver shortages in the coming years.
The Silver Institute highlighted that the deficit experienced in 2022, along with the 51.1 million ounce shortfall recorded in 2021, effectively eliminated the cumulative surpluses accumulated over the prior decade. Moreover, the Institute anticipates an additional undersupply on the horizon, predicting a shortfall of 142.1 million ounces for the current year.
Dolly Varden Silver (TSX-V: DV – OTCQX: DOLLF – FRK: DVQ1
This brings me to Dolly Varden Silver which trades under the symbol DV on the TSX Venture Exchange.
The company is fully focused on advancing its wholly-owned 163 square kilometer Kitsault Valley project.
This promising project is strategically situated in the southernmost corner of British Columbia’s iconic Golden Triangle, just below the world-class Brucejack and Eskay Creek gold mines.
The Golden Triangle has witnessed significant infrastructure enhancements over the years, transforming it into an even more attractive hub for mining operations.
These developments include the addition of more accessible roadways, a new transmission line, and ocean port facilities specifically designed for the export of concentrate.
Dolly Varden is advancing one of the largest high grade, undeveloped precious metal assets in the triangle and is focused heavily on adding ounces to its reserves for the remainder of the year.
The company has embarked on a 45,000-meter drill program at the Kitsault Valley Project, which covers the Dolly Varden Silver property and the Homestake Ridge Gold-Silver property.
As part of this program, four drill rigs are currently operational. Two rigs are focusing their efforts on the Wolf Vein while the remaining two are centered on the Kitsol Vein. The ultimate objective of this expansive program is to bridge these two remarkably high-grade silver areas. This strategic move not only signifies the company’s aggressive exploration efforts, but also hints at the promising potential locked within these silver-rich zones.
In the coming weeks, I will be sharing more on Dolly Varden’s progress. However, for today, I am delighted to be joined by Dolly Varden’s CEO and President to provide an introduction to the company to the Gold Telegraph community:
Alex Deluce:
Hello Shawn, thank you for introducing the Gold Telegraph community to the exciting Dolly Varden Silver story.
Could you please start by providing a brief history of how the company evolved to where it is today?
Shawn Khunkhun:
Alex honored to share the investment opportunity at Dolly Varden Silver. The company’s projects (past producing high-grade silver mines and silver-gold deposits) have a rich history in BC’s prolific Golden Triangle. High-grade silver was first discovered in the early 1900’s and production began around 1920, marking the Dolly Varden Silver Mine as the richest silver mine in the British Empire at that time. Throughout the 1950’s the Torbrit deposit located a few kilometers North of Dolly Varden Mine was Canada’s 3rd largest silver producer.
Fast forward to the modern era, DV in Canada and DOLLF in the US is a company that has consolidated 15 km’s of continuous strike that incorporate 7 deposits of high-grade silver and gold, making the project the highest grade undeveloped precious metals project in all of Western Canada. What’s truly extraordinary is now that the projects have all been consolidated into 1 land package which is 100% owned by Dolly, the rate of new discovery has been exceptional. In our most recent drill season the company has produced the best silver intercepts the property has ever seen, 1,500 g/t silver over 16 meters. And the best gold hit in the Golden Triangle in 2022, 46 g/t gold over 25 meters.
Alex Deluce:
As the company progresses with the development of one of the largest high-grade undeveloped precious metal assets in BC’s Golden Triangle, what key catalysts can we expect for the remainder of 2023?
Shawn Khunkhun:
With $26M in the bank and support from shareholders like Hecla Mining, Eric Sprott and Fidelity we have embarked on the largest drill campaign in the company’s history. With a total of 5 drill rigs and over 50,000 meters of targets, the company is well equipped to follow up on the breakthrough season we had in 2022. The reason Dolly has performed well as a stock and seen significant market cap growth, is due to the mineral inventory growing.
We expect to deliver organic growth through discovery and extending and expanding known deposits. Drill, drill, drill, results, results, results. We are also monitoring other opportunities in the region as corporates keep a close eye on our progress. We are also seeing significant inflows of ETF buying as our liquidity increases. 2023 is setting up to be a big year for Dolly.
Alex Deluce:
The company has recently launched a massive drilling campaign at the Kitsault Valley Project, deploying a total of five drill rigs to undertake a 45,000 metre program.
Can you please provide a brief overview of the success achieved last year, which serves as the foundation for this program?
Shawn Khunkhun:
Last year marked a watershed moment, as our crack technical team drilled below the sedimentary cap and made breakthrough discoveries significantly extending the strike of the Wolf deposit, one of 7 deposits on the property. Not only did we extend the deposit to almost 1 kilometers of strike, having most of that growth plunging South West, we also hit down dip and off to the North East drilling over 24,000 grams per ton silver in holes 329.
We also validated the purchase of Homestake Ridge, increasing our confidence in both grade and continuity hitting gold grades in drilling of over 1,100 g/t at Homestake Main. Dolly also hit 1,500 of silver in a 200 meter step out at Homestake Silver.
Alex Deluce:
Dolly boasts an impressive roster of top-tier shareholders, providing a strong foundation as the company embarks on this exciting phase of growth and expansion.
Can you please shed light on some of these distinguished shareholders, as well as the company’s robust cash position at present?
Shawn Khunkhun:
We are very unique amongst our junior mining peers in that we are only 10% owned by retail investors. We have 4 shareholders that control 50% of the company, Fury Gold (through the divestment of Homestake) Eric Sprott, Hecla Mining and Fidelity.
Other notable institutions account for about 40%. We are debt free and have over $25M in the bank.
Alex Deluce:
Lastly, Shawn, could you share your insights on the current state of the silver market or the broader precious metals market?
In light of the numerous prevailing trends unfolding in real time, do you believe we have reached a pivotal moment in the industry?
Shawn Khunkhun:
I think Silver is the most undervalued metal on the planet. The Silver Institute estimates a 230M oz deficit in 2023. With increasing challenges in Latin America, where most of the metal comes from and increasing demand for EV’s and Solar panels, if we continue to see robust investment demand
I suspect we see new all time highs for silver in the next 18 months. If you estimate the average silver producers costs are roughly $20/oz and the price is at $23, if the price merely goes to $26, companies are 100% more profitable. It is for that reason that silver stocks are so explosive to the upside in with just modest price moves. Also the silver to gold ratio is roughly 80 to 1, recent history has it trading at 40 to 1 and the average is closer to 15 to 1 one naturally, from a mining perspective and historically.
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