Month: April 2022

The likelihood of disruptive changes in the global financial system is growing. Investors around the world are wondering what to do about it.

The Biden administration is waging economic war on Russia in response to the invasion of Ukraine.

Officials are counting on the strength of the Federal Reserve Note “dollar” and hegemonic control over the world’s financial plumbing to win this war. They could end up being very wrong.

Russia responded to sanctions and the confiscation of Russian foreign reserves by requiring payment for exports in rubles and pegging the gold price 5,000 rubles per gram. Plus, Russia has offered to accept payment directly in gold and even Bitcoin.

Russia, China, India, and Saudi Arabia are among the nations looking to build non-dollar trading systems beyond the control of the U.S. Even allies may be realizing that total dependence on the dollar and the good will of the U.S. government presents risks.

Some investors are also getting this message and wondering just what to expect as economic warfare plays out.

They are contemplating events which seemed inconceivable just a few months ago.

More people are finally asking what dollars are worth if foreign demand for them begins to dry up. They are seeing a future where nations like China don’t need dollars to buy oil from Saudi Arabia or Russia.

At the same time, the flood of dollars and dollar denominated debt is set to grow into a tsunami. Federal deficits are ballooning as Congress spends seemingly without constraint.

Dwindling demand for dollars and exploding supply means hyperinflation is well within the realm of possibility.

Sanctions on Russia will disrupt many supply chains. Among the most concerning is agriculture.

The President himself is now warning about the possibility of food shortages. Russia produces an outsized portion of the world’s fertilizer, not to mention oil needed to power farming equipment.

Investors are suddenly grappling with these concerns and others. The world looks to be entering uncharted territory, so deciding where to invest requires plenty of thought.

Perhaps rubles or Chinese yuan will gain relative to the dollar. Maybe Bitcoin will. Some people even speculate this crisis will be used as a launchpad for Central Bank Digital Currencies.

Predicting what the world financial system will look like a few years from now is enormously complicated. Anyone talking confidently about exactly what comes next should be viewed with skepticism.

That isn’t to say investors must guess correctly to avoid being crushed. Tangible assets act as wildcards in that they are valuable in every currency. Investors who hold them will have something to sell for whatever currency, if any, happens to replace the dollar.

Pick any nation in the world and gold has a price in that country’s money. It is valuable everywhere and has been since civilization began. It continues to be accumulated by central banks as monetary reserves.

This history sets physical gold and silver apart from other commodities. Suddenly there is serious talk about gold regaining a more prominent role in the monetary system.

There are other reasons that precious metals stand out amongst tangible assets. Bullion is easy to buy and sell, private, simple to transport, and compact enough to be securely stored at home. It does not physically depreciate or rot.

These characteristics make gold and silver the ultimate wildcards to hold when uncertainty is so high.

      

Source: Bob Moriarty   04/03/2022

Frequent contributor Bob Moriarty is no stranger to reading the Daily Sentiment Index. In this article, he uses it to assess today’s silver market — and to show how he finds the best times to buy.

As soon as I downloaded the DSI numbers from March 8, I sat down to write a piece to get it up before trading began on March 9. I gave the DSI numbers for 13 different commodities from Gold to the Euro to Wheat. I ended the piece by saying, “To me it suggests the possibility of a turn in all these commodities.”

Take a wild stab at how many of the various commodities turned? I’ll have the answer for you in a minute or so.

I did a similar piece in January of 2018 where I made a similar prediction based on the DSI for 11 different commodities. How many of those commodities turned literally on the same day?

Investing is not rocket science. But there are two different and competing schools of thought.

Most prognosticators provide noise. They earn their keep by telling investors what they want to hear. After all, we tend to want to have our fantasies filled. The majority of paid writers are happy to do that for you. A very few provide signal. If you know the difference between signal and noise you can make a lot of money.

At the heart of every successful investment is sentiment. If you can determine what the mob is doing, just do the opposite and you will make a lot of money.

In the two examples above of me predicting market turns based on nothing more than the DSI, I was right on 13 out of 13 in March and 11 out of 11 in 2018. I know of no other writer who can make the same claim. Frankly I have never heard of it. And I have kept every piece I have ever written so anyone who cares to throw stones at me is free to do so. I don’t think I know any other writer who has the balls to do the same.

Up until Monday April 4, 2022, I found the DSI to be the single most valuable tool in my scabbard. As of April 4, I am going to add another weapon that is a lot cheaper and perhaps even more valuable.

I wrote Basic Investing in Resource Stocks in February of 2019 to good reviews. On page 40 of a chapter I called The Secret No One Wants You To Know, I posted a chart of the price of silver with a chart of price at the top and the DSI at the bottom. I actually went to Jake Bernstein and asked him to do a chart for me with both on the same page. Here is what he came up with.

Clearly if you knew the DSI you could pick excellent points to either buy or sell silver. The reason is simple. Most people are dumber than bricks, and they want to follow the herd. They get more and more bullish as prices go up and are the most bullish right at the top. The weak hands always buy at tops. Likewise as prices decline they tend to be more and more negative on the commodity, no matter what the commodity is. And the weak hands always sell at bottoms.

You can be either the strong hands or you can be the weak hands: It’s all up to you.

On page 41 of the same book I put in a similar chart for gold. Once again the DSI gave clear signals for both tops and for bottoms.

Naturally I have a subscription to the DSI so Jake sent me a blurb about the new service. Here is what he said:

”On April 4, 2022 my new service, Jake Bernstein’s Weekly Sentiment Analysis Video will publish its first issue. This truly incredible report will feature a weekly chart for every actively traded US Futures Market, as well as several European equity and interest rate futures, with my analysis of what the Daily Sentiment Index (DSI) is projecting in terms of highs and lows, potential tops and bottoms, and expected trends.”

Jake has a special price for my readers until April 15 at $495 for a year’s subscription. That’s $400 off. If you cannot afford $495 for the single most valuable bit of investment signal you will ever see, you are not an investor, you are one of the weak hands. I don’t mind that at all. I have a lot of strong hands as readers and we will happily take all your money. After all, we are bound to be able to give it a better home than you can.

I do not have a dog in the fight. I do not make a cent off this deal but obviously Jake likes me a lot and will give it to me along with the DSI for free.

Go here to subscribe but do it in the next 10 days.

Bob Moriarty
President: 321gold
Archives

321gold

Bob Moriarty founded 321gold.com, with his late wife, Barbara Moriarty, more than 16 years ago. They later added 321energy.com to cover oil, natural gas, gasoline, coal, solar, wind and nuclear energy. Both sites feature articles, editorial opinions, pricing figures and updates on current events affecting both sectors. Previously, Moriarty was a Marine F-4B and O-1 pilot with more than 832 missions in Vietnam. He holds 14 international aviation records.

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Disclosures

1) ) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.

2) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for 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. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.

3) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.  

Source: The Critical Investor   04/03/2022

The Critical Investor looks into a junior that is trading at all-time lows at the moment and could be an interesting opportunity.

Rarely do you get the opportunity to invest in a junior at rock bottom levels at the beginning of what might be a new bull market, with a management team that has been at the core of success story Kaminak Gold Corp. (acquired for CA$520M by Goldcorp, now Newmont Corp. [NEM:NYSE], in 2016). Tectonic Metals Inc. (TECT:TSX.V; TETOF:OTCQB) is backed by a number of blue-chip investors including Crescat Capital (advised by well-known Quinton Hennigh), which has been accumulating in the market recently, pushing their share ownership level to well over 10%, making it the company’s second largest shareholder. Sitting at first is Doyon, one of Alaska’s leading Native Regional Corporations and largest landholder in the state. By working closely with Doyon, Tectonic has taken ESG to a whole new level, garnering media and industry attention. 

Tectonic owns and explores three projects in Alaska that could each be able to emulate or even surpass the mineral endowments of Kaminak’s Coffee gold project on a stand-alone basis. Eira Thomas, Rob Carpenter, Curt Freeman, and Tony Reda founded Tectonic privately in 2017, and listed the company in September 2019 on the Toronto Venture Exchange. Tectonic raised approximately CA$20M in total over the years, spending most of it on exploration, followed by project generation and acquisition, and despite some impressive sampling and drill results, for whatever reason investors have been reluctant to reward the company’s progress in the open market. To the contrary, every financing completed by Tectonic has been oversubscribed, attracting some of the best resource funds the space has to offer. COVID-19, the Russia-Ukraine conflict, other negative worldly affairs, and something of a malaise in the junior mining sector hasn’t helped their cause either. Trading at all-time lows now, even below the founders cost base, Tectonic presents an attractive value proposition in my view. The company is one of the few juniors smart enough to secure a drill rig last year and is now in the process of formalizing exploration plans, which if successful will hopefully position the company for a significant re-rating, also better reflecting the caliber of its management and projects.

Native, Capital Backing

Tectonic Metals is a mineral exploration company backed by one of Alaska’s largest Native Regional Corporations (Doyon) and sophisticated, highly regarded resource funds (for example Crescat Capital). Tectonic is focused on the acquisition, exploration, discovery, and development of mineral resources from district-scale projects in politically stable jurisdictions.

Tectonic Metals is operated by an experienced and well-respected technical and financial team with a track record of wealth creation for shareholders, as key members of the Tectonic team were involved with Kaminak Gold, raising CA$165M to fund the acquisition, discovery, and advancement of the Coffee Gold Project in the Yukon Territory through to the completion of a bankable feasibility study, before selling the 5Moz gold project to Goldcorp (now Newmont) for CA$520M in 2016. Key people within Tectonic are founder, President and Chief Executive Officer Tony Reda, Strategic Advisor and co-founder Eira Thomas, Chair Allison Rippin Armstrong and recent addition Peter Kleespies, vice president of exploration.

Reda was the VP of corporate development for Kaminak, a company where he basically worked for his entire career from 2005 to 2016 until the buyout. He was instrumental in raising CA$165M, arranging the JV’s/strategic alliances, and overseeing IR and marketing at a high level, as Kaminak was chosen as one of four out of 1,971 TSX Venture companies as Best IR by IR Magazine in 2015. He puts his money where his mouth is, as he owns 4.47M shares of Tectonic himself, and invests all his time and energy into making the company a success. 

Mining Legend and strategic advisor Eira Thomas was the president and chief executive officer of Kaminak from 2013 until the buyout. Eira comes from a prolific mining family, as her father Grenville Thomas is a Canadian Mining Hall of Famer, as he and Eira discovered Canada’s second largest diamond mine, Diavik. Eira, along with mining titan Lukas Lundin and well-known former colleague Catherine McLeod Seltzer, founded and leads (since 2018) Lucara Diamond Corp. (LUC:TSX.V) as chief executive officer.

Chair Allison Rippin Armstrong is an industry legend in her own right, as she has over 25 years of experience in permitting, regulatory processes, and environmental compliance, working with Indigenous organizations, resource companies, regulatory agencies, and indigenous, territorial, and federal governments. She served as the vice president of sustainability at Kaminak until it was acquired by Goldcorp in 2016. She also served on the board of Yukon Women in Mining as vice president for three years, is a founding member of the Yukon University Foundation Board and has served on NWT and Nunavut Chambers of Mines as well as a number of working groups for the PDAC, and has won numerous awards in related fields.

Vice President of Exploration Peter Kleespies was involved with the discovery and delineation of several large deposits, among those the 8.5Moz Au Hope Bay deposit in Nunavut that was sold to Newmont for $1.5B in 2007. Peter has over 30 years of technical and management experience in mineral exploration covering North and South America, Australia, and Africa.

Curt Freeman, who also co-founded Tectonic and serves as director, brings over 40 years of experience and is considered to be one of the leading geologists in Alaska and the Yukon. In addition, Tectonic’s board is fortunate to include Mick Roper, another veteran geologist with 40 years of industry experience, most recently with Agnico Eagle. Both of these directors provide invaluable insights and contributions to Tectonic’s exploration programs.

Despite its strong team, projects and current high metal prices, it looks like the Tectonic share price is bottoming now. With the current high inflation environment, the negative real rates, being the main (at least for me) sentiment driver for gold, seem stronger than ever, so it looks like the gold price seems set for a move even higher soon. A rising tide certainly helps with lifting all boats in general.

Some basic information on share structure: Tectonic Metals has a 161.68M shares outstanding, and trades at an average daily volume of 317,926k shares. There are 61M warrants (with almost half expiring before the end of June 2022 and the remaining warrants priced at C$0.17, expiring in June 2023,) and only 1M options (400k at CA$0.33 expiring in July 2025, 400k at CA$0.20 expiring in August 2026), so the fully diluted number stands at 223.69M at the moment. Management and BoD have lots of skin in the game as they hold 17%, Doyon holds 15%, and various resource-focused funds (for example Crescat Capital) hold 31%.  

The cash position is estimated at CA$1M, with no debt, and management is looking to raise more soon. The current share price is CA$0.06, resulting in a current, tiny market cap of CA$9.7M, and because of people, projects, backing, and bullish metal sentiment, I believe this little junior could easily become a multi-bagger with the right drill results. Let’s have a look at their projects to see why I believe this kind of potential could be there.

Focusing on Alaska

Tectonic Metals designed a project portfolio based on a number of criteria, coupled with a comprehensive exploration strategy. They are focusing on Alaska now. As 52.3% of its land is open for claim staking, it has always ranked as a top mining jurisdiction (13 out of 77 for Policy Perception Index, indicating mining-friendly policies, according to the Fraser Survey of Mining Companies), and has seven producing mines (Pogo, Fort Knox, etc.).

For size, Tectonic is aiming at district-scale projects, which have the potential to generate multi-million ounce deposits. For ESG, they raised the bar even more by positioning Rippin Armstrong as chair, and aim at working together with First Nations very closely, as is illustrated by their agreements with Doyon, a top-tier Alaska Native Regional Corporation. For infrastructure, they are looking for well-established infrastructure and nearby operations. For mineralization, they are looking at large scale, near surface, good recovery type of projects, preferably gold.

Management outlined an extensive exploration strategy, including most well-known methods, to optimize the best targets.

• Their geological approach serves to define the surface geology, and is done by mapping and trenching.
• Their geochemical approach is built around the analysis of geological materials, by sampling target metals and pathfinder elements for large areas to establish mineral potential.
• Their geophysical approach looks for mineral potential sub-surface, by doing all sorts of surveys (IP/EM, airborne, for magnetic, conductivity, radioactivity, density).
• Drilling, to establish actual mineralization, by using three techniques in order of accuracy: rotary air blast (RAB), reverse circulation (RC) and diamond drilling (DD).

This all resulted in the current portfolio of three large exploration projects in Alaska: Tibbs, SeventyMile and Flat, all acquired from Doyon.

Tectonic’s fully owned flagship is the Tibbs project, covering 29,280 acres, 35km east of the 200koz Au per annum Pogo Mine. High-grade gold mineralization at Tibbs occurs in steeply dipping veins, crossing multiple lower grade low-angle veins similar to the Pogo Mine, which serves as an analogy.

The Tibbs property is close to existing infrastructure and an active mill, and has seen lots of exploration, ranging from sampling, airborne geophysical surveys, trenching to drilling. Drill highlights are 28.95m at 6 g/t Au, 5.3m at 15.7 g/t Au, 5.7m at 19.1 g/t Au, 1m at 104.5 g/t Au, and 5.1m at 12.45 g/t Au. These are very substantial results, and the most impressive drill results were obtained at the Gray Lead area:

Phase 2 drilling already established a 1000m by 350m mineralized zone, where the majority of drill results returned grades over 5 g/t Au, and within this high grade, steeply dipping veins with grades up to 127 g/t Au. It is still early days, but if we would guesstimate a mineralized envelope of 1000m by 350m by 5m by 2.75t/m3 density, this would result in 4.8Mt, and at an average grade of say 5 g/t this could already result in a hypothetical 770koz Au. And keep in mind that this is only a small part of the entire project. Below the Gray Lead target, another target area is located: the Jeans Ridge prospect, where successful sampling up to 50.3 g/t established a 450m long gold-in-soil anomaly.

According to management, a major development of the 2021 Phase 2 drilling program that appears to have been largely ignored by the market was the discovery of four stacked low-angle veins at Gray Lead West. This is significant because the missing piece of the puzzle necessary to confirm Tibbs as a true Pogo analog was a low-angled vein that had previously proven elusive at Tibbs. This matters because the Pogo mine discovery was itself hosted in a low-angle vein. Tibbs now exhibits all of the elements of the “Pogo Exploration Model.” The next step for Tectonic will be to determine whether these low-angle veins exhibit the same swelling or widening tendency as seen at Pogo’s East Deep target.

The 100%-owned Flat gold project is Tectonic’s latest project acquisition and is located 40km north from the 45Moz Au Donlin Gold project, jointly owned and operated by Barrick Gold Corp. (ABX:TSX; GOLD:NYSE) and NOVAGOLD Resources Inc. (NG:TSX; NG:NYSE.MKT). Flat gold consists of 92,160 acres of Native-owned land (Doyon) accessible by air with its 4,100-foot airstrip, which can accommodate a Hercules aircraft, and once on site, there is a network of roads and trails, and materials can be barged to and from via a commercially navigable nearby river.

The two main target areas are Chicken Mountain and Black Creek/Golden Horn. Mineralization is hosted in veins and disseminated sedimentary and volcanic rocks, similar to Fort Knox (Kinross) and Eagle (Victoria Gold), and historic drilling from 1997 returned interesting highlights, like 24.7m at 12.5 g/t Au, 36.6m at 1.36 g/t Au, and 31.7m at 1.28 g/t Au.

When talking to CEO Reda, he got so enthusiastic about Flat that it seemed he and his team actually have the biggest hopes for this project. There are several reasons for this. For starters, Flat is located in the fourth largest placer mining district in Alaska and has a history dating back to 1908. More recently the property was explored by companies like Fairbanks Gold (founded and financed by Robert Friedland), and has 11,000 meters of diamond and RC drilling into it. The main target, Chicken Mountain, hosts a robust 4km long gold-in-soil anomaly where drilling indicated gold mineralization over a kilometer, and is the likely source of the majority of the historic 1.4Moz of placer gold mined in the area. Historical metallurgical data suggests that the gold at Flat could be free milling as well as having untested oxide potential. Tectonic is taking steps to confirm both characteristics and ultimately the potential for heap leaching at the site.

Tectonic’s third project is the Seventymile project, part of an underexplored, fully owned 40km long Greenstone belt, located 270km east of Fairbanks, Alaska. The property is only accessible by air (small aircraft and helicopter), and in the winter by a winter trail.

Seventymile is an orogenic gold system, with lode-style high grade quartz mineralization occurring in shear zones and faults. Drilling highlights are 5.5 g/t Au over 15.0m, 1.1m at 205.9 g/t Au, 6.1m at 2 g/t Au, 19.8m at 1.37 g/t Au, and 6.1m at 4.38 g/t Au.

On a closing note, exploration programs are discussed at the moment between management and their technical team, and will be announced soon, as are the plans for an upcoming, necessary financing.

Conclusion

At a current market cap of just C$9.7M, owning three very interesting gold projects with district potential and a formidable, well-known team at the helm, backed by Alaskan natives and a roster of respected shareholders, Tectonic presents an attractive value proposition. The company is in the midst of formalizing its exploration plans and planning a raise, potentially turning 2022 into a pivotal year for Tectonic Metals, with several chances at large scale discoveries, which could lead to a substantial re-rating.

I hope you will find this article interesting and useful, and will have further interest in my upcoming articles on mining. To never miss a thing, please subscribe to my free newsletter at www.criticalinvestor.eu, in order to get an email notice of my new articles soon after they are published.

This article is also published on www.criticalinvestor.eu. To never miss a thing, please subscribe to my free newsletter, in order to get an email notice of my new articles soon after they are published.

All presented tables are my own material, unless stated otherwise.

All pictures are company material, unless stated otherwise.

All currencies are in US Dollars, unless stated otherwise.

Please note: the views, opinions, estimates, forecasts or predictions regarding Tectonic’s resource potential are those of the author alone and do not represent views, opinions, estimates, forecasts or predictions of Tectonic or Tectonic’s management. Tectonic Metals has not in any way endorsed the views, opinions, estimates, forecasts or predictions provided by the author.

The Critical Investor is a newsletter and comprehensive junior mining platform, providing analysis, blog and newsfeed and all sorts of information about junior mining. The editor is an avid and critical junior mining stock investor from The Netherlands, with an MSc background in construction/project management. Number cruncher at project economics, looking for high-quality companies, mostly growth/turnaround/catalyst-driven to avoid too much dependence/influence of long-term commodity pricing/market sentiments, and often looking for long-term deep value. Getting burned in the past himself at junior mining investments by following overly positive sources that more often than not avoided to mention (hidden) risks or critical flaws, The Critical Investor learned his lesson well, and goes a few steps further ever since, providing a fresh, more in-depth, and critical vision on things, hence the name.

The author is not a registered investment advisor, and has a long position in this stock. Tectonic Metals is a sponsoring company. All facts are to be checked by the reader. For more information go to www.tectonicmetals.com and read the company’s profile and official documents on www.sedar.com, also for important risk disclosures. This article is provided for information purposes only, and is not intended to be investment advice of any kind, and all readers are encouraged to do their own due diligence, and talk to their own licensed investment advisors prior to making any investment decisions.

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2) The following companies mentioned in the article are sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for 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. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Barrick Gold Corp., a company mentioned in this article.

( Companies Mentioned: TECT:TSX.V; TETOF:OTCQB,
)

Source: The Critical Investor   04/01/2022

One junior silver explorer has almost ideal backing. When it needs capital, it turns to the likes of mining financiers Eric Sprott, Jeff Zicherman, as well as institutional investor Crescat Capital. Hecla Mining is also a major shareholder. That kind of support is rare. Find out why they just added to their positions.

After announcing a CA$5.3 million (CA$5.3M) investment in Dolly Varden Silver Corp. (DV:TSX.V; DOLLF:OTCQX) on Feb. 23, 2022 at a share price of CA$0.59 — and maintaining its equity interest at 10.25% — Hecla Mining Co. (HL:NYSE) decided to invest further in the company, as part of a larger round led by Eventus Capital Corp. and Research Capital Corp., which also saw existing shareholder Eric Sprott participating again.

Total proceeds amounted to CA$13M, bringing the treasury to an impressive CA$26M, providing Dolly Varden with sufficient funds to do lots of exploration over the next two years.

Dolly Varden Silver doesn’t seem to be distracted or the least bit cautious at a time when inflation is approaching double digits; Russia running into unexpected resistance from both spirited military and civilian Ukraïne fighters; and the Western Hemisphere is imposing unprecedented sanctions, effectively crippling Vladimir Putin’s nation.

It seems stock markets are already pricing in some kind of solution and are cautiously finding a way up again, as Russia abandons Kiev as a main target and instead seems to concentrate on harbor cities and the eastern regions. Peace talks in Turkey are on the way, although without any tangible results so far.

The economic sanctions are much more impactful for Russia, when compared to the countries imposing them, but Russia has one important point of leverage: commodities.

Russia is an important supplier of oil, gas, coal, wheat, sunflower oil, iron, nickel, cobalt, vanadium, platinum and fertilizers, and affected supply chains are already resulting in high prices across the board, exacerbating already high inflation.

Ukraïne is a large exporter of wheat, but its exports are not hampered by sanctions, of course, but by the war itself. Russian soldiers consciously target huge wheat depots and shipping methods, but also machinery needed for large-scale wheat production.

Against this backdrop, Dolly Varden Silver is looking to develop the full potential of the combined Dolly Varden-Homestake Ridge projects, which is now called the Kitsault Valley Project after the recent transaction closed.

Dolly Varden management was in no direct need of raising funds, but was approached by the likes of Hecla, and fellow shareholders Eric Sprott and Jeff Zicherman (Eventus Capital) to do another round.

Private Placement Details

On March 7, 2022, Dolly Varden Silver announced its best efforts brokered private placement for CA$10M @ CA$1.02 Flow Through (FT) shares, lead by Research Capital and Eventus Capital, on behalf of a syndicate of agents including Haywood Securities Inc. and Gravitas Securities Inc.

Since the 15% over-allotment option for the agents was fully exercised, the company eventually issued 11,274,400 FT shares without warrants, for gross proceeds of approximately CA$11.5M.

A big participant was Eric Sprott, and according to management there was a higher level of institutional participation on this round. Hecla acquired CA$1.5M in common shares separately from the private placement.

Eric Sprott, through his well-known vehicle 2176423 Ontario Ltd., acquired 3,448,200 FT shares for total of CA$2.5M.

After the closing of the offering, Mr. Sprott now beneficially owns or controls 25.6 million (25.6M) common shares and 1.25M warrants, representing approximately 11.1% (up from 10.2%) of Dolly Varden on a non-diluted basis and 11.6% (up from 10.7%) on a fully diluted basis.

These shares were acquired by Mr. Sprott for investment purposes, as he has a long-term view of the investment.

Hecla exercised its anti-dilution right to acquire 1.74M common shares of Dolly Varden at a price per common share of CA$0.86 for gross proceeds of CA$1.5M.

Hecla has also exercised its anti-dilution right with respect to the previously announced issuance of shares to Haywood completed on March 11, 2022, to acquire 46,027 additional common shares at a price of CA$0.5896, for additional proceeds of CA$27,137.

The shares issued to Hecla are in addition to those issued as part of the private placement.

The FT shares in the private placement, and shares issued to Hecla, are subject to a four-month holding period in Canada that expires on Aug. 1, 2022. In connection with the FT private placement, the agents received an aggregate cash fee of up to 6% of the gross proceeds, including the over-allotment option.

The proceeds from the private placement will be used for further exploration, mineral resource expansion and drilling involving Kitsault Valley, located in northwestern British Columbia, Canada, and the Hecla proceeds will be used for general working capital.

The Kitsault Valley project is already of considerable size, containing 64 million ounces silver (64Moz Ag) and almost 1million ounces gold (1Moz Au) in the Indicated and Inferred categories, but management is looking to meaningfully expand the resource.

As a reminder, I estimated an after-tax NPV of $300M (CA$380M) in an earlier article for these combined resources using $1,620/oz Au and $14.40/oz Ag. At current precious metals prices this could increase to an estimated CA$700M.

With regards to the current market cap of about CA$178M at a share price of CA$0.82, advancing and expanding the project will only add value and should increase the chances of share price appreciation.

It’s hard to say what upside potential should be, as an economic precious metals PEA NPV is valued at anywhere from 10% to 40% of a company’s market cap. 

An important rule of thumb is a project going into production, which globally speaking usually trades on average at 100% of NPV, meaning it has a price to net asset value of 1. Of course you need to take into account capex funding here, usually with a 65-35% debt/equity package that causes additional dilution. Most leverage will probably come from a rising silver price, as this metal still sits at relative lows.

Share price: 1 year timeframe (Source: tmxmoney.com) 

The markets have recovered nicely from the mid-March Russia-Ukraïne conflict correction, and seem to be waiting a bit before further rate hikes are contemplated by the Fed and to see the ramifications of supply chain disruptions all over the globe.

Kitsault Valley Project Resource Expansion

Now that the financing has closed, Dolly Varden is looking to finalize its new exploration programs. According to management, current exploration plans include 10,000 meters of drilling at the high-grade Torbrit deposit, along with closer-spaced drilling in the current block model, as well as step-out holes along areas where the deposit is still open.

The Homestake Ridge target will also see approximately 20,000 meters of drilling to upgrade the Inferred resources in areas where the current model shows the thickest and highest grades.

Once higher grade ore shoots are defined, the down-plunge extension can be tested for continuity at depth.

Homestake Silver has seen relatively little drilling but the plan will be to expand Homestake in order to keep the silver-to-gold ratio high.

The exploration portion of the upcoming drill program will test several geophysical anomalies modelled along the 5.4-kilometer trend between South Reef and Wolf. Recent drilling in the area found strong potassic alteration associated with silver mineralization, which continues beneath the sediment overburden.

Current budgets for this work are estimated in the range of CA$15-20M and drilling may extend late into 2022. The upcoming programs for Torbrit and Homestake will start around mid-May.

An updated mineral resource estimate for the combined project is planned for Q2 2023, and will be used in a consolidated PEA for the Kitsault Valley project, which is scheduled for Q4 2023.

Conclusion

It is always good to see a company raising capital at a relatively high share price, as Dolly Varden just received C$13M from esteemed backers like Eric Sprott, Jeff Zicherman and Hecla Mining, most of it at a healthy FT premium per share.

Dolly Varden is planning exploration programs for the combined Kitsault Valley project, which are likely to commence in May. It will be very interesting to see if the 2022 programs could potentially connect mineralized trends between the Homestake and Dolly Varden/Torbrit deposits, by growing the individual deposits and finding new ones.

Furthermore I view the consolidated Kitsault Valley PEA, although this will take a while, as an important benchmark for indicating the consolidated project economics. The value of the project seems to have a good chance on improving beforehand, through exploration potential, and leverage to precious metal prices.

I hope you will find this article interesting and useful, and will have further interest in my upcoming articles on mining. To never miss a thing, please subscribe to my free newsletter at www.criticalinvestor.eu, in order to get an email notice of my new articles soon after they are published.

This article is also published on www.criticalinvestor.eu. To never miss a thing, please subscribe to my free newsletter, in order to get an email notice of my new articles soon after they are published.

All currencies are in US Dollars, unless stated otherwise.

All pictures are company material, unless stated otherwise.

Please note: the views, opinions, estimates, forecasts or predictions regarding Dolly Varden Silver’s NPV and resource potential are those of the author alone and do not represent views, opinions, estimates, forecasts or predictions of Dolly Varden Silver or Dolly Varden Silver’s management. Dolly Varden Silver has not in any way endorsed the views, opinions, estimates, forecasts or predictions provided by the author.

The Critical Investor is a newsletter and comprehensive junior mining platform, providing analysis, blog and newsfeed and all sorts of information about junior mining. The editor is an avid and critical junior mining stock investor from The Netherlands, with an MSc background in construction/project management. Number cruncher at project economics, looking for high-quality companies, mostly growth/turnaround/catalyst-driven to avoid too much dependence/influence of long-term commodity pricing/market sentiments, and often looking for long-term deep value. Getting burned in the past himself at junior mining investments by following overly positive sources that more often than not avoided to mention (hidden) risks or critical flaws, The Critical Investor learned his lesson well, and goes a few steps further ever since, providing a fresh, more in-depth, and critical vision on things, hence the name.

The author is not a registered investment advisor, and has a long position in this stock. Fancamp Exploration is a sponsoring company. All facts are to be checked by the reader. For more information go to www.fancamp.ca and read the company’s profile and official documents on www.sedar.com, also for important risk disclosures. This article is provided for information purposes only, and is not intended to be investment advice of any kind, and all readers are encouraged to do their own due diligence, and talk to their own licensed investment advisors prior to making any investment decisions.

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