Common Stock: Dolly Varden Silver (TSXV: DV)
Current Market Price: $.95 CAD
Market Capitalization: $81.4 million CAD
**Note: All values in this article are expressed in Canadian Dollars (CAD) unless otherwise noted.
Dolly Varden Silver Stock – Summary of the Company
Dolly Varden Silver is a precious metals exploration company focused on north western Canada. They currently own 2 exploration stage properties. The company was founded in 2011 and is headquartered in Vancouver Canada.
Revenue and Cost Analysis
Dolly Varden does not own any properties that are currently producing and therefore does not have any revenue. The company consistently runs a net loss and is likely to continue to do so for the foreseeable future.
In 2019, the company had a net loss of $5 million. Their largest expenses were exploration related, which totaled $4.4 million.
Dolly Varden Silver – Royalty and Streaming Agreements
Both of the company’s properties are subject to 2% net smelter royalties.
Dolly Varden Silver – Mineral Resources
The company has indicated resources of 32.9 million ounces of silver and inferred resources of 11.48 million ounces of silver.
Balance Sheet Analysis
Dolly Varden has a sound balance sheet with sufficient liquidity and low liability levels.
Dolly Varden Silver – Debt Analysis
As of year-end 2019 the company does not have any debt outstanding.
Dolly Varden Silver Stock – Share Dynamics and Capital Structure
As of August 2020, Dolly Varden had 121.3 million common shares outstanding. In addition, they had 6.4 million options outstanding. Fully diluted shares outstanding is around 127.7 million shares.
The company’s capital structure is not overly dilutive and is acceptable for common shareholders.
Dolly Varden Silver Stock – Dividends
The company does not pay a dividend and is unlikely to do so for the foreseeable future.
Management – Skin in the game
Insiders at Dolly Varden have not made any relevant transactions in the company’s stock in the recent past, providing no signal for investors.
Dolly Varden Silver Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$363 thousand/$8 million = .05
A debt to equity ratio of .05 indicates that Dolly Varden uses almost no debt in its capital structure and relies almost entirely on equity financing to fund itself.
Working Capital Ratio
Current Assets/Current Liabilities
$4.5 million/$363 thousand = 12
A working capital ratio of 12 indicates a strong liquidity position. Dolly Varden should not have problems meeting its near-term obligations.
Price to Book Ratio
Current Share Price/Book Value per Share.
$.95/$.06 = 15
Based on fully diluted shares outstanding Dolly Varden has a book value per share of $.06. At the current market price this implies a price to book ratio of 15, meaning Dolly Varden stock trades at a significant premium to the book value of the company.
Silver Market – Economic Factors and Competitive Landscape
Silver mining is a highly competitive, capital intensive business. The company will need to compete fiercely for both new projects and capital. However, given the current economic environment of global money printing and zero or negative interest rates, it would appear silver companies are poised to benefit from a strong economic tailwind.
Dolly Varden Silver Stock – Summary and Conclusions
Dolly Varden owns two promising early stage properties in a well-established mining region. The company is in good financial health and the capital structure is acceptable for common shareholders. They are actively exploring their properties however their drill program is by no means large.
Dolly Varden may be an acceptable investment for highly risk tolerant investors looking for leveraged silver exposure. I am not going to invest in Dolly Varden stock, as I would prefer to gain silver exposure through silver producers rather than explorers, for example Fortuna Silver. But I will continue to monitor the company and reconsider should either of their projects advance significantly.
Disclaimer
This is not investment advice. Nothing in this analysis should be construed as a recommendation to buy, sell, or otherwise take action related to the security discussed. If I own a position in the security discussed, I will clearly state it.
This is not intended to be a comprehensive analysis and you should not make an investment decision based solely on the information in this analysis. I hope this serves as a useful starting point for a more comprehensive analysis, and hopefully draws attention to aspects of the company that were overlooked or merit further investigation. This is by no means intended to be a complete analysis. Again, this is not investment advice, do your own research.
