Dolly Varden Silver CEO Shawn Khunkhun: The More Love You Give The Project, The More Love It Gives You
Shawn Khunkhun is one of the up and coming young executives in the junior mining sector & his results at Dolly Varden speak for itself
Conversation with Dolly Varden Silver CEO Shawn Khunkhun from the Rule Symposium in Boca Raton, FL on July 11th, 2024
Goldfinger:
So I'm with Shawn Khunkhun, CEO of Dolly Varden Silver (TSX-V:DV, OTC:DOLLF), at the Rule Symposium in Boca Raton, Florida. Shawn, it's a pleasure to meet you in the exact same spot as we spoke last year. And I'd like to start talking about the results you guys recently published. I guess it was a few weeks ago now, a very nice hit at Moose that was 5 meters of roughly 900 grams/tonne silver.
Shawn Khunkhun:
977 to be precise.
Goldfinger:
977 grams/tonne silver over 5 meters. So tell us about that and how is the drill program going?
Shawn Khunkhun:
Well, listen, I'm grateful to be here in the same spot we were a year ago on these comfy couches or chairs. Look, I want to say something before I get into these results, which is we've got this 15 kilometer long trend and on that trend we've got seven deposits we've outlined. And what the team believes is that every 1.4 kilometers, there's another system, there's another vein, there's another deposit. Two of them are past-producing mines. And so if you look at where Moose is, Moose is 1.4 kilometers north of Wolfe. Where's Wolfe? It's 1.4 kilometers north of Torbrit. So Torbrit was Canada's third largest silver mine and produced for a decade, grades of 466 grams per tonne. And when I first came into Dolly four years ago, people said, "Hey, this is a project that 's never going to grow. It's an old mine, it's an old toy mine, it's small."
And a young geo came in, Amanda Bennett, and she said, "We should look underneath the sediment cap." And people said, "No, don't do that. You can't see what's going on under there." She did it anyway and she found the Wolf Deposit. She found the Jurassic Hazelton formation. She found the silver mineralization persisting below the sediments. And I wasn't that impressed with what she hit. She hit 17 meters of 215 grams of silver because Dolly was a 300 gram per ton deposit on average. So finding 200 grams in a pretty depressing silver environment a couple of years ago, I was like, ah, it's encouraging. It's new, it's underneath the sediments. But a year later she drilled 1500 grams per ton over 16 meters right at surface. And everything we've hit since then has been like 20-30 meters wide, 300-400 grams of silver material. It's been incredible. Wolf has opened this thing up. We went out and we got Homestake then because we had the confidence that this was growing, let's go.
And now what we're finding up at Homestake is this silver system in the south goes silver, gold and then goes gold. And last year we tagged 93 meters, 212 g/t silver and 1.74 g/t gold. If you talk about a silver equivalent, that's 357 g/t silver EQ, 50% silver, 50% gold over 93 meters. And then we stepped out and we hit 12 meters of 79 grams of gold in a brand new gold zone. Okay, so what did we start this year with? We started this year with this program where we're going to look for more, we were going to infill Wolf and try to grow it and then find out how big this new gold discovery is. So basket number one, we started early. We started on May 17th drilling, and we've come up with two drills.
So last year we went up to Moose and we drilled seven meters of 270 g/t silver. And again, I wasn't that impressed. 270 silver, it's all right, seven meters, it's all right. But this year we went back there and now we tag some really high-grade, 3,600 grams per ton was the highest portion of the result over five meters that averaged 977 grams per ton silver. Now we're talking, now we're talking about some grades. Now 1.4 kilometers north, there's a vein called the Chance Vein. This is what attracted me to Dolly Varden back in 2019. The previous team had drilled 26 1/2 meters of 480 grams/tonne silver at Chance. Then they tried to follow up with it, but couldn't find it. In addition to this idea that every 1.4 kilometers there's another deposit, we also understand the plunge, the geometry, and the dip. So we took that understanding and we plugged the hole in to Chance. And again, it's 23 meters of 200 grams of silver, but I bet you let us have a couple more cracks at this and we'll get into that grade.
So my point here is this is a project that the first two holes out of the first... We've drilled 30, we've actually completed almost 12,000 meters and the first two have come out, and this is on the exploration side. What I was most excited about this year was chasing that gold discovery. So now I've got a rig up at Homestake and that's what I was excited about because it looks like Bruce Jack. And what I was confident about was Wolf because you're going to do a lot of infill, we're doing directional drilling, there's going to be a lot of kilo materials that'll be slogging around. And then what's going to be really important is if it holds together and if we could expand it to the Northeast and the southwest. But this exploration bucket, I've been telling people that the chances are not good in terms of that's the highest risk bucket of the drill program. And that to come out of the gate with two hits out of the gate is awesome. So I'm excited.
And then silver jumped $5 an ounce. We're through $30. But still at a 77-1 silver to gold ratio. So we've got a long way to go. But the mood here at the Rule Symposium is upbeat. People are excited, people are making money, but I don't think it's really even started. But normally I go to these things, I've been going to them for 20 years and in the last decade it's been long faces and when's your share price going to rise? And what are you guys doing? And now it's like, should I sell because I've already doubled my money? And my response is maybe. What are you looking for though? Do you think that $30 silver is it? Or is there more room to rise?
Goldfinger
I am glad you said that. So there's a lot to delve into there, we'll start with the Rule Symposium. So last year we sat at this table at this conference and silver was on its way down for the next few months. And the mood here generally wasn't that great last year, I think 2023 was a tough year for the junior mining sector. It was a tough year. And actually you were able to pick up a project due to the fact that 2023 was a tough year. You got a big extension to your property for pennies on the dollar due to taking advantage of that tough year. So what's your take away from this conference so far? What feedback have you gotten from investors here and have you sat in on any speakers that you found interesting?
Shawn Khunkhun
First of all, 2023 was a horrendous year if we measure brokered finances. So if you go back a decade to 2013, which was a tough year because gold fell in April of 2013 from 1500 to 1300 in a day, and it was a tough year, but 2023 was worse than 2013.
It's amazing to put it into context like that.
And it was a lot worse. I don't have the numbers off the tip of my tongue, but let's say there was $6 billion raised for brokered financings in 2013, there were like two in 2023, that's how bad it was. And we're not comparing it to 2010 or some of these glory years, we're comparing it to a crap year. So that's how bad 2023 was. I forgot that we picked up Big Bulk, so thanks for reminding me. And that was a good deal and that's how bad it was. I forgot how bad it was in Q4 2023. A company that had it was trading a very low price and we saw an opportunity.
Listen, I think that last year you and I could have sat here all day. This year I’ve got to run, I have a two o'clock, I got a 2:30, I got a three. I had a meeting before this. It's busy. Somebody who was asking me who's sort of sector agnostic, a very successful capital markets entrepreneur who I had just a call with before I came down here, he was asking me about our business. I still think it's crickets. Because I was there in 2010 and nine and it's seven and four, it's crickets.
And yeah, there's some people who it's encouraging, there's more bodies and there's more interest and there's more money. And I've got a friend that runs money out of LA who showed me some emails from college endowments and university endowments saying, "Hey, we want in." There's some big money that's rolling in. But I think it's like early, early, early, early, early, early. And so I haven't actually been able to catch a lot of the speakers because I've been busy and I listened to Keith talk about why silver and what he's doing. And I got to say Keith Neumeyer, he's a pioneer like he's got a silver store in Vegas. He has a retail store where you can buy silver bullion.
But let's think about this, he’s the silver surfer.
Goldfinger
He's the silver mascot.
Shawn Khunkhun
Think about this, he's a guy who's like, okay, I'm going to take millions of ounces, 10 million ounces that he produces. He does like 20 million ounces silver eq, but 10 million ounces silver. And he's like, you know what? I'm not putting it into the system. I'm not going to let the bullion banks and the paper market take my 10 million ounces and trade 200 million ounces on the back of it. I'm going to mint it, I'm going to sell it. I'm going to take it out of that system that I think is corrupt. First of all, to number one, recognize what's happening. Number two, have the balls and the resources to do something about it to execute on it, man. And that guy has been running a silver company at a time where it's been impossible to make money silver mining, and he's done it. So I know people are critical about the mining business and they say people have all sorts of opinions, but the reality is show me somebody who has given decades of his life to investors first in copper, First Quantum, now silver, and-
A lot of people don't know that he was a co-founder of First Quantum, but he was.
The story I heard was he had essentially a shell that he had poured all his money into, and I think he was going after a company after the wall went down in Russia like a brewery. And some Russian oligarch scooped it. So he is left there. He was all in on this St. Brewing company and he pivoted, I think there was a guy out of Australia, I know his son Rowley, Nick Rowley's dad, Martin Rowley, was one of the other partners. And they started First Quantum, Africa Copper. And then you look at Keith and you look at what he did with Snowline, that's his deal. Guy's a legend. Legend. And if he can do this well in a decade, bare, what's he going to do If this goes full on bold. First Majestic could be $100 a share.
Goldfinger
Let's talk about silver and Dolly. And look, I'm a technical guy. I love charts. I know that you like charts too. Silver is having one of its best years, at least the first half of this year has been very good. Silver mining companies (CDE, PAAS, etc.) that actually have cash flow and extract silver from the ground have had a great 2024 so far. When I think of silver and how to express a positive view on the future price of silver, only a handful of ideas come into my mind. One would be Hecla, maybe Pan American, then Dolly is in that top five list. And Dolly is a junior, so it's still in the junior category. It's still exploring, still trying to build ounces.
Silver (Weekly)
You've got about a $300 million market cap in Canada today, but you're still on the OTC in the U.S. Here we are in the U.S in one of the more wealthier areas in Boca Raton, it's a lot of millionaires, a lot of billionaires here within 50 mile radius. Some of these people can't even buy your stock because their brokers won't allow them to go on the pink sheets. Is it time for Dolly to step up to the big board and be an exchange traded company in the U.S?
Shawn Khunkhun
I'm going to use this interview with my board of directors because I've been advocating for us to make the move and my board was a little resistant because they're going, "Sean, there's higher costs."
There's liability issues to consider for directors and officers. And this was a $20 million company. And if you look at some of the costs that are associated with a big board listing, it doesn't make sense for a company that's $20 million, not even for a $100 million company. But at Dolly's market cap, I believe in this company and project, and so I will list this on a U.S big board 100%. And I will use this with my board because look, it's the biggest market in the world. 50% of all capital in the world is in the United States.
And people talk about de-dollarization and power going from west to east, there's still a lot of wealth here. The nice thing about going big board is the world's money can then also come into the story. That's what I've seen money out of places like Kazakhstan and all throughout the world can come and trade the NASDAQ and the NYSE. So it's about opening up ourselves to the 300 million plus in the U.S, but it's also about opening ourselves up to the world. So absolutely it's something that I've been advocating for, but I'm going to do more than advocate. I'm going to make it happen.
Goldfinger
That sounds great. Yeah, because let me explain a little further why it's important. I can buy your shares because I trade on the venture. I have an account where I can trade on the venture. Some retail investors can trade on the OTC and their brokers allow it, but for the larger institutional investors some of them literally have a mandate in their bylaws, the constitution of the fund where they cannot trade unless the stock is listed on certain exchanges. They can only trade on the NYSE or the Nasdaq or the AMEX. And it is partially due to the accounting standards. Perhaps, they have had some bad experiences in the past and they just said, no, it's got to be on these exchanges or else we cannot trade it.
So having a listing on the NYSE or the NASDAQ gives you more validation and it opens the company up to a much larger pool of capital. So yeah, I mean that's great to hear that. So next step, go on the NYSE or the Nasdaq, but then maybe a PEA pre-feasibility study.
What's in the cards for Dolly in terms of, I know you've got a lot more ounces than what you're showing right now in the resource. So what's the next steps for advancing this company?
Shawn Khunkhun
Part of me is reluctant to want to put out an estimate because I don't want investors to think we're limited by that estimate. And so when we put out our next resource, which wouldn't be until 2025, I want investors to know my goal is to keep growing it. We're not trying to wrap a bow on it and wrap economics around it and say we're going to now develop it because my business plan and my vision for this company going back to 2020 was let's add ounces to inventory. And so I still think it’s highly prospective. I hope this turns into like an Eskay or a Bruce Jack or a Premier, which Premier was 45 million ounces of silver produced and two million ounces of gold. Eskay produced 200 million ounces of silver and three million ounces of gold. Bruce Jack is still producing, and now Skeena is going back into production with five million ounces. Ascot's trying to go back into production with both the same amount of ounces.
But again, getting back to your question, look, we could find ourselves in a place in say, May, where we update the resource and then we could strap some economics around it a few months later with a PEA. But I just want investors to know that it's not going to be limited to those numbers because at the end of the day, I think what's driving you thinking Dolly is a top five silver name is the prospectiveness and the fact that we're hitting new areas and we're growing, but you know what? Investors should be privy to understand that we're not limited to 63 or 64 million ounces of silver, a million ounces of gold. We are bigger than that today. Wolf has shown me that. And also even the category that the current ounces are in. So a lot of those gold ounces, more than 80% are in the inferred category. I think because of the infill drilling we did, we've moved those into the measured & indicated category.
Plus, there's two things that happen when you infill a project, you can either be disappointed or you could be surprised to the upside. And I think what we learned at Homestake is that we're surprised to the upside. It holds together and it's richer than we thought in terms of an average grade. Tonnage is similar in terms of what's in the 43-101 there, but if your grade goes up, your ounce count's going to go. And now we've actually stepped out and we've hit this new gold zone where we tagged the 12.5 meters of 79 grams/tonne gold.
Goldfinger
So there's a rig at the Homestake right now, and you're testing that new gold zone right now, is that right?
Shawn Khunkhun
Yeah. And there's been a rig up there since, I want to say just after Canada Day. And so it's been up there. There are two rigs drilling at Wolf. The next results we should see, I would think are going to come from Wolf. And what our team has decided to do is take a different approach at Wolf, which is directional drilling, this enables them to hit all the multiple structures with precisions, the structures that are bringing in the mineralization and go at targets that we found the drill rig was deviating a little bit. So I am hoping the best results we've ever seen out of Wolf are yet to come, although it's going to be very hard to top hole 329.
Goldfinger
Yeah, that was pretty stellar.
Shawn Khunkhun
Yeah, there's some crazy numbers. But I think maybe we don't put out results that are better, but I think they're going to be very consistently very good. And I'm looking forward to the numbers. Look, this project has exceeded my expectations the last two years. With this potential, the results, the grade, the team's executed well, the shareholders have treated us better than I would ever thought. So a lot of things have just been really working here.
Well, there's a saying, Shawn, that the best projects get better the more that you work them, right? So Dolly Varden is showing that the more love that you give the project, the more love it gives you.
Yeah. No, I think that I got a friend who was involved with the company prior to me taking over, and he said to me, all it needs is some love. Just give it some love.
Give it some love.
That's what we've done. That's it.
Goldfinger
Love. That's what life's all about. Final question. Is there anybody you'd like to give some love to right now? So you're an investor in the sector, you've been around the block many times. Obviously you're bullish on Dolly, you're biased for Dolly, but are there some other companies that you think are really interesting and that investors should look into?
Shawn Khunkhun
Can I talk my own book?
Goldfinger
Of course, that's what this business is all about.
Shawn Khunkhun
So I've got a friend here with me at the conference. I think you might know him. His name's Ian Harris. He's running a company called Libero Copper (TSX-V:LBC). And a few months ago, me and Frank Giustra and a few other friends financed the company, not once, but twice. And it's really interesting because Dolly had done the deal with Libero to get Big Bulk, and then we financed Libero. And not only did we finance it, we pulled it into our office and we changed the board. And so you've got Frank's there. Frank's had a lot of success in the sector. He's had a lot of success in Columbia. Ernie Mast is there. Ernie was the president of the subsidiary that held Cobre Panama and Inmet. So you got Ernie Mast, who's a metallurgist, who was behind Cobre Panama on the board, you got Frank. Ian was senior vice president with Corriente. Corriente is a porphyry System in the same Belt of Rocks. First industrial scale project in Ecuador.
And for me, Dolly Varden represents my silver interest, my silver exposure. I have gold exposure through companies like Goldshore (TSX-V:GSHR) and West Red Lake (TSX-V:WRLD). I'm a director at Goldshore. I'm an advisor to West Red Lake. And on the copper side, I have Libero and I'm on the board of Gladiator. So those are five companies, one silver, two copper, two gold, where I'm a shareholder of all. I'm either at the board level management or advising. And I think for me, those are my top five picks for this coming bull market. And it's giving me the right exposure to the right people and the right assets. So those are a few ideas.
Goldfinger
Well, now that I have you here and you open the door to it, I'm going to ask you a follow up question. So you know Libero did announce some news and it seems like they're making some progress on the ground there towards getting the porphyry project, which has a whole lot of copper in resource already. And I've studied this project extensively. I've been down there and I am confident it's a lot larger. You just need to be able to drill it. What's the status of that? Is the company getting ready to follow up with drilling... I know you have a rig that's sitting right there at the project. It's been waiting for two years. So is that coming along and what's the vision for this company now? You overhauled the board, Frank is there. He is a big shareholder. I think he's got almost 20% right now. What's the vision?
Shawn Khunkhun
So back in November, Frank was in London speaking at Mines and Money. And after his speaking engagement, he was at a lunch and the guy he was sitting next to was from Saudi Arabia. He was a minister. And the Saudi minister said, "Hey, I really like your speech and I like your matter-of-fact no-nonsense approach. Will you come to Saudi in January and speak at a conference?" So Frank went and he then was in the presence of 64 ministers, and he met with their state-owned mining company, Ma’aden.
And they gave him a list of metals. They gave him a list of metals. He came home.
Goldfinger
And I bet Copper was on the list.
Shawn Khunkhun
It was a long list. And he goes, and I'm boring. I'm so boring. I like gold and I like Canada, and if I'm feeling a little exotic, maybe silver. And so when he shows me this list, I'm like, "Oh man, I just can't get my head around. Can't even pronounce some of these metals." So Copper was the one I picked. And so he goes, "Look, the Saudis want to partner with entrepreneurs. They want to secure these metals outside of the kingdom." And he goes, "Let's do a copper company." And so I said, "Instead of trying to create a copper company, why don't we invest into an existing copper company?" And that's where we came across Libero at a $2.5 million market cap. We took control of the company, we invested in it, and we knew the risk. And the risk was social license. That's why it was trading at the valuation it was trading. There might have been some other reasons, but that was the major one. And so our approach has been you get one chance to make a first impression.
So yes, there's a new mayor, yes, there's a new council. Yes, there's an appetite for development, growth, and jobs. It's actually been mandated in a development plan. But we want to make sure that even those minority voices that are sensitive to how projects get developed, we want to show them that we've built a rep. A good example of that rep is a new listing called Nations Royalty that listed on June 21st where we've created Canada's largest indigenous owned public company. And we faced a lot of systemic racism and a lot of resistance to the idea. But our thinking was our indigenous partners should have access to capital markets. And so we want to show the people of Mocoa and all the surrounding communities that you look at, Aris, Frank's an advisor to Aris. I was down there in May visiting Segovia. And you look at the work Neil Whittier's done at Aris and how he's taking Colombians all over the world.
And again, so for me, Libero is not about Mocoa, even though look, Mocoa, forget the copper at Mocoa. 70% of the project's copper, the 30% that's molybdenum there's been bids on that asset in good moly markets for hundreds of millions of dollars. So that's a project that's worth billions, I think. But forget Mocoa, what we want to do is Frank has got what he refers to as the buy and build strategy. So this is an exploration company with risk. We don't know how big it is, we don't know how economic it is. We don't know how the community wants us to advance it yet, there's a lot of unknowns. So what if we brought in other assets to de-risk the company?
Even once that rig starts turning and we get access, and I think, look, you look at where the resource is, and there's a 636 million tonne resource at, I don't know, .45% copper-Eq. You look at the five billion pounds that are identified already, and you look at where that resource is, you said it, the prospectiveness of that project is just scratching the surface. It's going to be a monster. It's going to be an absolute, it's like Warintza. It's like Solaris’ Warintza. And it's trading at a nothing cap, $14 million valuation. And it's got money in the bank. So it's trading to get a 10 million EV on a five billion pound copper resource. It's crazy.
But let's do this. Let's do this. Let's see, in this depressed environment where the metal prices are already led, let's see if we can add to this company by bringing in other assets, better people, better money. And so look, it's a choose your own adventure in this business. And it's about wanting to build a monster. A monster big enough that the kingdom of Saudi Arabia wants to partner with us to develop these projects. And maybe it's Mocoa, but maybe we need another kick or two at the can to de-risk the company. But whatever we do, and the nice thing about working with people like Frank, even when things don't go well, the off ramps are elegant. Sometimes you don't make 100 times your money, but you don't lose or you lose less.
Yeah, it's interesting the way that you articulated the opportunity in Libero, and when you say it like that, it's very compelling. But on the flip side, the market is punishing the company valuation for uncertainty as to future plans. And the fact the company has not clearly stated its vision, like this vision that you just said, the company has not expressed this in any way. So is the second half of this year going to be a time when some of the uncertainty gets taken away and there's a clear vision that is expressed by the company?
So I'm kidnapping Ian Harris, and he's coming back to Vancouver with me. And now that the deal's in our office, it's going to run a Fiore deal. And we finally get to live out a promise and a dream we had, which is we got through the bear market and encouraged each other to go, and we dreamed about one day being able to work together. And now not only are we together, but we've got Frank and incredible people like yourself who been to project, it's just an incredible opportunity.
So it's just incredible to live out that dream that we had in 2013 and '14 and '15 and '16. And Shawn, keep going, Ian, keep going. We're going to be able to do this. And he was in Saudi Arabia running a project, and then he's lived all over as this bear market persisted. And it was actually me who introduced him to this company prior to the management change and prior to us getting called.
Goldfinger
So it’s come full circle.
Shawn Khunkhun
It's totally come full circle. And so I’ve got a special feeling about him. He's a Boy Scout, he's a mining engineer from Virginia Tech. He's done a phenomenal job. And now that he's going to have the right sponsorship behind him, and I think he's going to do great things. People don't understand, you do, but he brought in lawyers from Santiago Chile to rewrite the Ecuadorian Mining Laws to help bring the first industrial scale project. And Ian's the kind of guy, nobody knows this, but you know this, but in Mocoa, he would get a local guy to make the boots for the people working, talk about ground up economics and talk about somebody who, is he the best mining engineer in the world? I don't even know.
It's overshadowed by his humanity and his ability to interact in his big heart. And that's what gets projects going, right? It's like Rob McLeod. Is Rob McLeod the best geologist in the world? I think he might be. But you know what? It's the heart that drives. And listen, there's that old, the speech, The Man in the Arena. Who was it? Was it, not Churchill, not Churchill, the U.S. president.
Goldfinger
Roosevelt. The first one, Teddy.
Shawn Khunkhun
Was it? But to have the balls to go in the arena. It's easy to be a critic. It's easy to be the Monday morning quarterback, but to have the balls to step into the arena is special. And you know what? I look at McLeod, and I look at Harris and I look at these guys and I'm like, "Man, they're the men in the arena." They don't mind getting marred with blood or dust. They get in there and they're gladiators.
Goldfinger
Yeah, you're right. Mining can do a lot of good. It can create a lot of jobs and stimulate the economy. But we have to win over the hearts and minds and get people to understand what's actually happening. We're not going to knock over a mountain or dig a massive hole in the earth, and then leave it. I have seen some mining remediation sites where you can hardly tell that mining happened here at one time. And when the mine gets built, it's going to be done responsibly in a very well thought out manner. Another aspect of mining education is to make sure people understand the mining project timeline, it doesn’t happen overnight that’s for sure. There's a lot that happens well before a mine gets built and the average timeline from discovery to production is roughly 20 years. Thank you, Shawn. I appreciate your time.
Shawn Khunkhun
Thanks for having me.
Disclosure: Author owns shares of Dolly Varden Silver, Libero Copper and may buy or sell at any time without notice. Dolly Varden Silver is a sponsor of Goldfinger Capital.
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