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Dolly Varden Silver | Shawn Khunkhun and Jimmy Connor

Jimmy Connor Feb 24, 2026 22:21

Summary

Dolly Varden's proposed merger with gold producer Contango ORE pairs Alaska gold cash flow with a rare high-grade primary silver developer.

Contango's direct shipping ore model — trucking high-grade rock to existing mills like Kinross's Fort Knox — avoids new processing plants and tailings permitting.

Management expects about $140 million in cash and roughly $150 million of annual free cash flow at closing, fully funding both drill programs.

Grade anchors the thesis: the Mancho open pit runs 8 g/t (grams per tonne) gold, and Dolly Varden's Wolf vein averages about 300 g/t silver.

Shareholders vote on the deal on March 17, with closing expected by end of March and Lucky Shot drill results due next.

Key points on Hecla Mining Company

  • Shawn Khunkhun describes Hecla as a $20 billion primary silver producer focused on the US and Canada and names it, alongside Eric Sprott and Fidelity, as a key backer behind the roughly $185 million raised for Dolly Varden.
  • He says the goal of the merger is to build the next Hecla: a second safe-jurisdiction choice for investors seeking gold production plus a large silver inventory moving into production.

Key points on Kinross Gold

  • Kinross owns 70% of the Peak Gold joint venture that operates the Manh Choh mine, which Shawn Khunkhun says gives shareholders a major miner as operator rather than a junior.
  • Manh Choh ore is trucked 240 miles to Kinross's Fort Knox facility, which he cites as an example of the underutilized processing plants the direct shipping ore model relies on.

Key points on Newmont

  • Named by Shawn Khunkhun as the operator of the Brucejack mine, which he calls one of Newmont's two big operations in BC's Golden Triangle, as evidence of the district's quality.

Key points on Contango Ore Inc

  • The proposed merger with Dolly Varden — shareholder vote on March 17, expected to close by end of March 2026 — pairs Contango's producing Alaska gold assets and cash flow with Dolly Varden's silver projects, with the direct shipping ore model as a core principle of the deal.
  • The Manh Choh open pit mine produces about 200,000 ounces of gold a year at the joint-venture level, of which roughly 60,000 ounces are attributed to Contango shareholders; Shawn Khunkhun cites $102 million of free cash flow in 2025 and a life-of-mine all-in sustaining cost of about $1,500 an ounce.
  • Lucky Shot, a past-producing permitted high-grade gold mine, is in an 18,000-metre drill program with a planned $50 million spend to restart production around 2028 at 30,000 ounces a year, ramping toward 50,000; together with Johnson Tract (~1 million ounces at ~10 g/t, targeted at ~100,000 ounces a year) he forecasts an Alaska pipeline of about 200,000 ounces a year.
  • Its direct shipping ore model trucks high-grade rock to existing mills such as Fort Knox, cutting capex and avoiding permitting an onsite processing plant and tailings facility — but it only works for high-grade deposits, which is why the combined company focuses on grade.
  • Shawn Khunkhun says the merged entity will be valued at about $1 billion, will span four districts with one producing and one soon-to-produce asset, and flags Lucky Shot drill results and the March 17 vote as near-term news flow.

Shawn Khunkhun's takeaways

  • Top takeaway His core argument is that the merger with Contango lets Dolly Varden skip the Lassonde-curve development low by pairing its silver district with a cash-flowing gold producer that has the permitting and development expertise his exploration team lacks.
  • At roughly $100 silver he now believes it is time to move the Kitsault Valley project toward production, reversing the view he held at $20 silver that exploring and acquiring was cheaper than developing.
  • He wants to build the next Hecla: a roughly $1 billion, safe-jurisdiction gold producer with a large silver inventory heading into production, with no comparable mid-tier peer.
  • He argues the merger's cash flow lets the company fund both development and exploration, keeping the same drill metres as last year while adding year-round programs across multiple projects.
  • He sees silver resources growing from 100 million ounces toward 200-400 million ounces on Wolf vein expansion, new Torbrit-style discoveries, and the Theo property, with the March 17 shareholder vote as the next catalyst.

Jimmy Connor's takeaways

  • Top takeaway Opens by noting the gold-to-silver ratio has compressed from about 100 at their last conversation in May to roughly 60, and says he would not be surprised to see it at 30 or 25 by their next conversation.
  • Structures the interview around the proposed Dolly Varden-Contango merger, pressing on the deal rationale, the Alaska and Kitsault Valley assets, the post-close balance sheet, and upcoming news flow.